Major Rewards: 3 Customer Loyalty Programs That Actually Add Value

Business.com / Customers / Last Modified: February 22, 2017

Points or perks? 65% of marketers use a customer loyalty program for retention and sales. Learn which customer loyalty program is best.

Are your customer acquisition expenditures going through the roof? Customer acquisition is an expensive business, especially when compared to customer retention. Its costs a business 5 to 10 times more to acquire a new customer than to keep an existing one.

Here’s an even bigger reason to keep your current customers happy: current customers spend 67 percent more than new customers, according to Inc.com. It’s no surprise then that 65 percent of marketers use a customer loyalty program to boost customer retention and incentivize additional purchases.

The key is to focus on lifetime value, rather than temporary transactional value. But how do you know which loyalty program is right for your business?

Customer loyalty programs can be a bit tricky to get right. On average, American households are part of 29 different loyalty programs, but are active in 12– less than half of these programs, according to the 2015 COLLOQUY Loyalty Census. With loyalty memberships topping 3 billion this year, how can your business cut through the clutter of airline frequent flier programs, store loyalty programs and credit card programs to boost sales?

Start by matching the right loyalty program to your business’s brand and customer needs. Here are three different approaches that all succeed at building loyalty. Apply these lessons when designing your program:

Related Article: Like PB&J: Customer Service as a Marketing Strategy

Keep Point Redemption Simple

Point accumulation is one of the most common loyalty programs, with a version of this point system in place for everything from credit cards to airlines. Confusing conversion systems can alienate customers and kill any motivation to frequent your business above others.

Case Study

Shenandoah Joe is a small coffee roaster based in Charlottesville, Virginia with a cluster of coffee shops serving the University of Virginia. Like any college town, Charlottesville is saturated with coffee shops, including big names like Starbucks and smaller local chains.

Shenandoah Joe

How does Shenandoah Joe’s stand out? They keep the loyalty program simple. Every beverage purchased earns one stamp on the card; purchase 9 and the 10th is on Shenandoah Joe’s, regardless of price.

Takeaway

A simple, straightforward loyalty program works great for a competitive marketplace with low-priced products.

Reduce Entry Barriers for Tiered Programs

Virtually every airline rewards program offers “tiers”; American Airlines AAdvantage program, for example, includes Gold, Platinum and Executive Platinum. For the casual flier, however, attaining Gold status is a virtual impossibility; they’d need to fly 25,000 miles or 30 segments—a lot more than the occasional weekend getaway.

Case Study

Virgin Atlantic’s Flying Club makes it easier to achieve “Club Silver” status (the first status bump above entry-level) by requiring only “15 tier points."

Red Benefits

And with one tier points roughly equivalent to a single flight segment travelers can achieve “Club Silver” status in half the time it takes for programs like American.

Takeaway

With a tiered system, customers enjoy both short-term and long-term membership value and remain incentivized to continue participating and accumulating points. And by lowering the entry-level requirements for basic privileges, more customers can feel like VIPs.

Be Exclusive

If your product or service derives its value from exclusivity, your rewards program should separate out the “one percent” of your business so they feel even more exclusive.

Case Study

Alpari’s “Premium Client program," dubbed the “last word in privilege” is the ultimate exclusive investor’s club. Alpari is an online foreign exchange (Forex) trading platform for independent traders and automated trading.

Premium Client Alpari

The Premium Client Program includes a personal manager, special bonuses, immediate funds access, interest on deposits, and the ability to trade without limits. Alpari recognizes that building a reliable brand means building a long-term relationship with its customers and achieves this through its Premium Client Program.

Takeaway

Exclusivity has its perks. Whether customers pay for the VIP treatment (like Amazon’s prime membership) or get inducted into an ultra-exclusive tier based on spending power, make the benefits of this service worth it and treat your customers like gold.

Related Article: Customer Delight: The New Standard in Customer Service

Bottom Line

A tiered program typically works best for higher priced businesses (e.g. airlines) while a simple point accumulation and redemption program is ideal for businesses with lower price points (e.g. a local coffee shop).

Only use an exclusive VIP program if your customer service team is prepared to meet VIP demand and truly support this program; otherwise, you could end up hurting your brand if your loyalty promises fall short.

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