A loyalty program seems to be an ideal tool for businesses to cultivate their own marketing list. Yet, with the growing popularity of customer loyalty programs, I am seeing an alarming trend: business owners often do not own their member data!
While discounts and promotions serve as a great incentive for customers to join a loyalty program, the real benefit behind offering a loyalty program comes from the ability to cultivate your own list of targeted and highly engaged recipients to market to. With a customer loyalty program there is a high potential that your list would be:
- Targeted. The business is able to access and survey useful data on their customers' spending behaviors, and use that data to tailor relevant incentives to send them.
- Highly engaged. As many as 94% of consumers mention that they want to hear from the loyalty programs they participate in, and over 50% said they always read that communication.
Growing a marketing list is at the heart of just about every business development plan out there. Having that list not only makes marketing possible, it also provides a safety net in the highly volatile world of small retail businesses. Rainy day? Slow season? Bad economy? Having a customer list to market to can be that parachute needed to survive the tough times.
But that is precisely what is not being delivered by most of the loyalty programs you see out there today.
How could a business ever agree to a loyalty program, without owning the customer data?
Here is how it typically works. A loyalty platform vendor convinces the business owner to sign on to their service, which comes with a bunch of hot gadgets (tablets/kiosks, scanners, plastic cards, apps). Hey, other businesses are already doing it and giving out rewards. The technology makes the business look advanced, the process is fun for the end consumers to play with, and easy for the staff, so it should be a "win-win", right?
Not so simple, if you look into the details.
The loyalty program provider is using the businesses to grow their own community
When joining the program, consumers become members of the loyalty program's community. Such members are not "exclusive" to say, Joe's Pizza, or Susie's Spa. Members are shared within the user base of that loyalty program vendor.
- When joining, consumers are aware of the fact that they are signing up for provider's loyalty community (with Joe's Pizza as a participant), and they would be using the same plastic card and/or app (with the provider's branding on it) to earn points or punches at Joe's Pizza's, but also potentially at Joe's competitors.
- Often the loyalty provider markets to its user lists directly, and Joe's customers may use the loyalty program to receive offers from Joe's competitors.
- Price-motivated users join to be a part of some loyalty community where they can watch for rewards from multiple businesses. They may have zero loyalty to your business, as they are simply shopping for discounts and freebies in the area (think Groupon-light). In fact, the main message on the provider's website is often targeted to the consumers, explaining the consumer benefits of their service.
While businesses are the ones paying their loyalty program provider a monthly fee to use the service, the actual customers of such loyalty programs seem to be the end consumers, not the businesses paying for them.
No access to members' contact information
Some popular loyalty program options give businesses zero access to the contact information of their members. The benefits of being able to control your destiny by sending the last minute "slow day" promotions or birthday offers are simply not there for the business.
Not owning your customer data
A few loyalty program providers do include the ability for the businesses to market to their members. Yet, the catch here is that the business does not own their loyalty program member list. If you take a look at the provider's Merchant Terms of Use, you can often find things like "all customer data is owned exclusively by [provider]", "the [business] is not allowed to separately store or download customer data", "the [business] is allowed to market to customers only through the use of [provider] services."
With these legal terms, what happens if the business needs to discontinue the relationship with their loyalty program provider?
No easy way out
In the unlucky event that the relationship with the loyalty provider goes sour (or the provider goes out of business), the small business owner would lose their marketing list AND their loyalty program member list. Transferring your loyalty program away to another provider without transferring your member data would instigate a huge disappointment to existing customers who may be in the middle of earning a reward and would now be starting from scratch (and joining again via a new provider).
Considering that many small businesses don't use any other CRM or marketing tools, in the event they lose the loyalty program the business would lose the only customer list they have.
Essentially, while doing all the heavy lifting of encouraging their own customers to sign up, and paying the loyalty program provider for this service, the business somehow ends up not owning their most important asset - their customer list. I am, by no means, stating that all loyalty program providers out there follow the above philosophy, but the trend is definitely there, and is something to be aware of.
Make sure your loyal customers are loyal to your business, not the program.
The best way to protect your business from these practices is to make sure you can view and download your own customer list. Read the fine print, and make sure, in legal terms, that you have the ability to reach out to your own customers both now, and down the road.
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Image credit: en.wikipedia.org