Innovation and creativity are among the key factors that define a successful customer loyalty program, particularly in the retail sector. The primary objective of the retailer is to keep the high-potential customer from straying by offering a loyalty program that is unique and exciting. That said, some underlying elements set apart the world's most successful retail loyalty programs from the also-rans.
Clear And Specific Objectives
Objectives are to a loyalty program what the destination is to a journey. A successful loyalty program is based on specific measurable targets and objectives. For instance, 'increasing share of wallet by 10% by year-end' is a better objective than 'increasing sales'. Laying down specific objectives has several advantages. It enables the retailer to design appropriate loyalty strategies and target relevant consumer segments. It simplifies the process of communicating the rationale behind the program to all concerned. Once the program is launched, the progress can be monitored against the goals and targets, and strategic changes made if required.
Thorough Research And Analysis
The customer is at the core of all loyalty-building measures. Hence, gaining a deep insight into consumer behaviour, motivation and expectations is crucial to the success of a loyalty program. The research needs to be well balanced and must contain data from various perspectives like demographic profile and socio-economic status of customers, purchase patterns, behavioural drivers, reward expectations, special interests and lifestyle factors.
The Feel-Good Factor
If there is one single factor that can decide the fate of a loyalty program, it is the personal touch. The raison d'etre of a customer loyalty program is to make the customer feel privileged and valued. The best programs do not stop with doling out rewards, cards and discounts. Instead, they constantly work at building a lasting relationship with the customer through various initiatives like customized loyalty cards, newsletters that not only help the firm and the customer stay in touch but also create a sense of belonging; a card or a voucher on birthdays and special occasions and organizing members-only events. For instance, members of Club West, the loyalty club of the Westside chain, receive an exclusive invitation to the bi-annual sale. They have the privilege of starting their shopping 90 minutes before the store's regular opening hour on the first day of the sale. The chain also pampers its loyalty program members with birthday cards, gift vouchers and special discounts. To ensure that the relationship is a two-way affair, Westside regularly seeks feedback from its members and ensures that complaints, if any, are dealt with promptly.
No loyalty program can survive on assumptions like 'everyone loves a discount'. A smart reward is one that is valued by the customer and at the same time, meets the program's objectives. Variety, uniqueness and attainability are among the several aspects to be considered while offering rewards. Often, an ongoing privilege scheme such as a discount on every purchase makes more business sense than a one-time gift, since the former encourages more footfalls and repeat purchases. Some of the most popular loyalty programs also involve several retailers and services as partners. This bundling of rewards creates a perception of maximum benefit to the customer, who becomes eligible for gifts and discounts from each of the partners. A prime example is UK's Nectar Card, which is jointly floated by Sainsbury's, BP, Debenhams Stores, Ford and many other partners. Similarly, the BonusLink Card, which is hugely popular in Malaysia, allows members to earn points and rewards at several major retailers.
Thanks to the technology revolution, cutting-edge software and data tracking mechanisms have emerged as a distinctive feature of the best loyalty program. As with any strategic intervention, the operational aspects are as crucial to the effectiveness of a loyalty program as the concept and plans. Loyalty software that combine multiple functions like data tracking and storage, automated transactions, updating membership details, points and churn etc. can ensure that the loyalty initiative is well co-coordinated, efficient and hassle-free.
A major advantage of implementing a loyalty program is that the company gets access to a wealth of customer-related data. Successful retailers realize that the utility of this data is not restricted to the loyalty program. They use the information to foster better relationships with the customer, improve the product or service delivery process, from new product development to the nitty-gritty of the marketing strategy, and enhance the quality of business intelligence. A smart firm realizes that the first step to customer loyalty is through customer satisfaction.
Many firms make the mistake of launching a loyalty program with great fanfare, and then letting it drift. A loyalty program is not a one-time affair, and definitely cannot run on its own steam. It needs a push now and then to enliven it, and to get the customer enthused once again. The best programs maintain an active relationship with the customer by informing them of new developments, offers etc. and seeking their feedback. This last bit is tricky, for customers also expect firms to act on feedback and let them know they are taking the communication seriously.
Customer loyalty programs need complete support and commitment from the top management in order to be successful. The program should also secure buy-in from all employees concerned by involving them in formulating the program strategy and implementation plan. Nothing could be more disastrous than a disgruntled employee lackadaisically administering a loyalty program. A final word - a loyalty program reflects the values and culture of a company's leadership or owners. The truly successful loyalty programs are not just short-term measures to expand the customer base. By aligning with the organization's strategy, mission and vision, they contribute significantly to long-term profitability, growth and competitiveness.