Considering a loyalty program for your customers comes with a price but it’s not as costly as the budget you spend for customer acquisition. Retaining customers with loyalty programs is a great is a great tactic to drive revenue growth of businesses. This is my experience and I am currently focussing on it with the help of an all-in-one customer loyalty reward platform, Poket ( https://poket.com/ ). This has free plans for DIY platform which is very efficient and easy to use.

peter@gopage.com

Antti has also raised an interesting point on increasing costs and lower customer acquisition: I’d like to add that communication needs to be carefully handled, as new customers might want to have access to the loyalty program straight away “come on, throw this extra in for me now and I’ll buy your product”.

Also for some it might be difficult to find something relevant. Should you “only” sell one single product, you could conceivably only go for some kind of discount system. If you have a modular kind of product (product A can be made better by buying product B or C) it might be an idea to offer one year module B for free and the next offer module C for free. If the client saw a value in module B, he’d buy it once it is no longer offered for free. This might be an opportunity to let your customers know more about your products/modules and how good (or bad!) they are.

Finally, have an exit strategy in place. What happens if you cannot longer afford (or want to) offer the loyalty program to new customers? What if customers with existing loyalty programs are not offered a new one to follow? I once changed hairdressers because it’s loyalty card (get the tenth haircut for free) was no longer offered.

The problem with loyalty program (development) is that it they tend to get tricky when put into practice because of all the integrations, technical and practical limitations; and requests (and fears) from different stakeholders within the company. Thus the end result is usually a watered down version with many limitations added to the terms.

A loyalty program succeed on how it can be communicated (and understood) by the customers. This is the most important success factor. Customers cannot behave how it’s intended if they do not understand how the program works. Hint: they are not going to read any further than you one liner about it.

Another typical pitfall is that loyalty programs may affect new customer acquisition negatively. Rewards add costs, if they are valuable. And they should be, as you point out. And the extra sales should bring far more profit to overcome the costs. But at customer acquisition, the cost of loyalty program tend to decrease profitability of new customers (depending how the costs are allocated) thus leading to optimisation decisions than decreases customer acquisition. On the other hand, costs may increase prices, thus decreasing competitiveness in eyes of new customers who do not (yet) understand the upside of the loyalty program.

All good stuff but nothing about your experience at Groove?

I’m interested to know if this can work well for B2B? We are experimenting here but it is very early days.

Roger
Co-founder, Fabmin