Moving Customers Up Loyalty Chain

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I like to cook, and I love to shop for cooking devices and supplies. Take Williams-Sonoma's Web site. I love surfing for the latest gadget that I didn't even know I needed, but I also go there for recipes.

The other day when I found a recipe for striped bass grilled in banana leaves, I also found products I might need if I really want to look the part when preparing the dish: the mortar and pestle for grinding herbs, the chef's knife for preparing the fish, and don't forget the citrus trumpet for coaxing the juice from a few limes.

What Williams-Sonoma does is the first step toward building customer loyalty. It provides recipes as a value-added service to keep customers like me coming back. It links recipes with products and products with recipes. It is providing an enabling mechanism for me to do business with the company and connecting the brand with my life. It's a good start, and it works. But it's not enough. E-tailers must do more to ensure they keep my business and maximize my spending.

There are basic things e-tailers must do to keep customers. I call these things "getting your house in order." These used to be differentiating characteristics, but now they're simply the cost of doing business in e-tail. Customers must be able to find information and products easily. They must be able to select items and check out easily with as few clicks as possible. And they increasingly need value-added information and services such as the recipes that Williams-Sonoma offers, or the how-to information Lowe's offers on home improvement, the gift guide RadioShack offers and the e-mail occasion reminder services at Things Remembered.

Customers need an even stronger proposition. When they're out physically shopping, location is an issue. If a customer goes to a mall looking to buy something, chances are he'll find a place to buy it at that mall. But online, all your competitors have the same location. They're all just as convenient. You need a compelling marketing program to make the customer choose your site first.

Customer loyalty is elusive. Customers are busy and bombarded with messages and deals. Things are even tougher online. E-tailers are often fooled by the single-transaction customer. I've heard the discussions: "If we could just get 20 percent of those one-time buyers to come back." Instead, focus on the multi-transaction customer. Develop ongoing programs to maximize the business relationships with those customers that have proven they're genuine online buyers. Focus on boosting loyalty and increasing share of customer.

When I say "loyalty," people conjure images of points and prizes. They run the math and conclude, "we could never afford that." Or, they tested something a few years ago that was poorly designed and lamely executed and are now equipped to announce, for the rest of their careers, "loyalty doesn't work in this industry."

There's a lot of mimicry in loyalty marketing. Too many people copy some variation of an airline frequent traveler program, and that's why they can't afford it or it doesn't work. The application of loyalty marketing techniques requires industry-level innovation and imagination.

Barnes & Noble has done a good job. Its Readers Advantage program, available for online and offline purchases, provides an instant discount. Customers make a commitment to B&N by paying a $25 annual fee. Think about it. Once you pay that fee, are you going to buy books anywhere else?

Famous Footwear has its rewards program, called Celebrity Club, for online and off-line purchases. There are multiple levels that members can achieve based on annual spending. And members can earn a bonus for opting in to e-mail communications.

Talbots offers Classic Awards on its private-label credit card. Customers earn a $25 appreciation dividend for every $500 in net purchases made on the card (online or off-line). Classic Awards also offers a 10 percent discount on any single purchase made in the month of the member's birthday, an extra soft benefit to help solidify the relationship.

These are just a few examples of e-tailers delivering well-planned loyalty programs to build long-term relationships with customers. When I talk to people about the right approach for their business, I encourage them to look across many industries for different examples but to remain focused on the unique challenges of their industry. Too often I'm asked why there are no successful loyalty programs in a certain industry. Is it because they don't work here? No. It's because all of the attempts have been ill-conceived copies of programs suited for another industry (or, perhaps, no industry at all). I collectively call these programs "random acts of marketing."

I believe there is a loyalty model for every business, and e-tail is fertile ground. Make sure you're doing all the basic things right (getting your house in order), then explore your opportunities. Don't be afraid to innovate. Benchmarking your industry is a good idea - to a certain point. Don't get carried away and talk yourself out of a good idea just because you haven't seen it done by another company.


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