Category: Academic Life

Expressing Gratitude to Loyal Customers

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My favorite holiday, Thanksgiving, is just around the corner. This is a great time of the year for companies to send out words or gifts of appreciation to their loyal customers. The insurance company AMICA sends out artistic Thanksgiving cards to their customers every year; many real estate agents send out fresh calendars for the next year to their clients; and I once even received a BIG can of popcorns as a customer appreciation gift during this time of the year. Are such gestures beneficial for companies? How should such thank-you’s be conveyed? In this week’s post, I pull academic research on gratitude to shed some light on these questions.

Feelings of Gratitude

According to philosophy and social psychology research, gratitude is an important emotional foundation for sustained reciprocity in human relationships. When an individual feels gratitude, he or she is motivated to repay the favor by conducting an act of kindness in return. Many of us probably still remember the paying it forward story at a Starbucks in Florida a few years ago. It started with a woman offering to pay coffee for the customer behind her, who then passed on the kindness by paying for the next customer. This chain continued unbroken for a total of 378 customers. That is the power of gratitude. In a bilateral relationship between a customer and a company or brand, feelings of gratitude can provide the drive to sustain a trusted and committed relationship and increase customer loyalty.

Gratitude Needs to be Expressed

The feeling of gratitude has a unique social component that prompts it to be expressed. In an eloquent essay written by Dr. James W. Ceasar, he describes gratitude as having developed into an objective standard of behavior. In his words, “Gratitude has a social aspect and is incomplete if it does not include the act of acknowledgment”. Or in more plain words, not saying “thank you” when someone has done something nice for you is just rude. Although much of Dr. Ceasar’s arguments relate to political and social domains, they are just as relevant to customer relationships. It is not quite enough for a company to claim its commitment to its customers when it does not properly express its gratitude to customers. Continue reading “Expressing Gratitude to Loyal Customers”

Measuring Loyalty Program Performance and ROI Part 3

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I hope you have enjoyed reading Part 1 and Part 2 of the loyalty program performance measurement series. In this last portion, let’s look at what your metrics should be for the last two types of program goals: to attract new customers, and to gain customer insight.

Metrics When New Customer Acquisition is the Goal

The obvious metric for measuring new customer acquisition is the number of new customers acquired as a result of the loyalty program. Although it seems rather straightforward, it is necessary to note a few things about this. One, depending on the nature of your business, determining who are new customers may not be so easy. An online retail business typically has customers’ name and contact information. So identifying and determining the number of new customers is pretty straightforward. Without such information, a new loyalty program member may simply be an existing customer who decided to sign up for the program. Therefore, it is generally not a good idea to count sign-ups for the loyalty program as a metric for customer acquisition.

Instead, you may want to leverage POS data to identify new credit cards that have not previously been used at your business. This is not 100% accurate either obviously, as existing customers may simply be using a different credit card. But it is likely to be closer to the true number of new customers. Measurement of foot traffic or sales and then excluding frequency+spending growth by existing members can be another crude measure of new business. Finally, it is also possible to draw a random sample of your visiting customers and ask the simple question of whether it is the first time that they are buying from your store. Whichever approach you use, it’ll be best to have some baseline customer acquisition numbers before the program was established to compare the new numbers to. Continue reading “Measuring Loyalty Program Performance and ROI Part 3”

Measuring Loyalty Program Performance and ROI Part 1

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Loyalty program can be an expensive investment. Once you decide to take that plunge, it is important to take the pulse of your program at regular intervals to make sure it is doing what you want it to do. In this series, I would like to discuss how to gauge loyalty program success and ROI.

Success Metric Depends on Your Goal

Different loyalty programs set out to achieve different goals. The best metrics for gauging your program performance depend on the specific goals you have for your program. Broadly, most companies decide to start a loyalty program for one of the following five reasons:

  • To grow customer spending. With this goal, you are trying to make consumers increase their spending at your business. This can happen either because they pull their purchases from other places to concentrate more of their purchases with your business, or because you are expanding their absolute demand. The latter one is more likely to be the case when your product category is a flexible one, e.g., travel, entertainment, etc.
  • To reward your best customers and strengthen their loyalty. You create a loyalty program to better understand and cater to their needs, and to make them feel truly appreciated. The delayed reward nature of such programs can also decrease your promotional cost to these customers.
  • To be on par with competition. This is a scenario where many of your competitors have loyalty programs. Although you may have felt ambivalent about having such a program, you realize the pressure the competitors’ programs are creating to your business and the bleeding of your customers because of it. In this case, your main focus is to catch up on competition and stop further loss of customers and their spending.
  • To attract new customers. This is almost the opposite to the last scenario. In this case, you may be a loyalty program pioneer among your competitors, or you may have a better designed loyalty program. Either way, you are hoping to lure at least some customers away from your competitors, or otherwise attract consumers who were not buying from you before the program was in place.
  • To gain customer insight. Your business may not offer a natural way of tracking consumer purchases. Starting a loyalty program can help you solve this problem by offering a mechanism of tracking at least some consumers’ purchases. You then leverage the insights learned to improve your products and marketing messages.

Continue reading “Measuring Loyalty Program Performance and ROI Part 1”