Five Myths about Retail Loyalty Programs That Need to be Debunked

  • Sep 13, 2010

Frequency Marketing Programs

Many retail loyalty programs are similar. In fact, many customers hold loyalty cards from several retailers in the same business and use each card from time to time. If that is the case, you will not maximize the success of your loyalty program.

The goal of any loyalty program should be threefold:
1) Retaining customers
2) Increasing sales to existing customers
3) Attracting new customers
There are several misconceptions about loyalty programs that need to be clarified. I have listed five:
1. Programs Will Take Off and Spread Like Wildfire:
The best promotions are the ones that are marketed correctly. For retail promotions, that means signage (inside the store, on the counters, on banners and pole signs, etc.), motivating store employees to introduce the program, mentioning the program in all areas of customer contact—including case register receipts, handouts at the store, all paid advertising, website, FaceBook page, emails, etc. A frequent shopper program cannot be a stand alone program or it will not yield the results you desire.
2. Loyalty Programs Should be Offered Only to Existing Customers or to Select Clients:
Many retailers contain their programs only to existing clients – whether it be in credit card statements, invoices, and other communications. Although it is admirable, and sometimes beneficial, to have a “club-like” or “members-only” feel to a loyalty program, be inclusive of prospective clients will help generate a significant portion of your revenue stream. With a detailed study it is found out that there are many good and prospective customers outside your realm. It is advised to conceptualize your store in such a way that it attracts new customers.
3. Offering a Loyalty Program Will Automatically Increase Sales:
Although incremental sales should be one of the goals of any loyalty program, it is wrong to thing that any loyalty program will attract customers. Too many retailers concentrate more on the infrastructure, administration and design pf their program rather than analyzing the motivation of customer behavior. Understand the motivations of your customers before introducing your program. Find out what really makes them tick.
4. Technology is the Key to Any Loyalty Promotion:
Never go by the misconception that technology is the key factor behind any improvement of a loyalty program, it is merely a means to an end. It is not technology by itself, but rather the capability of the retailer to use. It is important to think whether you are building up adequate knowledge from your data to create and deliver benefits from technology, which is not feasible by your competitors. I have seen high tech RFID and UPC-coded programs fail in big ways, and simple punch card programs succeed to tremendous proportions, so don’t fall in love with technology. Loyalty cards have the data but they cannot categorize customers based on frequency. So it is the analysis of the attitude of the customers that will make you deeply understand the motivation of the customers.
5. Store Managers Will Do What is Best For Their Store:
I have seen dozens of proven loyalty programs sabotaged by store managers because they fear that short-term profitability will suffer at the expense of the premium or reward for the loyalty program. Managers that are paid a percentage of the profits often look at customer frequency programs as a drain on their quarterly or monthly P&L statements. This needs to be discussed, as often the short –term needs of store managers and the long-term profitability of the store itself can be at odds.
The success of a retail loyalty program depends on many factors-both internal and external. Changing the way you look at these programs can help you to succeed – and yield tremendous long-term success for your store, while obtaining important customer demographics.
Happy Promoting.

  • Category: Loyalty Marketing/Frequency Programs
  • Tags:, car wash incentives, college recruitment promotion, com, customer loyalty program, display incentives, download incentives, downloadincetives, employee incentive program, em