Loyalty schemes growing in popularity again

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By: Wise Marketer Staff |

Posted on January 31, 2008

There has been continued growth in the popularity of loyalty schemes among marketers, with 41.2% of major companies now operating a loyalty scheme, according to a study from data analyst GI Insight.

The number of loyalty schemes operating in the UK has increased two and a half times in the past ten years, the study found. And, if the current rate of growth continues, GI Insight predicts that by 2013 the majority of top consumer companies will offer a loyalty programme.

Sectors with the most programmes
Interestingly, the Music/Entertainment sector showed the highest penetration of loyalty schemes, rather than the iconic grocery segment (although the large supermarket segment is also around the 90% mark).

Other above average sectors included Hotel Groups, Travel (transport), and Credit Cards. At the other end of the scale, Fashion/Department Stores had the lowest penetration of loyalty schemes, with catering, travel agents and electronics following close behind.

The Mobile Phone sector was also surprisingly below average in its loyalty activity (30% penetration). The sector has traditionally been the victim of unwise price-based strategies that forced down margins and created a great deal of churn.

What's driving the growth of loyalty?
According to Andy Wood, managing director for GI Insight, "Loyalty went through a crisis of confidence from 1998 to 2000, with a significant number of programme closures by well known brands. But it has since recovered and now shows consistent year-on-year growth."

This growth in loyalty activity is perhaps the result of increased competition as consumer marketplaces become more crowded and saturated. Successful companies over the next five years will be those that understand their customers better, and that appeal to consumers' real tastes and preferences. Loyalty programmes are now regarded by business as a strategic asset rather than a financial burden, and many companies have recognised the fundamental importance of loyalty data in improving business strategy and planning.

"From the marketer's viewpoint, they help identify who the really valuable customers are, allowing companies to develop strategies that help cement and increase customer value and satisfaction. However, this kind of well-crafted loyalty activity, in which customers are treated intelligently, appropriately and effectively, has yet to become the hallmark of the majority," concluded Wood.

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