Category: Loyalty Programs

Lock in vs. Loyalty

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Recently, while trying to obtain a mortgage, I spoke with a Quicken Loans customer service representative named Jorge (I omitted the last name here to save him some dignity). On the phone, I told him that we have not decided on a lender and that we wanted to get an idea of what Quicken Loans had to offer. Our intention was to shop around for the best deal AND service. Apparently, the fact that we are smart shoppers did not rest well with Mr. Jorge. He immediately asked us for a commitment that we are going to work with Quicken Loans if he were to spend any time working with us. When I told him that we cannot make such a commitment at this time, he refused to work with us. Needless to say, I finished my conversation with him quickly and crossed out Quicken Loans as a candidate lender.

What Mr. Jorge is trying to do is not uncommon in the business world — he is trying to lock in customers (or in my case, potential customers). Wireless companies do the same thing, by locking up our phones so that they can only be used with a specific provider. This attempt at locking in customers is not without a good reason. After all, today’s consumers are very fickle. Combined with the wealth of information we can find online and through social networks, we are given the power to choose the best service at the best price. So naturally companies want to create some kind of switching barrier so that we won’t go somewhere else.

 

Handcuffed
Image by mskogly | CC 2.0

The question is how effective such a switching barrier really is. The answer is: not very effective at all. Continue reading “Lock in vs. Loyalty”

LoyaltyScan – A Great Resource on Loyalty Program Design

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If you are in charge of designing or revamping a loyalty program, it can be useful to seek inspiration from others companies’ programs. Recently, Colloquy, a LoyaltyOne company, released a LoyaltyScan database that can make this research much easier. The database contains information about the background and program design for 500+ loyalty programs around the world, and includes details such as program launch date, point earning mechanism, hard and soft benefits offered, member communication, data collection, and total enrollment.

To illustrate the use of the LoyaltyScan database, I pulled together a selected list of loyalty programs from the retail sector and compared their designs below:

 Borders RewardsBarnes & Noble MembershipDSW RewardsBest Buy Reward Zone
ProductsBooks & CDsBooks & CDsShoes & AccessoriesComputers & Electronics
Launch DateJuly 2007April 2006September 20062002; Relaunched September 2006
Joining Requirements--Free
--Sign up online or in store		--$25 annual fee
--Sign up online or in store
--Extra bonus (20% coupon) for online sign-ups		--Free
--Sign up online or in store;
--Membership card optional (use phone number instead)		--Free
--Sign up online or in store
Point RatioDoes not use points but directly use consumers' qualifying purchase totalNot point based--10 points per $ on regular priced merchandise;
--5 points per $ on clearance merchandise.
--Premier members earn extra 50% more points per dollar spent		--1 point for each $1 spent in store or online
--Premium silver members get 25% bonus points
Point/Program Currency ExpirationFixed: end of calendar yearN/ARolling: after two years of inactivityRolling: after 12 months of inactivity
Hard Rewards$150 qualifying purchases = $5 Borders Bucks toward future Borders purchases--40% off hardcover bestsellers;
--20% off adult hardcovers;
--10% off almost everything else online and in stores.		1,500 points = $10 reward certificate toward future DSW purchases250 points = $5 reward certificate toward future BestBuy purchases
Reward Redemption and Expiration--Redeem online or in store
--Expires the end of the month in which the reward is issued		Show membership card or input membership number at check out--Automatic issuance of reward certificate when earned;
--Certificate expires after 180 days		--Online or in-store 5 weeks after reaching threshold
-- Certificate expires after 90 days
Soft BenefitsExclusive in-store offers and special weekly coupons tailored to their interests as indicated at enrollment, plus the latest news, recommendations, all via email--Invitations to book signings, readings and other members-only events
--Special promotions throughout the year		--Monthly email newsletter
--Premier members have a special email and phone number reserved just for them.		--Articles and insights from the tech pros at CNET
--Member-only offers and giveaways
--Special bonus point offers
--Premier Silver members Point Banking and Exclusive Rewards; Member-Only Events; Dedicated Premier Silver Helpline; Free Shipping at BestBuy.com; Extended Return Policy; and Complimentary Special Offers from Geek Squad
Program tiersNoneNonePremier membership after 6,000 points earned in a calendar yearPremium Silver membership 31 days after $2,500 of qualifying purchases during a single calendar year
Program PartnersNoneNoneNoneNetflix
Barnes & Noble
Expedia.com
Theater Seat Store
1-800-FLOWERS.COM
Sony Music
Teleflora
Rewards Network

Caveats

  • There is no clear indication from Colloquy on whether this database will be updated frequently. So if be sure to verify data accuracy down the road.
  • Not all data are available for all programs.

Despite these caveats, LoyaltyScan can be a valuable resource to check as you define your own loyalty program parameters.

Guest Post: 10 Steps for Setting up a Loyalty Program

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A few weeks ago, I wrote about the design fundamentals of a loyalty program, which had been inspired by discussion with one of my readers Kim Skaaning Jørgensen. After I published the post, Kim offered me a rather lengthy and thoughtful feedback on the topic. So I invited him to write a a little more about it. Today, I am happy to introduce to you Kim’s guest post discussing his 10-step strategy to setting up a loyalty program.

10 Steps for Setting up a Loyalty Program

By Kim Skaaning Jørgensen

Step 1: Evaluate the Product

The first step is always to answer the following questions honestly:
• Is my product good enough?
• Is my product worth the investment?

If the product does not sell because of a significant quality, distribution, design or price problem, then the customer loyalty program will not be able to salvage it. In that case, you can apply the framework from W. Chan Kim and Rennee Mauborgne’s book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant to first improve your products and your company.

 
Step 2: Identify the Value Proposition

This part is one of the absolutely most important steps before implementing a Customer Loyalty Program. What to offer customers? What is the value proposition? If the value is not well received by customers, the program will not work at all. Therefore use extra time to develop your value proposition. Here are some general guidelines:
1. The value, reward, benefits have to be of “high value” in order to make the membership attractive. The benefits must meet the expectations of the target groups.
2. It is not enough to think that a benefit offered are of high value. The benefit must also have a high “perceived value”. If customers perceive it differently because it is not the benefit they desire, the program will not work.
3. Selection of benefits. Benefits can be “Hard” or “Soft” (See figure below).
4. Timing of benefits or rewards (i.e., instant or delayed reward) needs to be considered.

The right mixture of loyalty program benefits

Continue reading “Guest Post: 10 Steps for Setting up a Loyalty Program”