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Home » Marketing Articles » Loyalty Cards Tips To Consider Before Committing To One

Loyalty Cards – Tips To Consider Before Committing To One

Loyalty marketing has been around for as long as retailing – attractive stores, good service, and a quality product line all contribute to building up a loyal customer base.

With the growth of larger stores, a relatively new marketing component – the loyalty card - has been added by many retail outlets. This is in an attempt to offset the lack of personal contact in the larger stores, and with that, the lack of knowledge of individual customers.

Despite what any loyalty card vendor tells you – merely introducing a loyalty card scheme will not suddenly buy you customer loyalty – the overall customer experience is the key.

So if a loyalty card doesn't buy you loyalty, why bother?

The primary purpose of a loyalty card scheme is quite simply to provide information on individual customer behaviour.

Retail stores do not capture customer details when recording a sale on a Point Of Sale device. A loyalty card – with its unique customer ID – provides the vital link between products sold, and customer demographics. It also provides – for the first time – an indication to the retailer who their regular customers are, and what the value of purchases are for each customer. Equally important – when a customer signs up for the loyalty card, they provide their contact details, and ideally, details of the members of their family.

Consider These Points Before Rushing Into A Loyalty Scheme

* A badly implemented loyalty scheme is merely a form of price discounting. If the scheme does nothing to improve your sales, and you issue a price rebate when a customer's sales reaches a certain level, then all you have succeeded in doing is give away margin.

* Once launched, loyalty schemes are difficult to shut down. You will be taking away something that some of your customers perceive as a benefit, and so this can cause some dissatisfaction amongst certain customer segments.

* The primary purpose of a loyalty scheme is to gather information. Gathering this information is pointless if you don't have a plan on how to use it. If you don't have access to some analytical skills, and no marketing campaign capability to use your new-found customer knowledge - don't go down this path.

What Do I Do With All This New Customer Information?

The key activities that this customer information enables are:

* You can identify your best customers, and will know what they buy, how often, and when you last saw them.

You can now focus on nurturing these customers - with special offers, or a short newsletter keeping them informed of new products that have just come in, or even pre-sale viewing so that top buyers get first crack at items going onto sale.

* You can look for the common characteristics of your best customers, identify what is the most effective way of marketing to that segment, and then advertise in magazines this segment is most likely to read - thereby attracting more higher value customers into your store.

* You can look for customers who do not buy as often, but who have similar demographic and lifestyle characteristics to your best customers. This segment offers the best opportunity - via various marketing campaigns - be 'grown' into joining the Best Customers group - through enticing these customers to allocate a greater share of their wallets to your business.

* You can introduce a referral program - where you offer your best customers some sort of reward or prize for introducing some of their friends. Normally like associate with like, so you have a good chance of gaining other high value customers through this highly effective, but low cost way of growing a quality customer base.

Loyalty card programs - correctly implemented - can assist in growing your base of highly profitable customers. This can only work, however, if the other components of your business - in-store experience, quality products, good service culture, analytical capability, and marketing campaign smarts - are in place. Make sure that the foundations are in place before your leap into a loyalty card scheme.

© 2005 Intellinova (Pty) Ltd. - All Rights Reserved

This article may be reprinted, provided it is published in its entirety, includes the author bio information, and all links remain active.

And here is another random article you might be interested in...

Get a Head Start on Performance Management System

Performance Management System

Performance management is a wide subject, that refers to measuring and gathering data, processing and analyzing it, understanding it and generating reports for leaders to make well informed decisions that move the company forward in its efficiency and productivity. It combines many methods from mathematics, statistics, business management and other studies and builds up a complex reporting system out of them.

It is important to realize that up to a certain point you can use a common, general performance management system, but from then on you need to tailor it to your needs. The underlying methods and principles are the same, but the data needs and the way the system puts it to use could be very different.

Just through a simple example, let me show you what I mean. Let's think of a company that produces food for customers and a company that produces food for the poor in Africa. The former is a Plc, while the latter is a non-profit organization. Both companies rely on the same data. They have expenses because they need to hire labor, pay utility bills, and so on, and their product is the same.

Despite this, the non-profit organization, as the name states, is not profit oriented. So while a 4% profitability for the Plc. may be a huge disappointment to its shareholders, the main concern for the non-profit organization is how many people they fed.

This is the reason for the lack of unified management systems. We can however categorize businesses, and thus performance management systems too, into a few orientations. We can speak of profit oriented, cost oriented, investment oriented, and other orientation systems.

All these require a different performance management system, since light through which we view the company is very different. A cost oriented performance management system's goals are to analyze cost structure through consecutive years and minimize them. The objective of an investment oriented system is quite different, since initial costs are very high there, the system has to have a more long-term view.

The actual performance management system is built up of two fundamental parts with regards to business structure. The first part is the process of gathering data. In most cases this process is already in place in a company, since adequate data can be peeled out from the balance sheet, cash flow analysis, and so on.

The second fundamental part is the controlling department of the company which takes this data and analyzes it with the methods that are best suited for the company.

On the IT side of things, performance management systems, from the software side, have to be implemented by the controlling department, coupled with IT. Many of these functions are built in to the reporting and accounting software that the firm uses, since it already assembles the balance sheet, it is very easy to extract information with it.

The methods that the company uses to manage its performance can also be coded and added to the software to make the data analysis automatic. The analysts job is then to make recommendations based on the data to the leadership.