Lessons Learned from 879 Programs in 45 Countries
When resources are too scarce to support a long-term reward program, some businesses dip their toes into temporary loyalty programs instead. These short-term programs have similar point accumulation and redemption structures as their permanent counterparts. But they usually run for only a few weeks or months.
Do grocery stores’ free holiday turkey or ham programs come to mind? Yep, those are some of the best known short-term loyalty programs.
Temporary loyalty programs are not always limited to businesses that cannot have or do not want a permanent loyalty programs. Sometimes companies offer them alongside existing permanent programs, as sort of a “program-in-a-program”.
Whether standing alone or as program-in-a-program, do short-term loyalty programs work? How should they be designed for success? A recent research study led by Professor Nick Bombaij at the University of Amsterdam offers some answers. In an article to be published in the International Journal of Research in Marketing, the researchers report their analysis of 879 short-term loyalty programs run by BrandLoyalty in the grocery retail sector across 45 countries. We bring you the key insights from their research.
A Word about Success Metrics
Before diving into the findings, we’d like to point out the success measure used in the research. The study focused mostly on a redemption-based metric, which is calculated as:
In essence, this metric captures the percentage of a retailer’s sales that were accrued for reward redemption under the program. It is very much a gauge of customer participation in the program.
This rate ranged from less than 1% to 83% across the programs, with an average of about 14%. As you read further, keep in mind that most of the findings are based on this redemption/participation based metric.
Is it the best metric to use? The answer depends on what a program’s goal is. For some, direct sales impact may be more relevant instead. Fortunately, the researchers did analyze a subset of the programs with more detailed sales data. We will get to that latter in the article.