Aug 22, 2007 6:03 AM, PROMO P&I, By Amy Johannes

Retailers need to transform their loyalty programs, a new survey has found.

The survey, by Retail Systems Research (RSR), a research company run by retailers, found that companies need to balance their loyalty programs to capture consumer data and use that information while offering value to their keep people loyal.

Loyalty programs are no longer about rewarding customers. Instead the focus is more about using the customer data gathered from a program to influence customer behavior. “The more your offers delight your customers, the more you’re likely to actually get loyal ones,” the report said.

“Having a loyalty program is not enough to drive retail success,” said Nikki Baird, managing director, and author of the report, in statement. “Retailers need to execute their loyalty programs well—by focusing on the customer insights a loyalty program can generate, rather than just on the sales lift they expect to achieve. Retailers who are getting the most success out of their loyalty programs today have centered their programs squarely around the objective of capturing and using customer data to create a sense of customer intimacy and retail differentiation.”

According to the survey, 69% of people said loyalty programs have become even more important as a customer service strategy over the past five years, while 2% said loyalty programs have become less important. Customer insights, and the data collected from loyalty programs ranked as the top two most valuable aspects of respondents’ loyalty programs today (43% and 36%, respectively), the report found.

Some 74% of people said that driving sales was the No. 1 driver of loyalty programs, followed by improving customer purchase frequency/driving repeat purchases and improving overall customer profitability.

What type of program works best? Most survey respondents run points based programs, where members accumulate points based on the dollar value of purchases. Another 63% said their programs reward shoppers based on purchases. Other retailers give exclusive offers to members. Just 37% of people said they tier their programs, offering different benefits depending on purchase volume, the survey found.

But for some, loyalty programs don’t cut it.

Twenty-seven percent of people said they have no loyalty program and don’t plan to implement one. Of that group, 24% such a program would reduce their margin and 10% said loyalty programs don’t provide a return on investment. Nearly one-third of people (29%) said they realized the value of a loyalty program, but said they don’t have a one because they wouldn’t be able to make good use of the data, the survey said.

Instead, those retailers said their customers’ loyalty comes mostly from customer service, unique products, assortment, and low prices.

The survey offered tips on how to run a success loyalty program:

* Keep your loyalty program flexible.
* Make sure your program objectives keep up with changing customer expectations.
* Protect your loyalty data with tight security.
* Implement adequate measurement to track success.

Some 77 retailers responded to the online survey, which was conducted between May and June.

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