Customer Loyalty Programs Can Be
Valuable for Small
Businesses
Loyalty programs are not just
for airlines or credit card companies.
Small and medium-sized businesses, both consumer and services based,
also have a lot to gain from incorporating a loyalty program into their
customer relationship management (CRM) strategy.
However, careful consideration needs to be given to the program
structure and maintenance needs to ensure cost-effectiveness.
Why implement a loyalty Program?
A loyalty program can be a profitable strategy for a company by:
Reducing the costs of serving customers
Developing loyal customers, who are less price sensitive (create
customer “lock-in”)
Creating an incentive to spend
Providing a point of difference, and
Providing valuable customer insight that will
ultimately identify & help develop new revenue-generating products and
services.
The First Steps
Points to consider when structuring a loyalty program include:
Develop an attractive value proposition. Your own
customers can be an invaluable source of information about the strengths
and weaknesses of your own product/service, how they use them and your
competition. There are three basic rules to remember if you are to
achieve the most effective value proposition for your loyalty program.
Rewards must be relevant.
Rewards must be realistic and attainable.
Rewards must balance emotional and economic benefits.
Research the program’s attractiveness and viability.
Program features must be tested through market research and the early
involvement of targeted consumers, whose feedback can help shape program
design. Continuous feasibility analysis is essential. In addition to the
ultimate test of return on investment through additional revenues, key
performance indicators for program success must include increased
customer insight, penetration rate, churn reduction and new customer
acquisition.
Develop a Contingency Plan. Changes in strategy or a
merger/acquisition can necessitate discontinuing a program. It is a good
idea to develop a contingency plan and possible exit strategy in
advance. You may never need to call on it but it’s nice to know you have
an acceptable way out of the program if you want use it.
Consider Online Options
There are specific start-up and maintenance costs involved in
establishing a loyalty program that can escalate if processes aren’t
streamlined. One of the options in developing and maintaining a program
while still controlling costs is to automate as much of the program
activity and maintenance as possible. Technology companies can undertake
this for business clients.
RAN ONE’s technology business partner, Bullseye Internet Solutions was
engaged to develop just such a program for a large client, ACP
Publishing in Australia. The entire loyalty program is conducted
cost-effectively by using a website to disseminate information and
facilitate reward transactions.
By implementing a reward based loyalty program that offers rewards to
newsagents based on magazine sales, ACP Publishing has increased sales
significantly within the first 4 months of the program launch. For more
information about the strategy, solution and the results of the loyalty
program click
here, or visit
www.bullseye.com.au and read the case
studies.
A rewards based loyalty
program is an excellent way to build customer loyalty and generate
sales.
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