One of the first entrants into this field, the Air Miles Program is still one of my favorites. I just returned from a three-day package at an ocean side resort spa using my air miles for business.
So how does one implement a customer loyalty program in your own organization? Following is a brief description of a seven-step process.
Top Management Commitment
The first step is to obtain top management commitment, as it is essential with any new initiative.
Internal Data Collection
The second step is to collect data that exists internally, such as sales from repeat customers, profitability form these sales, referrals from satisfied customers, and percentage of repeat customers.
The National Grocers Association reports that supermarkets with loyalty/frequent shopper programs receive 72 percent of their sales dollars through these programs. The average loyalty program member visits the store twice a week, whereas nonmembers visit only once a week. The average transaction for a member is $50, whereas a nonmember is $46. What type of customer would you prefer to have?
The third step is to collect data from the best-in-class companies who have superior customer loyalty and high profitability against which you want to benchmark yourself. Examples of these companies include Federal Express, which has 97% of its customers as repeat customers.
You want to integrate the voice of the customer into your Loyalty Program. This can be done by designing a customer satisfaction questionnaire that is administered quarterly to your customer base.
You could also conduct some qualitative research such as a focus group to determine what would make your customers loyal to your organization. Finding new ways to generate customer complaints, such as having suggestion boxes and phoning customers at random, are also progressive ways to find out what you need to do to enhance your customers' experiences.
Data Analysis and Interpretation
The fifth step is to analyze the data you have collected via questionnaires, or other methods, and determine the metrics for satisfaction and loyalty in your business. If you currently only have 50% of your customers as repeat customers, do you want to increase this number to 60% in the first year?
Determine the lifetime value of a customer. In a dry cleaning business, the average transaction is only $20, but the lifetime value of a repeat customer over 10 years is $10,000 (very significant!)
Designing your Program
Design loyalty enhancers for your business. Will this be a reward for frequent shopping? Develop employee retention strategies. Happy employees equate to happy customers in any business.
Commitment to Continuous Improvement
Once you have designed a program, keep working it. Continue to get feedback from your customers, and your employees, as to what it will take to get your business to other potential customers.
Following a process to increase your customer loyalty will help enhance your chances of success.
Written by: Pauline Patenaude, MBA, CMA, M.C.Inst.M
Published in "The Marketing Challenge", Canadian Institute of Marketing,
Volume 3, Issue 2, Fall 2000