This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Right Way to Run a Loyalty Program at Your Business

Stocks in this article: SBUX

NEW YORK ( MainStreet) -- Whether you prefer a stamp card, a keychain or an online check-in to give your customers rewards, loyalty programs are hot -- but do they work? Most of them follow a simple model: Customers earn a free product or service after making a certain number of purchases. Companies may advertise them as "Buy 10 ice cream cones, get one free, or, "Your sixth cup of coffee is on us." No matter how you phrase it, the concept is simple: Loyal customers get rewarded.

We checked in with experts to find out whether businesses see the benefits of these programs, and which rewards method is most effective.

"We know that customer excitement around loyalty programs continues to grow," says Fred Thompson, retail practice lead at LoyaltyOne Consulting. "Companies are definitely seeing the benefits -- some of them have had sales increase by 10% to 15%. The real question is how you set yourself apart."

There were 2.65 billion members of loyalty programs in the U.S. last year, according to the 2013 Colloquy Loyalty Census. That's up from 2 billion in 2010 -- an incredible 26% growth in the past two years. The study also showed that the average consumer is a member of 22 loyalty programs, but is active in only around nine of them.

Smart companies won't try to offer the "richest, craziest, most outlandish" rewards, but will seek instead to offer something "compelling enough to get the customer to raise their hand," Thompson says.

"The whole point is to get customers to change their habit and make you a part of their daily or weekly routine," he explains. "You're not out for that customer who would have bought their 11th cup of coffee from you regardless; you're out to change the minds of new customers and build your brand."

When the customer is already loyal to you, a program won't help build your brand, he says -- you are just giving them a "thank you" discount.

"You want customers who will act, who will have a behavior change," he says. "If you spend your valuable marketing dollars on people who were coming to the store anyway, then it's just dilutionary and you should have spent your money elsewhere."

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs