We lack clear language and definitions for loyalty programs. This page deconstructs such schemes to provide a better framework.
Loyalty programs come in many shapes and sizes, and the majority of consumers are in at least one program. But despite loyalty programs being quite commonplace, there is no common industry language or framework to describe them. I’d therefore like to propose a new framework to describe loyalty schemes…
The problem? Depending on which text book or industry figure you follow you might think of loyalty programs being categorised as:
- A B&T article of a few years ago listed 5 types; Appreciation, Reward, Partnership, Rebate and Affinity programs…
- Liu & Yang (Journal of Marketing 2009) proposed a 3-way framework looking at 1) internal company dynamics and 2) external factors (customers & competition).
- Barry Berman’s Types I-IV.
But no-one really agrees. As a result, marketing professionals have to use imperfect and imprecise language to define or create loyalty schemes, and as a result can miss market or customer opportunities.
The answer? Loyalty programs are in fact quite complex and multi-dimensional. So a simple list of scheme types is not going to be useful – we need a more multi-dimensional framework to describe them and help us design them. Here is a framework for describing loyalty options, with examples of how each fit.
Looking at this, it’s clear that here are a huge number of permutations, and any company can design a unique programs by moving the ‘slider’ to any position for any of these dimensions.
All four loyalty programs shown are successful – this framework is a tool used for scheme design, for competitive positioning, for customer fit and corporate objectives, and is one of many such tools in our kitbag. Use it, adapt it, or contact us to discuss…
