Designing the ideal programme

A good loyalty programme is one that not only persuades your customers to stay with you but also makes them want to recommend you to others. These days there are a lot of discussions in the sector, but often they only produce similar ideas trying to solve the same old problems. An approach that might seem great at first glance requires close observation and considerable work on the details to make the most of its strengths and enable it to stand out from other approaches. I will write about some of these issues in this blog.

Your biggest reward is getting to know your customer

Loyalty programmes were born out of a realisation that without knowing their customers, companies are unable to attract sufficient attention and offer privileges that people truly enjoy. Research findings about the effectiveness of such programmes also show interesting statistics. For example, according to a study by the Northwest University’s Department for Retail Management, the proportion of customers who are loyal to one company stands at 12–15% but their contribution to the company’s turnover can reach up to 70%. If you are in the food sector things are even more interesting as the contribution to overall turnover by loyalty programme members can be 65–95%.

When developing a loyalty programme the most important, but also most often ignored, issue is that instead of gaining information about the link between customers’ individual behaviour and their contribution to business processes, the focus is often placed on giving and receiving rewards. In fact, loyalty programmes have four main goals:

gaining new customers

increasing current customers’ spending

reducing customer loss

encouraging customers to use products with higher profit margins.

If you are going to establish a strategy with these goals in mind, you first need to know why people prefer you, when they come to you, and what it is that interests them. This is the biggest reward you gain from these programmes.

When it comes to consumers, rather than material rewards, most prefer rewards that make their experience feel more special. Serving this preference requires the ability to actively adapt not only to changing lifestyles but also to changing behaviour and ways of thinking. Ask yourself which you would prefer: To earn one reward point for every $100 dollars of shopping, or to have the ability to pay at a special till without queuing?

Make life easy for your customers

However you develop your programme do not ignore this: You are designing it for your customer. The focus should therefore be on improving their experience, not your own. This is something that involves many stages, from deciding on what methods to use, who to target and what is to be offered as ‘value’? But ultimately the most important thing is to ensure that the service or product you are offering is genuinely good (although I'm assuming that is already the case.)

As I mentioned at the beginning, it is not unusual for 70% of your income to come from customers within your loyalty programme, as long as it is well thought out and implemented. You should also know that you cannot include everyone in your programme. For example, in Turkey 25% of the population is not interested in such schemes.

A last point: Make your system simple so that it requires as few processes as possible. In other words make it as invisible as possible but also noticeable.

For example, I’ve been using the same car for years and each time I go to a petrol station they ask me if I have a reward card. Every time I ask myself why can’t they combine this information with my car license plate number instead of making me search my card and take it to a reader each time. No one noticed that I go to the same place repeatedly. If they had done so I think I would have gone there even more often.