Loyalty or reward programmes come in different formats and vary in terms of the extent to which they ‘give back’ to customers.
Benefits include an advance warning of sales and specials, discounts on the next round of purchases when customers spend more than a certain sum, and freebies on customers’ birthdays.
From a small business perspective, the pull of these loyalty programmes is that they could help with customer retention, particularly when customers become more selective due to greater competition or an economic downturn. The programmes can also help small business owners collect data on customer behavior and preferences, helping the business to introduce attractive products and services and improve its marketing and promotional activities.
Do loyalty programmes deliver on their perceived benefits?
Some people argue that an increase in customer spend or loyalty is better achieved through other means (e.g. developing a reputation for reliable, value-for-money products and services), instead of loyalty programmes that can be administration-intensive or lead to a loss of customer goodwill if terminated.
Others are convinced that the long-term benefits to the business outweigh the short-term hassle if the programme is well-structured, and that loyalty programmes reflect a business’ commitment to its relationship with its customers.
Below are some tips for small business owners interested in launching their own loyalty programmes:
• Offer ‘real’ rewards that customers can get excited about and look forward to, and are not readily available elsewhere.
• Keep it simple – Have clear, straightforward rules about what customers need to do to access the rewards.
• Embrace technology – Use SMS, e-mail, and social network sites to communicate with customers and create a more immediate, interactive experience.
• Partner with other companies – This widens the pool of benefits available in the programme, making it more worthwhile for customers to participate.
• Be realistic about the number of customers who will participate in the programme – Companies with a big customer base can aspire towards significant membership. For example, Discovery’s Vitality programme has more than 1 million members (Discovery's Vitality Programme); MTN’s 1-4-1 loyalty programme has about 15 million members (MTN Loyalty Programme) and the Clicks ClubCard has more than 3 million members (Clicks ClubCard). Small businesses are unlikely to be able to match these kinds of numbers and should be modest in their expectations.
• Measure results – Metrics that can be used to gauge the success of the loyalty programme include sales volumes and value, the customer retention rate, negative churn (customers who upgrade or purchase additional services), the net promoter score (a measure of the degree to which customers would recommend your company or brand to others), and the customer effort score (the effort made by customers to resolve problems and complaints).
Post By: Fadzai Munyaradzi Image: Stuart Miles / FreeDigitalPhotos.net