Friday, March 17, 2006

Loyalty Marketing Programs
Failing 68% of the Time

A recent analysis by AMR Research indicates that 68% of retail customer loyalty programs are not working effectively. Against such odds, you might wonder why even start one. It seems that those who have done so cannot determine how to provide enough value to motivate consumer behavior. That's a tough problem for stores that already promote every-day-low-price strategies. How can you give even more to customers in exchange for loyalty?

It is fairly obvious that as consumers we would want something of substantial value in exchange for our loyalty ... to get us to come back to one store instead of shopping around. But if you cannot give ever lower prices, what incentives are left?

The answer, of course, is that love lies in the eyes of the beholder. So the beholder has to tell you what kinds of value they need to get their loyalty. That gets back to the best practice of listening to customers. I know we don't like to do that. It is so much easier to crank up programs on our own with the assumption that we already know what's best for our customers. If this were true, however, we would have 68% of loyalty programs working instead of 68% failing.

To begin with, they will most likely tell you they want every-yet lower-price promotions. Price always pops up in such investigations. But you must dig deeper for victory. To begin with, lowering prices yet again is a cop-out. It is taking the easy road, the less creative road. There are things that all of us as consumers value in addition to money. Value-added benefits such as
personalized services, personalized recognition, advanced notice of new products, a more efficient checkout process, and access to valuable product content and expert advice available only on a Members Website.

There are other issues that determine success or failure of a loyalty program, but if you don't get the value-issue right, they won't matter. Once you are certain you have nailed the value issue, then shift your attention to data, database, and process issues that must also run smoothly and accurately to get the promised performance.

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