THE L FACTOR

March 15, 2018

Loyalty isn't just a virtue - it's critical to your business success.

By: Laurie Hileman

The travel agent called at 3 p.m. on a scorching August afternoon.

I’d won two front-row tickets and an all-expenses-paid trip to Boston to see one of my favorite bands—Bare Naked Ladies—in concert. As a one-a-day Diet Coke girl and travel fanatic, I’d faithfully redeemed My Coke Rewards points to enter sweepstakes for flights and fun trips.

While packing, in my wallet I found 24 loyalty cards from major brands such as Ulta, Dick’s Sporting Goods, Victoria’s Secret, Panera Bread, Best Buy, and Staples—along with local businesses including my greenhouse, clothing boutique, coffee shop, and children’s resale clothing store.

This can’t be normal, I thought.

Research proves otherwise. According to the “2017 Loyalty Consensus Report” produced by Colloquy, a publisher of research on customer loyalty and experiences, there are 3.8 billion loyalty program members in the United States. Apparently, I’m not alone in my love of loyalty programs.

Organizations big and small, in almost every industry, use loyalty programs to build profitable repeat business and nurture long-term customers. Here’s what you need to know about creating and marketing a program that will keep your customers coming back for more—and add more to your bottom line.

Why so popular?

Let’s start with a quick refresher. Loyalty programs are a marketing tool designed to encourage customers to continue shopping at or using the services of the business offering the program. Typically, businesses issue a credit card-sized paper or plastic card to customers to capture points or punches that are then redeemed for rewards such as discounts, rebates, special privileges, free gifts, and upgrades.

Some programs entail something as simple as a stamp on a physical card, while others connect to software that allows members to track their rewards online. Marketers often send personalized communications and offers to loyalty members via email and direct mail (a free birthday dessert coupon from a restaurant, for example).

So, why do so many customers go gaga over loyalty programs and the rewards that accompany them?

When asked, consumers say they participate because the programs are easy to use, easy to understand, and give great discounts. But when Colloquy delved deeper for its latest consensus report, it discovered intrinsic motivators such as: “I love the brand, company, retailer, or service,” “the program makes me feel like a valued member,” and “the program goes well beyond my expectations.”

The result is a win-win, with customers feeling valued and rewarded for shopping with a brand, and businesses gaining repeat sales and valuable data on their customers’ buying trends.

Create a feeling of exclusivity

“A lot of businesses focus on acquiring new customers, but I believe in keeping the ones you have shopping more—and shopping happy,” says Terri King, owner of My Secret Garden, a clothing and home goods boutique in Bay City, Michigan. “It’s much, much easier and less expensive.”

For more than 15 years, King has offered a loyalty rewards program that she calls her Fifth Saturday Club. Customers receive a business card-sized punch card to track their spending in the store. Once they’ve spent $300 on regular-priced merchandise, they receive $20 in-store credit along with a branded burlap tote bag. Then, during the few months a year that include a fifth Saturday, her exclusive club members receive 20 percent off anything they can fit in the bag.

King deliberately chooses not to offer her rewards program online, even though her point-of-sale system is capable of tracking such a program. Instead, she prefers the tangible reminder of the printed card. “We want them to see our card when they’re [looking] in their wallet,” says King.

With more than 5,000 members in her club, King occasionally emails additional discounts and promotions to keep customers happy and engaged, which is a bonus for her.

“It’s always nice to end a month with a really big [sales] day,” says King. She notes that the three or four times a year fifth Saturdays happen is perfect for her shop’s promotion-to-sales plan, but acknowledges that several of her retail friends offer slightly different programs. “Every program has its plusses and minuses, and you just have to find which one works for you,” says King.

Fast with no fuss

The Colloquy report comes with a warning for businesses, too. Currently, 54 percent of loyalty program members in the United States are inactive, and 28 percent abandon programs before ever redeeming a single reward. The No. 1 reason consumers abandon loyalty programs?

It took too long to earn points or miles for rewards.

Dave Wojewoda, co-owner of two Geyer’s Pennzoil 10-Minute Oil Change locations in Saginaw, Michigan, understands the importance of a loyalty program that rewards quickly and easily.

“It ties the customer to you. Our points add up quick so they don’t have to wait a year or two [to redeem rewards],” says Wojewoda. “We only see them two and a half times a year [for oil changes]; they don’t want to wait four years for $10.”

But, he admits, it took him awhile to find the perfect program. Through the years he’s tried different combinations of rewards centered on the number 10 (to link with 10-minute oil changes). First, it was buy nine oil changes and get your tenth free. But, as expenses continued to rise,

“We were going to go broke,” says Wojewoda, with a laugh.

He also tried $10 off every tenth oil change before settling on 5 percent back on every dollar spent. When a customer accumulates $10, the discount is applied to their next service. It requires no effort on behalf of the customer and is tracked completely within Wojewoda’s computer system.

In an increasingly competitive marketing landscape, connecting with customers using a carefully crafted and well-communicated loyalty programs offers businesses a leg up. Just ask the girl with 24 loyalty cards in her wallet and the Diet Coke in her hand.