What is Customer Loyalty Program?

Customer Loyalty Program is a program created by firms to gives various rewards to customers when they shop with the firm. It is designed to encourage customers to return often to same business and make regular purchases.

 

Customer Loyalty Programs: How It Begin

In today’s market over 86 percent of the Canadian consumers are enrolled in at least one Customer Loyalty program.  Both consumers and retailers are involved in Loyalty Programs for around half a century. Canadian Tire was first company that started a Customer Loyalty program in 1958. Canadian Tire offered “cash bonus coupons.” Some time in 1960s Quebec’s Steinberg’s super market also started their Loyalty program where they distributed Pinky stamps which allowed the customers to collect stamps and when enough stamps were collected you could exchange them for merchandise. From that point the number of loyalty programs increased dramatically and even up to date they continue to grow at a rapid pace.

Advantages for Companies Offereing Loyalty Programs?

Companies offer loyalty programs as well as constantly invest in them to improve and maintain their effectiveness for the following reasons.    

• Keep customers – customers stay loyal to the loyalty program because they focus on the amount of points they have already gathered and continually interact with the company to gather more points even if they don’t really feel loyal  
• Gain wallet share – when companies provide some extra bonuses in loyalty programs, they encourage the customers to come to them more often than going to their competitors.
•  Prompt customers to make additional purchases – customers can be lured to buy more than they would have bought without the customer loyalty program, especially when customers are really close to obtaining a reward
• Identifying which customers to focus – Customer relationship management system (CRM) is tool for companies to collect customer data and track their behavior meaning the companies know what a consumers buy, what amount and how often. CRM allows companies to choose which customers to focus their marketing resources to maximize their profits. 

advantages

Disadvantage for Companies Offering Loyalty Programs

Loyalty Programs may help companies to connect with their customers however people don’t realize that    there can be a lot of disadvantages for the companies to offer Loyalty Programs.

         

·         It can cost a company fortune to offer Loyalty programs. Small discounts may seem alright but it comes off from profit. A $100 transaction could cost them $90 in product and $10 profit. If they offer 5% off on their transaction the company only made $5 which is 50% decrease in profit. A 5% discount seems not so big but in this case it decreased their profit by 50%.

·         It is difficult for companies to get out of schemes once they offer it especially for cell phone companies. Once they offer a deal they cannot go back on it, even if it cost them from their own pocket.

·         When companies offer loyalty program there is always a risk of customer information may end up in wrong hands and also the risk of falling foul of Consumer Privacy ACT

Advantages to Customers Using Loyalty Programs

Advantages for Customers Participating in Loyalty Programs

        ·         Saving money on regular purchases or making money on      

                regular purchases. i.e. Canadian Tire Credit Card

        ·         Special offers or discounts for the customers in loyalty Programs

        ·         Feeling of being a member of a particular Company

        ·         May Receive other benefits such as Financial Services 

How to Create a Effective Loyalty Program

Creating a loyalty program is extremely easy however creating a loyalty program that attracts new customers while hold the existing one requires some work. These simple rules make it easy to make a effective loyalty program.

1.     Keep it simple – the main benefits of the loyalty program must be easy to understand. Make it as easy as possible for customers to understand how your loyalty program works. What they need to do and how can they benefit from it.

2.     Keep it real – The number of points required to obtain a reward must be reasonable. The customers need to be convinced that the efforts they going to put in are worth it.

3.     Make it meaningful – the rewards offered by companies must be relevant and meaningful to the customers. If the companies offer same reward to all the members, some might not find any interest in it and may choose to go to your competitors.

4.     Keep it fresh – Change the rewards and features offered by your company from time to time and keep them up to date. A loyalty program is similar to a marketing program so it should be like brand new program so the customers actively participate in them.

5.     Shout it out – provide information from time to time and give special offers to your existing customers and remind them that your program offers many privileges. Advertise the offers publicly so it may attract more customers for your business. 

http://ackroo.com/loyalty-programs/

Social Media Impact on Customer Loyalty Programs

Social media have influenced the daily life all human beings as well as businesses. Businesses can now update their clients through social media and businesses now days also offering their loyal customers with special discounts and offers through Social media. A perfect example of showing customer loyalty through social media is Alicia Keys. She rewarded her fans in Facebook by allowing them to listen to her album before it was even released.

Social media made all the information easy to access so nothing is hidden any more. Since the customers can now compare their loyalty program with other Loyalty programs, it has become harder for businesses to just ignore their competitors. Social media had made it harder for companies. Social media have enabled consumers to choose their Loyalty program not on the base of the brand but what actually do they offer.