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| Customer Loyalty Programs | March 6, 2007, 10:00 am | visits: 596 | wordcount: 563
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By Mario Churchill
Customer loyalty programs refer in general to points rewarded to customers for either brand or company loyalty, as opposed to say discounts. These types of customer loyalty programs can be a very effective form of promotion as long the rewards are valuable to the particular customer base. They are also more effective if they are regularly updated and kept relevant to the company's products/ service or are a good complimentary item to the product they are being used to promote. Another important element of customer loyalty programs is that they do not create additional costs for the customers in order for them to enjoy their rewards.
Customer loyalty programs are very effective in creating and keeping brand loyal customers. The rewards bring them back and they will continue to choose the given brand or company on a regular basis as well as spread the word about the product/company since they see value added rewards for their loyalty.
The technology age has also revamped the way customer loyalty programs are implemented and what customers are expecting in return for their loyalty. Gone are the days where you get one free after buying half a dozen of "product x". Customers are now looking for quicker "returns on their investments" and customer loyalty programs have to meet these demands.
The expense of a customer loyalty program means that companies have to be very diligent in their research of what to offer and the demographics of who they are trying to reach. It is vital that they get it right or these customer loyalty programs could cost them far more money than they will ever get back and that could be the undoing of a company that is not on stable ground. Grocery stores that have mature customer loyalty programs spend about 1-1.5% of their revenue on customer loyalty programs. Furthermore the commitment to customer loyalty programs is long term it could take almost 18 months before you start to see returns. It would be unfortunate to have irate customers after you drop a much loved program due to expense, shortly before you start to see the returns.
Customer loyalty programs can also be an avenue to track customer retention. You can track when you lost a customer and it could give you a chance to get them back or at the very least find out why they left. Vital data about what's working in your company and what does not can be gathered if you use your customer loyalty programs right.
Customer loyalty programs can also be used to weed out unprofitable customers, no company wants to retain unprofitable customers. The customer loyalty programs should be set up so that unprofitable customers are ineligible to join or receive the rewards, or better still the program should be used to turn them into profitable customers.
Customer loyalty programs have the added benefit of helping you grab more sales from existing customer base, which in turn help spread word of mouth marketing. There is also the ability to identify product/service problems earlier, which will improve profitability and this will in turn provide a competitive advantage. So a well implemented customer loyalty program can have a great bearing on a company's bottom line.
About the Author: Mario Churchill is a freelance author and has written many articles on various subjects. For more information on sales incentives or employee incentives checkout his websites.
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