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Posted by Chad Mitchell on April 8, 2010
Hi Marketing Leaders,
I stopped by Office Depot yesterday to purchase some office supplies. While I was waiting (for an extremely long time), the representative asked if I was a member of their loyalty program called Worklife Rewards. It’s always an interesting question, and many times my answer is: “I think so.” I DO know I am a member of six frequent flyer clubs; seven hotel guest clubs; and several other retail loyalty programs.
Office Depot offered a free program with cash-back. Hey, it wasn’t another credit card – how bad could it be? I joined because I can easily see myself purchasing ink toner, paper and other supplies and getting a “kick-back” in the process – that’s future loyalty in a one-person sample of everyday life.
There are only two problems with loyalty programs as I see it:
After climbing those small hurdles, you set off towards loyalty bliss with points, rebates, discounts and even cash-back.
Our recent survey data from 100 global B2C marketers shows the answers to those questions are all “yes.” Marketing leaders still see substantial value in loyalty programs. We found that 77 out of 100 B2C marketing leaders stated they would increase loyalty program budgets in 2010 trailing only digital (e.g. social, online) and market research. And of 16 choices ranging from print advertising to promotions, marketing leaders selected loyalty programs as the area they were least likely to decrease budgets.
Industry and academic research (V. Kumar, 2008) shows loyalty programs are often costly mechanisms that don’t generate incremental customer lifetime value. A loyal customer would purchase again, or more, regardless of the additional discounts or rewards given by a marketer.
Nearly 1 out of 5 marketing leaders we polled are increasing budgets on loyalty in 2010. Let's make sure those budget increases working smart. Forrester will continue a series of blogs and research on building effectively loyalty programs that drive loyalty, but more importantly, increase customer lifetime value and profitability for your firm.
Please share successes and ideas on what loyalty programs should look like in 2010 as budget dollars start to grow again.