Your Customer Loyalty Program: Improve It or Lose It

by Vanessa Richardson on June 15, 2011
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More than two-thirds of consumers have at least one customer loyalty card tucked away in their wallet. Nearly a third have two or more. But according to a new report by retail consulting firm CrossView, 54 percent of consumers are ready to “break up with their brands,” due to a barrage of irrelevant messages, low-value rewards, and impersonal engagements.

However, while a retailer’s loyalty program has little impact on their purchasing decisions, consumers do value what the brand represents, and 51 percent of them are motivated by their fondness for a brand when buying. That means that most people see participation in a business’s loyalty program as independent of the brand, says Jason Goldberg, the CrossView consultant who wrote the report, and that’s a major miss.

Do you need a loyalty program? Not necessarily, says Martha Rogers, a founding partner of the customer-relationship consulting firm Peppers & Rogers Group. “Many companies decide to do loyalty programs because they think they have to, because everyone else is doing it. That’s the wrong reason to do it.”

If you have a program or want to start one, forget handing out plastic cards with points and discounts that reward frequency rather than loyalty. Instead, create programs that strengthen the emotional connection between your business and your most profitable customers, Rogers says. “The right reason for a loyalty program is to recognize and reward your most valuable customers in exchange for information you can use to create products and services that more closely fit their needs and desires.”

Here are Rogers’ to-dos for creating a profitable and successful loyalty program.

  • Identify your best customers. The customer you talk to most may be so demanding that he’s costing you money, while the one who buys online every quarter may be a bigger spender. Find out which customers provide you with the most profit.
  • Find out their needs. Determine what those customers like most about your products, and what offers appeal most to them. To do that, start asking them questions casually each time you talk. When you’ve formed some ideas, mail a survey to get detailed answers.
  • Divide them into groups. Classify your customers into groups, from highest to lowest spenders. Then categorize which products and services get the most sales. The result: you’ll have a list of which customers to spend your marketing time on (as well as the profile of new customers you can focus on attracting in the future), and which offerings of yours are most attractive to them.
  • Determine their rewards. There are dozens of ways to reward customers, but you don’t have to make a big, expensive splash about it. Send personalized thank you notes for their business after each visit or big purchase. Send discounts after a certain interval of time if they haven’t bought anything. Send holiday discounts or personalized offers; a freebie on a customer’s birthday lets them know you’re paying attention.
  • Keep it up. Don’t just set up a loyalty program and then abandon it. Customers’ needs and wants have a way of evolving, so keep track of any changes in their information, from address changes to new purchases, and tweak your offers to keep them coming back.
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