Setting up Customer Loyalty Programs

A Guide to Rewards Programs, Loyalty Marketing,and Loyalty Solutions

Nov 28, 2009 Guy Lecky-Thompson

It is common knowledge amongst sales and marketing professionals that the first sale is the hardest and most expensive. Customer loyalty programs are intended to take advantage of repeat sales as a way to offset the cost and effort of converting the visitor (be it online or bricks and mortar) into a customer.

The most common form of such a program is the customer loyalty card. Any loyalty scheme, however, will help to boost sales and income as long as it is a reward program that offers clear customer incentives that reward loyalty to the brand or retail outlet.

Designing Loyalty Rewards

A loyalty reward has to offer value to the customer: for low value, high volume businesses, such as sandwich shops, a typical loyalty reward is to offer a free sandwich once a number have been purchased. Each sandwich that is purchased earns the customer a stamp on a card – when the card is full it can be exchanged for a free sandwich.

Experimentation will be needed to find the sweet spot in terms of the number of units that qualify for a freebie.

At the other end of the scale, high value, high volume businesses might like to consider a discount reward scheme, or a points based system where accumulated points can be traded against in-store discounts or special offers. This last can also be combined with loyalty marketing to extend communication to loyal customers in order to generate repeat sales.

The Loyalty Marketing Effort

Once a loyalty scheme is in place, and providing that contact information (email, physical address, etc.) has been obtained, retailers can conduct loyalty marketing exercises. An example of this would be to offer the top 10% of customers by value (sales x average spend) some kind of special offer.

Or, if the marketing effort is to bring back customers who were previously loyal and who haven't visited in a while, they can also be contacted with special offers, in an attempt to woo them back.

Of course, this requires that quite some data is gathered and stored about shoppers and their habits, and to managing this requires some form of manual or automated loyalty management system.

Implementing Loyalty Solutions

Before deciding how the loyalty solution should be implemented there are a few notes of warning:

Customer data is sacred, it should never be shared
Customers have to be aware that by joining the scheme, they are agreeing to share some data
Local data protection rules must be strictly adhered to.

The simplest form of loyalty solution is a stack of cards in a box, sorted alphabetically. Purchase values and dates can be added to the cards, and incentives offered to customers on demand. Provided that there are not too many customers on file, and that enough data is captured, this is sufficient for small retailers.

Larger retailers will want to computerize their loyalty solutions, and this can be achieved with a simple spreadsheet for medium sized customer bases, or full-blown professional packages, designed to help track all the information.

Of course, there are also multi-retailer card schemes for the largest of retailers, but these may require substantial investments or joining fees, not to mention participation in the cost of actually producing cards.

Whichever form of customer incentive scheme is implemented, it is vital to track and use the information wisely. Whether the result is searching through a box of cards, weeding out the top spenders or least frequent customers, or searching through a custom database to email special offers, managing a customer loyalty program will pay dividends, and help to build customer relationships.

1 comment:

AadvikKumarDecember 29, 2015 at 8:13 PM
Thanks for sharing such a great information..Its really nice and informative.

Loyalty Management System
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