How Can Customer Loyalty and Retention Programs be Proven to Work?

I’ve been looking on the web for the answer to this question: Do Customer Loyalty and Retention ProgramsWork and

Do customer Loyalty Programs Work & How do you know?

if so Which Ones? And all I’m getting is a headache!.  Allot of my readers are asking the same question and many small business owners are searching the web, books, articles, newspapers in the hope of finding that magic answer. Well, I’ve come to the realisation that it is one of those questions that just cannot be answered with a any degree certainty. And it is a quantifiable answer I’m looking for.  I’ve seen the headlines like customer loyalty program increases customer loyalty by 67%’ but how do they know with any reliability.

So I’ve done some thinking. Yes I know it’s hard  to find the time to sit down on think about business but this just had to be done.

Why there is no definitive answer?

It’s just too hard to try and get reliable definitive data!…

Here’s what I mean

Transactions would have to be recorded and analysed in detail. Shoppers would have to be tracked and their spending habits noted across all of their purchases, stores would have to be allocated a ‘type’ e.g. groceries, hairdressers, dentists, shoe store, clothing stores.   And then broken down into other areas, into ‘like’ groups such as bargain clothing store as opposed to designer. Then further broken down into  those with a loyalty program, those without and then into the ‘value’ that each program provides.

While the data  could be mined  from the EFPOS & Credit Card companies this would still not take into account convenience  and other factors.  I’m out and about, look up and there’s a gift shop. That jogs my memory that I have to buy a birthday present.  Would you travel to another store on the promise of a loyalty point or just buy then and there, assuming quality and price are then same?

Take coffee, I’m thirsty I’m beside a coffee shop, they all have loyalty cards so it doesn’t matter where I shop… unless… I’ve made plans to meet a friend, I’ve thought I want to go to my favourite cafe for the ambiance and food more maybe more importantly the quality of the  beans and barista, has a coffee card influenced my decision?

How on earth  can all the variables that go into making a purchasing decision be analyised to prove that  I shopped at  store X because the loyalty program is better than shop Y.

Now sometimes this will be true. I will make a decision based on what else I can get out of the deal.

Loyalty means to me that I want my business to be considered the No. 1 provider of goods or services for those who have purchased from me previously. That even when they are faced with similar choices at other stores they will visit me first.  This is simply not possible for even say, 80% of the time for 80% of  your market, I think it’s the variables that stuffs every thing up.

Sometimes a loyalty program will mean  your store will be preferred, mostly when price is an determinate and the goods and services are of a perceived similar value, but what really gets customers though the door repeatedly are the likes of customer service, quality of product and ambiance , both feel good intangibles and product/service  tangibles.

Why would I consider a loyalty program?  ( and not because every one has one and for data tracking, so I can see really who is my best shopers  and market to them more)…

… I really really want to reward my loyal customers…. because I genuinely like them, I want them to know that they are appreciated just because they do walk through that door with a simile on their faces.

What are your thoughts on this? Have I totally missed the mark?? Do you have examples of sustainable business growth, now I mean long term here,  though a loyalty program?… well prove it! :)

 

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Comments

  1. Mary says:

    Very thought provoking post. I can hear your frustration with the ‘paralysis of analysis’. Although I too have this tendency to over-think things, perhaps a simpler approach might be in order. Treat your customers with Karma in mind. Give them the best service possible and the rest will take care of itself.

  2. Peter Gehr says:

    Interesting insight into customer loyalty programs. Thanks for the post.

  3. My general feeling is that there really isn’t such a thing as customer loyalty any more. How’s that for unscientific? ;) People will shop based on convenience, price, and, if you can establish one, relationship (but that’s probably last, after several other issues). Lots of luck to you, let us know how it works out if you try it!

    • Amanda says:

      I agree totally, in small business we need to build a relationship (not always possible I know) with our customers/clients in the hope that they will choose our product/service.

  4. D C Rona says:

    I agree – this subject is giving me a headache too. If I keep prices at the lowest possible – to encourage new customers and keep old ones, then on what margin am I offering ‘loyalty’ programs? Talking with people about their concept of loyalty – they now say they think more about price, service and reliability and will go where ever they get it today – no loyalty in the mix. I’ll take two aspirin and read this again in the morning.

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