Why have a loyalty program? Do they actually work?

We all know what they say about loyalty programs, but is it true?

Does a promise of saving a few pennies actually inspire loyalty? Are they worth an investment?

Answer this question: If you were shopping for sneakers and you hold a rewards card to The Thrifty Sneaker, would you shop at Shoes with a Soul? Chances are, you wouldn’t. Why?

Pack Mentality

Loyalty programs provide a way for customers to feel like they connect with the business – they are part of something. They will feel loyal to a store simply because their name is on a list somewhere on the computer and a card is in their pocket. It’s simple, but it works. Why?

According to Susan Fiske, a Professor at Princeton University, the need to belong is a very real need. Psychologists call it the pack mentality. Every one of us wants to be accepted into a group such as a sports team, a family, or a clique at work. This pack mentality is an emotional and mental need to give and receive affection from others that are similar to ourselves. Fiske has found that we join groups that are full of people who like the same things (such as television shows, styles of clothing, or celebrities) or who have similar opinions.

A girl who loves dolls will play with other children who enjoy them. A skate-boarder will undoubtedly find a group of people who skate. People like to relate to others who are similar to them.

In the past, it was difficult to survive on your own. Straying from the pack meant fighting for your life and trying to avoid starvation. Every one of us wants a family, a nation, or a world that we are familiar with and belong to.

Free Advertising!

Science has proven the more times you see something, the more present it is in your mind. In fact, we don’t need to consciously be aware of a thing for it to affect us.

Derren Brown has studied the mind for over a decade, and has come up with a way to explain subconscious advertising. He is able to influence thought with subtle signs and images.

To test his theory, Brown took two marketers and drove them through the city to their destination where he told them to create a logo.

Beforehand, Brown made a logo that he predicted would be similar to the one the marketers would create. When the marketers finished, the logos were compared.

They looked almost identical!

How did this happen? Derrin Brown had placed many images and symbols on the route to the office. When the marketer’s were taken to the building they were exposed to subtle images and slogans that related to their project. They had no recollection of ever seeing them, but both marketers were affected none the less. Based on these symbols and images, Brown was able to correctly predict the finished product.

What’s my point? The key chain and card offered by loyalty programs are walking advertisements. How many times do you look at your keys throughout the day? The customer is reminded of a store every time he uses his keys, whether he consciously acknowledges it or not.

The end result? When they need a hammer, the store logo on their keychain will be the first they think of.

Reciprocation Principle

Have you ever received a gift for Christmas from someone you weren’t planning on giving a gift to? I have. I am immediately filled anti-holiday cheer and bolt to the store. Why couldn’t I just accept the gift? Why do I feel like I have to give one in return?

I blame it on the reciprocation principle. It states that people feel inclined to give when they receive something.

I’m sure you know where I’m going with this. A loyalty program provides a way to give to customers, making them more inclined to spend money. The end result, more money is made.

It Works!

To be blunt: it’s a way to bring customers back. If customers think they are saving money, they will continue shopping. A loyalty program is a way to give money back to the customer.

A rewards program offers a compelling reason to return to a store, and it is easy to use. All the customer has to do is use their key chain card to link their purchase to their rewards account.

Rewards programs are a way of giving your customers benefits and increasing store sales.

So, Are Loyalty Programs worth it?

Yes. According to Jose Alvarez, a senior lecturer at Harvard Business School, loyalty programs are incredibly affective.

  • It creates loyalty by giving the customer something to belong to — the pack mentality.
  • The key chain is constantly reminding the customer of the store — advertising.
  • It motivates customers to invest in the company because it invested in them — the reciprocation principle.

In the end, it all comes down to the customer. Customer satisfaction makes or breaks a store. A loyalty program is one more way to keep customer’s happy and coming back.