How to Generate Greater Customer Loyalty

7 Mar

by Joel R. Evans and Barry Berman

In this post, we continue our discussion about gaining the loyalty and increased patronage of current customers. Our focus is on the value of frequent-shopper programs.

WHAT IS A FREQUENT-SHOPPER PROGRAM? It is one awarding special discounts or gifts to people for their continued patronage. In most such programs, customers must accumulate a certain number of points (or their equivalent); these points are redeemed for cash or gifts. Here are examples: 

  • More than 70 million people belong to the American Airlines’ AAdvantage program. By traveling on American Airlines, and its recently acquired US Airways, and members of American’s One World Alliance – as well as patronizing participating firms such as Marriott and Hertz), people can earn free flights.
  • With Dunkin’ Donuts’ DD Card Perk Rewards Program: “Points will be earned when you use an enrolled DD Card as payment for Qualifying Purchases at participating Dunkin’ Donuts locations. Earn five points for every dollar spent. Every 200 points will get you a Reward Coupon for a free beverage.”
  • The BankAmericard Cash Rewards Credit Card offers online-exclusive $100 cash rewards bonus after a customer spends at least $500 on purchases in the first 90 days of account opening There is 1% cash back on every purchase, 2% at grocery stores, and 3% on gas for the first $1,500 in combined grocery store and gas purchases each quarter. There is no annual fee.
  • Loyalty programs are not just for large firms. Boloco is a small New-England based burrito chain with a very strong customer loyalty program. Customers receive a free item for every $50 spent. This is how the firm promotes the program.

 boloco card

 

Among the advantages of frequent-shopper programs are the loyalty bred (customers can accumulate points only through patronage of one or a few firms), the “free” nature of awards to many consumers, and the competitive edge (distinctiveness) for a firm that is similar to others. Frequent-shopper programs also let existing customers know they are important to the firm and encourage them to shop more often. As a result, a good frequent-shopper program can actually increase the profits of a retailer (rather than decrease them).

Here are several hints with regard to setting up and carrying out an effective frequent-shopper program: 

  • Make the plan easy for people to understand, as well as easy for them to participate.
  • Make the plan easy to administer by the firm.
  • Make sure that points can be redeemed for items which are of value to customers.
  • Do not set the point totals that are needed to gain a benefit from a frequent-shopper program (either a discount or a prize) so high that customers will be frustrated and thereby abandon the program.
  • Have a range of gifts and discounts to encourage higher patronage by current customers. Introduce some new prizes on a regular basis.
  • Run some special promotions that are keyed to frequent-shopper points (such as “Double Points Day”) rather than to run-of-the- mill sales (which everyone else will just copy).
  • Promote the program in and out of the store.
  • Publicize the big award winners. This creates excitement for all.
  • Keep prices competitive so that people do not think they are getting points in exchange for paying higher prices.
  • Constantly re-evaluate the program to see what is working and what is not. 
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17 Responses to “How to Generate Greater Customer Loyalty”

  1. jmohen March 7, 2015 at 9:48 am #

    Promotions are great ways to incentivize people to make more purchases. If a reward is offered as a result of spending a certain amount of money, the customer is more likely to spend the extra cash to achieve the goal. It can work with point incentives, sales, and even discounts. For example, Papa John’s Pizza offers a discount on their food the day after the Brooklyn Nets win a game. If the Nets win, a Nets fan may be incentivized to purchase Papa John’s the following day, even if they were not originally planning on it, due to the offer they provided. This is a reason why companies benefit from generating customer loyalty.

  2. Raven Takach March 7, 2015 at 11:14 pm #

    Keeping loyal customers satisfied is the key to keeping your business flowing. If you can’t keep customers coming back, there is no use in operating solely on short-term customers. As an employee of Express, I can say the Express Next Rewards Program is very similar to that of the Dunkin Donuts promotion mentioned in this article. It seems to me that recognizing and appreciating a customer’s loyalty through discounts for exclusive members makes the customer feel special and encouraged to keep supporting the business. When someone receives a promotion not granted to just anybody, he/she feels that their money/time spent on the company was worthwhile! Although this type of program saves money for the customer while taking away from the business, the encouragement to buy frequently to earn points definitely makes up for the money “lost” later on.

  3. Kevin Larrea March 8, 2015 at 7:45 pm #

    Customer loyalty I believe is a big factor for the success of a business. Unless you are in a low competition sector of the market, satisfying customers is going to be the reason they come back to your business over all the others they have to choose from. Reward programs and good customer service are some the ways that business create loyal customers. These type of customers are so important because they will indirectly market your business for you by telling others about the amazing experience they had at your location.

  4. rzheng March 8, 2015 at 7:48 pm #

    Developing a Frequent-shopper Program is really a good way for a company to cultivate more loyal customers. People are always attracted by special promotions easily and they love coupons, small gifs and so on. Once they get interested in this promotions, they will purchase the product more, which will increase the long-term profit of the retailers.

  5. Zan Sheikh March 8, 2015 at 11:08 pm #

    I agree that if people are given an incentive to earn some type of reward they will most likely spend that extra amount. It is a win win situation if the incentive is something to do with the actual business itself such as a free night or some discount on a future purchase or something along those lines because it is actually indirectly generating more business for the company/business. So the customer is happy and the business is happy to be selling more stuff.

