Relationship First, Loyalty Cards Second

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Is your wallet giving you a sore back à la George on Seinfeld?

Brian Palmer, in a recent Slate article, blames the loyalty reward cards and frequent customer punch tickets for your problem. As he writes, “Loyalty cards are usually a bad business strategy…. If a cashier tries to shove a loyalty card into your hand, it’s a good indicator that you should be taking your business elsewhere.”

He goes on to say that these loyalty cards are only relevant in industries where there is no differentiator between competitors in overall service or quality, such as airlines or car rental agencies. Companies should focus instead on relationships first before spending the time and money on a loyalty program.

Think about it: Would you still go to the same stores and buy the same products if you didn’t have a loyalty card?

When we reevaluate our own shopping habits, we can begin to reevaluate the driving forces behind business strategy. A loyalty program where nobody wants to shop won’t fix bad business. It’s not a substitute for quality customer interactions, above-and-beyond service, or a superior product. It’s also unlikely to make customers look very far beyond existing problems.

Before beginning a loyalty program, ask these key questions:

  • Are you focusing on customer relationships first?
  • How does your company differentiate itself in terms of service?
  • Is there a more creative or interesting way that your company could reward the top customers and brand advocates for your business?
  • How can you add value into your current customer experience model? Are there better ways of communicating with customers, such as social, that may provide more bang for your buck than a loyalty program?
  • Instead of a loyalty program, could you provide a “purple goldfish,” or a little something extra, at the point of purchase?
  • If you do want to develop a loyalty program, do you have a strategy for organizing, maintaining, analyzing, and using all of that new customer data?

When businesses focus on relationships first, they may find out that rewards or loyalty programs are unnecessary for driving future business. While there may be some value in developing a well thought-out loyalty program, the most successful businesses are those that already have strategies for developing true, long-term customer relationships.

What’s your opinion? Do customer loyalty programs make a difference in today’s economy or are they a marketing dinosaur destined to be phased out?

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