Paying the Price to Change Behavior
Using loyalty programs as a marketing tool is not a new concept to marketers, but their effectiveness has been debated for more than half a century. For example, within the airline industry, proponents contend that frequent flier miles have significant consumer appeal, while critics argue that most consumers are not loyal to one airline over another, even though every airline has extensive rewards/miles programs.
What makes a loyalty program succeed has little to do with subjective judgment; rather, it's the program's ability to change consumer behavior. Changes in behavior are what marketers are willing to pay for. Measuring those changes is how they measure success, even if the desired result is simply to retain customers.
In the above example, free airline tickets undoubtedly generate consumer interest, but with competing marketers' offering the same reward and the interminable wait time required to earn sufficient points for everyone but the most frequent of fliers, the real question is whether earning miles actually changes consumer behavior. And if a loyalty program isn't changing consumer behavior, it's probably just wasting money.
However, online awards programs are very different: They typically offer consumers a wider range of rewards that can be earned in considerably less time. Being better at holding consumers' attention is the key to changing consumer behavior, so these new online loyalty programs have growing appeal among marketers.
Online loyalty programs are still a relatively new concept. Loyal customers are repeat customers, and repeat customers increase Web site "stickiness." And by creating loyal customers and increasing site stickiness, Web sites enjoy increased revenue, the holy grail for many dot-coms.
According to Jupiter Communications, New York, loyalty programs are categorized as those that build a relationship with consumers over time; whereas, incentives and promotional campaigns are focused on driving immediate incremental transactions or purchases. Though short-term incentives and promotions can be effective customer acquisition tools, loyalty builds upon initial contact to retain and grow the lifetime value of the customer.
Online marketers can best achieve consumer loyalty and value for their brand by following three basic rules:
* Rewards must be offered to consumers consistently and continually. The occasional promotion is not enough to capture a consumer's loyalty. Consumers are much more likely to return to a site again and again when specific, desirable rewards are always available.
* Earning rewards must be quick and easy, or consumers will lose interest. Because Internet-savvy consumers expect instant gratification, sites that instantly reward consumers for many basic activities -- such as using a search engine, answering a survey or clicking on specific icons -- ensure that consumers will return. Online marketers must keep in mind that the easier and faster it is for consumers to accrue rewards, the more likely they are to enjoy the program, realize the benefits and become loyal to the program and, thus, loyal to the site, or specific product or service.
* Perhaps most importantly, rewards must be valuable. Marketers must offer relevant, demographic-appropriate rewards that consumers want, need and will use. If a broad target audience makes determining the appropriateness of a reward difficult, marketers must consider offering an equally wide range of rewards to serve the entire audience's interests. Typical examples include items that most consumers use every day such as groceries, toys, gift certificates and even gasoline.
So now that you have consumers returning to your site, how can you ensure that they aren't there just for the free loot?
Consider a portal-based program. Portals tend to have the greatest success in creating loyal consumers and not merely point junkies because they are easy to use and offer a wide array of services that consumers seek regardless of the reward being offered -- like surfing and search options. By turning the actions consumers do every day online into point-earning activities, the consumers are easily rewarded and less skeptical and gain even greater value than the reward -- they also gain convenience.
In addition, portal-based programs prove particularly effective in building loyalty for sponsors' sites, products or services because consumers come to the portal to interact when they are ready and willing. This way, marketers reach consumers while they surf, search or shop on a portal program and, therefore, when these consumers are predisposed to interacting with sponsors and are open to receiving their marketing messages and offers.
There are many ways to attract consumers to your online destination, but there is only one way to keep them coming back: by delivering constant value through rewards and creating customer loyalty. Incorporating an effective loyalty program that offers a short rewards cycle will continually drive consumers to your Web site or to your products and will lead to increased consumer loyalty, site stickiness and increased revenue.