Winning the Customer Comeback

When it comes to consumer loyalty, buyers feel connected to automobiles, but have little love for planes. Trains don’t figure in the picture.

That’s one conclusion from the most recent research from Carlson Marketing, a firm that tracks customer loyalty trends in the retail, financial, airline and automotive sectors.

On the macro level, overall spending on promotions tied to loyalty programs showed modest growth last year — approximately $2.1 billion, a 3.6% rise over the $2 billion spent in the previous year, according to the Veronis Suhler Stevenson Communications Industry Forecast.

The Carlson report, published in March, shows that some sectors are facing a particularly challenging prospect in maintaining customer loyalty. On an indexed scale of 1 to 7, with 7 as the strongest loyalty, Carlson reports that buyers currently feel relatively loyal to financial services and automotive brands (5.3 and 5.4, respectively) while showing less attachment for the big names in the retail and airline sectors (4.7 and 4.6).

And the trust factor for airlines (4.7) dives below the same ratings for retail (5.0), financials (5.7) or automotives (5.6).

“We’re seeing quite an interesting play as airlines cope with rising fuel prices,” says Luc Bondar, vice president of loyalty for Carlson Marketing.

“They’re seeking ways of using their loyalty programs to drive high margin streams with their frequent flier customers.”

He says airlines are now offering alternative redemption options in the form of online shopping and other perks.

A recent report on loyalty marketing by the Direct Marketing Association and Colloquy showed that frequent flier miles were among the least redeemed rewards among loyalty programs that spanned several industries.

Airlines’ alternative redemption ideas and other ways of encouraging loyalty are part of a larger trend among all businesses currently courting customer loyalty with programs.

“Across the board, one of the overarching trends we see is the expansion of customer choice, and enabling customers to identify benefits that are most interesting to them,” Bondar says.

Michele Tiletnick, who wrote the DMA/Colloquy report, notes that companies in all sectors are trying to better understand their loyal customers’ impulses.

“Overall, loyalty programs are doing more research to find out what makes customers tick,” she says. “As we get deeper into the life cycles, you’ll see brands offering experiences you can’t get elsewhere.”

Right now that’s largely limited to credit card companies. The DMA/Colloquy report notes that nearly half of all banks and credit card companies have partners who offer unique services or experiences to their loyalty customers.

In the retail sector, activity with programs such as Coca-Cola’s My Coke Rewards and Nike’s Nike Plus are cleverly enabling brands to learn how and what consumers buy and offering choices of rewards.

With the average U.S. household linked to a dozen loyalty programs, that increasing competition will help drive creativity and will also keep most program membership free, Tiletnick expects. Some 70% of respondents to the DMA/Colloquy report reported keeping free membership as part of their rewards offering.

“How can you not offer them for free, unless you’re giving something different?” she says.

LOYALTY PROMOTION SPENDING

SNAPSHOT

Promotion spending related to loyalty programs increased 3.6% to $2.1 billion in 2007

Frequent flier miles least redeemed rewards

Airlines and retail need work on relationship marketing