Do Your Customers Really Feel Rewarded?
By Gail Sneed
Design a program that engages members and drives profitable behavior.
The popularity of loyalty programs among today's consumers is evident in multiple industries in the United States. Nearly 90 percent of Americans actively participate in some type of loyalty program, including credit card, retail store and airline rewards programs, and most are enrolled in more than one, according to an October 2004 poll commissioned by Maritz Loyalty Marketing. More than half of those surveyed are more loyal to companies that offer rewards programs. Yet, at the same time, half of Maritz Poll respondents have stopped participating in a rewards program they were enrolled in at some point. A full 65 percent either don't know what their program balance is or are not sure of the exact balance.
When implemented correctly, however, rewards programs can be an important part of a marketer's tool kit to attract and retain the most profitable customers. Maritz's research shows that reward program members who participate in a program increase their spend three to one, and are more loyal to that particular company for five or more years.
So, what's the secret to a successful rewards program—one that keeps customers engaged and drives the type of behavior that fuels business growth?
Successful loyalty programs have at least three factors in common:
1) the right mix of rewards for the company's unique customer base,
2) an effective communications program to keep them engaged, and
3) a program structure that encourages desired/profitable behaviors.
Let's shed some light on how companies can ensure their loyalty pro-grams incorporate all three factors successfully.
Give Them What They Want
Striking the right balance between the types of rewards your customers want and the goals of your business is key to making your loyalty program work. While respondents to the Maritz poll indicated they preferred discounts and cash back over free merchandise, gift certificates and free travel, experience has shown that most rewards program members pass up discounts and redeem most for gift certificates. What's more, 70 percent of high-income rewards program members prefer to receive cash back, while 62 percent prefer free travel.