retail

Q&A: People Don't Care About Loyalty Programs

by Sarah Mahoney , January 6, 2012

Sue-McPartlin As more and more stores stampede toward expanded (not to mention expensive) customer loyalty programs, a new study from Pricewaterhouse Coopers reports there are some considerable ironies lurking: Most notably, consumers don’t care. The survey, which looked at some 6,000 shoppers, turned up some other major disconnects as well. Sue McPartlin, retail and consumer practice leader at the U.S. arm of PwC, explains it all to Marketing Daily.

Q: You’ve found that something like 92% of all retailers have some form of loyalty program. Why are so many stores way off base on the loyalty issue?

A: It is startling. Virtually every retailer has them, but our study found that loyalty programs ranked last in what consumers say are important to them. Just 1% cited the programs as a factor. And I’m not saying they’re not good things. In fact, done right, they turn up all kinds of customer insights that retailers can use to be more effective. But in terms of thinking that those points or whatever matter to shoppers, it’s just not true.

Q: What does matter?

A: Well, price ranks highest -- at 55% -- but I think in this environment, that just goes without saying. Past experience was very powerful, at 21%. And more than half of all shoppers say friendly, helpful sales associates make them most likely to return to a store. If an associate apologized to them for a problem, 88% say that made them willing to return.

Q: Yet that kind of interaction can’t happen online, really. So will associates’ helpfulness matter less?

A: No -- we think it will matter more, especially in this multichannel environment. We see more and more stores focus on their associates, because if they want to bring you into the store, one of the main advantages is that human element -- a personal touch. And that is very important to customers.

Q: What about brands?

A: People still care about brands, with some 14% saying it mattered. But we’ve seen private labels gain in recent years, and it never quite goes back to status quo.

Q: Were there other surprises?

A: Word of mouth mattered very little, with just 2% saying it made a difference. But we know, of course, that negative word of mouth is much more powerful than that. It’s got a really long tail, and customers need to know stores will fix a problem for them when something goes wrong. Also, we were impressed by how much a seamless experience meant to shoppers -- that a store’s Web site and brick-and-mortar experience work together. It’s better to cannibalize your own sales: If you’re going to lose a customer to online shopping, make sure it’s on your site.

Q: What else do consumers want?

A: Free shipping is another huge disconnect. Two-thirds of shoppers actually say they will cancel an order if they realize they have to pay for shipping, yet 59% of retailers charge shipping.

loyalty, q&a, retail

4 comments about "Q&A: People Don't Care About Loyalty Programs".

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Doug Pruden from Customer Experience Partners, January 9, 2012 at 9:02 a.m.
I'm hoping that you can clarify your comment of "Word of mouth mattered very little, with just 2% saying it made a difference". Are you refering to word of mouth about the loyalty program itself? Or is the research suggesting that neither online nor offline word of mouth has any influence on consumer awareness, consideration, and purchase decision? (Which would fly in the face of both logic and a large body of consumer research.)
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Henry Harteveldt from Atmosphere Research Group, January 9, 2012 at 9:22 a.m.

The headline should clarify this is about retail loyalty programs. In the travel industry, particularly airlines, loyalty programs do matter.

Kate Baumgart Hogenson from Loyalty Landscape, January 9, 2012 at 11:03 a.m.

Hmmm -- there could be some selective interpretations of response bias. On the one hand, low word of mouth results are dismissed but low loyalty program results are not. Both are mixed in with price which is 55%. We would never say that a loyalty program overcomes price as a reason, esp. in a survey where respondents like to appear rational. The question is "What makes a difference when prices are equal?" (And as Henry Harteveldt will tell you, for airlines you need to remove schedule w/in 2 hours too). THEN what makes a difference? Also, since many retail programs effectively use their loyalty programs for 2 tier pricing, separating a loyalty program from the perception of price requires subtlety.

Leslie Nolen from The Radial Group, January 9, 2012 at 1:21 p.m.

Interesting and flawed assumption by both McPartin and the writer that "[friendly, helpful, personal] can’t happen online, really."

It has nothing to do with the presence or absence of technology. It has everything to do with management expectations for how their companies will treat customers, and how well they translate that vision into staffing and operational decisions, whether we're talking about retail clerks or remote customer service reps or even presentation of information in an online self-service environment.

Amica customer service is a shining example of how it's possible to create a friendly, helpful and personal experience via email and chat, for example.

OTOH, Levi's first-line email-based customer service is an example of how not to provide friendly or helpful service. Is that because of the channel? Nope, it reflects management's flawed execution of its customer service vision.