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Loyalty programs, between brand and revenue

Jaime Jimenez | Sep 26, 2017 127 views No Comments

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“Customer Loyalty” this is one of top thoughts of the marketing executives along all the industries. This is not new, until now, not all the management teams were fully aware of the costs of focus their initiaties only in new customer acquisitions. CRM strategies were deployed in companies from long time ago and there are a lot of published case studies about this.

Return on investment (ROI) over new customer acquisition is lower that the one we can get talking about ROI over existing customer. Every company aim is the growth (revenue, number of customer, market share,..), therefore we should expand our sales activities as much as possible. Our efforts could not be based only of the renewals (selling repetition to a existing customer). Cross-Selling and Up-Selling activities are key. Although could be very good financial indicator, could help us to understand as well the customer satisfaction as it indicates not only that the customer trust on us as company, but also that customer expands the portfolio with our products.

Some of the companies are changing the strategic approach, moving forward from a simple product provider company to a solution selling one. Also, they are looking to improve the end-to-end customer experience (from pre to post sales moments). This is the first step, not an easy one, in order to set up a loyalty program. Be a customer-focus company means ensure we are able to address all customer’s needs and problems with our products. The engagement with the customer should be from different point of angle, customizing them as much as possible. Digital transformation is about this, and taking this step forward will ensure move away for a commodity company, have the price as unique competitive advantage. Don’t take wrong, price is a key element to take care of, but not the only way we should rely on. It depends on the strategy to follow, but a long-term relationship with customers could not based only on this parameter (price). All these customers searching only for the best price are not loyal a all. As soon as they find a cheaper provider, they simply go for that, ignoring the historical story behind.

In a nutshell, a loyal program goal is an initiative designed to reward the most frequent customers. But this reward could be in a huge variety of way. Looking thought the market there are a lot of different programs. I don’t want to list or rank them, but I would like to group them to review some of the more efficient ones.

    – Reimbursement or point system: When customer buy any of our products or services, we will assignment him/her some points. These points could be use in getting back rewards, reimbursements or new products in further transactions. One of the variant to mention, is that the points or prices to get back depend on the customer category (this category or classification use to be set up on the money spend by the customer or products they get). This type of loyalty program is not applicable to all business model. It is more suitable for those ones with frequent transactions run into a short term selling cycle. However, the mentioned above variant, should be apply to a higher end products with longer selling-cycles, when company search for a longer term relationship with those customers. One of the best examples are the Milles programs from Airline companies (i.e KLM, Iberia, Delta,..)
    – A different category, event though it could be group under the previous one, is the collaboration and partnerships with other entities (Charities and NGOs in some cases). When a customer get points by buying products, those could be be exchanges by getting articles from these associated business partners. American Express is the best example on this category.
    – Gamification: it consists in apply gaming techniques in non-games environment. One of the usage is the boost the customer engagement. When a customer buy a product, some rules are triggered. All these will be reflected in a game, that will progress as the customer would evolve within the relationship with the company
    – Emotional reward. More and more companies are trying to deploy these kind of programs very focus on return back to the society part what they earn in different ways. This model could be applied to any industry, but NGO, charities and companies with a philanthropy background are more likely to be eligible. However there are companies as Philips, Patagonia or Toms, that give back part of their profits to the society (via Charities or organizations) in order to help the more disadvantaged citizens. These companies try to increase the sell outs, while help certain segments of the society. The brand component is key, as the company image will be associated with this initiatives.


Loyalty programs
is not a different case, and it is crucial to have a clear Key performance indicator (KPI) to measure the success. This will help us, as company, if this initiative is working as desire, or if any adjustment or fine tune is needed in order to meet set up goals (customer loyalty in this case). There is not a magic formula, neither universal best practice applicable to all the cases. But there are some that use to be applied such as Churn (rotation of customer within our data base), Net promoter score (NPS) or recommendation rate by other customers, or even number of hold products per customer (indicating how many of our products in average have our customers)

All metrics have to be clear and straight forward, and more important being sponsored by top management. This will convert this initiative in a priority along the organization, and will help us to deploy it in the best way, mitigating some of the internal roadblock (we always face some). Not less important to mention the importance of set up a multidisciplinary team, where each of the members could provide insights from a different angle. A loyalty program is the pure definition of the end-to-end customer experience, as it will involved marketing, sales, finance, IT, HR and many other areas. Do you have any good example to share?

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