Loyalty is the brass ring that all companies want in their customer base. Loyalty will help a company ride out bad times, stiff competition or even poor products. Loyalty is earned and developed over time. As relationships grow between customers and a business or brand, a series of expectations start to manifest.
If the bond does not develop or starts to erode, companies may resort to various marketing efforts to shore up the customer or try to win back a churning customer base. One method often used is the good old loyalty program.
Prior to launching a loyalty program, clear goals should be defined for the project. Throughout development and implementation, keep foremost that the program should focus on the customer, not on products or sales.
Additional benefits of a loyalty program include:
Following are considerations in regards to developing a frequency or loyalty reward program. Keep in mind that a good program focuses on the customer and enhances positive behaviors.
A system must be put into place to identify and track individual members. Typically, this takes the form of a swipe card or a membership number of some sort. This number may be a phone number or another identifier. Compliance can be maximized if the identifier is easy to remember and the card is easy to keep track of.
Considerations for the program include membership duration. Will the member enroll once or annually?
Will there be a one time or annual fee? Will there be an enrollment kit that contains an immediate benefit such as discount on that day’s purchase?
Rewards are given to the customer for performing a requested or expected behavior. Some rewards are soft rewards, like shorter lines at the airline gate or being identified and remembered at the time of a retail purchase or when logging onto a website. Others are hard rewards like cash back, percent off or free product.
A general rule of thumb is to base the cost of the incentive on a percentage of the overall purchase, purchasing goal within a category, brand or product line, or lifetime value of the customer.
In consideration of relevancy, there should be several tiers to the program which will allow the sense of exclusivity without excluding the general customer base.
Rather than look for a one-to-one return on investment, track success of the program by measuring changes to the lifetime value of the customer.
Many companies are now affiliating with major points programs rather than starting their own program. There is an advantage in being able to redeem in many different ways, but avoid multiple agreements that reduce the feeling of exclusivity, i.e. AOL has partnered with virtually everyone to the level of becoming ubiquitous or confusing.
Remember that a loyalty program is an accent to a good marketing program, not a replacement for one! The program must avoid creating more loyalty to the points or the program than to the brand. And always develop an exit strategy with clear definitions of program rules and the ability to change or terminate benefits.