06 Jun 2018 18:01 IST

When done right, loyalty programmes hit the jackpot

Rewards and discounts are not the same; know the difference and see your sales sky-rocket

Loyalty programmes are everywhere these days. Brick and mortar stores use them to keep pace with the evolving e-commerce industry, and the e-commerce players use them to boost retention and drive down acquisition costs. For an average business, 80 per cent of sales come from the top 20 per cent customers and repeat customers are any growing business’ lifeline. Businesses have opted for loyalty programmes to identify, engage, and then retain these repeat customers, or loyalists. When done right, loyalty programmes can be incredibly profitable. A 5 per cent increase in customer retention can result in an 80 per cent increase in profitability. However, when done wrong, these programmes can be dreadfully expensive and hassle your most important customers.

Let’s take a relook at loyalty programmes:

Stop asking customers to carry around the plastic cards

There is a reason why 50 per cent of loyalty programme memberships are inactive. Let me narrate my experience. I signed up for a rewards programme with a retail store and was immediately handed a loyalty card. Here’s where you ought to stop asking your customers to carry yet another piece of plastic with them. Are we not lazy consumers? We don’t like doing extra work, especially when we know that the reward is so far in the future. In the course of eliminating the cost of cards, a smart mobile device may perhaps be the most consumer-friendly way to do rewards. However, these may also be torturous. When was the last time you scanned a QR code on your phone? Do you even remember how it’s done?

Let me rewind. You have to first unlock your phone, find the right app, open the screen to scan the QR code screen and scan it perfectly. Such a hassle annoys customers. If you don’t enjoy making your very important customers feel wretched, stay away from using QR codes.

Don’t treat all customers the same

Businesses implement customer loyalty programmes to identify their best customers. Why is it, then, that so many loyalty programmes treat every customer the same?

Why do airlines let the bigwigs board first? Those big, premium spenders deserve a little bit of recognition; after all, they bring in more than 60 per cent of the revenue. The key is to identify these big spenders and personalise their loyalty experiences accordingly; something like priority boarding facility. Research suggests that airline loyalists often concentrate as much as 95 per cent of their flying spend with one brand. Clearly, priority boarding works.

It is impossible to remember and engage with every customer that walks in. This problem is further worsened when you don’t have a loyalty programme that gathers customer information. And if you can’t identify your top customers and figure out when and why they have stopped returning, you have a leaking bucket that may eventually collapse your hopes for future growth. For most businesses, 60 per cent of the customers who shop today won’t come back in the next three to six months.

Target customers based on past purchases

Create a personalised and eloquent offer designed specifically for your high net worth customers in a scenario when their habits keep changing. Use historical purchase data to communicate with these lost loyalists and remind them that there was a time they used to love your brand dearly.

Loyalty and discounts are not the same. Loyalty programmes don’t have to be hard. There are easier ways; start by cutting out the hassle of integration. You don’t have to head bang against your antiquated point of sale or instal some clunky piece of hardware to identify your most important customers.

If loyalty comes effortlessly, you will certainly see higher engagement.

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