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Are You Creating Disloyalty Programs?

Oxymoron: a combination of contradictory or incongruous works (as in cruel kindness).

Whether directed at consumers or at business-to-business customers, loyalty marketing has become today's reigning oxymoron in the direct marketing industry.

Sophisticated marketers sometimes think the mere act of throwing marketing dollars at heavy users engenders the brand loyalty they have or expect.

Loyalty, however, is the result of a successful relationship. By using loyalty as an adjective, we create the illusion that we can make people loyal. In fact, rewards and other bribes may result in purchase behavior that is loyal on a superficial level, but highly dependent on incentives.

Loyalty programs that overlook more important issues such as access, delivery or price will throw the marketing expectations/responsibilities equation out of whack and lead to consumer rebellion and disloyalty. Being the bright individuals they are, consumers see through loyalty program frou-frou as just a marketing technique trying to cover up an uncompetitive market position.

True loyalty comes from a better brand and marketing proposition and it can produce stunning results for well-designed programs. Such programs have produced sales returns of 10-to-1 to 50-to-1 for every dollar invested.

To avoid inadvertently creating disloyalty programs, marketers should periodically perform a reality check with the following program considerations in mind.

Loyalty program vs. retention program: And the winner is… . Actually, they can both be winning strategies. Loyalty programs are, first and foremost, retention programs at heart. But traditional loyalty programs often create high expectations by and for customers, requiring greater and greater effort and expenditures on their part, and on the part of marketers who must fund such programs. The result: loyalty fatigue.

Retention programs, on the other hand, can be just as powerful — if not more so — but much easier and less costly to implement. A retention program, though, begins with an examination of how you can deliver on customers' current expectations rather than ratcheting up their — and your — future expectations by implementing an unending stream of new loyalty programs.

Which brings up another point: Always have an exit strategy to end programs gracefully.

Research imperative: Send love notes, not poison arrows. You must periodically conduct research to understand your customers' state of mind, their attitude toward your company and products and what they consider important in a business relationship. At the same time, such research is your opportunity to evaluate any contemplated loyalty/retention communications programs to make sure you're sending love notes and not poison arrows.

In addition to speaking with clients directly, it pays to listen to your sales force and any other repositories of invaluable customer information. Remember, a communications program tailored to the needs of your core category users will have a very high return on sales. And pretesting and tracking will help you determine what elements are having the greatest effect on loyalty vs. sales.

Consumer programs: The wrong model for BTB marketing? With its origins in travel marketing, consumer-directed loyalty marketing has become fashionable — too fashionable, perhaps. It gained its immense appeal in that industry largely because the incentives offered have traditionally been inexpensive, attractive and largely successful with consumers.

These consumer-based models, particularly travel models, can be very dangerous to use in BTB programs. They often aren't transferable to the BTB environment because of ethical barriers to using them. Is it ethical, for instance, to reward an individual with frequent-flier miles for a company-related purchase?

Top six motivators in BTB relationship building. In designing BTB retention programs, customers need more than the promotions and incentives commonly found in loyalty programs. Here is how customers in a recent survey ranked what they consider important in a business relationship:

* Access.

* Education.

* Service.

* Recognition.

* Preference.

* Reward.

Forget them and their order of importance at your own peril.

Make your IT infrastructure match your ambitions. Before launching your program, analyze whether your database management, fulfillment and other elements are up to the task of servicing your customers while also tracking their behavior and your program's performance. Otherwise, partner with someone who can help.

To sum it all up, when you try to make another person loyal without providing a relationship that works for them, you waste time, money and trust. You also drive him into the arms of competitors, which puts the squeeze on your bottom line. But if you follow the simple guidelines mentioned, you can build a powerful relationship marketing program that will be much easier and less costly to implement than a loyalty program. It also will bring you higher returns and more satisfied customers.

John E. Groman is executive vice president of Epsilon, Burlington, MA, a database marketing company. His e-mail address is [email protected]

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