September 6, 2011
Seth Godin, called “America’s Greatest Marketer” by American Way Magazine, wrote on his blog last year about loyalty, not specific to any one type of industry but brand loyalty in general. He stressed in his article that loyalty isn’t about customers choosing a brand because it was the cheapest at the time, but choosing one they might have to spend more on as long as they have reason to feel loyal, often from something as simple as good customer service.
Customer loyalty programs are one way to accomplish this.
Discussion on DrivingSales about what customers perceive as the most valuable reward have been centering around value proposition in sales or service through the earning of points. While the punch-card idea is slowly falling away in retail, many customer loyalty programs are still about earning points, and customers often enjoy the routine of, for example, knowing that an oil change here or tire rotation there will earn them points toward their next vehicle purchase.
Some customer loyalty programs that work, as reported by The Street in their 5 Best, 5 Worst Customer-Loyalty Programs, include National’s Emerald Club. National, who provides vehicle rental, allows their customers to pick any vehicle on the lot, and being a part of their reward program is free, offering 1 credit per rental. After 7 rentals they get a day free. Simple and valuable for the common rental customer.
Harvard Business School’s Working Knowledge, a site for innovation in business practice, observed how customer rewards are changing, going from cards to digital with mobile apps and email offers. They worry, however, that few companies understand how to best use such programs to their benefit.
“The loss of face-to-face interactions between merchant and shopper has left a lot of customers wandering the desert. Well-run loyalty schemes are a way to bring them back into the fold.”
In the case note Customer Loyalty Schemes in the Retail Sector, Jose B. Alvarez and Aldo Sesia found that successful retailers connect with their customer loyalty program participants at three levels: the intro with a reward for enrolling, direct contact to offer further rewards that are tailored to the customer, and finally engagement with two-way communication between customer and brand.
“When you combine this with a keen understanding of trends in the marketplace you can pleasantly surprise customers with goods and services that they may not have known existed. A great retailer is the agent for the customer. Loyalty programs and the insight and communication capabilities they provide can help retailers achieve greatness in a crowded and commoditized space.”
Dealers can benefit the same way.