Key Steps to a Successful Loyalty Program

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A loyalty and rewards program offers the opportunity to solidify existing relationships, initiate new ones and convert your one-time visitors, buyers and prospects into repeat business and long-term members. Implementing a successful loyalty program is all in the process.

For your program to fully capture your customer’s loyalty and convert this into revenue and profitability, keep in mind important elements that are critical to the success of a loyalty and rewards program:

Precision Targeting – Many Loyalty programs fail to precisely target and segment their customers, both in terms of demographics/interest and in rewards offers. Instead, they may offer “discounts”, which only erodes margin and does little to build actual loyalty.
An effective Loyalty solution will offer:
– Precise segmentation capabilities of customers, including ability for customers to voluntarily “opt in” to various groups/clubs
– Precision offers, communication and rewards, targeted at customer interests.

Sanity Test. The goal of your program should be clear. Customers need to understand what’s expected from them and how they can benefit. In other words, there can be no “smoke and mirrors.” The program must be simple and easily understandable. You (and your employees in the field) need to be able to explain the ins and outs of your program to your customers in a way that is easily understood.

Value, Value and More Value. The rewards offered to your customer base must have a perceived value. Rewards offered to your customer base can be a combination of hard and soft benefits but in theory all should have a strong value associated with them in order to keep customers coming back for more. Customers really need to become emotionally invested in your program and feel as if they are being rewarded, they are a valued, have access and are being recognized. If not, the rewards will not become their goal and customers will lose interest in your program.

Rewards within Reach. The rewards of any customer loyalty program must be obtainable. The structure of your points and rewards system should be established in a tiered fashion in order to provide your program members with an opportunity to receive the perks and rewards associated with membership in your loyalty program. Random instant rewards drive the excitement, interest and momentum in the program.

Knowledge is Power. One of the most significant pitfalls to effective loyalty marketing is the use of tactics without the benefit of reliable customer data analytics. All the tools you need to develop a comprehensive customer profile are at your fingertips. Use survey questions to ask your customers what really matters to them. What giveaways appeal to them most? What offers are the most enticing? What rewards are most valuable? Using such information can be incredibly valuable in tweaking your program along the way and useful as a means of providing your customers with what they really want.

Communication. Establishing a loyalty and rewards program enables you to proactively communicate with your existing members, prospects or members instead of passively waiting for them to return to your web site or stop by a store to purchase your product. Talk to your customer base often with information and offers that make sense. A rewards program enables you to easily and affordably create communications that are valued by your customer (since they have a vested interest in your company and your products) and you can make those communications support and enhance your brand in a way that substantially differentiates your company from the competition.

8 COMMENTS

  1. Can loyalty be created by loyalty programs? If loyalty programs are needed to make sure that the customers will stay, then the reason why they stay is not because of true loyalty but because of rewards. It will only result in competition of loyalty programs in the industry. Winning firms do not buy customers, because they understand that true loyalty comes not from the head (money), but from the heart.

    Daryl Choy
    Make Little Things Count
    wisdomboom.blogspot.com

  2. Daryl

    There is plenty of evidence that loyalty programmes work, albeit in different ways, for different groups of customers, in different circumstances.

    A loyalty programme is just one of many market instruments available to attract, grow, retain customers. There is nothing wrong with customers being more loyal to the loyalty programme than to the company’s core offering. Providing it offers the company a sustainable advantage. It may even be worth more than the company itself.

    Just look at the successful spin-off of Air Canada’s Aeroplan frequent flyer programme into a stand-alone business in 2005. The Aeroplan programme was initially valued at US$2 Billion, significantly more than Air Canada! Today, Aeroplan has a valuation of US$3.3 Billion against Air Canada’s US$0.9 Billion.

    Graham Hill
    Independent CRM Consultant
    Interim CRM Manager

    Further Reading:

    Aeroplan on Aeroplan
    http://corp.aeroplan.com/

    Inside Flyer on Aeroplan (pre-spin-off)
    http://www.insideflyer.com/articles/article.php?key=2366

    New York Times on Frequent Flyer Programmes
    http://www.nytimes.com/2008/04/01/business/01frequent.html?_r=3&pagewanted=1&ref=business&oref=slogin

  3. Daryl-

    A loyalty and rewards program offers the opportunity to solidify existing relationships, initiate new ones and convert your one-time visitors, buyers and members into repeat business and long-term members.

    Establishing a loyalty and rewards program enables you to proactively communicate with your existing members, prospects or members. Through the program, you are building a better understanding of who your customers really are and marketing to them with information, offers, rewards that they want and are in their best interests. By understanding your customers better, you truly providing a better service, product, program. Customers appreciate that sense of personalization and understanding.

    A rewards program enables you to easily and affordably create communications that are valued by your customer (since they have a vested interest in your company and your products) and you can make those communications support and enhance your brand in a way that substantially differentiates your company from the competition. The importance of knowing the preferences of individual customers in order to more effectively direct strategy, promotions and category management to ensure a better competitive position in the marketplace.

    Aileen M. Stacy
    Director of Marketing
    Smart Button Associates, Inc.
    300 Creek View Road, Suite 202
    Newark, DE 19711
    http://www.smartbutton.com
    302.283.0200 x 106

  4. Graham and Aileen

    Thank you for the comments.

    I never doubt the power of loyalty programs. However, look at Apple. It has no loyalty programs but still it has a growing number of Apple fans. As said, touch the customers’ heart to create loyalty, but try not to use rewards as baits to attract customers to stay.

    Daryl Choy
    Make Little Things Count
    wisdomboom.blogspot.com

  5. Appel, Nike, Zara, Coke… don’t need loyalty schemes to drive loyalty. Becouse loyalty can be gained through very different ways, including by advertising or sponsorship.

    However, it is not hard to see the benefits a loyalty programme can have for all those brands. Some of them has already realized.

    But as it is said, all roads lead to Rome.

  6. I’ve been studying loyalty programs and CRM software after having been given the responsibility to plan and co-ordinate a Loyalty Program project for a large-scale premium product retailer. What I’ve discovered is that it’s possible to use the loyalty program either to classically condition customer behavior or to satisfy them emotionally. Monetary rewards, discounts and positive reinforcements encourage a consumer to show behavior typical of loyalty. However, like some of the respected members over here have already said, some loyalty programs can be structured to be more emotional and target different needs of a segment. There’s no hard and fast rule that says whether a loyalty program should target the head or the heart. It’s all about studying consumer psychology.

  7. Dear Nayeem Arefin,

    I agree with your comments.I am also joined as loyalty cordintor in big retail firms kindly guide me to make sucessfully runing of this program.I am waiting for your reply.my mail [email protected] or any body els can help me regarding this programme.

  8. I have ready a lot about the loyalty programme, and believe in it . Will a company be able to implement it without a CRM Programme . Is there anyone who can provide me with a sample of a loyalty programme.

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