Blog

The concept behind customer loyalty programs is simple: provide customers who repeatedly do business with your company an incentive and they will not only continue to do business with your company but they will likely even increase the amount of business they send your way. However, implementing loyalty programs is not free, and can often be costly. The costs associated with implementation often leave business owners wondering whether or not such programs are really worth it. Here we will take a look at various perspectives on the topic.

What is a Reward?

Usually customers sign up for loyalty programs in exchange for the promise of a reward at some point in the future. Such rewards may be given by the retailer as a result of the customer having crossed a certain threshold of purchases, having remained a customer for certain amount of time, or any of a number of qualifiers. But, that which the retailer considers a reward is not always considered as such by the majority of customers. For example, while cash back is often desired customers, rewards which may mean “cashed in” at participating companies in a rewards network may be far less valuable in the customers’ eyes, depending on the extent of the network and the difficulty associated with redemption.

Rewards Programs for Data Collection

One of the primary reasons companies offer rewards programs is for data collection purposes. This data collection allows companies which offer such programs the ability to better identify which customers are making which kinds of purchases. This information can later be used for all manner of purposes including mass data analysis of customer preferences and trends, and more detail analysis of individual buying habits. Of course, when a company knows more about a customer’s buying habits the company will be in a better position to make personalized offers to that customer.

What About Rewards Personalization?

One of the most important aspects of creating a modern loyalty program, and making it successful, is ensuring that the rewards are as personalized to the customer as possible. For example, in a recent Forbes article the Tesco grocery store chain was praised for its “individual shopper targeted” offers which allow the company to send customized coupons to regular shoppers. The coupons are usually paid for by the suppliers and brands, reducing Tesco’s expenses. These kinds of personalized rewards were favored by customers over the 1% discount that Tesco offered as its standard premium in its rewards program.

Tiered Rewards

One way companies across many industries, including travel companies and casinos, have incentivized customers to stay loyal, while simultaneously incentivizing customers of other companies to come on board, is by offering a tiered reward system. Such tiered rewards may be referred to as silver, gold, and platinum or by other names such as the “Executive” or “Diamond” club. According to Forbes this kind of stratification may be somewhat effective, but is also be somewhat outdated. This is because the variation within each level will undoubtedly be wide. Retailers would do far better to leverage modern information technology solutions to offer personalized awards to each individual customer and client.

To learn more about how Servistree can help you develop an effective loyalty program call 1-866-944-3244 or info@servistree.com Keep up with the latest news and information and other small business news by subscribing to our blog by clicking here.