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Article 2: Develop Loyalty Rewards Programs
Loyalty rewards programs have become all the rage lately. Businesses ranging from grocery stores (the Kroger Plus card) and big box retailers (the Best Buy Reward Zone program) to local sub shops and ice cream parlors, with their ubiquitous frequency visit punch cards, are getting in on the act.
But do loyalty rewards programs work? Do they increase business and profits and help drive customer loyalty?
Yes, answers Steven S. Little, an expert on the subject of business growth and the author of “The 7 Irrefutable Rules of Small Business Growth” (John Wiley & Sons, 2005) — if they are done right.
“The program has to visible and it has to be consistent,” says Little, “and there has to be a long-term commitment to it. Businesses have to constantly promote it and remind customers about it. If they do, they can build strong customer loyalty and increase the lifetime value of each customer with their program.”
But the science behind loyalty rewards programs is really about more than just building customer loyalty, say experts in the field. When used properly, programs help companies gather the kind of data on their customers that will help them segment customers so they can serve them smarter and better.
In a recent article in “The Hub” magazine, Spencer L. Hapoienu, the president and co-founder of database and direct marketing firm Insight Out of Chaos, notes that the most overlooked benefit of loyalty programs is the improvement in customer relationships. In a world dominated by technology and distant connections, he writes, customers will respond to something that speaks directly to them, provided it is a real acknowledgement of their interests and behavior.
He stresses that wisely using the data that can be mined from a program — what customers like and buy, how much they spend, when they visit, etc. — in your marketing and customer service efforts will result in a good outcome from the customer’s perspective. This “good outcome” is the Holy Grail that businesses should be seeking through their programs.
It’s not necessarily the loyalty program itself that drives the benefits, Hapoienu concludes, but rather the customer attention, customization and recognition potential that will stem from it that will dictate the program’s (and ultimately the business’) success.
After all, how much is it worth to you to know who your best customers are, how profitable each customer is, which customers are buying which products, etc.? These are the areas where loyalty programs can deliver truly valuable rewards to your business.
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