Are Loyalty Programs Loyal to Income Disparity?
After attending a recent conference on E-Commerce, with its talk of discounts to debit card users and Amazon Prime, I wondered how we ended up with so many consumer benefit programs that reward people with cash on hand, instead of people who can’t afford the extra upfront cost but who desperately need the savings. If everyone knows massive income inequality is bad, what models can we put in place to fix the problem?
Of course, from a retailer’s point of view, having a “more-you-buy-the-more-you-save” policy increases brand loyalty and sales–this sounds like a great strategy for economic growth. But there is a cultural disconnect: loyalty or discount models appear to offer long-term savings for the consumer and short-term growth for the seller, but for a healthy economy, don’t we want spending power for the middle income consumer and sustainable growth for companies that offer real value?
Loyalty or discount programs which appear to offer benefits have become ubiquitous and on every business list of “best practices” for organizations. Even the New York City Metro Transit Authority has taken it to heart. Discounts are passed onto frequent riders who purchase “pay up front” products, like the monthly unlimited pass. Yes, this saves some money over the course of a month, but a commuter needs to shell out $116.50 before the month begins. That’s a pretty daunting cost for a minimum wage type worker who might feel more comfortable paying $2.75 per ride. I don’t want to fault the MTA – one of the great mass transit systems in the world. I am a loyal user (or is that customer?).
There is a business model innovation opportunity to make this a win-win situation for both retailers and consumers: one where a middle class can financially thrive and their spending power supports the success of companies that support the middle class.
This week’s heartening news of one such model is inspiring. CEO Dan Price of Gravity Payments personally took a massive pay cut so that he could guarantee his lowest-paid workers would earn at least $70K per year. Imagine both the happiness and the consumer buying power of those employees. It goes even further that that: what informed consumer wouldn’t want to support a company that makes choices like this? Now that’s a loyalty program.
