Is Loyalty still a thing?

Loyalty programs have been around for quite some time. Credit card points have been one of the most effective loyalty programs around. I personally love Chase Reserve given that I earn 3x points for payments on food and travel. Those points are then worth 1.5x if I buy flights or use them to purchase at participating online stores. Another is the Dunkin’ Donuts App, where I’m constantly earning points and taking advantage of promotions.

How effective are loyalty programs? In this digital age, companies have to implement a loyalty program through their website and mobile apps to stay competitive. A report from Harvard Business Review indicates that acquiring a new customer is 5x-25x harder than retaining than existing one, which makes sense given that it probably is much easier to keep an existing customer happier vs. putting in the marketing and sales efforts to retain new business. It’s tough to fully attract new business and retain them given that almost every company nowadays has some sort of promotion going on. When I was in D.C. this weekend, I downloaded 4 different electric scooter apps because there were just so many different scooters all over the streets next to monuments and other touristy spots. Each app either provided some sort of discount or free ride, but the ones that stood out to me the most were the ones that saved me the most money (a certain price per minute) and had the best designs that gave the best user experience.

With mobile apps, companies like Auntie Anne’s and Jamba Juice offer free food just by downloading the app and registering for a loyalty account. What’s stopping people from just downloading these apps just for that one free small plate of food or juice and never using the app again? NOTHING. The meal kit delivery market with companies like Blue Apron and HelloFresh is so saturated that many of these companies struggle to retain customers after the first purchase. While these companies typically offer a large discount on your first order, typically customers drop off when they see that their subsequent payments are the normal price and may switch over to a competitor to take advantage of the same benefits. This is a problem for a lot of companies in this digital age.

What can companies start focusing on to retain customers and increase their mobile app and loyalty program participation? Another study suggests that companies with the highest spending customers are the quickest and most likely to check out competitors. This means that companies need to focus on keeping existing customers happy by giving them the attention that they need. This can consist in more proactive outreaches where surveys are conducted to understand what customers like or don’t like about the mobile app experience. It could mean implementing new features based off those results to have better user engagement. Companies like LevelUp and Fooda are focused on working with vendors to provide reward points for users to apply for money off future food purchases. This is great considering that these apps are restaurant agnostic in that sense that you can earn points regardless of what restaurants you purchase from.

Another way to work towards retaining customers and keeping them in your loyalty program is not spamming them with unnecessary communication. The Retail Council of Canada found that 49% of millennials stopped using loyalty programs after receiving too much irrelevant things like emails and promotions. 70% of consumers also don’t sign up for loyalty programs due to the inconvenience and time required to register. Knowing this, companies should focus on the UI/UX of their mobile apps and website registration processes.

A Forrester study says that customers want to feel special. They want to have rewards and special discounts that they can’t get from other programs or that other customers from different tiers might not have access to. 59% of online US adults want an experience like this in addition to just saving money in their online purchases.

Customers are looking for a unique experience that will keep them feeling valued in order to continue using the loyalty programs available to them. Ultimately companies should not lose sight of innovation or get too comfortable. In the digital age, utilizing mobile apps is great, but getting an increase in the mobile app usage by customers is even better. Each company also needs to understand what their customers are looking for. A restaurant selling burgers that uses a food rewards app can’t expect the same level of usage that maybe a white label app like Starbucks has. Setting real expectations and examining the data will allow companies to make more informed decisions around what is driving the usage of customers. The other half of the battle is understanding how to actually attract new customers and being able to retain them in the long run. There will always be new competitors, so innovation has to be a continuous task.

What are some of your favorite mobile apps to earn rewards. What about these apps keep you using them time and time again? What would be a dealbreaker for you that would prompt you to seek a new company’s app to get similar benefits?

12 comments

  1. Great post! I am definitely guilty of signing up for Blue Apron just to get the first week of meals free, then canceling the service as soon as I received them. Similarly with HelloFresh, I took advantage of the promotions before canceling the service when it became full price. And now I have their recipe cards to recreate the meals at a cheaper price from a traditional grocery store. One rewards program which has recently gotten on my nerves is WestJet Airlines (a Canadian airline for those of you who don’t know it). I booked a flight home to Toronto and chose the economy fare, but their rewards program will not recognize this to reward the customer points. In order to collect points to be used on future flights I would have had to pay an additional ~$30 fee. For me this was not worth it and I would prefer to save the cash now than collect points – if other airlines have similar fares to the same destinations and offer points without an additional fee I would gladly switch to their service.

  2. dilillomelissa · · Reply

    Thanks for the interesting topic! Rewards are something that affect us all in the digital age. I know a lot of people that play the “point” game. I definitely try to make the most of my credit card points to get as many free flights as possible. I’ve done a lot of opening and closing of credit cards to get some of the good deals. I also have been using the LettuceEntertain You app for years. This is a chain of restaurants that gives you points anytime you dine with them in addition to a free $15 for your birthday. This is one of my most beneficial apps. I can’t tell you how many times I get $20-$50 worth of points to use towards my meals. I also use the Open Table app religiously. You can get up to $100 in dining or $50 in Amazon gift cards. I use Open Table everytime I book a reservation and usually earn 100 points each time. I like apps that are easy to use and get me points for things I’m doing anyways. If there is too much effort involved, I honestly won’t spend extra time using them. I also won’t use an app for a one time benefit. If I have to go out of my way to get one free Jamba Juice for instance, I’d rather not be bothered. Any apps that will clutter my phone are a no-go for me. It has to be a service I use regularly.

