Customer Service


In today’s hyper-competitive business environment, leaders are working hard to find and free up capital to drive growth.

Looking at all the investments they make in the name of loyalty and customer satisfaction is an often overlooked and underestimated place to start.

The truth is that traditional loyalty programs are costing significantly more, and delivering significantly less, than many executives realize. To reclaim the loyalty value that is slipping through their fingers, business leaders are starting to rethink what loyalty means for their customers—and for their business.



Investments in loyalty are booming. More than 90 percent of companies currently  employ some form of customer engagement or loyalty program.

In the United States, alone, loyalty program memberships grew at a rate of 26.7 percent from 2012 to 2014. There are already 3.3 billion such  memberships, or 29 per US household.

And that number is rising. This focus on loyalty is costing more than most business leaders realize. Businesses spend billions each year for non-cash loyalty incentives.

Even more, and potentially greater, costs are hidden in the “loyalty” line item within programs that simmer in the background, consuming investments at a steady pace, year after year. Once activated, they are difficult and time-consuming to shut down. So they rarely are.

57 percent spend more on brands or providers to which they are loyal. That means 43 percent spend the same or less. And more than a third (36  percent) consider loyalty irrelevant to their spending.

Investments in loyalty are booming.

Given the high cost, is the business case for loyalty investments sound? It depends.
Accenture has found that members of loyalty programs generate between 12 and 18 percent incremental revenue growth per year than non-members. However, there are several indications that loyalty investments, in their current form, are not generating all the value they could. Our recent research confirms that for growing numbers of consumers, many loyalty investments are simply missing the mark.

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71 percent claim loyalty programs do not engender loyalty. 61 percent switched some or all of their business from one brand or provider to another in the last year. Not surprisingly, the propensity to switch is 6 percentage points higher among customers for whom loyalty programs have a negative or negligible effect. But even consumers who spend more on brands to which they are loyal switched 17 percent more often than those who spend less. And the clincher? “Loyal” customers who spend more are 9 percent more likely to retract their loyalty altogether.
77 percent of all consumers admitted they now retract their loyalty more quickly than they did three years ago.
23 percent demonstrate a negative or non-existent reaction to companies’ loyalty efforts. And that number is rising, particularly among younger consumers who will be critical to driving revenue growth in the years ahead. The sobering truth is that for nearly a quarter of consumers, all that spend is actually hurting the relationship.



Loyalty still matters. It always will. But today, as the correlation between customers’ loyalty sentiments and purchasing behaviors continues to weaken, it’s becoming clear that the old loyalty rules no longer apply.
Business leaders can re-evaluate their loyalty investments and adjust to the new reality with a strategy that focuses on maximizing value. Those that make the necessary changes will not only achieve a new form of competitive advantage, but free up capital that can drive additional growth.

Source: paper


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