Category: Customer Relationship Management

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”

Turn Loyalty into Habit and Habit into Loyalty

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Recently I was interviewed by the creative minds at Venables Bell + Partners on the topic of customer habit and loyalty. One of the questions asked was how businesses can turn loyal customers into habitual customers and vice versa. That conversation inspired me to write this blog post, to share with you how a business can bring loyalty into habitual behavior and vice versa develop loyalty into automatic habits.

Why Do You Want To Turn the Customers?

Why would your business want to turn one type of customer into the other? Consider Jane, who loves your brand and is a loyal customer. She purchases your brand heavily and is in the top 20 percentile in terms of her spending. A paradoxical fact about loyal customers like Jane is that they are also often the most demanding customers. They negotiate the hardest and have the highest expectations because they have been so “loyal”. By encouraging Jane to become a habitual customer, you help make her brand choice process more automatic, reduce her overthinking, with the added bonus of having more regular, predictable behavior.

Now imagine the opposite case. Tom is also a frequent customer. He visits your store and buys your products habitually, but he does not have strong opinions about your store one way or another. I know what you are thinking. “Wait a minute! How is it possible for Tom to buy so much without liking you a lot in the first place?” You are certainly right that habit a lot of times evolves out of our passion for doing something. Over time, it becomes a habit. But for many products and services, consumers don’t necessarily care enough to want to choose the very best. Instead, they try the first thing that is available. It works reasonably well. They don’t care enough to go search for a better alternative. So they settle down right away and repeatedly buy that first product, eventually becoming a habitual buyer.

The above is just one example of how you can have a habitual customer who buys a lot but does not have strong feelings for you. Why do you want to turn someone like that into a loyal customer? The reasons are pretty straightforward. It could be a defensive move. If Tom loves you, he may not be so easily lured away by your competitors. He may also be more inclined to try other products from your brand. When unexpected things happen that disrupt his habit, you can hopefully have his loyalty to fall back on to keep him buying. Continue reading “Turn Loyalty into Habit and Habit into Loyalty”

An Ambush on Customer Loyalty

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I’ve always liked Delta Airlines. In my perception (perception is reality, right?), Delta has nice airplanes, friendly staff, and generally good service all the way around. I consider myself a loyal customer of Delta. With the exception of mandated price shopping for work travels, I always like to look at Delta first when I need to go somewhere. But my recent service issue with Delta caught me completely by surprise. It made me question if I had misplaced my loyalty this whole time.

The Delta Luggage Incident

It was something simple really. While coming back from my international travel, I rechecked my luggages at the New York JFK airport for the last domestic leg of my long flight home. When I reached the destination, two of my three checked-in luggages showed up on the conveyer belt, and the third one did not. I filed a claim with the Delta baggage service right away and was informed that Delta would contact me for delivering my luggage. In the days that ensued, I checked the online status of the luggage regularly. Unfortunately it never changed.

Delta Online Baggage Status

After 10 days not seeing any change and not hearing anything from Delta, I finally picked up the phone to call Delta. Having to hold for half an hour on the phone and still no one on the line, I reached out to Delta via Twitter instead. Luckily that got me a faster response than the good ol’ phone. In a few minutes of messaging with the Twitter service rep, I was informed that the status means that my luggage was in the security area. The rep asked what the luggage looked like and what was in it. I told him/her that it was a smart balance scooter (like the one you see at the top of this page). This was when I was informed of a Delta policy that I had been complete unaware of previously. The screenshot of the stated policy is shown below. Continue reading “An Ambush on Customer Loyalty”