Why loyalty programs work and how you can use them to compete with the big boys.
Posted on May 12, 2013 by Trudy Murphy, One of Thousands of Business Coaches on Noomii.
62% of consumers are more likely to continue doing business with a company because of their loyalty program. Do you have one?
I’ve been doing a lot of traveling for work lately, so in order to reduce travel costs I switched my Visa card loyalty program. Turns out, according to the latest loyalty report by Maritz1, I’m not the only one who will endure certain inconveniences to reap some extra rewards.
Maritz’s loyalty report, which surveyed 6,500 consumers, states the following very interesting statistics for Marketers:
– 92% of consumers are a member of at least 1 loyalty program, with the average person being a member of 6.4 programs.
– 62% of consumers are more likely to continue doing business with a company because of the loyalty program.
– 39% of shoppers will modify the brands they purchase to maximize loyalty benefits.
Now, if you fall into these categories and subscribe to loyalty programs yourself, these statistics may not be surprising to you at all. And as a marketer, the true value of Maritz’s report lies in their research on what makes a loyalty program successful. No matter how large or small your business is, the following information can help you build a desirable loyalty program for your customers.
The report provides 3 powerful pieces of information that will determine the success of your loyalty program:
– Consumers with higher personal income are more likely to join and be influenced by reward programs. If affluent consumers are your target market, you should definitely offer a loyalty program.
– Consumers prefer programs that offer clear value with hard benefits such as cash, rewards or discount incentives. Softer benefits such as privileges, priority access and in-kind benefits are important, but they are more enticing when offered in conjunction with a hard benefit that’s value can be clearly assessed by the consumer.
– Consumers are least likely to join a program if the enrollment, participation or redemption process is cumbersome or confusing. Make the program simple and you’ll attract more members.
Maritz also warns that there’s one major mistake companies should avoid making once their loyalty program is operational and that’s changing the program rules. 57% of consumers in points-based programs save up points for large ticket items and 45% report “getting a rush” from watching their points balance grow. If you want to maintain consumer loyalty, avoid changing the program rules.
As you probably learnt when you started your business, the only way to attract customers to something you’ve built is with relevant and compelling communication. Email continues to be the preferred channel of communication by program members. However, mobile is clearly emerging as an important vehicle for collecting and receiving rewards with 69% of smart phone owners saying they would be likely to download a loyalty program application.
Surprisingly, less than half of the consumers surveyed felt loyalty programs did a good job of communicating with them. This provides a tremendous opportunity for new and emerging companies to gain a competitive edge over established brands. As is the case with any marketing strategy, savvy communication that demonstrates a clear understanding of the customer’s needs and wants will always triumph over mundane price matching.