  3. Honestly the stickiest loyalty programs for me are the non-digital ones. Thats right, I love my El Pelon & Playa Bowl punch cards, primarily because I get a meal that I’m willing to purchase 10 times an 11th time for free. For me personally, the type of rewards available are what encourage me to be a sticky customer. A lot of the digital reward programs are on more of a point system per dollar at individual venues. Instead of participating in just those schemes, I too use the Chase Sapphire Preferred Card with similar benefits so I can cash in on every dollar I spend. In reality, when you can play the points game correctly it is truly absurd, just look up The Points Guy, who travels the world essentially for free. Personally, I’ll stick to my Chase Rewards and restaurant rewards for those I frequent often, otherwise its not worth the time or excitement. Great post!

  4. Great post, I have always been a huge fan of loyalty programs, especially the ones that provide points that allow you to utilize the points like cash or provide cash discounts. I remember when loyalty points first came out, they would provide trinkets that were cheap or magazine subscriptions that you would never read. Now, loyalty programs can earn you enough points to travel, make purchases and earn discounts. I have heard excellent things about the Chase Sapphire Preferred Card, however, personally chose the Amazon Visa as I earn Amazon points which I utilize frequently. I have not utilized mobile apps that provide discounts as I feel they are too tedious and varied however given the success some here have had with Open Table and Level Up, I might give them a shot.

  5. I can definitely say I am guilty of singing up for loyalty programs just to get the free/discounted first purchase. And like you mentioned, I also find the incessant emails and promotions to be very annoying and unsubscribe after getting frustrated enough. I think companies need to find the right balance of communicating incentives without overwhelming the customer. The rewards programs that usually work the best with me are ones where you get emailed a discount for your second purchase after you make your first. Those are usually the most successful in getting be to be a repeat customer because once I buy something from a website or store more than once it comes to my mind more quickly when I am considering making a purchase

  6. I love this topic! I like many others am a big fan of loyalty program, but am extremely guilty of jumping from one to another. I have about 5 different food ordering apps and have probably ordered food from restaurants owns apps at least once, and this is 100% due to the first time promo discounts. One company that I think has really nailed this concept is Starbucks, I have been a gold member most likely since post-undergrad. There is a certain level of fear of losing that gold card status that I can’t quite wrap my mind around why it would bother me. The point system of collection enough to use on any size beverage or food has kept me coming back. I am also able to bank my rewards which is great. I have gone a week with just using saved rewards, something that a lot of other retailers have not let me do. Most recently Starbucks has expanded their point system to allow you to use points on coffee beans and merchandise. They have put a lot into their UX/UI and have created incentive programs that are tailored to the customer, to ensure they keep coming back which I believe is genius marketing.

  7. Awesome post and insight! I am not too keen actually on using mobile apps to receive rewards. I think it takes too much time and space on my iPhone. Again, I am probably not a great example, as a lot of my peers use these loyalty programs and reap the rewards. I think these apps flourish with retail, airlines, and restaurants. If these three sectors can focus on really catering to their clientele and give rewards that will draw their customer in, then it will make sense to focus on advertising and marketing spend on these apps.

  8. I like how you started with the concept of loyalty programs and the ones which you frequent most then rolled the concept out to how it recently impacted you on your DC trip. Personally, I am a loyal Starbucks app user and I think they finally found the magic answer- This past week they rolled out a new rewards system based on different points levels for different items. For example a cup of normal coffee may be 50 points whereas a latte remains 150 points (this was the original amount of points needed before the new system.
    By changing the reward structure in a way that those making high ticket purchases still got the same rewards as before, but allowing customers with less expensive taste take advantage at lower reward points everyone can find a happy loyalty program!

  9. Very insightful post! I think most of us could highly relate to downloading apps to receive that one-time reward, knowing that we’ll probably never use it again. I agree that loyalty is so hard to find nowadays, as countless businesses are constantly offering different promotions. However, apps like Kung Fu Tea or Starbucks that allow you to accrue points to work towards a higher “level” are a lot more engaging and enticing for the customer. Customers should be rewarded for their loyalty. Nordstrom does a great job of that, offering its most loyal customers early access to big sales or a more personalized, catered retail experience. A lot of nail and beauty salons also offer a loyalty program where after every 10th visit, you get a free manicure or 50% discount off your next haircut. I totally agree with you– it’s all about making the customer feel valued and cared for.

  10. I was actually just thinking about this as I gazed into the abyss of my BOA checking account. They offer an insane number of rewards that I have never even thought about redeeming. To your point in the post, rewards are clearly just an antiquated must-have for these companies. However, I wonder to what extent they are just marketing vehicles for customer acquisition. People sign up for something with all the intention of cashing in on these rewards but never do. Then it creates a catch-22 for the company: customer doesn’t get full benefit of being a customer, but the company does pocket more revenue from the transaction.

  11. The only rewards program that I really use is the Starbucks app. No matter how long I live in Boston, I don’t think I will ever be able to hop on the Dunkin Donuts train. I’ve been a gold Starbucks member for 8 years which is the highest level you can get. I go to Starbucks less because of the rewards app and more because of the coffee. But I definitely have purposefully gotten more food than I needed certain times to get bonus stars…crazy to think about, but I would never want to lose my gold status if I could help it.

  12. Interesting post. I think you made a great point about unnecessary spamming being a factor for losing customers. I don’t really use many loyalty programs, although now I’m thinking I should use more to take advantage of the free deals for first time users, but I do subscribe with several store emails to get discounts, but I had to make a separate account just to give stores to avoid the crazy amount of emails that I check when I am looking for a coupon or deal, and sometimes I ended up just unsubscribing all together because I found the emails so annoying.

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