Loyalty programs are not just for airlines or credit card companies. Small and medium-sized businesses, both consumer and services based, also have a lot to gain from incorporating a loyalty program into their customer relationship management (CRM) strategy.
However, careful consideration needs to be given to the program structure and maintenance needs to ensure cost-effectiveness.
Why Implement a loyalty Program?
A loyalty program can be a profitable strategy for a company by:
- Reducing the costs of serving customers
- Developing loyal customers, who are less price sensitive (create customer “lock-in”)
- Creating an incentive to spend
- Providing a point of difference, and
- Providing valuable customer insight that will ultimately identify & help develop new revenue-generating products and services.
The First Steps
Points to consider when structuring a loyalty program include:
1. Rewards must be relevant.
2. Rewards must be realistic and attainable.
3. Rewards must balance emotional and economic benefits.
Research the program’s attractiveness and viability. Program features must be tested through market research and the early involvement of targeted consumers, whose feedback can help shape program design. Continuous feasibility analysis is essential. In addition to the ultimate test of return on investment through additional revenues, key performance indicators for program success must include increased customer insight, penetration rate, churn reduction and new customer acquisition.
Develop a Contingency Plan. Changes in strategy or a merger/acquisition can necessitate discontinuing a program. It is a good idea to develop a contingency plan and possible exit strategy in advance. You may never need to call on it but it’s nice to know you have an acceptable way out of the program if you want use it.
Consider Online Options
There are specific start-up and maintenance costs involved in establishing a loyalty program that can escalate if processes aren’t streamlined. One of the options in developing and maintaining a program while still controlling costs is to automate as much of the program activity and maintenance as possible. Technology companies can undertake this for business clients.
RAN ONE’s technology business partner, Bullseye Internet Solutions was engaged to develop just such a program for a large client, ACP Publishing in Australia. The entire loyalty program is conducted cost-effectively by using a website to disseminate information and facilitate reward transactions.
By implementing a reward based loyalty program that offers rewards to newsagents based on magazine sales, ACP Publishing has increased sales significantly within the first 4 months of the program launch. For more information about the strategy visit www.bullseye.com.au.
A rewards based loyalty program is an excellent way to build customer loyalty and generate sales.
Copyright 2003, RAN ONE Inc. All rights reserved. Reprinted with permission from www.ranone.com