Customer Loyalty Programs

2005 Direct and Interactive Marketing Programs
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Customer Loyalty Programs
Much is written about customer loyalty. Many companies have launched programs. Even more are currently considering programs and many are closing down their programs. The death of these rewards program has dealt a devastating blow to confidence in loyalty schemes.

So, what's the secret to customer loyalty? It understands that the pursuit of loyalty is more than just a marketing program. It's a business strategy. And it requires an understanding of your business and its people, its philosophy and core purpose and an in-depth knowledge of your customer, and the impact that each of these has on customer loyalty. Simply put - it is part of the market value of your company

While businesses are reviewing reward schemes, there is evidence customers may not be quite as keen on them as they once were.

What are the fundamental benefits of loyalty?
Firstly, it is the financial benefits. If a company improves its retention rate the average customer stays longer and sales increase. Also, if the company increases share of customer, sales per customer rises and bottom line increases.

However, there are other benefits.
Cost Savings: Loyal customers are familiar with your brand, products and services. They have done business with you before. And, they are more efficient in the way they use your resources.

Referrals: Loyal customers mention your brand to their friends and colleagues. They like to feel smart and "in the know," and have an opinion. They won't hesitate to make recommendations to others.

Complain rather than leave: When they have a bad experience they complain rather than leave because they feel they are stakeholders in your business - and believe in your brand. They give you a "second chance."

Channel migration: Loyal customers who are familiar with your brand are much more likely to buy through alternative and multiple channels, increasing their total consumption and reducing your cost of doing business with them.

Emotional buying: This has a dramatic impact on a loyalty strategy. Often a brand choice is made at the last minute. The reluctance to defect is created by a loyalty strategy and the added-value services that forms part of the program and brand asset.

Loyal employees create loyal customers: Companies are often to busy running their businesses that they forget their customers. "I just work here," is a number one reason for customers leaving. You are in business because of your customers. Promote an atmosphere of listening, learning and collaboration. Allow your employees to make decisions and to take care of customers.

Customer centric: Is your company's culture one that focuses on customers? Culture is created and sustained by the words and actions of its leaders. Do they talk about their customers in an open and honest way? Are they interested in interacting face to face with their customers?

Managing customers: Manage your customers and act responsible towards them. There must be responsibility and authority for ensuring that marketing strategies and programs make sense through the eyes of the customer. Many schemes have "over-promised" on what they can deliver and as a result customer cynicism has deepened.

Marketing and IT: Some of the best ideas never happened because of barriers between the marketing and the IT department. They don't know how to communicate with each other. Language is a major barrier. Education and training is the answer.

Customer database: In many companies, customer information is all over the place in different systems and used for different purposes. Consolidate the information into one system and build, enhance and manage the information. A customer database is the largest and most valuable asset any company can have.

Get your house in order
"Getting your house in order is a journey, not a destination" says Dennis Duffy from Loyalty-Rules. You'll always be working on it. Identify the most critical things that need to be addressed before undertaking a loyalty initiative.

Too often businesses leap right into the tactics of developing customer loyalty without considering the strategy. The building of a customer loyalty program is a business strategy. Like all business strategies it requires a high level of commitment and deep pockets. Done well, it will reward you with short-term and long-term dividends.

Locally and internationally businesses are reviewing their reward schemes and there is evidence that customers may not be quite as keen on them as they once were. The real danger for companies that use loyalty programs to attract business is that they generate increased expectations among their customers. They stand to lose a lot more if they don't meet expectations.

Despite the changing landscape for reward schemes, they will inevitably linger on in new forms, and I don't think they will ever go away, but there are lots of reasons to assume they will not be as prominent as they were in the late 1990s."

Take care and go well in 2005.

Winnifred Knight
Cell: 082 575 9922
Email: mailto:winn@themarketingsite.com
Web: http://www.themarketingsite.com