Loyalty: The Year Ahead

In 2010, the loyalty landscape will continue to be quite dynamic as companies continue to adapt to the uncertain economic climate. In particular, here are a few predictions for three specific industries:

FINANCIAL SERVICES: credit and debit issuers will continue to reflect on how to evolve their loyalty program value propositions in a challenging regulatory environment. With high levels of negative public opinions of the banking industry, issuers will have to navigate carefully as they make changes to existing rewards programs.

Among forward-thinking banks, we may see a trend toward the simplification of the loyalty options they provide cardholders rather than the adoption of annual fees for reward cards.

RETAIL will continue to see strong growth in loyalty efforts. For example, the executive teams of two major retailers (Walgreens and Rite Aid) have already publicly proclaimed that they will launch customer loyalty programs. We expect we will see other major retailers follow their lead. Retailers continue to increase their efforts to leverage customer insights from loyalty programs in ways that move well past simple marketing applications. In fact, about 10 retailers are already actively finding ways to apply customer-specific insights into their merchandising strategy. In 2010, more retailers are expected to make strides in progressing on the path to “enterprise loyalty”.

TRAVEL Some airlines and hotels will start to reap the fruits of their efforts to improve their rewards and benefits. Several companies like Hyatt, Marriott and Delta have reengineered many of their elite membership benefits to encourage frequent travelers to consolidate their travel activities with just their brand. As the economy begins to improve in 2010, many of the loyalty leaders in the travel industry will be well positioned to capture an even greater share of the frequent traveler’s business as companies start to loosen travel and entertainment budget restrictions.

The U.S. loyalty landscape is vibrant and growing. And, while companies face challenges in ensuring their loyalty programs are distinct and set up for long-term sustainability, continued growth is expected in loyalty efforts and customer adoption. In fact, 2010 may be the year that the number of U.S. loyalty program memberships exceeds 2 billion.

Kelly Hlavinka is a partner at Colloquy. She can be reached at [email protected].