It typically costs more money to gain a new customer than it does to keep a current customer. Implementing a customer loyalty program can provide incentive for customers to return again and again. Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behavior.
Before you begin your loyalty program, you want to ensure the initiative is right for your business as once it is established, it will be difficult to eliminate.
Some points to think about before implementing a loyalty program include:
- Determine how much your customers will have to purchase to receive a reward. You will need to find the balance between the amounts that provides enough repeat business vs the amount that is motivating for the customer. i.e. set the amount too high and the customer might not bother
- Determine how you will track the purchases and the customer’s progress towards their goal. Some companies use cards that you fill with a special stamp; others have a computerized system that lets you scan in a card.
- Decide what your reward will be. Some companies offer a percentage off the next purchase or a fixed dollar amount off. Be sure that the cost of the reward is not too high or you may lose money. One famous example of a promotion that cost more than the reward was when Hoover offered free flights with the purchase of a vacuum. The company found itself overwhelmed with demand. Read More
- Advertise your program. Now that you have a formal loyalty program established, you’ll need to let your customers know about it.
- Take the time to track and analyze to determine results. It is important to analyze the results of the program to see what kind of insightful information it may provide.
Lastly, remember, loyalty programs cannot create loyalty. True loyalty is established by the positive experiences your customer has with your company’s products or services. So continue to work hard at customer service and enhancing your customer’s experience and the loyalty program will assist in enhancing the loyalty that is derived from that.
This article originally appeared in the May 2011 edition of The Beal Business Advisor. The newsletter also includes:
- Buying a Business: What We Can Learn From “Dragons”
- Selling Your Business
- Quote of the Month
- Businesses Available for Sale
Check it out here.
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