Loyalty programs have been around for quite some time. One of the first real loyalty programs was S&H Green Stamps which emerged in the 1930’s. Customers would receive stamps at the checkout counter of supermarkets, department stores, and gas stations among other retailers, which could be redeemed for products in their catalog. In 1981 American Airlines launched one of the first modern day loyalty programs which was quickly replicated by competing airlines, hotels, rental car companies, credit card companies and retailers.
Despite the fact that there are over 1.8 billion loyalty program memberships in the US (according COLLOQUY, 2009), more than half (56%) of those memberships were inactive for a year or more.
There are many reasons why loyalty programs are often abandoned – but first, I think it’s important for companies to realize that loyalty is not just about points or rewards; it is about nurturing existing relationships, initiating new ones and converting first time customers into long-term customers. If done right, companies can reap the rewards of their loyalty programs.
Loyalty programs allow companies to gather and mine an abundance of relevant customer data. But if that data is not used properly – or at all – there is no point in launching or maintaining a customer loyalty program.
The use of that data needs to be used effectively to improve the customer experience and to create a customer-focused strategy. It should be used to identify customer segments, in addition to measuring and understanding customer behaviors. Only then can you effectively communicate with your customers by providing highly targeted offers, communications and rewards based on their interests and past history.
Many of the leading loyalty programs focus on increasing the frequency or amount of purchases over a specified period of time. This gives customers a reason to spend more and to keep coming back.
Developing Your Program
Simplicity – The program that you create needs to be simple and easy to understand. Customers should know immediately what is expected of them and how they can benefit from the program. Additionally, every employee should be educated on the program and should be able to easily explain the process and benefits.
Tangible Rewards – It is important to offer rewards that are obtainable. People are smarter than they appear and will know if your program is too good to be true.
Provide True Value - The rewards you offer must have a perceived value where customers truly feel like they are being rewarded. This includes the intangible benefits, in addition to the monetary rewards and discounts. Customers want to feel appreciated and many times simply recognizing them and keeping them engaged will help them to feel valued and emotionally invested in the program – and with your company.
Customer Data and Preferences – It is important to keep your customers’ information and preferences up-to-date – as this information is sure to change over time. It is critical to keep up with this information to ensure that you are targeting your communications based on this data. To do this, you can send out surveys, or ask them at the point of purchase. Ask them what matters the most or what offers are the most appealing to them. Based on the feedback you receive, you can target your promotions or adjust your program accordingly.