Loyalty Programs: What Does the Future Hold?
Open your wallet, look on your cell phone screen, and do a quick count. How many loyalty programs are you enrolled in? If you’re like most Americans and Canadians, you’ve signed up for seven or eight. However, some of these programs are better than others at getting their members to keep shopping. As we examine the future of these programs, various questions keep cropping up.
Loyalty Cards or Apps?
We’re in a digital age where many of us spend hours a day on our smartphones. More and more businesses are emailing receipts, and generally heading in a paperless direction. Yet, there are still loyalty programs that only provide customers with physical cards. Why? The evidence on the pro-app side is compelling.
Physical cards and coupons weigh down our wallets. They also get lost, stolen, or forgotten about. A quick tap on an app is so much easier. It also goes beyond just accessing the card itself. Ideally, a loyalty app provides the customer with access to:
- Their points balance
- Reward options
- Current deals
- Personalized recommendations
- Restocking reminders
- The online store
Some argue, however, that physical cards that live in a customer’s wallet keep a business front and center in the person’s mind. Also, the keychain-style cards can act as status symbols if the business is a luxury brand or is trendy. And, if a business is targeting an older demographic, they may prefer a physical card.
Many brands have embraced a let’s-please-everybody solution by offering both physical cards and an app. It seems, though, that the writing is on the wall for a digital-only future for loyalty programs.
Should Points Expire?
Shoppers worry about points expiration. Yet, with seven or eight loyalty cards, it is hard to keep track of dates when points need to be used by. Yes, companies send reminder emails, but they can easily get ignored or end up in the junk folder. In fact, as of January 1st, 2018, the Ontario government put new rules “into effect that stop the expiration of reward points based only on the amount of time that has passed since they were earned.” While there are exceptions to this, these new rules indicate a more concerted effort to protect consumers.
So, why do many companies place expiration limits on their rewards redemption? One theory is the sense of urgency a looming expiration date creates in the mind of the consumer. This compels the individual to visit the store, redeem the points, and likely spend money on additional items. It’s also natural that people want to avoid the pain of loss, which is arguably more of a motivator than a desire for gain. So, people are motivated by loss-avoidance to use their points. Businesses also understand that their loyalty programs only work if members use them. Thus, rewards expiration rules help to ensure a program doesn’t become a complete failure.
What does the future hold when it comes to points expiration? Chances are that companies will continue to place time limits on rewards redemption unless more governments or regulatory bodies pass legislation prohibiting the practice.
How Many Restrictions is Too Many?
Some loyalty programs are incredibly confusing—like “you can only redeem points on selected, discounted items during the full moon”—confusing. Simple redemption rules that don’t confuse the customer are obviously ideal, so why do companies make things so complicated? One reason is that some businesses only want to offer things that are cheap or represent unsold inventory as rewards. This also explains why many programs don’t allow points or rewards to be redeemed for cash. Simply put, companies can get a lot of merchandise more inexpensively than the average consumer (e.g. through bulk buying).
Also, well-publicized, high-value redemptions can be problematic. Say, when an airline program offers seats that turn out not to be readily available. “Such offers often do more harm than good, by unnecessarily raising customer expectations and then not delivering. If you can’t deliver reliably on what you promise in your loyalty program, you not only damage your program’s credibility, but you could undermine trust in your whole brand.”1
So, what can we expect to see in the next few years when it comes to loyalty program restrictions? There will always be some restrictions; that’s clear. However, some credit card companies, grocery stores, and other businesses are simply giving cash or gift cards after a certain amount of money is spent. As long as it doesn’t require a company to take a loss doing so, it is conceivable that other businesses may revise their programs to include this reward option. That way, at least, reward scarcity is unlikely to be a concern.
1 Peppers, Don. “5 Best Practices for Loyalty Programs.” DataCandy. n.d. Web. 29 Aug. 2018. https://www.datacandy.com/blog/5-best-practices-loyalty-programs/.