Loyalty Programs in Retail (Part-I)
Written by Angshu on 12:54 PM
Loyal Customers - Dream of Retailers (Part I)
There are two famous rules in retail -
Rule # 1: Customer is always right.
Rule # 2: If customer happens to be wrong refer to Rule # 1.
From this, it is evident that – customer is indeed the God in retail. That is why attracting and retaining customers have always remained the top priority of all retailers. But, in this era of cut-throat competition, retaining customers is becoming the toughest challenge for belligerent retailers. But is loyalty really important? And, if yes how do we achieve it – want to know? Then, read on…
Today’s retail marketplace competition is very aggressive. There are many big players all competing for same purpose of getting more and more customers and thus increasing their sales. Loyalty programs help to build relationship with customers which are very vital in case of long-term business. Several survey results have shown that loyalty programs provide a great boost in increasing the revenue as well as to create a brand image of the retailer by improving customer loyalty. Loyalty programs are getting popular day by day. Nearly 75 percent of shoppers in the U.S. now belong to at least one loyalty program.
| What is Loyalty Program? |
| Loyal customers are those who shop regularly or frequently in some particular retail shop/chain. These loyal, on-going customers are back-bone of any business and retail being a customer-centric business - loyal customers are the key to long-term business goals. Loyalty program is the process of providing special benefits to these loyal customers - by means of bonus, discounts, special offers etc. |
| Why Loyalty Program? |
| · Survey results have shown time and again that it is better to serve repeat customers than new customers. Because, most of the times, new customers are lured by discounts and choose to a different shop if they get better deals. · Revenue and sales can also be boosted by paying more attention to loyal customers. They can be encouraged to buy more or buy products which have higher profit margins for the retailer. If people get attended properly or get special benefits then they tend to buy more. So, loyalty programs create a ‘win-win’ situation for both the retailer and the customer. · Loyalty programs help in building a relationship with the customer and this is very critical for successful long-term business. This also helps in word-of-mouth marketing and building brand-image. · Loyalty programs are getting popular day by day. More than 75 percent of shoppers in the U.S. now belong to at least one loyalty program. So, when everyone else in the business are coming up with better and better offers for the loyal customers – no retailer can really afford to ignore the importance of the same – or else their customers will be won by the competitors. |
| Types of Loyalty Program: |
| 1. Appreciation: |
| This is about giving customers more of a company’s products/services as value-addition. Example - BOGO (Buy 1 Get 1 free).
|
| 2. Rewards: |
| In case of rewards - customers are gifted with the products/services which might not be related to the product being bought. The reward can be from a different company also. Example - Safeway provides air miles for Star alliance airlines. |
| 3. Partnership: |
| This can be considered a joint loyalty program provided by two or more partner companies. In this scenario - customers have the freedom to choose from the products/services of either company. Example - buy total $1000 product from either company A or B and get a coupon to participate in a joint sweepstakes. |
| 4. Rebate: |
| This is about giving customers money back when they buy more. Example - get 5% off on purchase of above $1000.  |
| 5. Affinity: |
| This is about building a personal relationship with the customer. Example – when a customer purchases some product they are provided tuition benefits or some percentage from the money paid by the customer goes to some charitable organization. |
| 6. Coalition: |
| This is about teaming up with a different company and sharing the customer data. This provides participating companies the advantage to target specific customer demographics to mutual advantages. Most of the times, partnership and coalition refers to the same kind of loyalty programs. |
[To Be Continued…]
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6 comments: Responses to “ Loyalty Programs in Retail (Part-I) ”
By Manoj on July 16, 2009 at 2:18 PM
nice cartoon, apt for the context :)
By Angshu on July 16, 2009 at 3:19 PM
@manoj - thanks so much buddy!! :)
By Prathik on July 18, 2009 at 6:34 AM
I used to keep the cartoon on my billboard in my office...but originally this cartoon consists a lion, not cat...and my manager used to come n see that now n then.. :)
All in all, a nice article...u r progressing at a fast pace in terms of writing... All the best for subsequent posts.. :)
By Angshu on July 18, 2009 at 7:32 AM
@Prathik - thanks a lot buddy for sharing ur experience. thanks once again for your encouraging comments. it is these comments that vil (hopefully) keep me going... :)
By Prathik on July 18, 2009 at 8:06 AM
its fine buddy..no need to be so formal...who else would better know the importance of getting comments and appreciation from friends on our posts...its a must to keep us going :)
By Angshu on July 18, 2009 at 8:21 AM
@Prathik - :-)