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Key Elements of Successful Customer Loyalty Programs

Do loyalty programs really work? Can a loyalty program change customer’s purchase behavior and get them to spend more money with a company? Can loyalty programs reduce the likelihood that customers will move their business to a competitor? The answer to all three questions is yes. There is, as you would guess a caveat.

Marketers must first understand what loyalty marketing can and cannot do for a business. This article starts by defining loyalty marketing and then applies the definition to today’s current environment for loyalty programs and outlines the four key elements of successful customer loyalty programs.


Definition of Loyalty Marketing

First, let’s start with the definition of loyalty marketing. Loyalty marketing is defined as the, “Discipline of identifying and nurturing the yield of best customers through a long-term, reciprocity, value-added relationship. “

There are four key elements in the definition: discipline, nurturing, yield and reciprocity. 

Discipline: Loyalty is not about short-term promotional tactics or a points program that is launched today and forgotten. It is needs to be a set of ongoing customer interactions that consistently exceed the needs and expectations of the customers.

It sounds so simple, this idea of building a relationship, but in practice, it’s an ongoing evolution that requires constant diligence, care and reshaping along the way. Just as a brand begins to understand their customers through data, purchase behavior and ongoing shopping patterns, it never fails that the customer then evolves too. Understand right away that relationship building is a constantly moving target and will require resources and dedication to make it work in the long run.

Some see the chart below as a list of challenges marketers face. We look at them as a list of opportunities and mistakes to avoid.

Loyalty Marketing in 2015

Nurturing: Companies need to proactively engage their customers to grow more profitable (or strategically improved) long-term behaviors of customers. To often companies get bogged down with sales promotions and don’t stop to put the customer’s needs at the center of their strategy. According to Forrester’s research, State of Loyalty Programs, marketers are failing to engage members. Forrester’s study found that on average, only 45% of customers enroll in loyalty programs and only 35% of them redeem awards. This means about only 16% of the customer base is actually using the loyalty programs.

Marketers Need to Nurture Customer Relationships

Action Steps: There is a real opportunity in 2015, for loyalty marketers to:

  • Focus efforts and resources to gain the greatest ROI.
  • Version messaging by customer segments to meet customer needs and inspire incremental purchases.
  • Leverage customer insight to improve business process.
  • Communicate. Communicate. Communicate. Have a communication strategy to actively engage new member and to grow the customer relationship.
  • Create a differentiated value proposition and customer experience to engage customers and improve retention. Understand who is earning rewards, who is not and who earns and doesn’t redeem. Program benefits are not compelling if they don’t impact customer behavior.

Yield: By cultivating the customer relationship we expect that there will be a product of our efforts. This can be measured in growth, frequency of purchase, transaction size, profit per customer. Depending on your business goals, you may also want to measure customer satisfaction, retention, referrals, new member enrollment, active member participation and reward redemption.

Measure Success of Loyalty Program

Action Steps: If you’re developing a new loyalty program, define your business objectives. What do you want to achieve. Then, plan for how you will measure success. If you’ve had a loyalty program for a while, ask yourself, “Is my loyalty program strategy aligned with our business goals?” If not, start with clarifying business goals, given that loyalty programs can produce a variety of benefits. Next, reengineer your program’s reward structure, and create incentives powerful enough to change buying behavior but not so generous that they erode your margins.

Reciprocity: You have a mutual dependence, action, or influence. It is a give and take relationship. A customer spends money, provides personal data and hopefully becomes a potential advocate of the organization. The company gives the customer recognition, uses the information to better meet the customers needs and may reward them for their loyalty.

Action Steps: Deliver value the way the customer wants it delivered. Use a Customer Experiential Benefit Strategy  to align and deliver value that is meaningful, timely and mutually beneficial to the customer and ultimately the company as well. In developing your program, we recommend a mix of the five types of benefits.

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Who is Customer Insight Group?

Customer Insight Group, is a Colorado based loyalty marketing agency leading the way in helping companies engage, keep and grow profitable customer relationships.

Loyalty Programs Excel with Right Mix of Program Benefits

Bon Ton Loyalty Program Benefits

With more than 20 years of experience in developing and enhancing customer loyalty programs for companies like The Bon Ton, Dick Sporting Goods and others, we know how important it is to use a customer-centric approach to align and deliver value that is meaningful, timely and mutually beneficial to the customer and ultimately the company as well.

