Retail Loyalty Programs: Pain Killer or Vitamin?

Source: http://www.loyalty360.org

by Jon Wurfl, Retail Solution Principal, SAP

At a time when retailers struggle to retain and attract key segments of their shopping audiences, customer loyalty management, practiced as a strategic element of their business plans, can drive sustainability and differentiation into the enterprise. One mistake many retailers make: Viewing loyalty programs as a short-term source of brand buzz to jumpstart sales and lessen the pain of the tough economic climate.

Done right, retail loyalty programs can indeed “bring people back to the brand.” A successfully delivered loyalty program has immediate benefits to a retailer’s top line. In this economy we’ve witnessed  shoppers switch to every-day low prices in a dash to get economic benefits as soon as possible. But loyalty, if delivered successfully over a period of a time (at least four or five consecutive quarters), can go from painkiller to vitamin. If you put in the time and effort to develop a well-thought-out loyalty program that truly engages with customers on their terms, the program will pay dividends that go far beyond just a quick hit of interest.  Our studies show retailers have the opportunity to drive the top line of their revenue by 20 to 25% annually thanks to a well-executed loyalty program.

To keep receiving the benefits of this organizational “vitamin,” however, you have to keep at it, keep working on your loyalty program, constantly refining the benefits, engaging regularly with your shoppers  to understand their wants and needs. Many programs I have seen don’t offer rewards that are truly in line with what members want. It is especially important for you to have “wow” perks for your most valuable customers – tickets to a home basketball game, for example, when you know the member is a fan.  To feel understood is thrilling for anyone, especially customers.

You can also give special access as a benefit for program members. For example, a book retailer could provide the first chapter of a popular author’s new book to his devoted fans. This creates a sense of entitlement as an insider, which can be even more potent than the perk itself. In this example, it costs the book store practically nothing to provide access to a download of the chapter, while being granted that access means a lot to customers who are fans of that author.

The point here is that once you start “doing” loyalty you must keep innovating your loyalty program over time as opposed to going backwards. Your customers are ever changing, and your program has to evolve along with them. If you can maintain your focus on the customer –  and your loyalty program reflects that focus – you can help give your organization the health-giving vitamin it needs to sustain growth.

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