A solid customer loyalty program should be a feature of your overall business plan. That's a pretty strong statement, but both research data and my personal experience back it up.
Let's start with a look at research conducted by the firm, Total Research for the Carlson Marketing Group.
This study found that six out of ten people say that they spent more with the company that offers their favorite loyalty program than they did before joining the program. The estimate of how much more they spend is 27%.
The two types of programs that were most likely to increase business were the airline and credit card programs.
We also have a recent study out from A. C. Nielsen. They find that participation in grocery store frequent shopper programs is growing steadily. It's 66% of U. S. households today up from 55% in 1997 and only 35% in 1996.
WALLY's COMMENT . . .People like to be rewarded for loyalty, not just with good prices but with some kind of recognition.
Let's take a look at different types of loyalty programs and how they might apply effectively in the digital age.
NFO Worldwide, a marketing research company, surveyed 1905 online shoppers and found that 53% said they would buy more if incentives were offered. Fifteen percent said that rewards would not influence them to make more purchases.
One twist in the online area is that many companies are opting to go outside to another company for their loyalty programs. Companies that provide this service include ClickRewards, MyPoints.com, and others.
To some extent, customer loyalty programs are a reprise of the store charge cards that were a major feature of business at high end department stores before the development of bank cards. The idea is to give special recognition and privileges to the customers who are the most valuable to you. What are some of the Digital Age twists.
Grocery store loyalty programs almost all issue a card and smaller keyring card to shoppers who sign up. The cards carry a barcode that identifies the shopper as a member of the loyalty program. Since it's bar-coded, just a flash across the scanner tells the store's computer that the purchase is a loyalty program purchase.
That's using technology to make sure that benefits are delivered. It also creates a ritual that reinforces the "specialness" of the shopper.
The same technology can now break out loyalty program purchases down to the individual level. Stores say they'll "never" do that, but I doubt that they'll keep that promise. Why? Because it's too tempting and there may actually be benefits to the shopper.
If you know that I buy a particular brand of beer, why not offer me special on other brands, or notify me (by email) when my brand goes on sale so I'll be sure to come into the store? If you know that I buy a lot of convenience items, why not offer me some other ones? Why not link up with a store that offers a non-competitive convenience product?
This could be good for me, but there are privacy issues to be hammered out.
Another Digital Age twist is the email alert. Harris Teeter, the grocery store where I shop most, sends me a weekly email telling me that the latest specials are now available and offering me a link to their website. There I can print off coupons for items I want.
Loyalty programs work best, I think, if they have the following characteristics.
They should provide real benefits and reward the behavior you want. You have to do both.
They should have some identification systems that make me a "member" instead of just another customer. Membership cards work great for this.
They should be easy to use.
They should allow me to personalize my benefits.
Date Published: 1 November 1999
Reviewed: 2/15/03
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