When developing the loyalty program benefits strategy for a new loyalty program, Customer Insight Group uses a mix of the five types of benefits to achieve your business objectives:

  • Initial Participation and Enrollment Benefits: Create instant gratification and affinity with the company. These are the core set of benefits members enjoy upon applying for program membership.
  • Cumulative Benefits: The more a customer exhibits the desired purchase behavior the more he/she is recognized and rewarded. Often times, this type of benefit is associated with a points or rewards program where a customer accumulates points to earn a specified rebate or dollar off reward certificate.
  • Periodic Benefits: Strategically invest markdowns by targeting discounts and special offers based on the customer’s previous purchase behavior.
  • Instant Benefits: Unexpected “little surprises” that occur spontaneously from the customer’s perspective reinforce the sense of belonging and increase share of wallet.
  • Emotional Benefits: Explore and reinforce the customers’ emotional connections with the brand with benefits that are unique to the company and to the brand.

In addition to varying the benefits based on your business objectives, we also tailor the benefits based on your customers’ anticipated reaction.  A recent study that is soon to be published in the Journal of Consumer Research shows that consumer reactions vary widely across cultures to special recognition and free gifts associated with loyalty programs.

Learn more about the study published in The New York Times.

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Who is Customer Insight Group?

Customer Insight Group, is a Colorado based loyalty marketing agency leading the way in helping companies engage, keep and grow profitable customer relationships.

How Do You Define Customer Loyalty?

Many people associate the quality of loyalty with their families, close friends, even their dogs. Loyalty plays a part in most of our daily activities. The brand of toothpaste most of us use each morning probably is one we have used for years, as maybe our coffee, soap and cleaning solutions. We generally order from the same pizza delivery service, visit a dry cleaner whose face we know and whose reputation we trust.

As a result, when I looked up the word ‘loyalty’ in the dictionary, I wasn’t surprise by its definition: “Faithfulness; advocacy, devotion; constancy”.

Definition of Loyalty

Now, when you ask marketers how do you translate loyalty into business terms, there is a lot of confusion. Are you talking about a rewards credit card, or is it a grocery discount card? Or are you talking about a coalition program? Frequent shopper program? Or is it an email club? Punch cards? I don’t want you to get bogged down by these tactical descriptions of marketing programs. Instead, I want to give you a definition of loyalty marketing that provides you and your organization a strategic focus.

After helping over twenty-five Fortune 500 companies understand the drivers of loyalty and defection from the customers’ point of view, I define loyalty marketing as: “Discipline of identifying and nurturing the yield of best customers through a long-term, reciprocity, value-added relationship.”*

Definition of Loyalty Marketing

This definition speaks to your CFO as well as your customer experience manager.

Now that we have some common definitions, it’s time to concentrate on the hard stuff: nurturing customer loyalty. My upcoming blog posts will focus on five key elements of successful loyalty marketing:

  1. Insight — Create a competitive advantage
  2. Precision — Treat different customers differently
  3. Relevancy— Make it resonate
  4. Reciprocity — Deliver value in every interaction
  5. Yield — Gain an amount as a return on an investment

* Definition is trademarked to Customer Insight Group, Inc.

How do you justify a loyalty program?

Trying to justify a loyalty marketing program? Here are  8 major benefits, each a competitive advantage, only a loyalty program can provide.

Who is Customer Insight Group?

Customer Insight Group, is a Colorado based loyalty marketing agency leading the way in helping companies engage, keep and grow profitable customer relationships.

Rawlings Launches Loyalty Program

Loyalty Program

Rawlings Sporting Goods Company announced the launch of Rawlings Rewards, a rewards program designed to target some of its most loyal customers.

The loyalty program encourages repeat purchases, subsequently building a database of brand ambassadors for future marketing ventures.  Rawlings Rewards will be accessible via the e-commerce portion of the brand’s website at RawlingsGear.com.

“One of our key initiatives heading into 2015 is to invest in digital opportunities pertaining to our internal web properties and substantially grow our e-commerce business as a result,” said Mike Thompson, executive vice president of marketing for St. Louis-based Rawlings. “Rawlings Rewards is an avenue to help us achieve our fiscal goals while recognizing and rewarding our brand enthusiasts.”

