Should loyalty programs be exclusive?

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The gloves are off
The gloves are off

Loyalty programs can reward loyal customers and aid retention — important in this global economic recession. But should every customer be an equal member? Our experts weigh in

CONTENDER
Evan Weisenfeld
SVP, business development, Upromise Inc.
More than 18 years experience in sales/marketing

A loyalty program, if properly designed and leveraged, can be a successful tool to appeal to all customers — not just a select few. The key is setting up the program cor­rectly to achieve your business goals while providing value for the consumer.

The first question to ask is what you hope to accomplish. Are you looking for new cus­tomers, to retain customers, to get custom­ers to spend more now than they have in the past, to change purchase frequency or move specific products? The design of your program should meet your goals.

Some companies launch loyalty programs to appeal only to their best customers. While there is nothing inherently wrong with this strategy, these companies ignore the majority of other customers who could be influenced by a broader program. A “best customer” program will reward the best customers, but won't help attract and retain other customers and move them up the engagement ladder.

Loyalty programs can be designed to encourage specific behavior and ultimately grow the number of best customers. At the same time, these companies can engage in a dialog with their other customers, learn what motivates them, and implement the tactics to improve their shopping behavior.

But beware — companies often run into trouble developing programs that engender loyalty vs. simply providing rewards. Make sure your program is designed in such a way that the end result will be loyalty and not just a way to erode your margins


CONTENDER
Luc Bondar
VP of loyalty marketing, Carlson Marketing
More than 10 years experience in marketing

Loyalty programs that treat all customers the same way, giving away rewards to anyone for a sale regardless of their value, are at best leaving money on the table and, at worst, throwing good money at bad customers.

Loyalty programs that create sustainable value for the customer and the company successfully observe three guiding prin­ciples: treat different customers differently, build stronger relationships, and reward value with value. To integrate these prin­ciples into your marketing strategy, think about your loyalty program in two ways: as the price you pay to know your custom­ers, and as a vehicle to create more value from your most valuable, easiest to grow customer relationships.

Through their participation in your loy­alty program, customers give you more information every time they interact with your brand, product or service. By analyz­ing this information, you will gain insights that point to the differences in your cus­tomer base and help you make efficient marketing budget allocations, and effective choices about which customers to target, what behaviors to incent, what to offer them and how to offer it.

You should only target customers and behaviors that add value to your business. And when it comes to rewards, more valuable customers get more, less valuable customers get less. And for those that erode value? Man­age them out of the program. After all, it's not worth trying to please everybody.


DMNews' DECISION

Weisenfeld contends that when effectively designed, a loyalty program can not only reward best customers, but also draw in new ones. However, Bondar says companies should invest only in those customers with the potential to grow, while less valuable customers should be dropped.

Have your say E-mail your topic to nancy.kearney@dmnews.com

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