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Loyalty Marketing Programs
Posted By: john3952* on 12/21/2004 11:54 PM (CST) 250 Points
I wanted to get folks points of view about what is working and isn't working in loyalty marketing or customer retention programs today. In financial services, up to 28% of a given client's customer base is at risk of defecting in any given year. Is anyone aware of active loyalty marketing programs that do a quantifiable job of "saving" potentially lost customers? Do you have specific metrics that you can share?

Posted by: Manu Rajan Accepted Answer
12/22/2004 3:17 AM (CST)
Hi John,

What loyalty programs intend to do is to create an additional exit barrier for customers. Because people hate 'losing' something of value which they already own. In telecom sector, we have found that the number is of 'value' and the thought of changing the number stops people from switching. Financial services is a different ball game today with plenty of choices which essentially lets you extend your credit limits.

But broadly, there are three major elements that influence customer loyalty.

Your product

Price

Customer Service

What is assumed here is that all the customers use your product. If you ask me, the single most indicator of customer churn is the usage pattern. Any industry, any product/service. All churned customers follow almost the same pattern. (Unless the switch is caused by external factors like a transfer of job, death, divorce etc.). The usage comes down drastically towards the end of the tenure with a brand. This could be an indication of unhappiness with your product, price or customer service. Most of the times the reason can be limited to any of these.

There are instances where 'convenience' acts as a retention tool for retail business and financial services if it is linked to retail as in the case of private label credit cards.

There is a hugely successful airline loyalty program in India, which has 'convenience' as the single most reward. Most of the benefits/rewards/privileges are linked back to the services offered. Attrition rate is really low. People look forward to upgrading themselves to the next tier.

Strategic Retention route is to identify the core differentiator (product delivery, price, convenience, emotional reasons like status etc.) and enhance it through your loyalty program.

But tactically if you are looking at reducing churn over a specific period of time, then a 'deferred gratification' model has worked for us in telecom sector. Customer gains something instantly for being in the network, but realises that he can claim a higher value item if he/she deferrs the claim to stay in the network a little longer.

Hope this helps. Do feel free to askif you would need anything more specific.
 
Posted by: bob* Accepted Answer
1/22/2005 7:43 PM (CST)
A loyalty program can make the difference in keeping and losing customers, so make it memorable.

First of all, make sure you have a plan that keeps working. Always think of benefits that are different, and worthwhile. Don't use benefits that other companies use frequently. If you do, it will dilute your program.

Find benefits that don't have to cost you a lot, but have good long term benefits. Also, don't forget to communicate with your members. Communication is something that most loyalty program have. Spend the time to get to know your customers and find out what "benefits they might want"

Good luck with your program. Hope I helped.
b_perlstein
 
Posted by: TheEagle* Accepted Answer
1/22/2005 8:53 PM (CST)
There is a new Global Rewards Consumer Loyalty program getting off the ground this next week. The agent's site is up now: http://www.bestofagent.com/TheEagle

Once the Merchant's and Member's sites are live I will notify by another post. Obviously, there are no metrics, as yet, but this should be a phenomenal instant draw. Everyone wins by exposure for the Merchants Worldwide and SAVINGS for the Consumer at participating stores.
 
Posted by: Colleen Sharen* Accepted Answer
1/23/2005 8:56 AM (CST)
I've been thinking a lot about loyalty programs recently. Although they can play an important role in customer retention, in my experience very few companies actually use their loyalty programs effectively.

Typically, loyalty programs are very expensive, and most often, the company has no real idea whether the program is working.

My recommendation is to go back to the fundamentals, as Manu suggested. Figure out why that 28% is at risk of switching. Get your product, pricing and especially your customer service right. Find out what your heavy users want, and give it to them.

I'm including a link to an article from HBS Working Knowledge on Retail Loyalty programs that might be enlightening http://hbsworkingknowledge.hbs.edu/item.jhtml?id=4003&t=marketing


I hope that this helps.
Colleen
 
Posted by: Sanjeev Kumar Vyas Accepted Answer
1/23/2005 8:32 PM (CST)
I recently had a discussion on the loyalty program. Many companies use loyalty program to try to mend the mess they have made with the customer. Forexample you get a key chain free because the product given to you was damaged and you were shouting and letting others know about it so the copany gives you small gifts to keep you quite kind. However Customer loyalty program should be done to enhance the customer experience not just mend the relationship.
As mentioned above the 3 reasons why a person defects is Product, Price, Service.

When a customer is not happy with either of the three s/he defects.
In Financial services I think the most important of the three would be the service. Finance is something in which people just don't trust anybody. If you can gain high trust from your customers then they would not defect. You have to be geneuenly interested in your clients well being. If your customer trusts you chances are s/he won't leave you.
I am sorry but I do not have any stats to show this.
Hope that helps
Regards
Sanjeev
 
Posted by: Val (Moderator)* Moderator Response
1/26/2005 8:01 PM (CST)
Hello all. I am closing this question, since its more than two weeks old. We do this to make sure members' contributions are rewarded in a timely manner and to improve the visibility of newer questions.

Thanks, so much, for participating!
Val (Moderator)
 


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