Magazine Article | March 20, 2008

Loyalty — The Marketing Play

Source: Innovative Retail Technologies

More than half the loyalty cards you’ve issued are idle in your customers’ wallets. Are you showing them the benefits of loyalty?

Integrated Solutions For Retailers, April 2008

Although most American households are loyal when it comes to joining a loyalty program, are we truly creating loyal consumers? While 85% of American households are a part of a loyalty program by definition, less than 40% are active participants, according to a recent study by research firm Aite Group.

Twenty years ago, many of the nation's most loyal consumers joined their favorite airline frequent flier program or signed up for an affinity credit card from their preferred financial institution. They collected stamps and searched feverishly for their frequent-purchase punch cards. Today's loyalty programs are a mix of creativity, retail innovation, marketing, and technology that is changing behaviors and driving benefits for both merchants and consumers. Loyalty marketing programs are more effective than ever before in targeting a merchant's most profitable consumers with products and services that are meaningful and influence behavior in a way that can generate additional revenue. And, while the average U.S. household belongs to 12 loyalty programs, according to a report from COLLOQUY, many merchants and industry experts believe we are just beginning to scratch the surface when it comes to leveraging the power of loyalty as a true marketing tool.  Technology advancements make it possible for merchants of all sizes and from a diverse and continuously growing list of industries to incorporate loyalty marketing as a part of their overall business strategies. While merchants spend a large amount of time and financial resources working to gain new customers, today's merchants are savvy about the importance of taking care of their most loyal customers in an effort to protect the potential of a long-term relationship and revenue stream.

Merchants are looking for a relationship and connection with their customers. They want to know what their customers buy, how much, and how often, so they can identify and reward this buying behavior with valuable offers and increase spending and/or get customers to shop more often.  This is all information that can be collected at the point of sale and analyzed to create a targeted offer.

For example, some loyalty systems use historic transaction data to create promotions that can alter behavior, such as using discounts to get customers who may never order a dessert at their favorite restaurant, to buy a dessert.  Another example is capturing product specific data such as the SKU, integrating that with other transaction information, and offering a point-of-purchase discount to consumers on products that complement what they are buying. These types of loyalty marketing programs can help merchants achieve their objectives of building lasting relationships with their customers, while also setting them apart from their competitors.

Expand Your Loyalty Offerings With Marketing Strategies
Merchants looking to expand their loyalty offerings should consider several key elements when evaluating and implementing a loyalty marketing system:
•  Customer Relationship Management Capability — understand purchase behavior
• Targeted Offerings — right message, right customer, right time
• Right Mix Of Rewards — matched to customer needs and wants
• Effective Communication Program — keep customers informed and engaged
• Measurable Results — track program results against objectives and success metrics

Before taking on a robust loyalty program, it is important for merchants to understand their business needs as the first step in finding the right program. Most importantly, merchants need to remember that loyalty programs can only be effective when they are committed to being loyal to customers by first offering them the best products, service, and pricing, and then complement that by providing relevant, tailored offerings that best meet their customers' needs.