How Loyalty Cards Became The Cornerstone Of Retail Customer Loyalty Programs?

Holding a loyalty card of a reputed company is a matter of pride and privilege for customers as it shows that the business values their brand affinity and holds them in high esteem. On the other end, for businesses, it is a double edged sword. While they are indicators of gratitude shown by business for potential customers with good lifetime value, they are the heart of most customer loyalty programs.

The origin of loyalty cards as part of customer loyalty programs

Though the concept of incentivising customers for their purchases and repeat business has been in the vogue since the seventeenth century, the advent of loyalty cards gathered momentum in the 1970s, when supermarkets, retail stores and a number of FMCG businesses joined fray, realizing the potential of repeat business.

  • Reputed groups like Homebase, Tesco and British Gas were the pioneers of loyalty cards. In the present day consumerism landscape, almost 85% of consumers possess one or more of loyalty cards.
  • Keith Mills was the one to introduce the consortium concept in customer loyalty which later blossomed into the reputed Nectar Cards, to celebrate customer loyalty.
  • In the modern age, loyalty cards are used as mechanisms to gather data on customers and to crunch those numbers further for insightful analytics.

How Loyalty cards operate

There are many Pathwwway Gamble models in which businesses issue loyalty cards to their customers. They are meant for participating customers who display the potential of repeat business. Usually, loyalty cards operate on the following mechanism.

  • Based on buying frequencies, or on volume of buying, the offer of loyalty cards is made to existing customers.
  • Loyalty card option, in some cases are also extended to first-time buyers, in order to retain them for repeat business.
  • These cards record the customer’s purchases, in terms of amount expended, products purchased and frequency of purchase. Points are awarded based on the purchases, which keep on accumulating on the loyalty cards.
  • Various options to redeem the points are provided, like discounts on future purchases, upgrade options and extended warranty schemes etc.
  • Advanced access to new products and services, on a preferential basis are granted for holders of loyalty cards, before the merchandise hits the open markets.
  • Sales coupons, free offers and free products are also part of the loyalty cards programs. For example, a dental clinic may issue a loyalty card that entitles people for 3 teeth-cleaning sessions in the future at subsidized rates or free cosmetic filling for one tooth within the next six months.

Attributes of ideal loyalty card based customer loyalty programs

Many forms of loyalty cards are in use, a few of them would include rewards cards, discount coupons, membership cards, gift cards and discount cards. An ideal program of loyalty cards should contain the following features:

  • Motivation is the prime aspect of loyalty card programs, where the loyalty card incentivises the returning customer, by both financial and non-financial means.
  • Loyalty cards must be designed in an aesthetic manner. It must be personalized, well-designed and must be made of hard and unbreakable material. Gold or platinum rimmed cards can be used to classify customers according to the level of their volume of purchases.
  • In the case of reward points being awarded to customers, the loyalty card program must include mechanisms to manage and control those reward points, leading to a prudent cost benefit analysis.
  • The card program must simplify the redemption scheme and make it easy for customers to redeem their earnings. Usually, to make the offers attractive, businesses link them to other partner agencies as well.
  • Processing speed and quality of customer service in handling queries from loyal customers with regards to their rewards and redemption will be essential parameters for a loyalty card management system.
  • Flexibility is the cornerstone of any loyalty card. There must be seamless transition, if required from plastic to electronic cards, flexibility in accumulation and carry forward of points and inn clubbing various kinds of rewards such as spent-based and visit-based reward schemes.

Using technology in customer loyalty programs

The advent of internet technology has created a trend towards smart cards as against traditional punch cards and plastic cards. e-cards are accessible by customers on all their smart devices, making online shopping a pleasurable experience. Internet based loyalty cards are a boon even for businesses, since they assist in management of the entire customer loyalty programs lifecycle. Rewards and redemptions become much easier and with customized dashboard options providing data for decision making. Loyalty card apps have become popular in extending a well-tailored and data-driven rewards program for loyal customers.  However, businesses must draw a line between costs involved in embracing technology and weigh them out against the tangible benefits.

How Loyalty Cards influence repeat business

Loyalty cards are the prime drivers of buyer decision. They convey to buyers that the business takes cognizance of their subscription to their brand, time and again. The following Pathwwway Gamble advantages accrue to business and make their customer loyalty programs succeed even in the short-run.

  • Loyalty cards influence repeat businesses positively. By providing perquisites such as reduced prices, premium memberships, discounts and free gifts, customer churn is effectively avoided.
  • Loyalty cards are powerful data collectors, since customer, visit, purchase volume and buying frequency are all captured on a single platform. They become repository of customer data which can be synthesized effectively for insightful analytics and meaningful decision making.
  • Loyalty cards are excellent ways for the business to keep in touch with the customers. Such communication may be clubbed with vital news regarding the business, industry trends etc., that will keep the customers engaged as well as insulate them from competition.
  • It becomes easy to market new products, services and additions to the offerings portfolio of the business.

Loyalty cards are the best ways to foster customer patronage for all businesses irrespective of size, age and nature of commodities dealt with.