Management January 16, 2015 Last updated September 18th, 2018 2,046 Reads share

Loyalty Programs: 2 Guiding Principles & 4 Implementation Tips You Must Understand

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A friend who keeps a keen eye on sales noted that Best Buy had a great deal on Apple laptops just before Christmas. He and his wife both needed one, so he bought two. A week after the purchase, he got an email saying that he had $40 in loyalty program credits. It turns out he also needed two new Wii U controllers at $40 each, so he used the credit and essentially got one for free. Now he is beginning to watch his Best Buy loyalty points. If he makes a significant electronics or appliance purchase in the future, you can be certain that he will consider Best Buy as a vendor.

There are two important lessons here:

  1. Loyalty programs are not for rewarding loyalty, they are for creating loyalty, and
  2. You don’t have to make customers sign up for your loyalty program.

The first point should be obvious as long as you are looking at loyalty programs from the business side of the relationship. From the consumer side, they should look like their purpose is to

If you are doing business online, there’s a good chance you have all the information you need to automatically enroll your customer into a loyalty program. If you have no commerce side to your online presence, then you need to figure out a way to capture the information you need and start presenting reward opportunities to your customers.

Now that you appreciate these two important principles, here are four tips to consider when you design and implement your loyalty program.

#1. Leverage “finish line” enthusiasm.

At horse races, spectators come out of their seats and cram themselves as close to the fence as they can when the horses are in the final stretch to the finish line. For your loyalty program this means putting the finish line in sight. Panera immediately acknowledges purchases and tells its customers how close they are getting to a reward. Be flexible in the location of your finish line. If customers are not responding to your offers, move them closer to a smaller premium. Try something like “Acme’s 15 percent off for Loyalty Program Members Only Sale.”

#2. Build progress monitoring into your program.

This idea works hand-in-hand with the “finish line” strategy and has implications for both customers and businesses. The customers and clients in your loyalty program need to know that they are making progress, as Panera does when it tells customers how close they are to the next reward. In practical terms, this means that you have to regularly communicate with your customers to let them know exactly where they stand in relationship to their next reward.

From the business side of the equation, a problem arises when you see too many customers who are not making progress along your loyalty program path. When this occurs it’s time for some self-examination. There are two basic questions you need to ask yourself:

  1. Am I not providing adequate motivation to promote repeat business?
  2. Am I actually de-motivating my customers?

If you believe the answer lies in the first of these questions, the solution is pretty easy to state (although it might not be as easy to implement): You need to provide more value.

If you think you are providing great value, then perhaps your business is turning customers off. In other words, you have a customer service issue. Again, this is entirely correctable and you should take holistic corrective action immediately. And since we’re on the topic, I want to make one point that may be more important than anything else I say here: World-class customer service is the best loyalty program.

#3. Use your loyalty program to develop your relationship.

Not every reward in a loyalty program needs to be directly tied to a purchase. Use it to add dimensions to your relationship with your customers. Consider rewarding referrals, email list opt-ins, birthdays, contest participation, completion of surveys, attendance at events and whatever else you can dream up.

This sends a message that you just aren’t about pulling another few bucks out of the pockets of your customers and if you really want to make this point, figure out a way to reward altruistic behavior. For example, you could give extra loyalty program credit if a customer makes a purchase and selects a charity that your company will, in turn, make a donation to. Promote it with a slogan like this: Earn double points and support your favorite charity with your next purchase. Or: We’re in the giving mood. Select your favorite charity. We’ll make the donation. You get the Rewards Points.

#4. Make loyalty an element of your mobile app.

Businesses from Toledo to Timbuktu are looking for good reasons to develop a mobile app. Make your loyalty program an important element of your app development. With good graphics you can find ways to magnify finish line enthusiasm and it also gives you a powerful reason to encourage acceptance of push notifications.

And if you’re a retail business, combining your loyalty program, with your app and with an in-store beacon, could make an absolutely incredible combination. If you haven’t yet decided to experiment with beacon technology, you could promote bonus loyalty point opportunities through Quick Response (QR) codes on in-store displays.

A couple of generations ago, many families did all their grocery shopping at the stores that handed out Green Stamps. They pasted them into booklets and redeemed them for merchandise. Loyalty programs are here to stay because they work. Remember these principles and tips to help you discover how to best incorporate one into your business model.

Images: ”Shopper Loyalty Club words on a store shopping bag as a promotional rewards program for customers and consumers/



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Megan Wright

Megan Wright

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