Loyalty. It’s a term that has a lot of buzz, but plenty of fizz. Every company wants loyalty from customers, and many believe loyalty programs are the way to go. And customers scream back that they have enough programs they are a part of. But do they have enough good programs? Before we talk about how, let’s talk about why or if you should have a loyalty program, with a specific focus on the B2C segment.

When and Why You Need a Loyalty Program

There are a number of reasons why you may want to invest in a loyalty program. Here are the top 5:

1. Frequent shoppers: If you have frequent customers but very little differentiation in your product (coffee, grocery, etc), it may be a necessity to have a loyalty program. Think of the success Starbucks has had with its loyalty program. Many people are loyal to them just to get additional stars, levels, or because they can pay with their phone (innovation in loyalty for sure). If customers come shop at your store or site once every few years (think of cars or computers), maybe a loyalty program is not the first thing to check off your marketing wishlist. But that’s not to say it would be wrong.
2. Keep customers from defecting: Whether because of price, service, or product quality and selection, your customers have thought about leaving you for the competition. So all things being equal, and not wanting to get into a price war (unless that’s your thing and you’re Walmart), you should start thinking hard about creating loyalty amongst these customers on the edge of churning. I think we’ve all been to gas stations and chose them solely for the price they showed, regardless of the quality.
3. Increase top line: Some loyalty programs work great at incentivizing customers enough that they either buy more frequently, or they buy more (as in items per transaction). Victoria’s Secret or Sephora’s loyalty programs come to mind, as does Shoppers Drug Mart/Pharmaprix’s Optimum Program. You want to get free gifts or more discounts sooner, and you will add more items to your cart to get them, virtual or otherwise.
4. Need for data: Loyalty programs are known by brands as a great way to obtain data. They exchange the chance for incentives for a better view of their customers – what they shop for, when they shop, when they are latent, whether they are bargain hunters or fashion seekers, etc. Loyalty programs can be instrumental in getting good data on customers. So if you’re struggling with obtaining quality data, a loyalty program may be the quickest way to fix that. Think of your favourite grocery chain, where you probably shop once per week, and the little data they have available on you unless they have a loyalty program.
5. Attract new customers: Loyalty programs are often used to acquire new customers, often times with a large incentive at sign-up. We all know that attracting new customers can be difficult and costly. But positioning a hefty incentive in front of a customer for purchasing from your brand or switching brands can be a huge windfall of savings in marketing acquisition campaigns. Think of RBC and their Avion program, where you get thousands of points just for signing up to their credit card.

[Read more…]