Is Your Frequency Program in A Rut?
The objective of any loyalty program is to establish long-term relationships with customers so that they count on the program as they would a trusted friend. If that friend -- or program -- starts interacting with them superficially or ignoring them altogether, they'll probably disengage, if not leave outright, without ever revealing that something is wrong.
You have to catch your customers before they reach this point, because once they're disenchanted, you'll probably need a big infusion of creativity and cash to win them back. That's why it pays to look for signs that your loyalty program is in a rut before the customer notices. We've identified three important trouble markers, along with steps you can take now to turn your program around.
Member participation rates are declining. A thriving loyalty program has steadily increasing participation rates. Although rates vary widely depending on the level of customer involvement, the size and scope of the program and the marketing strategy of the organization, a few ground rules apply. New programs should grow steadily over the first two years. A mature program should generate inquiries at a monthly rate of 4 percent to 5 percent.
The most common cause for declining participation rates is loss of creative focus on the program. Too often the loyalty program gets major support and attention from the sponsor only through the launch year, the assumption being that a successful launch signals the end of the really hard work. Nothing could be further from the truth. The day you decide that your program can be relegated to second priority is the day you plant the seeds of disenchantment in the minds of your members.
It is also common for newly launched programs to settle into a rut of self-imposed sameness. Members repeatedly receive the same kinds of offers. Member communications repeat themselves in form and substance. Benefits begin to lose their luster as their delivery becomes inconsistent or insincere. The relationship's special character is belied by the homogeneous nature of all member interactions with the program.
There's no excuse for this, and it's easy to fix. Simply set as your goal the creation of some kind of surprise value-added offer for at least one segment of your membership base each quarter. By surprise, I mean something different in style and substance from anything you've already done. Of course, this kind of commitment to testing new and different tactics on a continuous basis means you'll be pushing yourself harder. But that's the price of the game, and the impact is both cumulative and positive. Customers like pleasant surprises and they tend to talk about them, which generates more new members and increasing activity rates.
Return on investment has diminished. When ROI begins to slip in a loyalty program, management's first reaction is often cost reduction. But that's like opening a vein. Reducing program funding may improve short-term ROI, but it only weakens your ability to recover and thrive.
The better approach to reversing declining ROI is to tackle your benefits structure with fresh eyes and open ears. Talk to members. Ask them what they like and dislike about the program and what kinds of recognition and reward they wish for. Look for new benefits or variations of existing benefits that might be offered to stimulate incremental purchase behavior.
Test carefully. The appropriate approach is with a scalpel, not a butcher knife. ROI can be affected dramatically if you focus on member segments where share of customer is already moderately strong. These customers are already willing to select you over your competition. By giving them evidence of added value, you might see large gains -- without having to deliver that same new benefit to the entire membership.
The loyalty program's been orphaned. Whether through attrition, reorganization, mergers or downsizing, chances are that both the original "parent" and objectives of your company's loyalty program are no longer around. An alternative scenario is that the whole marketing department oversees the program, rather than one individual being directly responsible.
Loyalty programs need a corporate champion and a day-to-day leader. The champion ensures that the organization stays focused on the customers' wants and needs and that the program is positioned as one of the key direct contact points that the company has with the customer. The leader ensures that the program is directly linked with corporate and product marketing strategies and that the consequences of other marketing decisions take the frequency program into consideration.
The day-to-day leader of a frequency program needs special skills in order to manage it effectively. He must recognize the potential of the program to build a dialogue with best customers. He must be well respected within the organization and recognized as someone who is close to the customer. And he must understand the many facets of making a program successful such as linking program to strategy, effective communications and ensuring operating systems deliver information quickly.
One more attribute to look for in finding your new program champion: courage. Select someone who has the dedication and courage to fight for the customer. It's all too easy to allow the loyalty program to settle into the broader portfolio of marketing projects which are buffeted by the stresses and strains of organizational budgets and politics. Unlike your advertising and sales promotion efforts, your loyalty program constitutes a genuine, tangible connection to your most valuable customers. Your champion must be willing to march straight into the CEO's office, if necessary, to defend the integrity of that connection.
When all is said and done, only a steadfast, courageous commitment to continuous innovation and creativity in the pursuit of delighting high value customers will keep your loyalty program out of the ruts that can sidetrack and deplete them.
Richard G. Barlow is president of Frequency Marketing Inc., Cincinnati, and publisher of Colloquy, The Quarterly Frequency-Marketing Newsletter (www.colloquy.com). His e-mail address is email@example.com.