The program is free to join and requires a minimum level of customer information to be submitted during the enrollment process. Consumers earn one point for every $1 dollar they spend on merchandise at the base “Red” level, and 1.25 points for every $1 dollar at the “Gold” level, a tier achieved upon earning 500 points. For every 250 points earned, a $10 dollar coupon is awarded which can be used for online purchases. There is no expiration of points issued in the program.

[Source: PR Newswire/Photo Source: Rawlings]

Want to learn more about loyalty marketing? Schedule a loyalty marketing workshop. Here is a sample Loyalty Workshop agenda.

Want to learn more about loyalty marketing? Checkout these resources:

Loyalty Marketing Blog
Loyalty Marketing Infographics

White Papers & eBooks

Krispy Kreme Launches Customer Loyalty App

krispy kreme loyalty program

Krispy Kreme recently introduced My Krispy Kreme Treats customer loyalty App. A loyalty app that allows customers to use their iOS and Android smartphone technology to earn reward points and redeem them for free food and drinks.

“The new My Krispy Kreme Treats App is designed as a complement to our existing guest engagement offerings,” says Dwayne Chambers, Chief Marketing and Innovation Officer for Krispy Kreme.

“The brand currently has a 900,000-member Friends of Krispy Kreme e-club, and its Hot Light App has had over 100,000 downloads since its launch. The My Krispy Kreme Treats App not only provides our retail guests faster and more convenient service at checkout, it also enhances our connection with our most loyal fans as we celebrate them with personalized surprises and delights throughout the year, and easy-to-earn reward points redeemable for their favorite Krispy Kreme products at their convenience.” says Chambers.

The App’s user-friendly functionality allows guests at shops in the initial test markets to store value and make mobile payments with a virtual gift-card, while earning reward points redeemable for free doughnuts, coffee and other beverages. App users receive a free doughnut for enrolling, a free doughnut and beverage on their birthday, and surprises and delights throughout the year.

[Source: Krispy Kreme]

Want to learn more about loyalty marketing? Checkout these resources:

Loyalty Marketing Blog
Loyalty Marketing Infographics
White Papers & eBooks

RiteAid Rewards Loyal Customers

RiteAid Loyalty Program

Rite Aid announced it’s offering members of their wellness+ loyalty program the opportunity to receive lifestyle and entertainment rewards for every $50 spent in stores on participating products through January 24.

Members of the free wellness+ loyalty program can look for the red “Buy & Earn” symbol on store shelves. Once wellness+ members purchase $50 of qualifying products, they will receive a Unique Reward Code on the bottom of the register receipt. Customers can make multiple visits and purchases to reach the reward thresholds of $50, $100, $150, $200 and $250 receiving a new code at each threshold up to a total of 5.  The codes may be used individually or added together to redeem for bigger and better rewards.

“We wanted to offer something special to our most loyal customers – wellness+ members – as we enter the New Year, as a way to thank them for their business,” said John Learish, Rite Aid senior vice president of marketing. “By participating in ‘Happy You Year,’ our customers have the opportunity to earn a reward of their choosing, and with rewards ranging from an evening out with the family to a fitness class or a day at the salon, there’s something for everyone.”

[Source: RiteAid]

Engage, keep and grow your customer relationships.

Need some guidance and expertise in developing a loyalty program? Maybe a  loyalty workshop designed just for your business would make all the difference in driving your program forward. Look to the experts at Customer Insight Group for the advice and experience you need.

Alaska Airlines’ Loyalty Members Get New Perk in January

 

Alaska Airlines Loyalty Members

This January Alaska Airlines is waiving its standard $25 bag fee to encourage new and existing loyalty members to experience the benefits of Alaska’s award-winning frequent flier program.

All checked bags come with Alaska’s baggage service guarantee. If a customer’s checked bag does not reach baggage claim within 20 minutes of the plane’s arrival at the gate, the customer is entitled to a $25 discount for use on a future Alaska Airlines flight or 2,500 Alaska Airlines Mileage Plan miles.

Alaska Airlines Mileage Plan, which ranked highest in J.D. Power’s 2014 Airline Loyalty/Rewards Program Satisfaction Report, stands apart from other airline frequent flier programs.

