Why and How-to Reward Customer Loyalty

Siobhan Lynch
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On: 19 Oct 2017
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3Plus Customer Loyalty Rewards

Customer loyalty for its own sake is rare. Most customers keep one eye on the grass on the other side of the fence.

That’s why an efficient and relevant customer loyalty rewards programme can help businesses retain customers for longer, or even forever, whatever the size or type of business.

Whatever you’re selling, you’re almost certainly not the only one selling it. You need to attract new customers and retain the ones you already have, so you need to offer a product that’s better than your competitors’, or cheaper, or support it with better after-sales, a longer warranty, or any of the other differentiators in the SME armoury. Even then some customers will up and leave, which serves as an expensive reminder that attracting new customers to replace those you have lost costs far more than retaining the customers you have.

In the telecoms industry, customers leaving or ‘porting out’ to another operator is known as ‘churn’. It can be a significant issue in such a competitive industry, but we have found a successful solution and in this is a valuable lesson for other businesses.

When Doing Your Job is Not Enough

In a marketplace offering infinite choice, consumers start to look beyond their requirements for eye-catching differentiators. And human nature being what it is, nothing catches the eye like the opportunity to get something for nothing. Of course, the business gurus and marketers don’t put it in those terms exactly; we refer to it as a customer loyalty rewards programme. Any business can establish one. It usually takes one of two forms: points collection or instant rewards.

Delayed Gratification

A points collection scheme, like the supermarket loyalty cards most of us have in our wallets, requires customers to amass loyalty points through their actions. It’s usually based on spend, e.g. €1 is one point, but it can be based on length of membership or buying certain items during a promotion. Once the predefined number of points has been collected, the customer can spend them in whatever way the scheme defines. They may be able to redeem points against the cost of the business’ own goods or services, or against goods or services from partner companies.

Perhaps one of the best known examples of this type of loyalty scheme is Tesco Clubcard, which awards points to members for every Euro spent in-store or online. The points can then be exchanged for vouchers with a monetary value, for redemption against purchases from the company itself, or from a huge variety of partners. Partners range from restaurant chains to roadside breakdown companies to family attractions. Spent at Tesco, the vouchers are worth their face value only. Redeemed with Tesco’s Reward Partners, they can be worth up to four times as much.

Instant Satisfaction

Much different to points collection, the second type of scheme doesn’t expect customers to wait to claim their reward. However, it is based on sound customer psychology. Younger generations of consumers are less willing to wait for rewards when so many things are now available instantly with the swipe of a screen. If desirable rewards are given immediately, loyalty is gained through the rewards rather than the other way round.

Members of this type of scheme are not required to collect points or be customers for a specific length of time. Instead they are offered rewards simply for being customers at that moment. 3Plus, Three’s customer loyalty rewards programme, operates in this way. We give business and personal customers the opportunity to claim free credit to use against motorway tolls, 2-for-1 cinema tickets, discounts on meals out, and more. Some offers are constantly available, while others are introduced or dropped when the range of offers is refreshed every month. Click-to-enter competitions are also open to members on a regular basis, with prizes like a new mobile or a hotel break. We offer enough variety that customers are always likely to find something of interest to them.

A key reason the programme has been such a success is that instant gratification starts, as you would expect, instantly. Business and personal customers of Three can join 3Plus as soon as they become customers, simply by registering and downloading the 3Plus app.

Managing Loyalty

If you decide to introduce a loyalty programme for your own business, it’s important that you do more than give away points or other rewards. Like any other business initiative, your scheme needs to be monitored and measured to assess and maintain its effectiveness.

Monitor and measure to assess and maintain effectiveness

Comparisons of customer churn before and after the scheme is introduced will provide some indication of its effectiveness, and customer surveys will provide more. Customer feedback to Three, for example, reveals that most are actively participating in the 3Plus scheme, and – along with comprehensive network coverage and high-quality customer service – it’s one of the main reasons for their continuing loyalty.

From the financial aspect, it is also important to measure margin. Partners will contribute to be part of a scheme, and this – together with the reduction in customer churn – needs to be set against the cost of establishing and running the scheme.

Loyalty Lessons Learned

Some of the lessons we learned in establishing and running 3Plus can help you to avoid the most obvious pitfalls, should you decide to establish a loyalty scheme for your own business. Firstly, consider the advantages of instant rewards versus points. Secondly, make the scheme as easy to use as possible, with a seamless interface for a satisfactory customer experience. Thirdly, make sure the rewards you offer are appropriate to your market. Fuel discounts for our customers, for example, are attractive not only to personal customers but also to business customers. Lastly, remember that what can’t be measured, can’t be managed or improved. Set key performance indicators for your scheme, measure against them and take action if it fails to measure up.

Follow all that advice and you should have a loyalty scheme as successful as 3Plus, as well as some very loyal customers.

 

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