If you’re pondering this question right now within your organisation you would be forgiven for coming to a quick conclusion that yes, a loyalty scheme is the answer- after all why wouldn’t it be? Offering your customers the chance to be rewarded for repeat custom is a win/win situation, surely? The organisation benefits from repeat sales and returning visits, whilst the customers are offered discounts/perks for their continued purchasing. Well, actually it may not be that straight forward.
Firstly let me address why you may even consider this question. Customer retention is an incredibly important part of any sales and marketing strategy, and surprisingly it is one that often gets overlooked. You may also be thinking ‘I want to increase customer retention, but a loyalty scheme simply doesn’t fit the mould of our current set up’ which is fine, I’ll come back to that later.
For now let’s look at companies who run successful loyalty strategies, many companies do. One of the most obvious and familiar strategies will be Starbucks’ (other high street coffee houses are available) rewards program. Other notable mentions include McDonald’s Monopoly campaigns and the supermarket points collection services such as Nectar. All of these provide value to customers and in their competitive markets give each customer a specific reason to be loyal towards one company. This, in theory, means that you’re likely to continue shopping at Tesco over Sainsbury’s, drink Starbucks over Café Nero and vice versa. Reading this now, you’ll probably be familiar with which company you are loyal to- most of us have one.
Now consider the other side of this coin, consider your own buying habits- how much impact does being rewarded really have? Do you go out of your way to get to your loyalty driven coffee house? Or do you go because of location, quality of product, atmosphere, ethics etc? The chances are that as a consumer you make your decisions on who you give your money to based on more than collecting stamps or points.
Think about another company now, arguably the company in this current age, Apple. Apple do not use a single loyalty scheme. No discounts, no rewards, no cards, no sales. Nothing. Yet Apple have an insanely high number of retained customers. Most iPhone users will upgrade to a newer version, most MacBook users will look to purchase an iMac if possible. So how do they do it?
One of the common mistakes that often happens is companies believe they can generate customer loyalty by ‘buying’ that through rewards and discounts. Apple have proven that isn’t the only way to generate loyalty, the idea that customers are so simple minded that they only purchase or remain loyal based on gaining rewards for themselves is simply inaccurate. Apple have shown that great customer service, great products and adding value to a consumer’s life are all equally adequate methods of generating loyalty and customer retention. .
So before you rush in with the idea of offering customers discounts or rewards, you should consider a few questions:
- Does a reward scheme sit in line with our brand? – Refer back to your marketing mix.
- Does a reward scheme devalue our product/services?
- Can we improve the customer experience throughout the customer lifecycle?
The answers to these questions will determine the most relevant steps for you to begin increasing your own customer retention. You should put some serious thought into the customer lifecycle and find areas where you can improve. A reward scheme may seem like a suitable short-term fix but remember- the old saying rings true… “Customers get addicted to discounts.”