Customer Loyalty Programmes: a tale of two viewpoints

A customer loyalty or rewards programme is such a simple concept; providing value added services, typically designed to encourage and/ or reward loyal customer behavior and to build engaging relationships with customers, that promote retention and up selling.

Today, more than ever, customers are looking for brands to meet their needs for personalisation, convenience and, most importantly, added value. When this balance is right, they can provide powerful platforms and incentives to ensure repeat business, retention and acquisition of new customers.

So why then, are so many brands adopting a cookie-cutter approach to developing their customer benefit programmes - providing customers with carbon copies of what their competitors are offering?

The differentiation problem

A harsh reality for businesses today is the increase in competition – many companies offering the same products and services, with little differentiation. This is why customer programmes came about originally – to differentiate commoditised products and services with something more.

However the playing field is leveled again when, all competitors offer similar or the same value added benefits.

We have started to see some further differentiation in the diversification of products and services being offered by brands, not traditionally associated with their core business:
Consider retailers offering financial services products, or banks selling cellphones and airtime.

Competition is emerging from unexpected directions; brands can no longer differentiate themselves by relying on features, functionality, efficiency and ability alone.

Cultivating relationships

To meet these challenges, successful businesses continue to search for ways to connect and cultivate profitable and engaging customer relationships.

Programmes can provide powerful platforms to assist businesses in identifying their most valuable customers, gaining customer insights about their needs and preferences and increasing involvement with their brand. More importantly, a well designed strategy can assist a business in connecting and cultivating customer relationships by providing customers with value, beyond the business’s core product and service offering.

Striking a balance

Do not forget about striking a balance between engaging your loyal customers and the cost of providing these value added services. When constructing a programme, consider the following with regards to the benefit or reward:

• Must be valuable enough to entice the customer to participate, but not be too big that the customer becomes loyal to the reward and not your brand;
• Should be affordable if you want it to be sustainable; and
• Is structured so that they can be altered, reduced or even withdrawn without alienating too many of your best customers.

Examples of commoditised value added services

Roadside assistance

Most customers with vehicles in South Africa, have Roadside Assistance packaged as value add on short-term insurance products. In addition, customers today have roadside assistance also available on their medical aid, banking products, retail credit programmes and independent memberships to the Automobile Association, by example.

Over time, customers do not place great value on a benefit that they have multiple times and, providers of such benefits are forced to reduce the cost associated with the benefit to take this fact into consideration.

Gym, Movies and Travel

The plethora of benefits offered across industries includes typically gym, movies and travel as key signature benefits. Many of the financial services and healthcare businesses (who charge for membership to their programmes) have these benefits – at a large cost to the business.

More recently, retailers too are offering these type of benefits on their programmes (which are typically free to customers carrying their cards).

Evolving these benefits to suit the changing and growing needs of the customer and provide real, relevant and tangible reasons to engage your customer are also crucial to the success of the programme.