Posted by Ajay Kelkar on Sun, Feb 21, 2010
Whenever companies run short of ideas for engaging with their customers, they launch Loyalty programmes. In fact ,my belief is that companies end up spending millions of dollars supporting loyalty programs many of which do “zilch” to their bottom line.
According to a recent report by loyalty program watchdogs, Colloquy, the average U.S. household is enrolled in 14.1 loyalty programs, which marketers spend as much as $2 billion annually to operate.
Here is an interesting article by Tim Keiningham, Global Chief Strategy Officer at Ipsos Loyalty and author of the newly published book Why Loyalty Matters. The premise of the article is that many companies incorrectly associate so-called “loyal” customers with profitable ones
Here’s is what Tim has to say:
Looking at customer actions and attitudes, our research showed a very large percentage of loyal customers—often more than 50%—are not profitable for most companies, because their loyalty is driven largely by expectations of great deals.
http://online.wsj.com/article/SB10001424052970203353904574149041326829628.html
Bill Hanifin has this very interesting comment
Take it a step farther and I’ll assert that while every company doesn’t need a “loyalty” program, EVERY company needs a well planned and executed Customer Strategy. Imagine if our industry ditched the “L” word and adopted a more inclusive term. The semantics debate might be de-fused and we could get down to business.
Read more of what Bill has to say at:
http://blog.hanifinloyalty.com/2009/06/25/ipsos-theres-no-p-in-loyalty.html
Here is what I believe are key questions to think about:
1. Is your loyalty program only ending up rewarding new customers?
2. Do you measure the profits that you get from loyalty or do you just see Loyalty sales as a percentage of total sales?
3. Are you under investing in your loyalty program by not impacting any core aspect of your service or product delivery? As a retailer do you say that your loyalty program is doing well but hesitate to give an exclusive checkout counter for loyalty program members because it is operationally difficult.