Loyalty Programs for Customers

Customer loyalty, as anyone running a business knows, is hard to get. It is almost like climbing a vertical mountain with a heavy pack of the other nuances of the business. If a company slips, the ground gained over ‘the mountain’ can be easily lost. To make matters worse, it costs any business, both big and small, around 5-10 times more to attract new customers. According to Inc., current customers are easier to manage and also are more likely to spend 67% more than new customers. One of the best and effective methods to gain and keep this customer loyalty is to implement loyalty programs for customers and is a great customer service initiative.

However, just implementing loyalty programs is not sufficient as suggested by the 2011 Colloquy Customer Loyalty Census. At least one-third of these loyalty programs are ignored or remain unredeemed by customers which is unfortunate since companies have already spent a lot of time, effort and money on putting together these loyalty programs. Also ‘loyal’ customers end up not getting added value or benefits from the companies they are ‘loyally’ investing in. Companies must consciously strive to remain outside this ‘non-beneficial’ one third portion and think up loyalty programs for customers that would actually work for them and profit your business.

Loyalty Programs for customers must actually work and keep your customers coming back with more business.

– A loyalty program that works and yet is simple to implement is the points system. It adds up points for customers who are regular and frequently provide business to the company. These points once accumulated to a high number, are then converted to a discount, a complimentary offering or any other preferential treatment for the customer. Inform the customer of how the system will work and keep them updated on the number of points they currently have in their kitty. For example a large hotel chain had provided their customers with a special program by which if they provided the hotel with even a minimum of 6 room nights per month, it would translate to a benefit of a two days and one night complimentary all inclusive stay, for their company. It was up to the company to give that away to a deserving employee as a reward. The company benefited in two ways – received preferential treatment from the hotel and also were able to provide a reward to a deserving employee at no cost to themselves. The hotel in turn received substantial and sustained business from the company.

Although this seems to be among the rather simple and common kind of loyalty programs, it should only be implemented where there are short term but regular purchases, as in the case of the hotel.

– A segmented and level based program lets even the most ‘recent’ loyal customers receive some benefits. This keeps them encouraged and engaged rather than lose interest by virtue of having to wait for loyalty programs till they reach a certain level of loyalty. For the customers who have been loyal for long, the benefits and privileges would be higher and more substantial. This method of ‘loyalty tiers’ allows for a wider loyal customer base, keeps the costs down for the company and is long term value.

– Offer ‘preferred customer’ or ‘VIP customer’ status at the start of the relationship by charging a one-time or annual nominal fee. A VIP status makes customers feel important and are happier since they can easily moves past the long purchase processes and other hiccups and be sure to receive top class customer service. Companies benefit by having an understanding of the needs of such customers in advance and thereby preventing their departure or dissatisfaction. Although customers are paying a sum, the benefits they receive by being loyal and frequent business providers are far more substantial.

– Another non-monetary yet among the effective loyalty programs is around the customer’s company culture and values. Instead of discount coupons, freebies or other monetary methods, this revolves around companies partnering with their customers in programs that are valuable to the customer. For example, a company could partner with their customer in their drive towards sustainability in the area of saving paper. Helping the customer with these programs by way of staff help or sponsoring an awareness driver or using recycled paper bought from an NGO that is supported by the customer. This encourages a feeling of oneness and provides a common set of values and goals between the customer and the company.

– To encourage loyalty, another highly workable of loyalty programs is partnering with another company to provided added benefits and value to the customer. For example if the company deals with baby products, it would be a great idea to partner with a well-known pediatrician or a baby day care facility. These would be value added services that the customers are most definitely going to need. The value of these services comes from the fact that as a company you are thinking about your customer’s needs beyond what your company can provide for. These added services reduce customer effort and time in looking for the services and are able to benefit from them through a single ‘vendor’. Your company will come to be seen as dependable and customer loyalty will increase and solidify with time.

– Offering products and or services that completely different and ‘insanely innovative’. It goes beyond offering discounts or lowest prices it is about redefining the product or service. Separate loyalty programs will be unnecessary since the product or service will be so spectacular and would have no equal or be available anywhere else. Customers will see the benefit of being associated with your company and brand just by virtue of this ‘individualistic streak’. The added value will be apparent at the outset, keeping your customers loyal to you.

After implementing your pick from the loyalty programs, it is vital that the success is constantly monitored and measured. To understand the effectiveness of the program, companies must be able to gauge whether loyalty programs are increasing customer satisfaction and happiness leading to higher retention and ultimately customer loyalty. Without these measures, loyalty programs could turn out to be a colossal waste of the company’s efforts.

The loyalty programs must first of all increase the rate of customer retention. Increasing customer retention numbers will increase the number of members in the loyalty programs and your company’s bottom-line figures would reflect a positive trend. Author Fred Reichheld says that even a “5% increase in customer retention leads to a 25-100% increase in profit”. Those are astounding numbers – surprising then that some companies have still not invested in thoughtful and practical loyalty programs for customers!

Loyalty programs must drastically reduce the number of customers that walk away or stop doing business with you company. They should simultaneously be increasing the number and volume of purchases and business being given to your company. An increase in these figures would help to offset any negative or ‘obvious churn’ in any business.

Ensure that customer feedback is taken and the Net Promoter Score is used to arrive at customer satisfaction levels. The NPS should reveal upward trends in customers being willing to recommend your company and its offerings to others. Loyalty programs that are effective and well-implemented should get your NPS over 70%, which is a very significant landmark and one that can be used as a benchmark for programs in the future.

Loyalty programs should also lower the customer effort score. This CES reflects the amount of effort the customer had to exert to get great customer service and do business with your company. If customers have had to use too much effort, then this score would be high. Bad customer service will impact not just the customer satisfaction levels, but also increase customer attrition and lower the NPS. Loyalty programs must be designed to address all customer service issues and lower the CES.

Companies are steadily supporting loyalty programs for customers and some of them have even managed to raise and set a high bar for other companies. Through perceptiveness, innovation, creativity and effectiveness, these companies are not just wowing customers but setting new standards of customer loyalty. They are going all out to not just reward their customers through these loyalty programs but are constantly saying a big thank to all their customers. Are you there yet?

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