When You Cannot Implement a Loyalty Program… Facts and Myths about Why Brands Are Afraid to Invest in Loyalty

From global retail giants to local grocery stores, more and more companies are choosing to introduce a loyalty program as a tool to attract and retain customers. The prevalence of loyalty programs attests to their effectiveness and popularity among consumers. Some companies – due to the nature of their industry, or fear of losing profits and only incurring more costs associated with the implementation of promotions, are afraid to introduce a loyalty program. There is no denying that in this way myths are growing, which can unnecessarily discourage people from reaching for this solution, while it could brilliantly help achieve business goals. With this article we will try to disenchant them

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A Loyalty Program In a Low-frequency Industry Ss Unlikely to Survive

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There are some industries where the frequency of purchases is simply low. And this will not be changed by the most favorable promotion or the best offer in a loyalty program, because a given product category is replaced once every few years. In such a situation, a loyalty program can be a challenge, but this does not necessarily mean that it cannot be developed.

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An example of such an industry could be a brand selling corrective eyeglasses. Poles replace eyeglasses on average once every three years, and yet there are loyalty programs on the market related to this product category. It is important to offer an extended program, which is used not only during purchases. It is imperative to get the customer in contact with the brand as often as possible.

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Through a loyalty program, a brand can stay in touch with its customers, reminding them of regular eye examinations, offering complementary products like sunglasses, educating on eye care and product innovations, or serving club members on more preferential terms, offering service, cleaning, replacement of broken items at any dealership. Another similar case is car dealers. A car is usually replaced once every few years, but a good relationship needs to be nurtured all the time. This makes the customer become attached to the brand. Reminders to service the car, change the oil, change the tires, build a relationship, the value of which from the dealer’s perspective can prove invaluable when replacing the car.

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Facts and Myths about Loyalty In a Low-frequency Industry

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As you can see, a loyalty program can be built around other touchpoints, not just those related to value and number of transactions. Simply keeping the customer in touch with the brand, offering services complementary to the purchased product builds customer attachment to the brand. In this way – even if the clubber does not increase the number of transactions made – he or she will become fond of the brand for good and is very likely to choose it at the next possible opportunity, and perhaps recommend it to a friend.

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Once acquired, a customer is very valuable to a company. A customer may not buy more than one product per year, there is nothing wrong with that. However, there is a high probability that after a long time he will have to replace the purchased product. And without a loyalty program and offering complementary benefits, this potential sales opportunity can be lost.

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Loyalty Program Is All About Discounting

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Discounts are, of course, one of the most visible and popular forms of rewarding customer loyalty. As a result, some brands considering introducing a loyalty program are concerned about the risk of losing some of their profits. This is especially true for companies that sell products on low margins, since in their situation it is difficult to offer products at an even better price as rewards. However, the value of a loyalty program does not have to be based solely on price reductions. First of all, a loyalty program must be attractive enough to change customer behavior in favor of the organizer, but at the same time it should not be so generous as to constantly reduce the margin. It is important to understand that customer loyalty does not always have to be measured only in the number of transactions or money spent, but also in club members’ engagement, recommendations and long-term relationship with the brand.

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What to Offer in Return?

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Instead of over-discounting, focus on other elements that can attract and retain customers. Receipt history or customizing offers to suit individual customer preferences improve the customer experience. Inspirations, exclusive offers, amenities such as an extended return process or a price invariability guarantee can also be attractive rewards for being loyal. Alternative forms of value build a long-term relationship with customers without the need to constantly lower prices and lose margins.

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A Loyalty Program Only Reduces the Value of Sales That Would Have Happened Anyway

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One common view is that loyalty programs lead to excessive transaction discounting, as they attract customers who would have made a purchase anyway. It is worth remembering in such a situation that a loyalty program is not just a one-time transaction, but an entire ecosystem of customer relationships. The question brands often ask themselves is whether the program will encourage additional customer activity, or whether it will only cover transactions that would have happened anyway. In either case, the brand will still be a winner. Why? Despite concerns about the potential cannibalization of sales, it is important to remember that the value of a loyalty program is not only the direct impact on revenue, but also the data that customers leave behind, and thus the opportunity to better understand their needs and preferences.

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The multi-faceted nature of a loyalty program includes the collection of data that can be used to further improve marketing strategy. This allows brands to target and personalize their offers, focusing on those individuals who need an extra boost to close the deal. This simultaneously reduces the cost of both the communication itself, as we cover a slice of the base, and the promotion, as we selectively tailor the offer to the customer.

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All that is still needed for full success is board approval. So how do you prove that the program is making money? Conducting an analysis before and after joining a loyalty program can help you understand the real impact of the program on customer buying behavior. By comparing the behavior of customers who joined the program with those who did not, we will gain valuable insights into the effectiveness of the program and its impact on revenue, which will certainly convince management of the validity of the loyalty program’s efforts. An additional element that will help us prove the effectiveness of the program are control groups, which are always worth using to show differences in consumer behavior.

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A Loyalty Program Is a Complex Project That an In-house Team Cannot Handle

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While implementing a loyalty program may seem complicated, with the right planning, support and commitment it is an achievable task for any company. However, some brands may fear the challenges involved. Unfortunately, not every company has the right forces on board, and not every independent effort can pay off. Using outside consulting services or partnering with technology providers that have experience with loyalty programs for many companies may be the only right solution. Such collaboration can bring valuable guidance and support in program design, implementation and management.

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Any program should provide convenience to customers at a reasonable cost on the part of the organizer. Finding a partner who will not wonder if it is possible to implement a loyalty program or propose a solution that is unattainable from the company’s perspective, but will tell how to do it most effectively, taking into account the capabilities and limitations of a given company, is a game changer in implementing loyalty. The basis of a good loyalty program, is to consider what opportunities a particular business has, and at the same time, what barriers it may face. The selection of the optimal solution should be based on an analysis of the company’s characteristics, customer profiles and the constraints it faces Recognizing the prospects and identifying the barriers is the first step to building a well-thought-out loyalty program strategy.

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Summary

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At a time when loyalty is conjugated by all cases and Artificial Intelligence is fed with consumer data, the lack of a loyalty program can cost companies dearly. In addition, the rising cost of reaching customers through external media makes in-house channels both the cheapest and most effective communication option. Having a baseline of knowledge about customers, coming directly from them, and systematizing it is crucial in today’s world, where every different customer behavior translates into business value. With the dynamic changes in the market, quickly understanding customer behavior, such as less frequent visits or fewer purchases, becomes a priority. A loyalty program is no longer just a tool to reward customers, but also a key to understanding and responding quickly to changing market needs.

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