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We’ve all seen the stores out there that offer programs for being a “loyal” customer. To be honest, anyone and their mom can typically become a member of these loyalty programs and receive a card to keep with them and use while shopping. These programs can range from coupons used at check out to reward points based on qualifying purchases. Airlines use frequent flyer miles for every trip a loyal customer takes with the airline. Several companies employ these loyalty marketing tactics, but the real question from a business perspective is whether or not it is worth the cost to create a loyalty program within your organization. The answer is yes…and no.

Research has surfaced that says that only about 57% of Americans participate in loyalty programs. The hand-bc-1question lies in why does only a little over half the US population use loyalty programs, and what can businesses do to ensure repeat business?

Without going into a history lesson, let’s cover just a few bases on how loyalty programs have evolved and then we will talk about how and/or why you should (or should not) use a loyalty program to retain customers.

Loyalty marketing has existed for several decades; however, it was only in the mid ‘90s that consumers really started to buy in to the trend of loyalty programs. We know that coupons have been successful in the past, but did you know that couponing actually originated in the 1880’s (1887 to be exact) by Coca-Cola. Airline frequent flyer miles were introduced in 1981 by American Airlines. Since its inception the American Airlines program has grown to over 50 million active members.

So what does this mean for you? Does it work or doesn’t it? Well we can’t answer the question based solely on the history of loyalty programs. The second part of the answer comes from the feedback of the consumer over the past several years. Brandweek went the distance to survey the consumer market to find out that answer, and the survey says “Yes…but no”. Statistics quoted from the report on brandweek are as follows:

  • 69% say their experience with loyalty programs has been “pretty good”
  • 50” said their loyalty program “strongly motivated” them for repeat business
  • 37% said individual rewards had less to offer by way of value
  • 32% said they felt the program had little value
  • 10% said they were “very satisfied”

So what do these numbers mean? They basically say that if you are going to invest in a rewards or loyalty program make it a good one that offers a lot by way of value to the customer. Notice the key word of “value”. It doesn’t say that you have to give them the farm in order to create loyalty, but it does say that they need to feel like they are benefiting from the program. To give you a high note to end on, there was a 19% improvement from 2007 to 2009 in loyalty programs!

So, if you decide to invest in a loyalty program, here are a few tips that will help you keep customers coming back, instead of creating a customer for your competition.

Choose the right value to offer your customer.

  • 66% polled said they liked programs with “discounts and savings
  • 43% were looking for “better deals and offers”
  • 38% wanted “free products and premiums”
  • 36% asked for “perks and privileges”
  • 33% said “cash back”
  • 18% wanted “recognition and appreciation”
  • And 12% said “more individualized attention”

People are looking for the best prices everyday – not just on Sunday

Thanks to consumer retailers like Wal-Mart, IKEA, and others the consumer has now been conditioned to check for the cheapest price everyday and not just in the Sunday ads. Be cognizant of your consumers search and build a program that offers the ideal shopping location every day.

Be aware of your competition (and don’t carbon copy!)

Too many times in the business world we look at our competitors to see what they are doing to engage their customers. There is nothing wrong with researching your market; however, do not rush to do the same thing as your competitor. Euromonitor suggests that the increased competition in the market is causing a decrease in certain marketing initiatives and can cause more harm than good to your marketing budget.

When looking for a way to engage your current clients, be original in your attempt to re-engage them. If a loyalty program is your answer and your competition already has one, offer something different to your customers. You may even draw some of the customer from the other establishment by offering what the customers want.

Lastly, treat your customers right

However you determine to initiate a loyalty program, make sure the customers best value is in mind. If you can give things away without losing money then do it. If you can offer more quantity for the same price, give a little more. The consumer who is appreciated and feels good value is offered will shop with you again and again and again and they will tell their friends.

Determining whether or not to initiate a loyalty program depends on your business and what you are going to offer to your loyal customers. Take the time to research what your customers want, what your competitors are doing (so you know what to do differently), and give your customers the loyalty program they have been waiting for!

*Statistics compiled and distributed by Brandweek by Mark Dolliver from AdWeek. Euromonitor information obtained from the May 2009 Euromonitor International Strategy Briefing.