  6. helijundell March 8, 2015 at 11:23 pm #

    Customer loyalty depends on brand product and how degree customers like this brand. We always use build account and subscribe the email to advertise the brand and let customers do not forget our brands. How to keep customer loyalty? I think it is the best way to update new arrival products to let old customers to try and try again. For example, I always use Lancome product because it has all I need and good for my skin. After I used all its products, I do not want to spend more money to buy so that I would ask my friends to recommendation a new brand to let me try,which is Dior. Then I would like to use Clinique because it did has better products than Lancome and cheaper than it. That is the the reason why Lancome lose loyalty customers like me before. I even do not want to use their reward points because I do not like their products. So besides reasons discussed in the article, I think product is so important.

  7. bchajkewicz March 8, 2015 at 11:23 pm #

    Working in retail, I can relate to all of the tips you pointed out about customer loyalty. Bloomingdales has promotions all the time to get our customers to make Bloomingdales their favorite place to shop. We have 3 different levels of customer loyalty programs. Our promotions are actually called “Loyallist Points.” If you just have the “Loyallist” card, you get 1 point for every dollar. If you have a silver Bloomingdales credit card, you get three points for every dollar, and if you are a Bloomingdales black card holder you get 4 points for every dollar, free gift wrapping, and free vallet parking. For every 5000 points a customer gets, they received a $25 dollar reward card. We do reward our most valuable and high buying customers with more rewards. However, we are also loyal to customers that do not have any type of “Loyallist” card. We take pride in our business, we will take back any broken or damaged goods. We are also loyal to our customers by forming relationships with them and by calling our clients to tell them about upcoming sales. Customer loyalty should be every businesses top priority.

  8. kristinaweller March 9, 2015 at 1:46 am #

    I can relate to this post from past experience working in retail. My parents used to own a small business, a Life is good neighborhood shoppe. Customer loyalty goes a long way these days, especially when small businesses are competing with their internet counterparts. This coincides with employee empowerment. Giving our most frequent customers a simple 15% – 25% off of their purchases shows them 1. that we acknowledge their business and appreciate it, and 2. that we value them as someone who helps us financially as a customer. When customers see this, it gives them more of an incentive to come back, as well as tell others about their positive experience at your shop, adding to your customer base!

  9. Brian McManus March 9, 2015 at 3:43 pm #

    Promotional cards that offer rewards are a fantastic way to keep a loyal fan base. However, i am not a fan of the current method it is being done. I for one do not enjoy hoarding around 10-20-30 different cards in my wallet. this more along the lines applies to companies that require you to sign up for the credit card. Ive been noticing a lot more companies such as macys, target, and toys r us requiring you to sign up for there credit card in order to receive promotions. Aside from having to carry these cards around, having that many credit cards is dangerous. Its to easy to spend beyond your means and accumulate interest (which is what these companies want you to do). Especially when these cards are interest free for 12 months. If i shop at a store only once and sign up for this card because there is a fantastic promotion but dont have the means to pay the debt off asap (not saying id ever do that) , i can expect to receive a letter from debt collectors reminding me i owe 50$ plus accumulated interest. In all, major credit card companies should work with these companies and offer these rewards through them.

  10. LoganDiamond1 March 10, 2015 at 1:44 pm #

    Customer loyalty is a very big aspect of business. Most business, rely on it and will use certain methods to encourage it. For example, at the place where I get my car washed they give me a card and after the 10th punch I get a free car wash. This type of incentive encourages me to go back because I want the free car wash and it helps with loyalty because I now only go to them for my car wash.

  11. julialentini March 10, 2015 at 6:02 pm #

    Customer loyalty is one of the biggest aspects to make a company flourish. Without a customer base you basically have no business. Promotions are a great way to keep people from coming back. It helps create a steady and loyal customer base. For example Starbucks has a loyalty card and they offer different promotions, so it keeps you coming back. Another example might be when you go to get your nails done they give you a card and by your 10th time you receive a free manicure pedicure so it helps keep their fan base loyal to their store.

  12. Lindsay Leine March 11, 2015 at 1:38 am #

    Customer loyalty is a key aspect for a company to do well in business. By creating a frequent shopper program and making the plan easy for people to understand, as well as easy for them to participate. When there is an incentive that you will get a reward back for instance money, vacations, product, etc. a customer is more likely to shop at that business. My dad for example loves Costco and uses his Costco credit card for everything because he is a loyal customer to Costco as well he gets back 2% on his purchases. This is a good idea for Costco because customers will want to shop there more and get their credit card since they get 2% of their purchase money back.

  13. Carla March 11, 2015 at 12:37 pm #

    I think CVS Pharmacy has a very good rewards card system that keeps customers going back.
    CVS gives you a $5.00 free coupon to buy anything you want in the store; of course you always end up spending more than $5.00 every shopping trip to the store.

  14. caolauren0208 March 11, 2015 at 7:11 pm #

    In order to keep customers coming back, company should give them a sound reason. Free gift always will attract people’s attention, like BOGO for free, or free sample will be given on orders over $50.

  15. Anthony Imperato April 7, 2015 at 2:22 pm #

    Whenever a consumer sees “BOGO” or “free”, they are just naturally attracted to see what the deal is for. So when it comes to gaining a customer’s attention, this is definitely a great way to do it. By offering this often, you will gain consumer loyalty which is one of the most important aspects to having a prospering business.

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