Loyalty programs are by nature designed to create a loyal following among customers. Unfortunately, if not handled correctly, they can actually have the opposite effect.
One of the most innovative programs to reward loyal customers was started in the 1970s by airlines with frequent flyer miles. These and other similar type loyalty programs are obviously extremely popular today and speak loudly to customers basically saying, “Thank you for your patronage.” Customers love to feel appreciated and loyalty programs stress the importance that customers are important and the particular business appreciates their continued support.
Loyal customers can be rewarded in many different ways depending on the business...points, gifts, discounts, rebates, etc. Regardless of the type of program, the strategy is simple which is to give customers the incentive to make repeat purchases.
When all things are fairly equal for a company’s products or services...quality, pricing, benefits, availability, etc...a loyalty program can make the difference for a purchaser. A natural tendency is to make a purchase where something more than just the product or service will be received. This is the perfect scenario for loyalty programs to enhance repeat sales for a business.
Some loyalty programs are simple for customers to understand while others are more complicated with the “details in the fine print.” Although it is best to have a loyalty program that is easily understood by all customers, the most important point is that it works to attract new customers and keep loyal customers returning.
The Opposite Is True
While a business might have a loyalty program, its effects might be the opposite of the intended objective which is, of course, loyal customers repeating a purchasing experience. The “details in the fine print” can produce an opposite effect for loyal customers, thus, creating disloyalty because of the program rather than loyalty.
Maybe an award has to be used within a certain time period, cannot be carried over if only part of an award is used, too complicated for customers to understand how to benefit from the award, or the loyalty program is not explained in detail leading to customer confusion and dissatisfaction. So, the very program meant to create loyalty, enthusiasm, and goodwill for the business can turn a positive objective into a negative outcome.
Develop And Market A Loyalty Program
Overall, loyalty programs cost little compared to the benefits received. With competition intense in most industries, it is understandable that it is far less costly to retain customers than to attract new ones. One retention factor is through the use of a loyalty program.
With a little ingenuity, any business can develop some type of loyalty program. Whether a business’ loyalty program is new or already in existence, it must be marketed. There is little purpose in having a loyalty program if customers are not constantly made aware that such a program is available. Many businesses have loyalty programs but don’t aggressively market them because they are worried about the back-end cost. This cost, however, is insignificant compared to the overall additional business generated because of repeat business from loyal customers.
The trade-off is either (1) continuously looking for new business or (2) relying on business growth through building a foundation of loyal customers who repeat a buying experience plus adding new customers who are made to feel welcome, valued, and appreciated. These new customers then become local customers.
The Right Loyalty Program
A loyalty program should work for a business rather than against it. It should be simple for customers to understand and simple to implement. The right type of loyalty program is a win for both customers and the business.