As far back as the 18th century, when a U.S. merchant reportedly created the first loyalty program by giving out copper tokens that could be exchanged for items in his store, businesses have used incentive strategies to drive more revenue through returning customers.
Even though copper tokens have long disappeared from rewards programs, some aspects—such as a points system—hold steady while marketers experiment with new ways to enhance their relationships with consumers.
A points system that enables consumers to earn prizes and perks continues to be a popular approach to loyalty programs. As Kim Matlock, Hard Rock International’s senior director of digital marketing and CRM, notes, “Consumers like earning points off their purchases and having the ability to track their visits to Hard Rock locations around the world.”
Hard Rock recently rolled out a new global loyalty program, Hard Rock Rewards, for its cafes, shops, hotels, and casinos. The rewards include dedicated check-in lines, late check-outs and amenities at Hard Rock hotels and priority seating at participating cafes. Members of the paid program can also earn upgrades at hotels, membership to the Casino Players Club, and other perks.
Hard Rock deliberately avoids using discounts as an incentive, explains Hard Rock International chief marketing officer John Galloway. “Discount is a naughty word for our brand and our business,” Galloway says. “Instead we looked for other compelling offers that can drive traffic to all of our locations.”
According to Galloway, the company’s goal is to have at least one million people join the rewards program by December 2013. He declined to reveal how many people had already signed up for the program.
Even when a rewards program includes a discount, the benefits of added traffic and greater consumer insight can outweigh the costs, according to Julia Pchelina, customer loyalty manager at the IKEA Shopping Centers in Russia.
The Russian division of the furniture retailer, which is also a shopping center developer, created a loyalty card program in conjunction with MasterCard. Consumers earn points every time they make a purchase with their MegaCard, which can be redeemed at IKEA’s Mega-branded Russian shopping centers.
“The Mega malls have about 15 million unique customers so that gives stores an opportunity to attract people who may not already shop at their stores,” Pchelina says. “We also provide a monthly report that shows stores how many Mega cardholders came to them, the number of transactions, how much they spent etc., and they can compare that with the behavior of their other customers.”
There are currently 450 stores participating in the loyalty card program among 14 shopping centers and more than 300,000 people have signed up for the MegaCard, according to Pchelina.
In terms of implementing loyalty programs through mobile, social media and other emerging channels, many marketers are still in a “test and learn” period, according to Forrester analyst Emily Collins. In her report, “TechRadar for Customer Intelligence: Customer Loyalty Programs,” Collins notes the main challenge is that “for the few companies that have adopted these tools, the value isn’t always clear-cut.”
Without “widespread deployments and proven return on investment (ROI),” Collins continues, “marketers resist investment, and many of the tools…remain in a test-and-learn period while marketers wait for their bright and shiny features to be proven out.”
As the central hub for loyalty information and activity, program Web sites offer the highest business value, according to Collins, followed by social rewards and location-based services. Card-linked rewards and gamification techniques also hold promise as engagement tools, but it is still too early to determine what the impact will be, Collins adds.