(Original post: http://blog.beyondthepod.com/2007/06/26/the-loyalty-program-at-jr-music-world-and-consumer-loyalty-to-the-ipod/)
So I was reading that back in 2006 J&R music was “testing a loyalty program developed with San Francisco-based services provider Loyalty Lab.” The full article is here.
I wonder how that worked out? When I think about such loyalty programs they seem to lack real punch. I mean J&R needs to drive customers to their specific online e-commerce site when most consumers drift to what J&R calls “aggregator” sites.
The interesting problem is that most consumer loyalty is to a brand such as the iPod. The consumer’s loyalty is not necessarily connected to J&R. How can J&R capitalize on the consumer’s loyalty to the iPod and drive consumers to their specific web site?
The loyalty program they ran at J&R looks like it spiffed the consumer gift card by 2% or so for navigating directly to their consumer site. The reward is just not significant. I’m sure on the corporate books the reward looks monumental to the VP of Finance — digging a massive gouge into the margin. But the actuarial perception of the incentive is exactly the opposite of the perception of the consumer.
The consumer’s perception of a 2% spiff is actually creating a negative impact in the marketplace. The consumer thinks, “Is that it?” or “Is that all that a supposedly great store like J&R con do for me?” Such a small incentive actually damages customer loyalty rather than growing it. This is the risk of low impact offers.
Now what if J&R offered a J&R gift card for a used iPod of used Gaming Console the consumer previously purchased at J&R (or anywhere else for that matter). Consider how many more purchasers of new iPods would go to J&R specifically if the knew they could get a near premium price in J&R store credit for their old iPod to put towards their new iPod.
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