Loyalty programs can help businesses increase customer engagement and influence purchasing behavior. However, signing up for or regularly using a loyalty program does not mean customers will become more loyal. Research from Edith Cowan University (ECU), based on more than 800 supermarket customers in Australia, found that loyalty program engagement was associated with higher retailer engagement and customer loyalty. Trust, perceived benefits, commitment, and the ability to use discounts can all influence participation.
The psychology of the checkout line
Businesses can encourage participation by making loyalty programs part of the purchasing process. Professor Sanjit Roy, from ECU’s School of Business and Law, said checkout prompts can reinforce the habit. “Many customers don’t have the time to do mental cost-benefit analysis. What am I getting and what am I giving up? Retailers know this, so they’ll prompt you at the till before you pay,” he said.
But participation depends on whether customers see enough value in a program. Spending $1 to earn one point and requiring 2000 points to redeem a $10 voucher, for example, may prompt customers to question whether it is worth using, particularly when offers are not personalized to their buying habits. Customers also differ in their ability to use discounts. Some may delay purchases or buy in bulk, while others may not be able to wait or have the budget to buy more. They may also compare deals across businesses rather than rely on a loyalty program, which the research refers to as temporal and spatial price search strategies.
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Building trust beyond the points
Trust also influences loyalty program engagement. Professor Roy said businesses need to consider the wider relationship with customers rather than treat the program as a standalone points or discount mechanism. Lessons from supermarket loyalty programs show that businesses can build trust through transparency around prices and business practices, customer service, and consistent delivery on commitments.
Retailers should strive to be transparent about their prices and business practices, provide exceptional customer service, and send out consistent brand image messages. If you make a commitment to providing fresh fruit and vegetables—ensure you deliver on that promise, he said. Businesses can also use customer data to personalize loyalty benefits and establish a dialogue with customers. Professor Roy said this can make loyalty benefits more relevant and help build trust. According to Dr Sadeque, market research can also help businesses align their values with those of their customers and develop personalized offerings that support loyalty program engagement.
