When customers applied for the card, they completed a demographic/psychographic profile questionnaire which, along with their specific purchases, helped these retailers target promotions (using direct marketing tools like mail, email, online/offline newsletters, etc.) and tailor communications based on their profiles. The resulting database would not only help identify the most valuable customers, but it would make their marketing programs more cost effective by tracking purchase recency and frequency. They can also be used to identify former customers for promotion.
The challenge for these cards is that, what began as an attractive concept has deteriorated because of the low real value they represent and because there are so many of them. Further, they often have no specific relationship to the individual retailer's business (i.e., airline miles for purchases at a sporting goods store). As an example of how these card programs have so quickly matured, several major U.K. supermarket chains, though investing millions of dollars to produce and promote the cards, as well as install the equipment to monitor purchases with them, have determined they are not an attractive builder of revenue and profitability.
They have eliminated their loyalty card programs in favor of deep price discounting. Studies in the U.K. suggest there's relatively little incremental loyalty based on holding retailers' cards. Often the card programs merely reward those already loyal.
For more information, check out searchCRM's Best Web Links on Customer Care and Tracking.
This was first published in October 2001