FAQ Loyalty Program
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Before your company enters into the arena of developing a reward program there are many preconditions that a FAQ loyalty program should answer..  . 

Question:  What are some preconditions that should exist before moving forward with a well-designed loyalty program?

Answer:

bulletYour customers do not distinguish between or consolidate spending with a single source provider
bulletA non-differentiated market fuels low-cost seekers for products
bulletDefection rates are high from year to year which suggests lack of loyalty
bulletIn general, there are small perceived soft benefit advantages among competitive products

Question:  What are some of the key tips in delivering a well-designed loyalty program?

Answer: 

bulletDeliver a solid value proposition
bulletEstablish a program that offers incentive and motivates
bulletMake it easy to understand, participate and redeem – low involvement
bulletInvolves rewards for both customers and frontline employees
bulletBe culturally aware not to create the impression that your company has extra money to be giving away, especially during  difficult periods
bulletBe sensitive to your customers’ desire to have the choice to participate in the program
bulletShift/reduce reliance on rebate-driven programs
bulletBundle/package your company's product/service portfolio 
bulletConsider "front of the line" type services/products for core customers 
bulletLeverage customer data capture for long term planning, prospecting, measurement and communication

 

Question: Where Do Loyalty Programs Work Best?

Answer:
bulletHighly competitive markets
bulletParity is perceived to be high
bulletHigh fixed, low variable cost businesses
bulletPerishable inventories
bulletPurchase Behaviors can be tracked
bulletFrequent purchase cycles
bulletManagement does not want to compete on price

Question: Why Do Loyalty Programs Work?

Answer:
bulletAll customers are not created equal
bulletShare of customer (share of mind) is a more profitable pursuit that share of market
bulletImprove earnings with existing resources
bulletManage customer relationships through corporate-wide initiatives
bulletCurrent relevant dialogue creates competitive advantage
bulletThey build customer loyalty not purchase loyalty
bulletIt becomes the differentiator when all other things are equal or closes the gap on small perceived differences.

Question:  What type of loyalty programs are there and which is the best one for my company?

Answer:

Promotional Model
Rewards your customers with:
bulletSweepstakes
bulletInstant Rewards
bulletTargeted Coupons
bulletGames
bulletPunch Cards
bulletStickers
Pro:
bulletInexpensive
bulletCreate the illusion of value
Con:
bulletMany games are anonymous
bulletShort-term, no continuity
bulletNo way to motivate specific, individual behavior

Overall: May motivate short-term behavior shift; takes creativity to sustain it

Player Model
Reward your customers with someone else’s promotional currency
bulletLong Distance
bulletHotels
bulletCar Rental
bulletRetail
bulletCredit Cards
bulletAffinity Groups
Pro:
bulletInexpensive (no infrastructure)
bulletImmediate recognition
Con:
bulletSelf-selecting
bulletMotivation is suspect
bullet"Relationship" is second-hand

Overall: Can be effective with competitive exclusivity.

Proprietary Model

bulletReward your customers with your own promotional currency based upon their spending with you
bulletYour currency
bulletYour database
bulletYour dialogue
bulletYour relationship
bulletPro:
bulletTrack and reward individual behavior
bulletCreate value far in excess of actual cost
bulletEstablish a continuity relationship
bulletSupports differentiation & value add strategy
bulletCon:
bulletSignificant commitment to operate and maintain
bulletPoor design/implementation can be costly

Overall: The most reliably effective.

Coalition Model
Reward your customers with promotional currency shared between two or more partners
bulletShared currency
bulletShared database
bulletShared dialogue
bulletShared relationship
Pro:
bulletTrack and reward individual behavior
bulletSuperb potential to create value
bulletGreat customer acquisition vehicle
bulletShared expenses
Con:
bulletExtremely difficult to implement
bulletMultiple brands competing for loyalty

Overall: A great idea, but not very practical.

The above FAQ loyalty program answers have been summarized from a  number of sources and people who have experience in the development, launch and ongoing administration of loyalty programs across many business sectors.

 

Consumer Loyalty Program    Customer Loyalty Program    Customer Loyalty Program Web    Discount Loyalty Program    Employee Loyalty Program    FAQ Loyalty Program    Guest Loyalty program    Loyalty Building Program    Loyalty Program Software    Loyalty Reward Program    

 

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Last modified: November 21, 2007