Understanding Digitized Loyalty vs. Legacy Loyalty Programs

January 18, 2018 Vibes Marketing

With 12 months of potential in front of us, marketers may look for new and innovative ways to connect with their customers and offer them additional value.

While there’s no denying that loyalty programs work in terms of driving repeat business and extending customer lifetime value — loyalty program members spend 12% to 18% more than non-members — the fact remains that the legacy loyalty systems we’ve been using up until now are no longer efficient in the way we need them to be.

A Quick History of Loyalty Programs

You might assume that loyalty programs are a modern construct, but in fact, they can be traced as far back as the 1700s, when American retailers would give customers copper tokens with their purchases that they could return to redeem on future purchases.

In the 1800s, retailers in both the US and Britain began to offer stamps with purchase that could be redeemed for items out of a catalog (a practice that grocery chains like Albertsons have carried through to modern times. Customers would yearn for a particular item from the catalog and keep buying from the same retailer to rack up enough stamps to “purchase” it.

Enter the 1900s, where we saw box top collections, frequent flier programs, and then finally, at the end of the century (not all that long ago!), card-based loyalty programs. Before long, it seemed like every retailer was offering a plastic card that customers could use to add points from a purchase, then redeem rewards or discounts with.

While plastic card programs served their purpose, they now can’t keep up with consumers who thrive in a digital environment.

Why Legacy Loyalty Programs are Broken

You probably have an assortment of plastic cards clogging up your purse or wallet right now. If you’ve ever shuffled through your stack of cards at checkout, breaking into a sweat when you couldn’t find the right card, you’ve already seen one of the drawbacks of the legacy loyalty system.

Sure, many retailers can look up your loyalty account with your phone number, but not all. If you didn’t bother to memorize the 12-digit account number, your purchase wouldn’t count toward your loyalty points.

Cost, too, factors into why plastic loyalty card programs are dying off. Each physical card can cost between $.50 and $1.00 (which adds up, the more customers who join). The software you’ll need to access a customer’s loyalty account at the point of sale can cost up to $400 per location, plus $50-75 per location if you use credit card terminals to swipe the loyalty cards. On top of that, you may have transaction fees and monthly maintenance fees.

It’s not cheap.

For smaller retailers, loyalty programs may be a simple punch card where, for example, a customer gets a free coffee after 10 purchases. With such analog systems, these businesses haven’t been able to get valuable insight about their audiences…up until now.

What the Future of Loyalty Looks Like

Leave it to the technologists of the world to come up with a better solution for the loyalty industry. Now, the mobile phone replaces that plastic card, and provides so many more benefits.

Leveraging the power of the mobile wallet, digitized loyalty cards are accessible to consumers with the swipe of a finger. At the point of sale, shoppers can tap their phones to the payment terminal to unlock their loyalty information, rack up points, and redeem loyalty offers.

For the consumer who wants to sign up for a loyalty program, there’s no rushed form-filling at checkout to sign up. The mobile wallet pass for the retailer will auto populate with the shopper’s information once they give the wallet permission to do so.

Not only are digital loyalty programs more affordable than their plastic predecessors (90% cheaper, in fact), but they also provide unprecedented amounts of data that help marketers better understand which offers drive sales and which stores see the most loyalty redemption, as well as provide access to granular details on consumer behavior.

With that sort of insight, retailers can boost conversion rates, personalize offers, and maintain long-lasting customer relationships.

This quarter, we’re launching a #DropYourWallet campaign. We’re helping retailers lower their costs for loyalty programs while increasing signups and utilization. How much could you grow your business this year by upgrading and updating your loyalty program?


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