Introduction to the Loyalty Industry
The Future of Loyalty
Cost Justification
Do Smart Cards and Loyalty Mix?
Has Loyalty Peaked?

Introduction to the Loyalty Industry
Who said, “Money Can’t Buy You Love”? A useful metaphor, though, to help understand the true concept behind customer loyalty. Loyalty programmes are about developing sustainable, mutually beneficial relationships. Price incentives can generate a short-term sales uplift but will not engender long-term loyalty. Customer loyalty has long been recognized as essential, whereas (electronic) customer loyalty systems are still relatively young. The man in the corner shop has practiced the art all his life; the electronic version was invented to overcome the limitations of the human brain to remember more than a few hundred customers personally.
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The Future of Loyalty
Business in the new millennium is more competitive than it’s ever been. There will be even more channels to market, even more opportunities for customers to purchase, even more offers and inducements, and even more opportunities for customers to switch. As customers’ expectations continue to rise, and businesses repeatedly fail to meet them, the focus will move away from acquisition to retention. Some customers are inherently loyal and predictable and some are more profitable than others – the ‘best’ need to be identified and kept, and the ‘worst’ left to bounce from one new competitor offer to the next. The last ten years has been devoted to developing ways of gaining knowledge of and understanding customers, the next ten years will be devoted to developing ways of using the information. Those that do this effectively will win and those that don’t bother will surely fail.
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Cost Justification
Interest in customer loyalty programmes has never been more avid. After a number of years when such programmes always seemed to be on the brink of taking off - but never quite managed to reach expectations - recent years have seen a real and dramatic increase in their uptake.
Putting aside the superficial reasons for installing a loyalty system, such as everyone else in the same sector appears to be ‘doing something’, or fear that the main competitor might steal a march by implementing a loyalty strategy, the key consideration is whether such a system can be cost justified. Will it measurably help the retailer in his bid to build long term profitable relationships with his customers? Can the investment required in a sophisticated customer loyalty system be justified on the basis of anticipated increased profits?
This paper explores the issues which need to be addressed in order to cost justify the implementation of a customer loyalty system.
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Do Smart Cards and Loyalty Mix?
Chris has been involved in implementing loyalty systems for many well-known organisations. An increasingly frequent demand from retail clients, usually at the initial meeting to discuss the concept of a loyalty scheme, is for a Smart Card loyalty system. However, the final system is almost always based on magnetic stripe card technology. The Smart Card has become a generic term for electronic points collection schemes but the benefits of using (genuine) smart cards is questionable.
This paper considers whether smart cards really do have a role to play in loyalty systems or whether they are simply being promoted by the suppliers of smart card technology into what they see as a fast growing, profitable marketplace.
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Has Loyalty Peaked?
Loyalty schemes, in their current card-based format, made their debut in the UK marketplace in the early 90s. Although they took a long time to be widely adopted, perhaps it is not surprising to be questioning, a decade later, whether they have reached their peak. Have they reached the stage in their development when they are likely to be merged with other marketing and retailing systems, or will they simply fade away and join their precursors, the green shield stamps, in some far flung promotional graveyard?
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