Pick a Card, Any Card
Jupiter Research claims that 75% of consumers are card-carrying members of one loyalty program or another.
by Jon Winsell,
ID Society Strategy Director
Appearing in Convenience Store Decisions
July 2006
It seems like you can’t buy anything now without bumping into an offer to join some type of consumer loyalty club. Retailers have long adopted loyalty programs as a method of getting more sales out of their customers. Whether they "live" offline or online, loyalty programs can and do work when properly executed. Simply issuing a card, offering some incentive and sitting back to wait for the sales to ring up is not going to deliver good results. You need to design your program with defined success in mind.
For example, loyalty programs come in many flavors, from the frequent-flyer/buyer/diner/shopper to deep luxury product programs. Jupiter Research claims that 75% of consumers are card-carrying members of one program or another. And not all programs are created equally. The key to success is not in simply "having" a program, but structuring that program to collect usable data. Success is in the execution of slicing the data collected, and using it to build repeat sales. It’s not the data itself, but the trends and actionable insight that will spell success.
Loyalty programs also vary in purpose. Most loyalty programs are structured for retention through rewards or other forms of consumer appreciation. Retention programs have a direct ROI, especially those focused on decreasing defection rates. Clearly, it’s easier and more cost effective to keep existing customers than to recruit new ones; however, a recent Harvard Business Review study claims that reducing the defection rate by only 5% can double your profits.
Why a Loyalty Program?
Do it for the data. Loyalty programs are designed to retain customers and draw them closer to the brand so that they will buy more, more frequently. Although such programs can certainly work and be successful offline, the real cost savings and expandability comes from a strong digital strategy. Your POS system can collect data that can be used to create direct mail campaigns, but by adding an online component, you have instantly accessible data that can be easily segmented as the foundation for a strong relationship marketing strategy.
A digital strategy can allow you to define who your most loyal customers are and create a campaign with messaging and incentives designed specifically for the high value customers. If 20% of your customers are giving you 80% of your sales, find a special way to communicate and reward those customers. Use them as your true ambassadors to spread the word to their friends. Now your online retention strategy also assists in customer acquisition, and sales will spiral upward.
By starting small and adopting a religious fervor for testing, your loyalty program can demonstrate strong ROI while providing high value consumers with the emotional quotient of feeling special - something that all consumers want.
Jon Winsell is director of the strategy team at ID Society, an interactive marketing and design agency whose clients include Diageo, L’Oreal and ABC Family Network. It specializes in developing strategic online marketing programs that build loyalty and relationships while extending brands to new audiences. Winsell has more than 20 years of experience leading companies to increased brand awareness, deeper customer loyalty and higher profitability.