“We are excited to offer all Alaska Airlines Mileage Plan members a great perk when they fly with us during January – one free checked bag,” said Caroline Boren, Alaska Airlines’ managing director of loyalty marketing and customer care. “Starting the year by sampling Alaska’s award-winning loyalty program and beginning to earn miles toward a weekend getaway or the vacation of a lifetime is a great way to kick off 2015.”

[Source: PR Newswire/Photo Source: Alaska Airlines]

Want to learn more about loyalty marketing? Schedule a loyalty marketing workshop. Here is a sample Loyalty Workshop agenda.

Sprint’s Rewards Program to Engage & Keep Customers

Sprint Rewards Program

Sprint is launching a new rewards program that will reward loyal existing customers and enable them to acquire the iPhone 6 for $5 per month, including their monthly service plan. The program will enact a “loyalty service credit” of $15 a month to customers leasing the iPhone 6 or 6+ which, when applied to the traditional cost, reduces the monthly fee to $5 for the 6 and $10 a month for the 6+.

This loyalty program is the latest move by Sprint to turn its slumping subscriber base around. The company previously announced individual and family plans that undercut the competition — or at least offered more data — and last month introduced its $50 unlimited plan specifically for the iPhone. That plan comes with a $20 monthly fee for leasing a new iPhone 6 or iPhone 6 Plus, in which the customer would hand back the device to Sprint after two years.

“Consumers have told us they want the best value and the ability to upgrade their devices every year,” said Marcelo Claure, Sprint CEO. “Sprint delivers with its new 12-month lease offer, allowing customers to upgrade to the latest iPhone every year. The iPhone for Life Plan gives customers the lowest monthly cost in the industry for acquiring an iPhone. We are making it easy and affordable for consumers to get what they want.”

Need some guidance and expertise in developing a rewards program? Maybe a  loyalty workshop designed just for your business would make all the difference in driving your program forward. Look to the experts at Customer Insight Group for the advice and experience you need.

[Source: Cnet/Sprint]

RedBox Launches Rewards Program

Digital entertainment rental kiosk company Redbox has launched its first nationwide rewards program, becoming the latest entertainment provider to take advantage of loyalty marketing strategies.

RedBox Launches Rewards Program

Called Redbox Play Pass, the program is point-based and gives Redbox customers a new way to earn free movie or video game rentals. Members earn 10 points for each rental, with no limit to the number of points that can be earned. Additional benefits include free movie rentals on member birthdays and membership anniversaries and exclusive savings offers throughout the year.

“Our customers asked for a loyalty program, and today we’re delivering with the launch of Redbox Play Pass,” said Mike Wokosin, vice president of Digital Marketing at Redbox, said in a statement. Wokosin said Redbox has experienced a “tremendous response” to the beta program.

[Source: Redbox]

Want to learn more about loyalty marketing? Schedule a loyalty marketing workshop. Here is a sample Loyalty Workshop agenda.

Finish Line Boosts Customer Loyalty with New App

The Finish Line, a premium retailer of athletic shoes, announced the launch of its new mobile app aimed at providing services and conveniences that reward Winners Circle loyalty program customers with points and loyalty perks.

FinishLine_Loyalty Marketing Program

The new Winners Circle customer loyalty app reinforces brand interactions, improves customer service and sales, and also provides timely information about customers’ favorite product releases.

“We closely examined the needs of our customers and created features within this app that make it easy for them to keep tabs on their Winners Circle points, rewards and special offers,” said Danielle Quatrochi, Finish Line’s Vice President, Digital. “This app enhances our customer experience as another omnichannel resource, especially for those who shop us regularly. We’re excited to offer them details that assist in the decision making process right from their smartphones.”

The new app is an important component of Finish Line’s strategy to deepen the understanding of the customer, inform enterprise decisions and encourage loyalty and sales, and incorporates the in-store sales associate in the overall customer engagement. For example, using geo-location technology, customers can get push notifications and information about nearby stores including real-time visibility into inventory to determine if a specific item is in stock and available for purchase. The app also enables customers to make purchases directly from the store’s website no matter where they are.

[Source: Finish Line]

Want to learn more about loyalty marketing? Checkout these resources:

Loyalty Marketing Blog
Loyalty Marketing Infographics

White Papers & eBooks