Consumer Skepticism of Customer Loyalty Programs on the Rise

September 26, 2012

One potential obstacle to the success of geo-fencing apps like those enabled by Apple’s new Passbook feature is growing consumer fatigue with loyalty programs, which often fall short when it comes to meeting customer expectations.

A report released last week by LoyaltyOne, which provides brands with loyalty services and data analytics, suggests U.S. consumers have become less willing to provide personal information to brands in the last year. In the survey, 78 percent of the 1,000 respondents said they do not feel they receive any benefit from sharing information with brands, up from 74 percent in 2011. Less than half feel that companies use customers’ personal data to better serve them, down 11 percent from 2011. The number who said they would share more personal data if it meant receiving relevant product and service offers fell to 62 percent from 66 percent.

“Consumers are disappointed,” said Bryan Pearson, president of LoyaltyOne, which provides loyalty services and customer analytics to brands and published the survey. “For years they’ve provided their valuable information, and they’re not realizing something of suitable worth in return. If businesses don’t act quickly to demonstrate they have the consumer’s best interest at heart, they risk an erosion of the business-to-consumer relationship.”

This is particularly true among outdoor specialty retailers, said Larry Pluimer, president of Indigitous, LLC, which helps brands sell on Amazon.

“The shining example of customer loyalty programs right now is Amazon,” said Pluimer, noting that Amazon Prime offers members unlimited, free instant streaming of movies and TV shows, a free Kindle book rental each month and free two-day shipping on eligible items for an annual membership fee of $79. “They keep making it more and more valuable and it’s a good wake-up call for everyone as to what you have to offer your customer to get them to opt in to a loyalty program. If you are a specialty shop, you should be asking yourself what you are going to give customers and how you are going to up that game.”