From discount- to service-driven loyalty

29. April 2020
by Teun van der Zijden

Loyalty programs form a tried and tested marketing mechanism for retailers to drive repeat visits and purchases. Additionally, at least as important nowadays, they provide granular insight into shopping behaviour, allowing retailers to adapt their proposition to their customers' evolving needs and preferences.

Consumers, however, are more and more reluctant to sign up to traditional loyalty schemes. Recent research shows that no less than 38% of consumers are not interested in joining any sort of loyalty program, due to a lack of perceived value. The discount-driven offers following from these schemes are struggling increasingly to bring customers through the door.

Still, not all is lost in loyalty land. Consumers also point to what would convince them to sign up: service-related perks. Faster delivery, personalized customer service and more flexible returns will all contribute to improved loyalty program uptake, by consumers' own account. This is in line with earlier research by RBC Capital Markets on Amazon Prime, which showed that for almost 80% of members the superior delivery proposition was their #1 reason to sign up, well ahead of the proprietary content offered and the exclusive deals and promotions associated with Prime.

As consumers become more price-savvy, classical discount-driven loyalty schemes struggle to sustain their relevance. Retailers will need to rethink how to tie their customers to their businesses. Service elements may be the missing piece of the puzzle - but do you know what would appeal to your customers?

The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.

Incentivizing loyalty membership based on shipping and service-related perks offers an alternative to more traditional deal-oriented programs, which give customers discounts on specific products in return for membership.