An earlier exposition spoke about the benefits of loyalty programs and their effect on customers and profits for companies. Loyalty programs have been around a long time but with time they have become better, more competitive and more strategic to allow companies to grab a bigger share of the customer’s pocket. Loyalty programs are not just about increased sales, but have a much greater potential. The reasons that companies are unable to tap into the true potential of these is due to the myths around customer loyalty programs.
It is no surprise then that many companies are using customer loyalty programs as an effective and easy method to produce a high impact differentiation between them and their competitors. Customer loyalty programs are offering incentives and benefits that are being seen as high value from a customer’s point of view. Such CLPs if executed methodically they are easily established and provide returns fairly quickly for the company irrespective of the ongoing price wars in the market.
Considering the benefits of customer loyalty programs, it is surprising that not all companies have invested time and money on such programs or are limiting their use. The reason seems to be the plethora of doubts, uncertainties, pre-conceived notions and vagueness that cloud the minds of companies regarding the efficacy of these programs in building a successful and sustainable business. Companies are unsure whether they would see any tangible benefits from these customer loyalty programs even after high costs and effort being put in to them. These uncertainties are however, the offshoots of the large number of myths surrounding customer loyalty programs. The goal of any customer loyalty program must be to increase business through current customers, retaining these customers and be able to attract new customers. It would be good to look at some of these myths or misconceptions that surround customer loyalty programs.
– Myth 1: Customer loyalty works better depending on the size of the reward – the bigger the better.
Smaller businesses believe that these customer loyalty programs will not work for them since they would not be able to provide customers with rewards as huge as what the larger companies can afford. The market is far too competitive and expenses are rising with each passing day and hence their already miniscule margins would be further cut back if they were to provide customer loyalty programs. This however is not true. Courteous, polite and efficiently tailor made service and customer loyalty programs have far reaching effects too. The value of customized programs is higher for customers since it allows them to actually use the benefits of the program and come back to do more business. For an average income family for example – a tailor made coupon that entitles them to some amount of free groceries will be much more ‘valuable’ than a large store offering them 50% off on purchases of over a certain sum of money spent in one shopping trip. This offer is futile as this family would be uninterested in skewing their monthly budget just to get a 50% off and would rather go with the first offer.
The fact is that the more the individual shoppers buy from a particular store, the greater the amount of information this store will have about the customer’s needs and expectations. As the accuracy of the information increases, the company would find it easier to fashion customer loyalty programs that benefit and are suitable to the customer base. As customers begin to see the connection between their interests and the company’s offerings, their loyalty towards the company increases as does their faith in these loyalty programs. Customer loyalty programs are only effective when the customers can actually use the benefits and redeem the loyalty bonus points regularly. This busts the myth that customer loyalty programs must have great payouts for them to be successful. What makes customer loyalty programs work is the value they create for the customer.
– Myth 2: The customer loyalty program will spread on its own.
Like any program or customer service effort, this one too requires accurate promotion, adequate publicity and awareness. It must be a combined effort of every team in the company since as a standalone program through the customer service team it is unlikely to be successful. There must be enough hype generated regarding its value and benefit for customers before it can actually take flight.
– Myth 3: Customer loyalty programs must be only for ‘select’ customers or only existing ones.
This would work only if there is an exclusive club or members only program and are limited only to a few. However, if the aim of the customer loyalty program is to generate more revenue and attract more customers, then they must include a sizeable portion of prospective customers that hold good promise. Customer loyalty programs are about gaining ‘loyalty’ from customers and leaving it out this big chunk of prospective customers who would prove to be beneficial and good customers would be a very unwise business move.
– Myth 4: A customer loyalty program will most definitely increases sales
This is far removed from the truth. Even though the basis of such programs is to increase sales, it is incorrect to assume that as a company whatever you put out there will be accepted by customers. Loyalty programs that are only focused internally and implemented basis the company’s processes and desire to increase sales are unlikely to succeed. The programs must take in to account the customer’s needs and expectations, what they really want and what will motivate them to actually use your loyalty program beneficially.
– Myth 5: Technology will help and contribute to the success of the customer loyalty program. This is so untrue – technology is but a means and its success depends on how the capability of the user to put it into action. Technology can build and store data regarding your customer’s buying history and other details, but it cannot categorize or determine what the prospective customer’s mindset is like currently. Technology can help to determine the kind of loyalty program, but cannot get customers to use it if they don’t see value in it for themselves. Technology is helpful but cannot guarantee the success of your customer loyalty programs. It is for the company to discover through personal interactions what will motivate the customer to move towards doing business with them.
– Myth 6: Your customer loyalty programs will translate to loyal customers. The fact is that customer attention is very short-lived and their interest only holds till the program is around. Since loyalty programs are fleeting, the loyalty from customers is also ephemeral. Research does show a rise in loyalty from such programs but it soon wears off when the program runs out. Creating some exclusive programs for long standing customers while having a separate one to encourage new entrants.
The success of customer loyalty programs depends on many internal and external factors and companies must be flexible enough to use and implement these programs in a way that is beneficial not just for the customer but also ensuring long term success for the company. Every member in the organization must see themselves as custodians of these programs rather than they being the sole responsibility of the marketing and customer service teams. Each person must act as a facilitator to enhance the efficacy of these programs so that they may deliver better results and yield higher customer loyalty scores. Empowering each employee, which means even the ones that do not directly deal with customers, to put the customer loyalty programs to action is bound to yield better results. Involving everyone does not only drive loyalty but increases the chances of getting other benefits as well from these programs. Involving all staff also provides everyone with an understanding of the company’s customer base, the current trends and the efforts required in keeping customers and acquiring new ones. A sense of involvement will enhance team spirit and get people to work together better.
“Customer loyalty programs have to have relevance to the individual customers to be effective. Some of the programs just don’t generate returns” – Paco Underhill
