If you talk to marketers who have run customer loyalty programs, they can pretty quickly tell you the basic keys to program success. I’ve set them out as best I can here, though I recommend reading the last key first.
If you think I’m right on target, or way off base, please leave a comment.
In order for the program to be meaningful and attract participation, you need to offer participants things they want. To find out what those things are, you have to ask them. Then, when the program is up and running, you’ve got to continually ask them if they are really getting what they want. Were they happy with the item they received? Was the customer service up to snuff? Were their expectations met? Is there anything else they’d like to see in the program? And so on.
The listening should never stop. You’ve got to keep checking in with them to update and expand your offerings to meet their changing needs and wishes.
2. Act on What the Customer Tells You
If you’re going to go to the trouble of asking what customers want, and they are going to take the time to respond, then you’ve got to deliver. If they want pet supplies, offer pet supplies. If they want home and garden accessories, offer home and garden accessories. If they want it, and you can get it for them, do it.
More importantly, if there are problems with fulfillment, customer service, or the account management process, you’ve got to fix them. The program is supposed to be a benefit to your customers. If it turns out to be a hassle or a disappointment, it will fail.
3. Manage Expectations
Listening to customers and responding to their requests is a no-brainer. Nevertheless, you need to be prepared for the most obvious request: discounted services. This may not be out of the question, depending on your business model, but it can bring with it several complications. First and foremost, offering discounts may fall outside the authority of the program manager, and therefore be difficult to implement. Second of all, it might make the tracking and redemption of reward points unworkably cumbersome.
Finally, it just might not fit your business. In the staffing industry, for example, it’s hard to imagine one of our clients engaging two of our talent when they only needed one, or asking someone to work more hours once a project was complete, just to earn a discount. While a loyalty program like this may be a differentiator at the outset, it’s difficult to see how it would figure into purchasing decisions after that.
4. Measure, Measure, Measure
As the name implies, a “Loyalty Program” is supposed to drive “loyalty.” But this poses a number of interrelated challenges to anyone who wants to demonstrate whether it is working or not. Specifically, you need to decide how you are going to measure “customer loyalty” in general, then you have to decide how you are going to measure the success of the program in itself, and THEN you have to measure how the success of the program relates back to the loyalty it’s supposed to engender. The folks at Marketing Sherpa published a “how to” piece on assessing your loyalty program which suggests a number of possible metrics, all of which seem useful, but none of which strike me as definitive.
At minimum, one needs to measure usage: How many participants do you have? How many of them actually take advantage of the program? And how much do the ones who use it, well, use it? To gauge the significance of usage levels, you’ll need to establish a cost-per-user target, and then regularly compare that to the actual cost.
Naturally, if you can create a program that pays for itself, or even generates profit, then the question of whether or not it is really promoting loyalty becomes moot. If, however, the program always runs at a cost, then establishing the linkage between program performance and customer loyalty demands constant vigilance.
As you can read in my conversation with Michael Lowenstein of Harris Interactive Loyalty, there is not only serious disagreement concerning the best way to measure loyalty, there is also disagreement around the best ways to generate it in the first place. I tend to agree with Mr. Lowenstein when he points to the real differentiating power of a positive customer experience, not only with your product, service, or brand, but especially with the employees of your company, and I’ll tell you why.
When I first joined Aquent some eleven years ago, we were considering the institution of a “Frequent Hire Program” to promote loyalty and customer retention. The program never came to be, but in the course of listening to our customers (see Key #1 above), we discovered some important things about what mattered most to them.
Since our clients work with us because they have projects which require specialized skills and years of demonstrated professional experience, it was not surprising to learn that the thing they cared most about was the quality of our talent. That mattered to them far more than cost of service or speed of delivery, for example.
The other thing that mattered to them a great deal, and frequently determined whether they chose to work with us or with a competitor, was the quality of the relationship they had with their account manager or sales rep. This was somewhat surprising, but perfectly understandable.
To make a good placement, you need to know more than a set of skill requirements; you need a solid understanding of the work environment, the company culture, and the type of person who will best “fit.” That sort of knowledge is only garnered over the course of developing a relationship with a hiring manager and their company. Because such relationships cannot be easily replicated, since they take time and personal commitment on the part of the agency, they serve as true differentiators and form the basis of real loyalty.
As far as I can tell, in situations where competition is intense and there is little product differentiation, a loyalty program may be the only thing that separates one option from another in the minds of consumers. In most other cases, and, frankly, even in this one, it’s ultimately up to your people to make the difference.