Reward programs, including birthday freebies and discounts, have long been a way for companies and brands to build loyalty and incentivize spending. But now some companies are becoming a bit more stingy—and customers are taking notice.
Last fall, for example, many customers balked at Dunkin’s decision to stop offering a free drink on their birthday and instead give triple loyalty points on their purchase. On June 1, Sephora started requiring a $25 minimum purchase for online customers looking to claim a free gift and 250 loyalty points during their birthday month. And Red Robin added a dine-in only and $4.99 minimum purchase requirement for customers to get their free birthday burger.
Some experts say the cost of maintaining loyalty programs coupled with inflation and changes in consumer behavior since the start of the COVID-19 pandemic are reasons why companies may be pulling back.
“While we’re assessing our own personal expenses, so are businesses,” says Marshal Cohen, chief industry adviser of Circana. “Businesses have to look and say, ‘Are these programs working? Are they working to full capacity? … [And] is there another way of doing this that wouldn’t cost us as much money?’”
For Sephora customers enrolled in its Beauty Insider birthday rewards, for example, they can still claim their free gift in person with no minimum purchase. But it costs the company money to ship products sold online, says Leora Lanz, assistant dean of academic affairs and assistant professor of practice at Boston University’s School of Hospitality Administration.
Experts say the way companies communicate changes to rewards programs is key.
“What (brands) need to do is not make too many changes so often—because you’re going to start rubbing your audience the wrong way and it could backfire—and you should be very thoughtful about it,” Lanz says.
Consumers are likely to continue to see changes to rewards and customer loyalty programs down the road as companies assess their situations to figure out how to drive business in a more profitable way, Cohen says. Read the full story.
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Companies are reining in rewards and loyalty programs to save money - Greater Baton Rouge Business Report
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