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Customers Buy into Being Rewarded for Loyalty

The ride into town wasn’t a chore; it was a break from routine, a little something free, and a chance to catch up on the latest gossip. And Sam? He knew you were a loyal customer – that the profit he’d make from the flour and tools you were about to buy would pay for the free gift many times over. He knew why you came, and he knew you’d be back next week, next month and next year.

Flash forward to the 21st century, and merchants are figuring new ways to keep customers coming back: Today’s retailers are enticing customers to pay a premium for access to deeper discounts and personalized perks. Borders Group, owner of hundreds of Borders and Waldenbooks stores nationwide, recently became the latest to jump into this new arena, offering a loyalty card program with a “paid option.”

The company’s existing program offered 30% off hardcover bestsellers, other in-store and online discounts, personal shopping days, free coffee, a free birthday gift and “Borders Bucks” discounts based on purchase volume.

For $20 a year, cardholders in the new “Borders Rewards Plus” program will get 40% off hardcover bestsellers, 20% off other hardcovers, and 10% off most other items.

“We saw a great opportunity to differentiate Borders in the marketplace by offering the choice of a paid program or a free program …. (expanding) Borders’ commitment to creating an outstanding customer experience.”

Similarly, Loehmann’s Insider Club last year added a Gold tier to its customer loyalty program. Gold Club members get 10% added to everyday 30-65% discounts, a 15% birthday discount, “Bring-a-Friend” promotions, and advance notice on sales and special events.

The designer-fashions retailer makes it easy for customers to sign up for the $25 program instantly, and even adds free shipping to the mix.

Affinity gambits are fashionable, according to industry observers, but not universal money-makers. There are four factors are critical to the success of any loyalty program: discipline, nurturing, yield and reciprocity. The appropriate blending of these four elements creates a dynamic value exchange unique to each relationship between the customer and the company.

Discipline dictates that today’s short-term promotional tactic or points program must remain a priority tomorrow, next week and next year. Discipline involves a flow of interactions that consistently exceeds customer needs and expectations.

Nurturing builds on those interactions to engage customers proactively, making them more profitable and improving their long-term value to corporate strategy. Don’t be sidetracked by old-school sales gimmicks; tailor the messaging and benefits to meet customer needs.

Yield is the measurable impact of marketing actions. The cultivation of a relationship with a customer must yield a return for our efforts and for our investment. This can be measured in customer satisfaction, retention, referrals, sales and profits.

Finally, this give-and-take relationship spawns reciprocity – it’s a two-way street, after all. A customer spends money, surrenders his personal data and (hopefully) becomes a personal advocate of your organization. In return, the company rewards customers with recognition and with discounts and other financial benefits …. cementing their loyalty.