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Five Reasons Why You Should Create a Customer-Loyalty Program

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We all want loyal customers. There’s no debating the value of establishing loyalty and maximizing lifetime value, which is why you can find countless articles on how to create and execute better rewards programs. In this article, however, we take a step back and delve into the why behind rewards programs.


While a large and integrated undertaking itself, today’s rewards program is not a standalone effort. It should be a major part of your brand’s overall approach to customer loyalty management, along with the interconnected elements of...





  • A more holistic view of marketing derived from a fuller stream of events.


  • Customer-focused relationship marketing.


  • Test-and-learn rigor and culture.


  • Ideation and creativity.


  • The “rewards program.”


The "why" behind a rewards program can be organized into five pillars, all of which have some connectivity to the elements of customer loyalty management...





  1. Permission to market on a more intimate level.


  2. Capture and use of otherwise personally private information.


  3. Development and adherence to a more rigorous marketing process.


  4. Higher levels of customer profitability.


  5. Alignment of culture and commitment behind a common purpose


Here's a more in-depth look at each pillar.



1. Permission


The first thing most people associate with permission is email marketing permission, but this isn’t your father’s CAN-SPAM. This is about permission to interact more frequently, and through additional channels like SMS and social direct messaging. The trick here is to leverage modern technology--- yet transcend the creepy factor that often accompanies it.


Why permission? Because there is a tangible return on permission. When customers raise their hands and tell the brand they’re “in,” they accept a higher degree of intimacy because they expect to get something from joining the rewards program.



2. Privacy



Rewards program enrollment is the single most important “event” after an initial transaction. It’s where the customer gives permission in return for relinquishing a certain amount of privacy. Enrollment provides access to a wider view of the customer’s behavior and allows us to be better marketers.


Event streams offer marketers real-time analysis of CRM data, Web analytics and social data streams to better understand the customer’s current product sentiments and current needs. But what is considered to be a basic event stream (like Web behavior and response data) cannot be assumed to be capturable and usable in the future.


Privacy is becoming increasingly important in Europe, with strict new laws in the Netherlands expected to extend to the rest of the European Union. While the “give to get” terms of rewards programs will likely overcome many future legal hurdles, it’s important to note where the puck is moving in North America and be prepared for possible shifts in privacy laws.



3. Process


Rewards programs give marketers much richer data sets with which to work. This allows us to complement the traditional “offers looking for people” system with a customer-centric ability to match people to the offers most relevant to them.


A more engaged, identifiable audience allows a marketer to create more rigorous test-and-control cells and measure the output of experiments thoroughly at the customer level, not just the macro level. The test-and-learn cycle causes the organization to focus on the processes that align with specific performance metrics.



4. Profitability


In a nutshell, rewards programs work. There are measurable lifts in responsiveness, repeat purchases and profitability. The real impact on profitability comes from the rewards themselves, from measuring and improving on response and redemption rates, cannibalization, and increased spend.



5. Purpose


Marketers need organizational alignment to establish a programmatic approach to cultivating greater customer loyalty. In other words, everyone needs to buy in---from top to bottom, from HQ to the field, from the business side to the technology side.


The language of loyalty is a high unifier. It can redefine how your entire organization delivers the customer experience. There’s also a competitive element. Are you establishing a rewards program because your competitors are doing it or because you are looking for a strategic way to keep your best members and take theirs?


The keys to success are simple. You need executive support at the highest level, lots of members, key metrics and measurement, and a focus on continuous improvement.


Why? Because you’re not just building a rewards program, you’re establishing how your brand interacts with its customers.


What is your company doing to enhance your brand’s rewards program and overall approach to customer loyalty management?


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David Rosen is head of strategy, Analytics and Consumer Insights, Loyalty Lab, at TIBCO Software.

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