With Free Loyalty, What’s The Risk?

A free loyalty program poses little risk to consumers. You’re often required to give a few pieces of personal information to join, and if you spend enough, you get rewarded.

On the surface, there appears to be limited risk to the retailer as well. The biggest challenge companies face is the long term commitment to their loyalty program. They fail to evolve, and the relationship with their core customer is often compromised.

For example, how many punch cards do you still have in your wallet? Today’s consumers have evolved to using smartphone apps or email rewards.

DISCOUNT TRAINING

Often times, free loyalty programs end up training customers not to shop without a coupon. Kohl’s Department Stores offer 10%, 20%, and 30% off coupons. As a customer, I won’t shop until I receive the 30% off coupon because I know it will eventually arrive in my mailbox.

How many of those blue 20% off Bed Bath and Beyond coupons do you have stockpiled? According to Fortune, the retailer has felt pressure on profits due to widespread coupon usage and as a result they have implemented a premium loyalty program that provides access to an everyday discount.