Rewarding Your Loyal Customer


“it costs five times as much money to find a new customer than it does to get a current customer to come back and buy from you”

By: JUSTINE P. CASTELLON 

Over the years, a variety of marketing approaches have been used to extract and evaluate customer information in an effort to understand and replicate what keeps customers happy and loyal. So businesses have adopted the tactics of recognition and reward to identify, maintain and increase the yield from their best customers . . . loyalty program. And it is designed to increase the lifetime value of current customers through a long-term interactive relationship. Why do businesses do this? Because when you’re in a commodity trade, you need to offer customers a reason to choose you and stick with your product or service. They need something that helps to break the tie in their head. Choosing between two or more nearly indistinguishable products or services is always hard. It’s like finding a needle in haystack, unless yours is the golden needle that shines amidst the bunch of hays.

By running loyalty programs that not only increase overall usage but also offer elements of exclusivity and personalization, you reinforce market behaviours, buying patterns and relationships. While this valued in the marketing arsenal, start-up companies or even the big businesses are either frightened or their eyes glaze over the idea of customer loyalty program because they think it’s either too expensive or too complicated to implement. And many still find it difficult to set up a strategy that will make life easier for them and better for their customers. But always bear in mind that it is cheaper to retain old customers than acquire new ones, because it costs five times as much money to find a new customer than it does to get a current customer to come back and do business with you.

Create a simple yet effective loyalty program. It doesn’t have to be complex. A simple, graded points system or freebies for multiple purchases is all it takes. For instance, you may implement the FREE service fee on the FIFTH Transaction (your promotional cost is 20% of your retail price). The traditional Limited Edition Starbucks Coffee Planner, is also a good example of effective loyalty program.  Customers were required to complete 17 stickers (meaning 17 cups of push products!)  to redeem a planner. As in previous years, Starbucks applies advocacy campaign to strengthen customer relationship – therefore in  every redemption comes with a donation to SparkHope Starbucks flagship program for early childhood care and development in partnership with UNICEF.

 The new enterprise-wide business process management approach.
You may also check National Bookstore’s Laking National or SM Advantage or Prestige card where customers were awarded certain point for every purchase which can be redeemed anytime. The best part of SM Prestige card is not just for the point system but the services behind being the top loyal customer such as free shopping valet parking and the exclusive check out counters. One of the key tenets point system is the management of customer buying behaviour and the contact points. That will be the next level of customer loyalty management – CUSTOMER RELATIONSHIP MANAGEMENT or CRM.

CRM is a customer-focused retail strategy and it involves the management of the business relationships with the customers.  It encompasses the people, processes, and technology associated with successful marketing, sales, and customer service solutions. CRM works on a simple and straightforward principle: Figure out who your best customers are and their characteristics, get customers like your best customers, and then understand the value drivers that make your best customers better. Understanding this principle will lead you to discover that customers should be treated differently depending on their value.  While CRM is more complicated for start-up business because of data-mining process and how to analyse the gather customer behaviors, it is still considered as one of the most effective way of managing and developing loyal customers.

Make sure your customers come back after the first purchase.  The first transaction is considered trial stage – meaning your potential customer is testing your product or service – conversion happens only when he comes back on second or third transaction.  So it is important that your prospects come back and you should incentivise them to do so.

The first rule to start a customer loyalty initiative is to identify important customer. Use whatever tools, and data-mining techniques to locate your repeat, regular customers. Equally vital is to know your profit margins. Don’t offer discounts until you know the impact on your bottom line. Then follow the key features that provide the framework and the kick-start to those who wanted to create a process that is both positive and profitable.

  1. Analyze and capture customer information. Identify customer types and purchases accordingly. Start to what the marketplace is telling you – what your loyal customer wants, how they buy and what motivates them. This data will help you in designing the ideal loyalty program that meets your objectives, targets , and delivers a return on investment.
  2. Track customer behavior. By grouping customer’s types you will be able to know where your business comes from and sell to them more effectively. This will also allow you to react and respond differently and with intention to each group.
  3. Develop a customer contact plan. Creating such plan provides you with a broader view and allows you to see where your activity time is being spent. Identify areas of commonality and where leverage can be gained.
  4. Raise customer expectations. The best programs build excitement by letting customers know exactly what rewards they can expect and how to earn them.
  5. Manage points and redemption. Invest in technology to automate customer purchases and rewards. These will allow you to easily monitor what keeps them (customer) coming back to you. No retention solution would be complete without continuous and insightful monitoring and tracking of your most valued customers’ usage patterns, purchasing behaviors and redemption rates.
  6. Communicate. Launch your loyalty program and communicate its value to your target customers. This includes developing and distributing introductory kits, membership cards online and offline registration, sign-up events direct marketing, and internal staff training.
  7. Evaluate. Does program bring in more foot traffic to your store or inquiries on your services? Is the conversion rate higher? Do you still have the same customer despite the heavy competition? Is the profit margin exhibit better performance? If yes, then your program is successfully managed and implemented.

And here’s the best part of your loyalty program: the data you collect can also help you improve your customer acquisition results. Just take what you learn about your best customers and tailor your marketing approach to address prospects with similar characteristics. A loyalty program which is properly designed, promoted and personalized – is a powerful and cost-effective way to complete the sales cycle, retain profitable customers and accelerate your market share. But as efforts are steered toward retention rather than acquisition, particular attention is being paid to cultivating high-value customers. But never forget the balance of customer management by putting similar effort in the acquisition of new customers.

TYPES OF LOYALTY PROGRAM
While there is no “all-in one” type of program in loyalty marketing. There are four basic types of loyalty programs to choose from.

  1. Rewards program – Rewarding loyal customers with awards unrelated to your product/service.
  2. Appreciation program – Rewarding loyal customers with more of your own product/service.
  3. Rebate program – Rewarding loyal customers incrementally according to their purchase activity.
  4. Affinity program – Building a lifetime value relationship with a customer based on mutual interests and not on the use of rewards.

PREREQUISITES OF LOYALTY PROGRAM
Creating a program is a great idea but there are things to think about before you decide to build one. For starters, it requires the following three items:

  1. Members – you must have a targeted, well-defined group of members who have similar values and interests.
  2. Loyalty Currency – the rewards points that members earn over time. Extending this currency beyond the boundaries for which it was initially intended increases the relevance of the program to its members, enhancing members’ opportunity to earn points through more locations.
  3. Marketing – you need a vehicle to communicate your program enhancements to members. Using a combination of advertising, direct mail and online channels to reach existing and prospective members is not free, so be prepared to make that necessary investment.

(EDITOR’s NOTE: Images were taken from  http://www.freedigitalphotos.net)

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