Loyalty Pays: Hang On to Your Best Customers
It's important to remember that loyalty programs are designed to solve specific business problems. "You need to define what the program objectives are. What do you really want to do? Do you want to increase spend or increase interaction?" asks Paul Walczyk, senior vice president of client services for Carlson Marketing, a global marketing services company. Once you define your program objectives, Walczyk stresses the importance of budgeting by creating an economic model around your objectives. "It does always boil down to economics in that ... there are some customers who you can afford to spend more money on to keep than other customers," agrees Gary Hennerberg, creative director and copywriter for Hennerberg Group, a direct mail agency based in Colleyville, Texas.
In terms of up-front investment dollars, a loyalty program can cost a lot or very little depending on the size of your business and the nature of your existing retention process. Ferguson points out that some companies may need to build a database, creative communications piece, website and call center from scratch. Other mid- to small-sized businesses only may need to refresh their current efforts to do a bit more on the loyalty front, Ferguson advises.
Segmentation and Tailored Messaging
Targeted communications are inherent in any loyalty effort-and the way to achieve relevant, customer-centric messaging is through segmentation. "I don't recommend that you go in and just arbitrarily say that someone who spent $500 is one group and, $300 to $500 is another group, etc.," Hennerberg says. He instead likes to look at every customer in a database, whether that's 5,000 or 50,000, and associate each customer with several statistics such as sales per customer, cumulative sales and percentage of sales. Ferguson stresses the importance of accounting for those customers who aren't your best at the moment but have the potential, based on past behaviors, to become more valuable in the future.