While shoppers join loyalty programs every day, studies (Colloquy Loyalty Census) indicate they don’t always participate, in fact in the USA it has been suggested only half the memberships in loyalty programs are active in the last 12 months. Which means we, as a population are addicted to signing up and taking the initial reward but do not follow up with additional transactions.
As the whole objective of a loyalty program is to create an atmosphere where customers want to continue to do business with you and encourage their family and friends to do the same, then if the studies show this is not happening then businesses are doing something wrong.
When we look at the loyalty programs in the market, we begin to understand why they are viewed with scepticism. For one thing business owners have an attitude that once they have set them up that is all they have to do (set and forget attitude) well this attitude will filter down to employees in no time rendering the programs blunted.
Although you have rewarded your customer, which is the obvious objective, this in itself does not make the customer loyal, it merely rewards them for loyal behaviour. Customer loyalty by definition, means commitment to buy from you over and over again. There is a clear difference. You need to do more, to create the loyal customer or you set up a marketing strategy which cuts into your profitability (discounting). I’ll assume you realise that discounting will draw a certain type of customer to your business but if someone offers the same service or product cheaper they will move. There is no lasting loyalty here.
So let’s look at creating loyalty starting with a concept “loyalty it not natural it has to be earned”, just like trust is earned in any relationship. Trying to buy it is ineffective, expensive and generally short term. Factors that make someone loyal to your business include:
Price, is one factor but it isn’t the determining factor when making decisions and remember someone will always beat you.
Value, it’s important that whatever you provide it’s fit for purpose.
Quality, which is close to value but it must satisfy the customer.
Experience, was it painful or a good experience and is your business culture good?
Convenience, we all want this but if you want me to travel you need to provide me with a reason to do so.
These and even social responsibility are factors in creating loyalty. As we said earlier it’s neither quick nor easy. It’s also not an impossible task and one that brings reward to the business owner if done correctly.
So a “loyalty program” is not the total picture nor can you just use a “set and forget attitude” to a loyalty program but so many people do and it’s why so many people are sceptical about loyalty programs. People set them up but don’t run them properly and when this happens it leads to clear opportunity for those who want to be different. If you are covering the above well then adding the loyalty program is the next step.
The loyalty program (whatever it is) recognises your businesses good customers, rewards them and possibly, if done well, makes them feel special. This paper is designed to remind business owners to make sure your loyalty program is not an inactive one or worse subject to customer and employee scepticism or treated as an afterthought.
Before we move to this subject, we need to remind owners that a loyalty program is the next stage after you provide great customer service. If you have not addressed the point listed above, your program will be behind your competitors. Business owner generally think better technology, communications or systems is key or a substitute for customer service – this is wrong. Give me a reward with poor customer service and I’ll take it and leave. You have not made me “loyal”. The customers will merely take the reward and look for a business that gives great customer service.
Customers want to feel special in a world that continually makes them feel insignificant. It follows that business owners who realise this and provide great customer service, successfully compete against others.
So how do we ensure your loyalty program members to not fall into the inactive category? We look at the elements to make it a success:
1. Data Collection
By collecting customer’s basic information and then tracking their activities you can provide more thoughtful benefits
- Saying happy birthday in person or by email, SMS
- Providing a little gift when they next come in
- Discounting something on their birthday
- Provide them with a birthday voucher when they next come in which you scan into the system
- Understand their current buying trends and offer something special or a special price for items which might interest them
You are telling them they are relevant and important to your business, which is a feeling we all want. It’s not the value of the gesture, it’s the fact that you made it at all which counts. Also this tells other customer’s what they might expect if they join your loyalty program and continue to trade with your business.
Ivan Pavlov was one of the first to recognise “classic conditioning” which led to behaviour therapy. In essence if we want desired behaviours, we must reinforce them. A loyalty program falls into this strategy but it’s not just important to give points or accumulate money on sales. In today’s market this is generic and worldwide (everyone does it), so we need to think of benefits that make members feel special and/or in an exclusive club.
- For instance if a loyalty member has purchased $1,000 in a calendar year then their transactional loyalty earns rises from 5% to 6.5% per transaction going forward then resets for the next year, or
- If a member purchases $500 they get an additional $25 added to their loyalty rewards, or when they have purchased $1,000, they get a $50 bonus added to their accumulated loyalty account and so on.
- Making the type of gifts relevant to who you are dealing with ie female or male oriented vouchers which can be used in local hair salons and/or petrol vouchers for either.
- Make special offers (price or rewards earned) to club members.
You need to determine the rewards based not only on your gross margin, but your client base. This could be a learning curve for you but one which will payback well if you get it right
3. Surprise and delight
If you do this well your customers will want to engage with you and be inclined to tell others that you are not one of many but treat them like no other business does. This is especially so when they don’t see it coming. We will refer to something we read some time ago which stuck a chord:
“Customers won’t remember what they purchased over time but will remember unexpected gifts “
Qantas does this well with unexpected upgrades from cattle class to business class or first class and while this would be cheap for them, you need to relate the reward to your business and clientele. You don’t want to offer prizes, which is like winning a lottery for one person out of your entire client base. Instead consider 50 people winning so they talk to others. Giving one person the gold ring makes one person happy and 99 per cent envious, while giving 50 people a silver ring tells them and others they have a chance to be surprised one day.
4. Convenience and meaningful
Make every transaction seamless if they use cards. If they have forgotten their card have a backup by providing them with the ability to use their mobile phone. Let the sales transaction update the loyalty program and don’t stop the process to enter what they have earned. Also make the process of them seeking to look at what they have earned simple and easy whether they are in your business, at home or in a coffee shop talking to friends.
Don’t make customers jump through hoops to enrol in your program. If you are upgrading from just loyalty cards with no details, reward them with a gift for telling you their name, birthday, email address and/or telephone number.
Make sure the rewards are commensurate with your business profitability and the money your customer is spending. A meaningless reward is worse than no reward at all and makes you look cheap and ridiculous. If you monitor their buying, tailor special offers to them and make them feel special.
Marketing in all its forms is crucial for businesses whether telling people who you are, what you do, to what you offer. Keeping the loyalty program a secret will do nothing and hoping clients talk to each other to spread the work could take ages. Use posters, counter/reception advertising, website information, Facebook and every means at your disposal.
Remember your employees are your frontline and if they are motivated you open the doors to the program becoming a success. Also a loyalty program needs effort to make it reward you.
Director Stephen Marshall