In these difficult times, a focus on customer loyalty is critical to survival. Retaining customers is a more cost efficient process than trying to gain new ones, and efforts to rethink methods to maintain customer loyalty are at the forefront of many companies, or at least should be. Customer loyalty programs are one method companies are utilizing to retain customers.
"According to Adam Sarner, a research analyst at Gartner Inc. as reported in Barney Beals’ Leveraging Customer Loyalty in a Down Economy, 'There’s an idea around what I call operational loyalty and long-term loyalty. They can work in a down environment and a growth environment. Operational loyalty offers a payoff -- buy nine, get the 10th free, for example. Long-term loyalty initiatives depend on building trust and affinity. You want to engage customers so when everyone’s ready to take advantage of an up market, they think of you.'"
Customer loyalty programs do not have to require a huge investment, but in order to successfully maintain loyalty in the long term, they should not only offer free products, but also be geared towards ease of use and offering customers something that is a real benefit to them. As Sarner explains,
"The more relevant you are to the customer, the more likely they will be loyal to you. There's no sense doing a loyalty program that benefits the business and doesn't benefit the customer at the same time."
Data collected by Aberdeen and reported in Retailers Strive to Develop Lifetime Customer Value (LCV) shows that “93 percent of retailers execute loyalty programs as a standard offering for their web, store or catalog channel customers. Such campaigns include but are not limited to point perks, rewards, frequent buyer offers or private label credit cards. But here's the rub: Of those that have programs, 74 percent report "partial to no tangible improvement" in their customer loyalty programs compared to their competitors.”
In order for a loyalty program to successfully improve customer retention, thought must be given to how programs will most benefit the customer in the long run. This should include personalized elements that focus on specific customer segments.
According to Aberdeen,
"With the increase in the pressure of LCV and the need to closely align loyalty elements with customer affinity, the single biggest common challenge facing all retailers today is the need to re-configure their organizational, strategic and tactical objectives around the integration of loyalty operations with customer retention, acquisition and reduced attrition goals."
Companies like eBay are jumping on the customer loyalty program bandwagon. As reported in eBay to Test eBay Bucks Shopping Rewards Program, "The arrival of eBay Bucks marks the company's latest customer-retention move -- something the company is focusing on as it works to improve its online marketplace, at a time when consumers have cut back on spending because of the dismal economy. Other efforts eBay has undertaken include distributing coupons to users and offering discounts."
This is just one example of a company that is focusing on what it thinks customers want in an effort to keep customers coming back for more.
