In this post we will dive into one of the top issues affecting loyalty programs. We will see that there are too many loyalty programs and why coalition is the answer.
Too many loyalty programs
According to a research on American consumers (Bond 2016), each customer is registered to 13.7 different loyalty programs, but is actually active only in 7. This means that more than half of all loyalty programs aren’t having any effect on the customer.
The research also shows that inactive loyalty program members are 2.7 times more likely to switch to a competitor than active members. Non redeemers, that is those members that earn loyalty points and don’t claim any prizes are 2.3 times more likely to defect from the program.
The bottom line is: Users aren’t active in about half of the programs they register to. If they are not active and don’t redeem prizes they will defect from the program and likely to switch to competitors.
Your Goal as a merchant is to make your program relevant and rewarding for your customer. The rewards must be truly appealing. Even more crucial is offering the correct mix of opportunities to earn points and amount of points necessary to eventually claim prizes.
If there aren’t many opportunities to earn points, it will be more expensive to motivate the member to return and spend more.
For example: the small online shop that offers a very basic “punch card” loyalty campaign: “If you buy this product 10 times, the next one is for free”. In this case the store is giving back 10% of value each time the program member makes a purchase.
In the above example, if the member can only earn points on that store, how much value must the store give back to really stimulate the customer to return. How much value is the merchant giving back to customers that would most likely return anyway?
Coalition is the answer
Open programs, are not only a trend (as you can see for your self in this video ), they are the concrete answer to the far too abundant market supply of proprietary loyalty programs.
Coalitions, also known as open alliances, are a great way to make your program relevant and rewarding for the end user. By allowing more companies into a loyalty program the user has more opportunities to collect points. In a coalition the user has a higher probability to collect points through different channels. This way the user can aim at higher rewards.
For the merchant there is also a higher return on investment. It is estimated that a proprietary program requires the merchant to give back 5 – 10% of the value of a purchase to stimulate a 10 – 15% increase in sales. In a coalition instead, the amount given back is generally between 1 to 3% to stimulate a 10 – 15% increase in sales.
Other benefits of a coalition program include:
- Leverage base of registered members if the program;
- Lower implementation and maintenance costs;
- Leverage the brand of the program;
- Leverage aggregated data from the program.
Koomalooma is an open coalition program and platform designed specifically for mobile and web stores. Koomalooma has thousands of registered members collecting points globally.
You can set-up an account and get started immediately here
Otherwise you can get in touch with koomalooma team here to understand more about how our program works.