In the current economic climate, customers are increasingly likely to shop around for goods and services. When budgets are tight and adding real value becomes more difficult by the day, maintaining market share is all about customer loyalty.

During a recession, customers are less susceptible to a simple discount or a reward in return for a purchase. Customers know the value of their money and seek to get the most from every pound. From a commercial point of view, the way to bring that indefinable added something that customers seek is often through a loyalty scheme.

If you’re considering setting up such a scheme, the first thing to realise is that a good scheme is not about being cheaper. It’s about being better and being different. It is also an efficient way to influence customer behaviour without entering into a price war.

Second, you need to consider your objectives and aims carefully. What are you trying to achieve? Where does your product/service/brand fit? You need to understand your customers to hold on to a share of their budget for any length of time. Examine the supermarkets as a great example of this. Sainsbury’s gives points, Tesco gives discounts; the difference is subtle but key to attracting their different target audiences. A common objective for many loyalty schemes, particularly for offline businesses, is to capture customer details such as contact information and other additional demographic data. Online businesses will often have access to these details as part of their customer registration process, but could use a loyalty scheme as a tool to gain even deeper customer insight.

Third, knowing the client inside out is crucial to keeping a loyalty scheme fresh and ensuring the rewards remain appropriate. A scheme must provide clear benefits for members and deliver added value in terms of financial rewards, customer service and the member experience. Therefore it is critical your scheme collects relevant data that you can act upon quickly. It must also offer members a better service than their non-member counterparts.

Once you have customers earning rewards for loyalty, you are still only half way there. To build a truly loyal customer base, redeeming rewards has to be simple. Customers increasingly like to redeem rewards via the same channel with which they have initially engaged with the brand. Online is obviously critical, while QR codes, mobile apps and NFC (near field communication – i.e. mobile phones chipped for quick transactions) are becoming more popular as the mobile platform develops. Customers now expect instant in store reward redemption to complement purchases.

For smaller companies considering a loyalty scheme but with concerns about cost and operational burden, working in partnership with carefully selected partners can offer a satisfactory solution. However there are issues to consider such as diluting a strong brand, information leaks or customers receiving irrelevant offers. It is crucial that brands are compatible.

Loyalty schemes at their best should deliver for both sides. If a loyalty scheme is well planned, expertly executed and consistently improved, the subsequent gain in revenue should far outweigh the running costs. But never forget, a bad customer experience will always cause damage however many points or gifts you offer the customer. If you neglect the customer experience, your reward scheme is doomed to failure.

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