Relationship Marketing | How to Avoid the Loyalty Program Black Hole

Relationship marketing is a strategy employed by many companies to generate customer loyalty. And a points-based loyalty program is a tactic often selected to deliver the relationship marketing strategy.

But, is your loyalty program costing a lot of money and only generating marginal returns? If it is, well, you aren’t alone.

Many companies think points-based frequency programs are the best way to deliver their relationship marketing strategy and foster loyalty among their best customers. And they can be, but more often they are black holes for money. This happens when the program, a tactic, doesn’t support the company’s relationship marketing strategy.

To be more than a product with a name, in other words, to be a brand, your customers must perceive value beyond functional benefits. A relationship marketing strategy can help achieve this so, if your points-based program is a means to this end, you are on to something.

Your best customers are important, they are the current and future basis of your company. They know it and expect to be rewarded. A points-based loyalty program can be an excellent tactic that exploits this desire. Just remember, it’s a tactic, and the end game is having a brand built on relationship equity, on value beyond functional benefits.

Hip Shots

Use the program as an excuse to engage with best customers. Reward them, absolutely, but it’s more important to talk to them and let them talk to you. This dialogue will go a long way toward building relationship equity.
Encourage them to redeem. The finance department will fight you on this. I have the scares to prove it, but they are wrong. When I win the battle I see significant reductions in attrition. They don’t stay with you because they will soon be able to redeem. They stay because they have experienced value beyond what’s delivered by your product.
Build the rewards around your core product. Travelers want miles, wireless customers want additional minutes. Managing a catalog of merchandise is expensive and, if you do the analysis, you will find that a high percentage of redemptions are for your core product.
Look for special opportunities to reward you best customers. For example, buy some end-of-line TVs or some other attractive merchandise and offer them to the members for a very low point value. It won’t cost you much and your members will have a great reason to redeem. See the second point above.