Spurred on by Amazon, retailers are upping their loyalty program game—and associations that focus on loyalty might want to keep an eye on the perks and pitfalls. One such pitfall? Cybersecurity.
The for-profit world is increasingly finding much value in loyalty programs—and as the going gets tough, businesses are boosting their investments.
But not everything is rosy—especially considering the investment is coming partly as a result of growing competition, leaving open more room for error (and security risks).
Among the recent trends in for-profit loyalty programs that associations should heed:
Brand experience is a driving factor. In a recent report [registration] by Bond Brand Loyalty, the marketing firm found that one of the main reasons people took part in loyalty programs is that they improved the experience with the brand, not just that they could save them money. In a study of more than 55,000 consumers and 900 loyalty programs in more than 20 markets, the firm found that nearly three-quarters of respondents cited experience-related issues, such as brand alignment, support, and personal relevance, played a key role in their use of a loyalty program. The report also noted that if game mechanics were available in a program, 81 percent of respondents were likely to use them, and it led to nearly twice the engagement as simply having a membership program at all.
Amazon is increasingly an inspiration—and a frustration. A recent Reuters story notes that major mainline retailers are increasingly investing big bucks in loyalty programs, whether by trying to fix programs that aren’t working or by rebooting the programs entirely. With Amazon getting ever more aggressive with its efforts—it recently stated it plans to offer one-day delivery to Prime members—it’s creating something of an arms race as retailers attempt to keep pace with their digital competitor. “In the age of Amazon, it’s very much ‘what have you done for me lately’ type of retail environment,” Mintel E-Commerce Analyst Matt Lindner told the wire service. “The challenge these retailers are facing is how do you offer attractive rewards without totally compromising your bottom line.” Some are even making pitches beyond loyalty programs to keep up: Walmart just announced it would also offer one-day shipping, no loyalty program needed.
Data-hungry loyalty programs are creating security concerns. Of course, as loyalty programs become more popular and their offerings more valuable, it creates a situation in which the programs are more susceptible to hacking and exploits. A recent New York Times article noted how data-driven loyalty programs are increasingly the subject of criminal activity—with $1 billion or more lost each year to fraud in the programs, according to one estimate. The recent data breach that affected the hotel chain Marriott specifically targeted the chain’s Starwood Preferred Guest program, and companies such as Dunkin’ and the Canadian arm of McDonald’s have run into problems. Part of the issue, risk expert Kevin Lee told the outlet, is that because the programs are easy to sign up for, they tend to have weak passwords and can be forgotten about by their users.