What is Proper Length of Time To Run a Loyalty Promotion?
Jun 30, 2011
One of the questions I get asked about most is “How Long Should A Loyalty Promotion Run?”.
Some people want to run their programs indefinitely. Others want to run their programs for two weeks.
I once had a regional manager for an oil company ask me to get involved with a “Free Watch with 10 Fillups Punch Card Promotion” on 250 c-stores, and run the program for just 4 weeks, when the average customer fills up once per week. We eventually got him to run it for 12 weeks, allowing customers the opportunity to get their punch cards and sufficient time to complete it.
Loyalty programs are ideal for short-term promotions (it can be weeks to months depending on the type of business and number of transactions opportunities per week). But how do you determine the proper length for a loyalty program?
They key factors are to determine how much business this customer is likely spending with your competition and how often they shop (or use) for that service.
In the above example, the average fillup was once per week, so the program should be run to get them into the c-stores once per week for ten weeks. At that time, the customer should have been getting used to coming into the store, becoming familiar with the store, and changing their buying habit.
If you have a quick serve restaurant, once a week is also probably sufficient. If it is a car wash or even a dry cleaners, about the same. A customer can visit at least once per week, and two months of consistent repeat business should accomplish your goal of trying to convert customers.
A hair salon, for example, would have to run a longer program, as once a month for 6 months would probably be appropriate.
However, if you are selling auto parts to dealers, for example, six months to one year might be the proper length for a loyalty program. We have done many distributor incentive programs that lasted for a full year, as it gave sufficient time for customers and prospects to purchase parts from them.
These programs are usually point-based and points are equivalent to a certain percentage of wholesale. For example, certain parts may be based on 1% of wholesale, while others may be as high as 2%-3%, depending on its margins. In addition, they tend to run longer as many times bonus points are offered for slower seasons, for slower selling merchandise or for other special occasions and opportunities.
Keep in mind, that any frequency or loyalty any promotion must have a stated end date, where it then needs to carry its own weight. This should be printed on the website, redemption card, posters, etc.
Do not run an open ended program, or run a promotion “while supplies last”. These lack in transaprancy and will greatly reduce partcipation rates.
Instead, clearly state the last day of the promotion, as well as the date that prizes can be redeemed. This can be as simple a statement as “Offer Valid Thru December 31, 2011. Redemptions must be postmarked no later than January 31, 2012.”
Programs can always be extended, but can never be ended early.
Be conservative, but realistic in calculating how often a typical customer makes a purchase decision, then add 15%-20% to the program length, to allow late comers to stand a good chance for winning. Why prohibit them from becoming loyal customers just because they found out about the program a week or two later than others?
Detremining program length for a loyalty program is not a science.
Keep in mind the reason that you are implementing a loyalty program in the fist place. If the gift has a nominal value, be generous and forgiving in redeeming to build goodwill. This is your opportunity to build trust and win over customers. Saying “rules are rules” is not a good answer.
Regardless of the time frame, be sure to treat your customers with respect and provide an excellent customer experience.
This is the best way to build your brand, increase loyalty and create added value.
The goal of any loyalty program should be to change people’s buying habits and help then become a loyal customer of yours.
You can gauge a successful loyalty promotion by the retention rate of customers a few months after the program has ended.
Take the time and study your metrics to see what percentage of customers you have retained. When a loyalty program is executed correctly, ROI should be minimal when compared to the lifetime value of a customer.