Category: Customer Loyalty

1 Point Per Dollar or 100 Points Per Dollar?

Posted on

When designing a loyalty program, have you ever wondered whether you should give customers 1 point for each dollar they spend and require 100 points for a free reward, or if it’s better to grant 10 points per dollar and require 1000 points for the reward? On the surface, these two setups require the exact same effort from consumers and should make no difference to the effectiveness of your program. But an article by Professor Rajesh Bagchi and graduate student Xingbo Li published in the Journal of Consumer Research says it’s not quite as straightforward as you may think. Which option is better depends on whether you have a straightforward single point structure or a mixed structure, and whether your focus is on encouraging low spenders or rewarding heavy buyers.

numbers
Photo by Flickr User twitchcraft | CC 2.0

Context

The authors conducted two lab experiments. The first experiment was based on a grocery store loyalty program and involved 246 undergraduate students. Various aspects of the loyalty program were manipulated, and the respondents reported how likely they would recommend the program to others and whether the program would increase their loyalty toward the store. In the second experiment, 375 student and non-student respondents made simulated purchases given a restaurant loyalty program. At the end of the simulation, they also reported their recommendation likelihood and perceived loyalty effect. Continue reading “1 Point Per Dollar or 100 Points Per Dollar?”

Do You Need a Loyalty Program?

Posted on

The most recent Loyalty Census from Colloquy pegs loyalty program membership in the US at more than 2 billion, up 16% from 2008. Perceived value of points earned through loyalty programs is estimated to be $38.83 billion. With this much activity going on, you may be tempted to offer a loyalty program for your business too. But do you really need a loyalty program? I’d like to address this question in this post. Let’s start by taking a look at the pros and cons of having a loyalty program.

Key Advantages of Having a Loyalty Program

  • It encourages consumers to concentrate their purchases in your company so that they can reach a reward faster.
  • It increases switching cost so that consumers who have already earned points through your loyalty program are less likely to jump ship to a competitor.
  • Compared with other promotions such as price discounts, a loyalty program incurs delayed promotional cost, because consumers make purchases first and get rewards later only after they have accumulated enough points.
  • Related to the above cost issue, not all points earned through a loyalty program translate into reward costs, as there will always be some consumers who never reach the reward threshold or who never redeem their points.
  • A loyalty program offers a way to capture consumer transaction history and can lead to more in-depth understanding of your customers.
  • If you have a sizable business such as an airline, a loyalty program can be a revenue source as you can sell program currency (e.g., miles, points, etc.) to partner businesses.
  • A loyalty program, when properly designed, can make your best customers feel appreciated and become more loyal.

    • Continue reading “Do You Need a Loyalty Program?”

Google+ Circles for Managing Customers

Posted on

It was really nice spending the last few months with my newborn baby. As every parent I know tells me, “Kids grow up so fast! Cherish this time!” But in between the joy and wonders of being a mom, a part of me missed the excitement from the constantly changing online social media landscape. So when I came out of the hiatus, I was glad to find a major development on the horizon: the Google+ project. According to Google, the project is supposed to “make sharing on the web feel like sharing in real life”.

After receiving a Google+ invitation from a friend, I immediately started digging into it to see if it has more potential than Google Wave, the once hyped product that has since retired into the background. My first impression when getting onto Google+ was: this looks a lot like Facebook! But after looking into it a little further, I started to see several critical differences between Google+ and the Facebook concept. I don’t plan to get into all that in this post, as there are many great articles out there discussing the Google+ concept. Instead, I want to share with you how Google+ can potentially evolve into a great tool for managing customer relationships in the online social media space.

Google+ Circles

The Old Way

To do that, let us first look at how brands now engage consumers on Facebook. Most likely, this is done through a Facebook page, where consumers can “like” a brand to show their appreciation and support of the brand. Through such a page, a business can share information such as useful articles and upcoming promotions with consumers, and at the same time consumers can interact with the business and other consumers by asking questions and posting comments. This is all good, but it happens in a very undifferentiated fashion. Everyone on a brand’s Facebook page sees exactly the same information, and a business needs to sift through tons of questions and comments to identify the priority issues that need to be addressed. This is neither very effective nor efficient. Continue reading “Google+ Circles for Managing Customers”