Assessing whether Loyalty Programs are good for your Business

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“A good customer-loyalty program is an easy way for small businesses to show their personal side and remain competitive in spaces dominated by big business,” – Entrepreneur.com

Loyalty programs represent a modern invention designed to mould customer behaviour and to help commercial entities to achieve desired business outcomes. In essence, these programs reward customers with a variety of gains and rewards when they shop at an establishment time and again. We must note that such programs operate on the premise of repeat customers, which implies that a customer is happy with the products and services purveyed by a business and therefore, continues to direct his or her monies at a certain business enterprise. While these actions tend to boost business revenue for said business establishments, it is worthwhile for businesses to assess the efficacy of loyalty programs to boost business success.

One of the obvious benefits of loyalty programs is manifest in the gains when business customers discuss their experiences with a certain brand or product. The online and offline conversations that ensue appear to acquire a life of their own and can encourage other customers to try these brands and products. Subsequently, these new customers may be requested to join the proffered loyalty programs and accrue certain benefits. The sum total of these actions enable brands and businesses to expand their customer base and to win a steady supply of business transactions. A linear expansion along these lines bears tangible benefits for the business enterprise, but customers need to be assured of a durable value proposition if they are to commit to these businesses for the long term.

The use of loyalty programs can be viewed through the prism of modern markets that are characterised by a huge number of brands, products, services, and value propositions. The modern world we live in offers the customer endless choices in terms of the above factors and this distinctly calls into question the efficacy of loyalty programs. We must note that the very nature of modern markets encourages tough competition and this is set to escalate in the years to come, bringing in its wake even more diversity that will amplify (and empower) customer choice as never before. This situation sets the stage for a serious re-think among business strategists regarding the structure and the rationale that underline legacy strategies such as loyalty programs.

However, businesses must note that marketing strategies, such as loyalty programs, can be tailored and stewarded keeping customers’ interests in mind. For instance, a restaurant business can choose to consistently operate such programs with a central plank that is devised to benefit repeat customers. The said business should dispense with all manner of gimmickry in the operation of such programs and must address the core issue of customer benefit (for instance, a consistent customer experience). Once that is established, loyalty programs operated will create a distinct business benefit in terms of loyal customers and positive customer feedback. This paradigm can be recreated by other businesses and therefore, they can reap the benefits of these marketing strategies.

Interestingly, recent market research suggests that the number of inactive memberships in loyalty programs tend to eclipse the gains registered by such programs every year. This clearly represents a point of concern because large numbers of inactive memberships indicate low customer interest in such programs. This fact also indicates that the legacy structures and mechanisms that attend traditional loyalty programs are no longer effective in retaining the customer’s interest. In light of the above, we may infer that brands and businesses should devote more time and effort to understand the drawbacks of such programs in order to decipher the lack of market traction as detailed above. Research indicates that a key reason why customers abandon these programs lies in the fact that they do not perceive any tangible gain in pursuing said programs. This, again, points to deficiencies in the ideation, creation, and operation of loyalty programs. We must note that an objective evaluation of the trends listed above must force brands and businesses to re-engineer the very concept of loyalty programs in the interests of long-term business success.

Customer feedback also appears to indicate that most customers have a sub-par perception of loyalty programs because the promised rewards tend to materialise over a very long time frame. The ‘points’-based programs tend to accumulate the ‘points’ very slowly and this mars customer enthusiasm to the point of losing interest in loyalty programs. Additional feedback from customers indicates that the rewards offered by said programs did not excite the customers’ palate and this further contributed to lower customer enthusiasm. These inputs offer create the perfect business case for businesses to reassess the efficacy of loyalty programs. Perhaps, brands and businesses may be encouraged to approach the concept of ‘rewards’ from a different angle with a view to enthuse the customer. The overhauling of such programs assumes additional significance when we consider the fact that such programs have formed a mainstay of traditional marketing practices. They may be tweaked and re-engineered to breathe new life into them.

Poor customer service has emerged as one of the primary reasons behind the abandonment of loyalty programs. This represents a serious customer complaint and therefore, businesses must first overhaul primary commitments to customers, such as core value propositions and commitments to customer service. Corporate captains and business managers alike must renew their basic commitments to customer service, because these factors comprise the core of the modern customer’s product or service experience. In addition, brands and businesses can work to customise the rewards due to customers in an attempt to ignite interest. For instance, a retail business can choose to impart more meaning to its programs by allotting special points to customers’ accounts on birthdays, festivals, and anniversaries. This approach may help the business to delight the customer and thus create momentum in the operation of loyalty programs. These efforts may require further brainstorming and refinement, but appropriate rewards can be ideated to rejuvenate the business prospects of operating loyalty programs.

Commercial organisations can choose to engage with customers at a deeper level in order to infuse more meaning to their loyalty programs. For instance, online retail businesses can greet customers by name each time they log in and offer an update in terms of points accrued to a certain loyalty program. This reminder is an interesting technique of reminding the customer of his participation and piquing his or her interest afresh. Milestones in these programs can be indicated and the corresponding benefits can be explained at length. These efforts, on the part of the business operator, can help to spread awareness about loyalty programs and the impact it can exert on the customer’s shopping behaviour.

In the preceding paragraphs, we have examined some of the aspects of operating customer loyalty programs and assessed the efficacy of such programs. In light of these statements, arguments, and facts we must note that the legacy structure of loyalty programs faces serious challenges in the modern world and therefore, these programs must be overhauled keeping in mind the operating environments and imperatives that attend various business enterprises. The basic premise of these programs remains valid, but the nature of modern commerce has forced us to consider serious re-engineering so that these programs can preserve their core value proposition into the future.

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