We have a saying in our family: “Going broke saving money.” The philosophy of a traditional reward program is simple: reward customers for their purchases thus encouraging future purchases (and hopefully an increase in spending). As a marketer I’m a fan of loyalty programs and as a consumer I love receiving my free drink from Starbucks every couple of weeks (I need to purchase 15 drinks to get a free drink. You do the math.) But as my interactions with brands move away from offline engagement and move toward Facebook, Twitter, Foursquare, etc., I’m starting to evaluate the effectiveness of the traditional loyalty program. Do loyalty programs really work? Apparently Mason Thelen from BrandWeek is asking this same question.
According to Thelen, “a typical retailer might make over half of its revenue from 10-15 percent of its customers.” Sounds pretty good, right? But what about the other 50% of revenue? Those dollars are coming from customers that are probably not very loyal to one particular brand and are harder to capture and retain thus more expensive for a brand to earn.
The brands that will win the loyalty battle are the ones that will do a great job of combining traditional loyalty programs (earning points, rewards, free stuff, etc.) with regular online communication and relationship building. Thelen said it nicely, “It goes without saying that large companies can’t know every customer on a personal level. But by identifying the most loyal ones and communicating with them, a company can—often digitally—create the kind of bonds that many say the digital age has obliterated: A sense of a one-on-one relationship.”
In my post about how Similiac engaged its loyalists during the formula recall, I mentioned a few of the steps the company took to try to earn my trust back. Now that the recall is old news, Similac is evaluating the millions of dollars lost and spending a lot of money trying to regain revenue. One of the marketing tactics being employed is a loyalty program. Will Similac’s loyalty program achieve its goal to get parents to buy its product again? We’ll have to wait and see.
What brands do you think do a good job of integrating offline and online loyalty programs?