In the retail point of sale, one problem seen with loyalty programs is that retailers want new customers, but often the primary users of the loyalty programs are the existing high users. So when they are starting a loyalty program what they tend to see is that they are giving a discount to customers that they already have. So I was engaging in reading a report by Paytronix Systems, a provider of reward program solutions, what they had to say about this.
Their conclusions seem to have a ring of truth as it appears to match our clients' experiences.
They tended to find as we do that that the high-frequency then the medium-frequency customers were the first to join a loyalty program. They are the ones that can most easy justify doing it. It took about four months for the proportion of new members when we start to see the existing medium- to high-visit frequency to drop to one-sixth.
They conclude that if you are doing something like this, you need to run it for at least four months of actively trying to get new customers to join your program and that you need to be continually enrolling new members during this period. After that, the program tends to get a life of its own.
Overall their conclusion, I think it is valid that customers on a loyalty program tend to come much more often and buy slightly more and you need to budget about four months.
This is one very successful programs that we are actively involved with that you may want to examine.
