Encouraging Loyalty — Loyalty Cards
Marketers’ world over, have long realized the importance of repeat business and have devised innovative ways to retain customers. One such method is by way of the loyalty programs.
Customer loyalty to a retailer can be defined as existing when a customer chooses to shop in only on store or retail chain for specific product or group of products.
One of most popular loyalty programs of all times was the Airline Frequent Flyer program designed by airlines in the seventies. Given the popularity of airline programs other businesses like hotels, restaurants and supermarkets too devised similar loyalty programs to attract and retain customers. In the more developed markets of the word, these cards are looked upon as tools of gathering consumer information and encouraging the patronage of a store.
There is another major attraction for business to encourage loyalty programs: sophisticated data mining techniques are available to help companies study buying patterns, customer preferences and trends. This is a really useful tool for businesses trying to forecast demand and for managing inventory and supply chains. ‘
Large retailers spend millions on tools and technologies to gather more information about their customers. This information s then used to design, develop and package products and solutions tailored to the customer’s needs. For example supermarkets have discovered that people generally buy milk, eggs and cheese together. Therefore they generally stock cartons of eggs and sampling of new cheese products near the aisles where they stock milk. This way, customers who go to pick up milk are subconsciously encouraged to also buy eggs and try out newer kinds of cheese, thus increasing sales for the supermarket too. Data warehouses help in studying customer patterns, buying trends and behaviors and provide a tremendous amount of information to marketing managers and planners.
In categories where products and services are at par, customer relationships — and therefore loyalty programs – play the role of differentiation. The blend of recognition and rewards offered through a loyalty program can encourage customers to be identified. Once they have joined an identification number allows all customers to be recognized regardless of their preferred method of payment.
When customers opt in to a permission based loyalty program, they are more willing to share information and enable the retailer to create dialogue with his customers. In this manner, the retailer can learn a lot more than the bits and pieces of information available from transactional data.
The best way to coordinate marketing objectives across channels is to build a knowledge base of customer behaviors ad preferences. A well conceived and executed loyalty program can be the key to turning invisible shoppers into profitable customers. A good customer loyalty program needs to possess the following characteristics.
A loyalty program must be highly visible regardless of the channel. The retailer’s website can show special offers for program members a catalogue can feature the program prominently and shoppers in the store should be asked if they’d like to join. Cross promotional materials should be present and easily obtainable.
To succeed a loyalty program must be easy to use in all. Minimize the fine print the more the customers have to figure out, the less they like the program.
The balance of reward and recognition must establish value in the customer’s mind and motivate incremental purchases. Program rewards should be credited regardless of where the customer prefers to shop.
Keep the promises made by the loyalty program. If the promise is for personalized highly valued service, don’t bombard program participants with meaningless offers that obviously are available to everyone.