By George Anderson
As retailers know, there is a big difference between a customer having a store's loyalty card and that customer being loyal to the store.
According to a report in the St. Louis Post-Dispatch, nearly 90 percent of customers carry at least one loyalty card but only 20 percent say the cards are important in their decision where to shop.
Some, such as Frederick Reichheld, author of "The Loyalty Effect" and a director at Bain & Co., have come to the conclusion that most loyalty programs do little to keep customers from defecting to other stores. What often happens, detractors argue, is customers purchase items they would have anyway but, instead of paying full price, they buy at a discount.
"I see companies pouring enormous resources and energy into loyalty programs that really don't create loyalty at all," said Mr. Reichheld.
Others suggest that the problem is not with offering a loyalty program but with executing it properly. Retailers, loyalty card proponents argue, are not using the data they capture from cardholder purchases to tailor offers to their needs.
"Take a step back and reconsider what the true objective is," said Mr. Reichheld. "Is it just to push more merchandise on the consumer, or is it to build a better relationship?"
Retailers, for their part, still remain committed to card programs as a means to better serve customers. Chains such as Chico's and Circuit City, for example, use the information from loyalty cardholders in determining product selection on a store-level basis.
Nordstrom sees the combination of its superior level of customer service and the benefits of its Rewards' card program (discounts based on purchase levels) as the right approach to achieving shopper loyalty.
Company spokesperson Deniz Anders, said, "Customers that have more of a relationship with Nordstrom through Rewards, or through their salesperson, do end up shopping more with us."
Moderator's Comment: What is preventing retailers from using loyalty card data to its full potential? Are there retailers successfully tapping into card data to generate customer loyalty? How are they doing it? - George Anderson - Moderator