Loyalty Programs’ Impact On Online Sales — Part 2

John Dawson commented on the last post, wondering if the greater online sales activity on the part of loyalty program members was due more to their underlying demographics than to their program membership.

While more affluent consumers are more active online, even within income bands, loyalty members are more likely to have shopped online this past holiday season than non-loyalty program members.

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So why would this be the case? My theory:

1) Loyalty members are more engaged with the firms whose loyalty programs they’re enrolled in. And as a result, they interact with those firms more often, and in more channels.

2) Firms right-channel their loyalty members’ behavior. Through frequent communications, retailers with reward programs communicate more often with program members, call attention to online capabilities, and steer program members online.

(And btw, 1 to 1 magazine’s claim that right channeling “got its start through the thinking of Scott Neslin, a Dartmouth professor” is wrong — Cathy Graeber and I first wrote about right-channeling in 2002).

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One thought on “Loyalty Programs’ Impact On Online Sales — Part 2

  1. Ron, let me state upfront that I’m a big fan of loyalty programs done “correctly”, but that’s another story…

    What I’m wondering is this: the stats for retail loyalty programs especially are often quoted in terms of “share” and “repeat” of people in the program versus those who are not. But typically, these programs are most attractive to best customers, so the program membership itself is heavily weighted to customers who are already best customers and already outperform other customers.

    In other words, there is significant measurement bias when comparing “in program” to “not in program” customers in this setting. Are you aware of any work being done to look at the true incremental profitability of a program when it is naturally biased towards best customers?

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