Tip

Step this way for a successful customer loyalty program

Matt Hines, SearchCIO.com News Writer

SINCE supermarket chains first started giving out S&H Green Stamps in the 1950s, companies having been cooking up creative ways to keep customers coming back for more.

However, with the advancement of information technology that's designed to help manage customer loyalty systems, creating the right strategy to successfully implement and execute a rewards program has only grown more complex.

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According to Steve Walker, CEO of Walker Information Inc., an Indianapolis-based loyalty research and measurement software specialist, the most significant trend in the business today is a shift toward using loyalty data to drive customer management strategies.

Sounds daunting? Here are some tips that should help:

Look inside first

Malcolm Fowler is the executive vice president of Vancouver-based marketing automation applications provider Ernex Marketing Technologies Inc., which has already helped about 50 companies launch their customer rewards programs. Having seen businesses both fail and succeed with their loyalty campaigns, Fowler's advice to organizations just getting started is simple: get to know your customers -- and your own organization -- first.

"Most companies don't even know who their best customers are, and they make mass marketing decisions based on assumptions and observations," said Fowler. "Building an accurate portrait of what your customers look like is the first step, and sometimes doing this correctly takes more time and effort than you'd think."

According to Fowler, another huge mistake is trying to follow a competitor who appears to have a successful loyalty program in place. Fowler said this often leads to disappointing results because a system that suits one business might spell disaster for another.

"If you're trying to build a program just because your competitors have one, you need to take a step back and think about what your own specific needs, objectives and goals are," he said.

Instant gratification pays

Fowler and Walker agree that one of the most significant benefits of a cutting-edge loyalty system is that it brings the ability to engage customers with special offers even before they've walked out of your business. An example of this might be extending a promotion to a customer through a representative at a point of sale, or via a message printed on a receipt.

"Organizations that can provide the right information to the right people will have a positive effect on both customers and employees," Walker said.

Fowler adds that bringing a real-time element to customer rewards through these kinds of efforts eliminates one of the biggest hindrances to successful programs: a perceived delay in benefits delivery.

"When a customer can redeem a reward right in your place of business, you're talking about a big interaction improvement," Fowler said. "And not only does the 'no-waiting' approach make your program more attractive to customers, it saves money you might have spent supporting a call center or sending direct mail."

Use the Web to your advantage

The Internet can be viewed as a killer application for enabling more successful customer rewards efforts. Strategies ranging from using the Web to collect customer information, to sending e-mail rather than paper-based promotions, can equate to huge savings in time and money.

Michael Klauber, an Ernex customer using a rewards program to help keep customers returning to his family's network of hotels and restaurants, believes the Internet has only begun to prove its worth. Klauber's group, the Sarasota, Fla.-based Gulf Coast Connoisseurs Club, uses e-mail notifications to save money on direct mail. The company is currently building a "members-only" Web portal to give club members access to rewards-status information and the ability to make online reservations.

"We're already saving a lot of money previously spent on print offers with e-mail, and we've been able to add more promotions, such as offering people special deals for their birthdays or anniversaries," Klauber said.

Keep it simple

One of the biggest pitfalls that Fowler sees companies fall into is the idea that their loyalty programs need to be expansive from the beginning. Starting out simple can pay dividends faster and get more customers interested in participating, he said.

"Creating a lot of hoops for customers to jump through to get points or value doesn't work," said Fowler. "If you build around a single grounded proposition and make it more complex over time, you'll get pull-through."

Fowler said that he believes consumers need a simple line of value and that a key to enabling any loyalty program is effectively communicating with users to enrich their experience.


This was first published in March 2003

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