Hardly a day goes by when you don’t visit a store, restaurant or supermarket and have an employee ask, “Do you belong to our loyalty program?” Loyalty (or rewards) programs have become ubiquitous — a fact of life in American business. Accordingly, it’s helpful to ask what the role of a loyalty program should be in a company’s marketing and customer relationship management efforts.
We can define customer loyalty as a trust-based relationship between a company and the customers it serves. This relationship is developed by consistently executing the company’s value proposition for its customers over time.
- A company’s highly satisfied customers (i.e., a “5” on a five-point overall satisfaction scale) are approximately 40 percent more profitable than that company’s satisfied customers (i.e., a “4” on a five-point satisfaction scale).
- Companies that correctly market to their highly satisfied customers can increase their value by an additional 30 percent. Each member of this subset of a company’s highly satisfied customers is thus worth over 80 percent more than a satisfied customer (1.3 x 1.2 = 1.82).
Concerted and refined efforts to target existing highly satisfied customers represent the single best marketing opportunity a company faces. In spite of this, we’re amazed by the number of our clients that spend their time either trying to bring back “escaped customers” or calming down complainers when their real (and easiest) opportunity lies with their existing base of highly satisfied customers.
So let me briefly describe how you can transform your loyalty program in order to take full advantage of this significant growth opportunity. Use your loyalty program to develop targeted communications and marketing programs designed to appeal to the key motivators that drive visit and purchase behavior among these highly satisfied customers. This will allow you to use your loyalty program to develop targeted communications and marketing programs designed to appeal to the key motivators that drive visit and purchase behavior among these highly satisfied customers.
Such communications and marketing initiatives that focus on the key purchase motivations of a client’s highly satisfied customers will produce a larger increase in profits than efforts targeted at attracting new customers or trying to bring customers back into the fold who have previously purchased from you and have subsequently moved on to other options. Conversely, rewards-based customer loyalty programs that don’t take advantage of this opportunity are chasing the least profitable customers rather than grooming the best.
Adapted from John Larson’s article in Total Retail Report, https://www.mytotalretail.com/article/the-proper-role-of-loyalty-programs/
