Loyalty Marketing is Much More Than Points and Redemption

Written By Linda Xu, Strategic Marketing Analytics Manager, Synchrony Financial
Edited By Wen (Ellen) He, Medill IMC Class Of 2015

Published on 10/21/2015

“American business has developed an insane imbalance between obsessive customer acquisition and negligent customer retention.”
Wunderman’s Loyalty Marketing Practice

This quote is particularly true with the credit card industry. New account acquisition has been the main focus of marketing and hit-and-run rate (percent of new accounts that only use the card once to get the initial discount and become inactive afterwards) has been trending upward. Retailers know that they will be missing the boat without a loyalty program to keep customers engaged; however, often times such programs are developed with good intentions but with unclear objectives and a very meager budget. It is estimated by Colloquy (2015) that there are over 3 billion loyalty program memberships in the U.S. (a 26 percent increase from its 2013 census) — with the average U.S. household participating in 29 programs. Approximately 58 percent of those memberships were inactive (defined as no engagement within a 12-month period), bringing the average household active participation to 12 programs.1

The competition is fierce, and therefore loyalty programs have to differentiate by being much more than points, thresholds or incentives. Consumers are demanding more than something a little extra. Reward is now perceived as an entitlement. Furthermore, consumers’ mindsets have shifted, to some degree, away from a desire for possessions to a desire for experiences.

Nordstrom’s exceptional customer service and aspirational loyalty program are the reasons why the company has enjoyed one of the most loyal and engaged member bases in the industry. Its hassle-free everyday free shipping and return policy is attractive to busy working women. The structure of Nordstrom’s loyalty program and the data insight the company has gathered through the program to make informed product, marketing and customer experience decisions are key to its success.

Long-term customers are the most valuable to a company, as business strategist F.P. Reichheld put it so well: “As a customer’s relationship with the company lengthens, profits rise. And not just by a little. Companies can boost profits by almost 100 percent by retaining just five percent more of their customers.”

Credit card customer behavioral data has proven the point. If a customer isn’t engaged with the card during the first 90 days after acquisition, the chance of him/her becoming hit-and-run is very high and the issuer will never recoup the expensive acquisition cost. Therefore, early engagement is crucial to loyalty and long-term profitability. It’s important to communicate the card benefits and the content of the loyalty program to new customers right away and generate strategic touchpoints throughout the card life cycle. Luring consumers back to the store with coupons might be a good idea, but what if you can predict what they are likely to purchase next and send relevant offers that speak to them personally? This type of insightful communication will breed a more engaged new customer base early in their life cycles and stimulate the desirable cross-shopping behavior. Our data proves that customers who shop multiple departments are more likely to remain active.

Loyalty programs are far more than offering points to the best customers so that they’ll continue spending. It’s about acquiring new customers with desirable behavior, increasing the spending of existing customers and shifting spending to higher margin products. Additionally, analytic insight from loyalty programs facilitates meaningful dialogue with customers to satisfy their desire for experience rather than possessions. [END]


  1. “U.S. Customer Loyalty Program Memberships Top 3 Billion for First Time, 2015 Colloquy Census Shows.” Colloquy.com. Colloquy, 9 Feb 2015.


LindaXu Linda Xu is the strategic marketing analytics manager for Synchrony Financial (previously known as GE Capital), a consumer financial services company in the U.S. Synchrony Financial provides a range of credit products through programs it has established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. At Synchrony, Linda leads the strategic analytic efforts for the Specialty Retail Group (SRG) portfolios utilizing new account acquisition, transactional, demographic, bureau and any useful external data to gain customer insight and build loyalty.
DSC_7500 While in college, Ellen He interned in several different fields, including: database and CRM, PR and creative in a national advertising agency, mobile commerce and internal management for a top real estate corporation. She graduated from Xiamen University in China where she received a bachelor of arts degree in advertising.

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