June 14, 2013 remembergroup

Loyalty programs can reap financial rewards

We recently came across this article by Jill Griffin. Although this article was published in February of 2000, the principles remain the same for building and implementing a solid loyalty program. What’s interesting is that we were facing a similar economy in 2000 as we are today, in 2008. Companies who have embraced loyalty programs prior to today are reaping the benefits. It’s not too late though…

Jill Griffin is the author of “Customer Loyalty: How to Earn It, How to Keep It.” We’re going to post the abridged article today, but then spend some time dissecting it for today. We’ll see how this article parallels nicely the philosophy of the re:member group and the Customized Programs we build for our customers.

Across the country, businesses are awakening to the fact that all customers are not created equal and that keeping the right customers is as critical to success as acquiring them in the first place.

Keeping customers who are highly valued can greatly improve profit, Fred Reichheld says in his ground-breaking book, “The Loyalty Effect.” Presenting extensive data across a wide array of industries, Reichheld shows why as little as a 5 percent increase in retention can improve a company’s bottom-line profitability between 25 percent and 85 percent, depending on the industry.

Frequent buyer programs, also referred to as loyalty programs and reward programs, have become a critical retention tool for companies searching for unique ways to add value and, in turn, build customer loyalty. For example, estimates show that more than 60 million Americans belong to frequent flier programs. You also can earn points when you shop for groceries, go to the dry cleaner, use the phone or even use an HMO.

For many companies, these loyalty programs are proving to be wise investments. A.C. Nielsen recently completed an in-depth market research project on U.S. retail loyalty programs and found:

• In most cases, frequent shoppers spend more per household each year than non-members.

• There appears to be a correlation between higher income levels, frequent shopper participation and customer loyalty.

• There’s a high level of cross-shopping among “loyal” customers.

Expect to see more loyalty programs introduced in every market space. Why? Because now, more than ever, technology is making these programs easier and less expensive to do and because customers have come to expect them. Given these two realities, “Me Too” loyalty programs likely will be bypassed by those customers you most want to keep. Instead, these high-value customers search out loyalty programs that give them the highest return for their participation.

Adding value

Make your staff advocates of your program. A loyalty program truly can’t thrive without the understanding, enthusiasm and support from sales staff. Who better to firmly establish the benefits of loyalty program participation than the front-line staffers, who constantly touch customers? When planning your program, think about “selling” your customers and your staff.

Boots the Chemist is Great Britain’s leading health and beauty retailer with 1,300 stores. Boots signed on all 60,000 sales associates as members of its Advantage Card program six months before the official launch. This way, associates could earn “treats” themselves and appreciate, firsthand, the benefits they soon would be offering customers.

Avoid “one size fits all” reward plans. Customers increasingly are drawn to programs that recognize their particular interests and lifestyle preferences.

As a five-time winner of the J.D. Power Award for Customer Satisfaction among high-use customers of long distance, Sprint Corp. knows such recognition comes only by going the extra mile. That’s why Sprint spent nearly a year conducting extensive research to truly understand what program rewards their customers would find most valuable.

Customers say they wanted customized rewards relevant to their particular interests. So Sprint relaunched its Members Reward program on these terms. Now, a Sprint Rewards member who loves travel can redeem points for a Mediterranean cruise while a family with small children can choose a series of children’s videotapes.

Use the Hook Principle. Studies find the Hook Principle — which states the more products and services a customer buys from one source, the less likely that customer will leave — is central to any sound loyalty strategy. Designing your loyalty program so that members can sample and experience as many of your offerings as possible lessens the risk that another competitor will woo your customer away.

The Boots program’s points structure is designed so that members can enjoy products that they might not so readily buy for themselves — like a special fragrance or a more luxurious skin care line. Boots call this “guilt-free indulgence” and it helps “hook” their customers for deeper loyalty.

Sprint designed its reward program so that members can earn rewards more quickly by using a wide range of Sprint communication products and services, including long distance, Internet, wireless and calling cards. Introducing members to several product solutions helps ensure long-term loyalty.

Stay tuned for our analysis of this article…

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