Are Low Threshold Customers Worth The Effort in a Loyalty Program?
May 23, 2011
With fewer tiers and levels, the “dream prizes” can scare off many possible participants Ã¢â‚¬“ or turn them off entirely. After all, nobody likes to have a company woo them while, at the same time, making them feel inferior.
Do these marginal or low threshold customers matter?
For most loyalty programs, I would argue that not only do they matter, but they are the keys to the success of your overall program.
Most small customers should be valued because of their “lifetime value”. In the course of a longer period of time, what are these customers worth to your organization? If you view each customer or prospect that way, you will not be so quick to thumb your nose at these people.
In addition, small customers can become mid-sized customers…which can later become large customers.
This has surely happened to all of us. Currently, I have at least six large clients that I can think of at the top of my head that had given me small, but steady orders when they were first starting out—and are now six or seven figure accounts.
Currently, the main schools of thought regarding smaller accounts are that they cost too much to service and that their breakage is counted upon in the overall cost of the program.
Costs to Service: With tangible gifts, the cost of fulfillment might very well be too costly. By the time you pick the item, pack it, label it and ship it, there are definite fixed costs involved with the servicing and fulfillment of this order. However, with the growth of digital rewards, such as music ringtones, free movie coupons, personal assistant/concierge services, these gifts can be emailed to the recipients in the form of a unique identification code with a very nominal fulfillment cost.
Breakage/Slippage Built Into Program Cost: Building non-redemption rate into any loyalty program is crucial and gives you a realistic cost estimate. However, why should you alienate lower-tiered performers by allowing them to feel unappreciated or, at least, under-appreciated. This will only make it easier for your competition to target them. Everyone likes the superstars and high point earners, but the smaller accounts are your core clients and, most likely, your company’s bread and butter. Preserve these relationships and make them feel valued by creating lower-tiered levels that they can strive for.
Are low threshold customers worth the effort?
Definitely! Just make it easier to service their rewards.