If You Build It

MG

Mike Grucella

04/13/2014

Using Loyalty Programs to Turn Customers into Fans

Nothing is more ubiquitous these days than loyalty programs. Hotels, grocery stores, airlines, coffee shops, gas stations, restaurants, casinos, pet stores…and on and on. From the big box stores to mom and pop shops; from global corporations to emerging startups; organizations are looking to entice customers into repeat sales by offering programs laced with different incentives and advantages.

Not every loyalty program is the same. Price points, frequency of purchases and differentiating from the competition could all determine how rewards are structured, calculated and used. Take grocery shopping as an example. Everybody does it. Since there is built in consistency, stores don’t need to offer extravagant rewards. However, they also don’t want to lose customers to a competitor down the street. So maybe they offer just enough to bring customers back week after week. This might include tracking the type of purchases they make and offering coupons at the check-out on follow-up purchases of the same item. Alternatively, with a higher price point, airlines have to take a different approach. Airlines want to make sure they can get the customer commitment to use their airline on every trip. The more miles flown leads to better status, seat upgrades, or discounts on future flights.

Home Court Advantage

You’re probably familiar with a standard retail loyalty program whereby you purchase items and get points in return. You can then use those points against future purchases. Let’s say you shop at Olympic Sports, which sells athletic apparel and equipment. Their rewards program is set up in such a way that as you get points, you earn membership statuses like “Bronze”, “Silver” or “Gold.” Olympic Sports wants to make sure that they provide you with a shopping experience tailored to your preferences. Here’s a sample of what those business rules might look like for a seasonal promotion:

In this case, if you’re a “Bronze” member, it’s Fall and you like basketball, then Olympic Sports will email a coupon for a 15% discount on basketball apparel or equipment. And when you get the email with the coupon, you’re going to think “Perfect! I need a new pair of shoes.” And off to Olympic Sports you go. On the other side of things, the person who is managing the loyalty program can use this table to quickly modify the discount percent or, if they need to include a sport like soccer, they can do so within a single, easy-to-read interface.

What Happens in a Loyalty Program, Stays in a Loyalty Program

Let’s look at another example. Casinos aren’t just about playing the tables anymore. With restaurants, clubs, concerts, shows, museums, spas and amusement parks, they offer everything you would ever need without leaving the comfort of the hotel. High rollers may still get comped, but casinos have learned that a loyalty program for all patrons is the way to go. By awarding points for dining, entertainment, hotel, etc., members are encouraged to repeat the experience at any of their locations with the benefit of getting discounts, vouchers, a free meal or even a free night at the hotel.

Want to calculate points differently for a visit to a restaurant versus a night at the show? Use a rule like the following:

All you need to do is change the point and dollar value(s) based on the loyalty program requirements.

Want to check for a status upgrade and award the member with more points if they qualify? Use the following:

 

Have I Made My Point(s)?

There are a lot of factors you may need to track with your own loyalty program: points, status, usage, frequency, and expiration. And it goes without saying that the complexity of managing such a system can be overwhelming. With the right tool at your disposal, you can take comfort in knowing you are connecting with your customers and providing them with the best value that keeps them coming back for more.

 

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