What Do Customers Want From a Loyalty Program?

Thinking about a loyalty program to boost the bottom line? Whether it is a digital music promotion, offering free gifts with a purchase, or even a buy-10-get-1 frequent buyers card, many marketers question whether they should use a loyalty program for their business, and how effective it might be.

Back in 2009, the Chief Marketing Officer Council (CMOC) studied what customers wanted from their customer loyalty program, and what marketers were providing. What they learned was that companies are not fully connecting with their customers through their loyalty programs. Most companies receive high marks for their loyalty program offerings — perks, discounts, free gifts, deals, digital music downloads — but are not providing effective or useful communication to their program members.

According to the CMOC survey, customers are looking for "deeper engagement and personalized contact" in their loyalty program, "not mass blast communications and gimmicks." In other words, loyalty program marketers should focus on:

* Personalized Communication: According to the survey, customers expect their companies to understand them better (24 percent of marketers say their customers feel they do not get enough personalized attention). Whether it is direct mail or email, the technology exists to completely personalize communication with customers. The technology has gone beyond the basic "Dear _______" mail merge program, which means there should be no "Dear Valued Customer" emails or letters. Now loyalty program communications can change out body copy, offers, and even photos and graphics, providing a completely personal experience.
* Meaningful Rewards: The CMOC also found that customers want "more relevant and valued offers" from their loyalty program. However, the survey respondents were almost equally divided about what they should offer as member benefits: 39 percent offer discounts and savings, 34 percent offer free products and premiums, and 33 percent offer points.

This becomes a little more important when looking at the results for "typical customer complaints about loyalty programs." According to the CMOC, nearly 30 percent of respondents said that some of their customers saw little or no added value to becoming a member, 24 percent believe the rewards "lack substance." As a regular member of several loyalty programs, it is easy to see how small discounts or low-dollar value gifts for high-dollar purchases can be seen as lacking substance.

The very definition of the loyalty program is to get occasional customers and visitors to become regular customers and even brand loyalists. Given the fact that most marketers (61 percent) believe that members are their most profitable customers, it makes sense that they try to create more brand loyalists. However, the more desired result is to motivate the brand loyalists to become brand evangelists. The best way to do this is to include a reward-for-referral component to the company loyalty program.

Marketers spend over $2 billion each year to grow and run their loyalty programs. But according to the CMOC survey, only 13 percent of the respondents believe they have been "highly effective" in using their loyalty program to achieve any success. Another 25 percent say they have not been able to motivate their brand loyalists to become brand evangelists.

The long and short of it is, a loyalty program is an efficient way to turn visitors into regular customers, regular customers into brand loyalists. These loyalists can even become evangelists, given the right type of program and offer. To determine this, the savvy marketer will take time to examine her target market, the use (or non-use) of technology, and what sort of offers will keep the customers returning time after time. By finding out what their customers want, marketers can turn their brand loyalists into brand evangelists, who can bring in new customers, and grow their customer base, starting a whole new group of customers to move through the process.

SOURCE: http://www.cmocouncil.org/news/pr/2010/012510.asp