April 22, 2004, 12:00 AM

Marketers look to the web to boost flattening growth in loyalty programs

To differentiate their loyalty programs some marketers are using the web to expand points-based awards beyond the ho-hum to the unusual.


Even the well-designed customer loyalty program--meaning one that has sufficient scale and data management capacity to make it work--won’t hit its goals if it doesn’t grab customers` attention. Injecting the "Wow" factor into the equation with rewards that raise the stakes above the "ho-hum,” toaster variety is one way marketers are raising interest in their loyalty programs, and the web’s playing a role, according to Michael Capizzi, vice president and general manager of loyalty marketing program consultants Frequency Marketing Inc.

According to the company’s own research, growth in U.S. loyalty program membership is flattening out. The average increase in loyalty program membership exceeded a compound annual growth rate of 30% between 1996 and 2000, but in 2002, it grew by only 4% over the previous year. “The market is mature. Programs look the same everywhere,” says Capizzi.

In response, some marketers are trying new strategies such as web-based loyalty points auctions, in which loyalty program members bid points for special awards available only in limited quantity. As an example, Capizzi cites Dr.Pepper/Seven Up, which offers its LiquidLoot.com web site to auction off to points holders items such as home theater systems and autographed posters of musicians. Capizzi also notes that the web`s largest auction site itself has launched a loyalty program to take advantage of what is literally the largest awards redemption catalog in the world. In eBay’s Anything Points loyalty program, sellers encourage loyalty among buyers by awarding points redeemable on eBay items to buyers who pay with PayPal, for example.

For some members, the unusual rewards are singular enough that they become more than just rewards--they are sought-after experiential opportunities, Capizzi says, which increases the value they drive back to the marketers who sponsor them. “These are awards the consumer will aspire to redeem, which means growth in spending and increased share of customer or reduced attrition for the program sponsor,” he says.



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