Develop a Loyalty Marketing Program, Strategic Partnerships Article

Loyalty marketing programs are a way to reward your best customers and build long-term relationships, according to Karen Drost, vice president of Tecmark Services. Tecmark (#236 on the 1999 Inc. 500 list) offers services for the design, development, administration, and analysis of loyalty marketing programs. A well-executed program can increase sales, increase the lifetime value of customers, and differentiate your business from the competition.

We recently spoke with Drost and Tecmark CEO Brent Harms to learn more about the benefits of coalition loyalty programs and what small businesses should keep in mind when developing their own loyalty programs. Here are their thoughts.

Dos and Don'ts

Have a person dedicated to the program, acting as a liaison between employees and the administering loyalty company.
Make sure you have the support of senior management.
Make sure everyone in your organization understands the goals of the program.
Set goals for your employees.

Employees must feel a responsibility to execute the program as it was designed in order for it to be successful. You might want to include loyalty program goals as part of performance reviews to encourage employee participation.

Coalition Programs

Coalition loyalty programs can be extremely effective. Coalition programs involve a group of dissimilar businesses working together to offer membership benefits. Ohana Savers is one such program Tecmark helped implement. A group of small business retailers on Maui -- including grocers, a hardware store, a lighting store, auto supply retailers, restaurants, and a pet shop -- created the program to encourage island residents to patronize locally-owned businesses. Consumers earn points shopping at these businesses. Points can be exchanged for gift certificates redeemable at any Ohana Savers business. Partnerships enrich loyalty programs by giving members options as to where they can "spend" points.

Keep the program easy to understand and execute. The program must be simple for employees to execute, explain, and sell or promote. If the members can't understand what they are supposed to do, how they can get information, or what benefits they get, then their participation will be minimized.
Make sure you get enough information from people when they enroll so that you offer benefits that matter to them. Ask customers what their preferences are. Find out what their hobbies are. Ask, "How many times do you eat out/shop/travel per month? How many times do you do that here per month?" Your goals will determine the questions you ask.
Communicate with your members when it's appropriate. Communicate only when you have something relevant and timely to tell them.
Track your mailings. Generate a personalized bar code for each type of mailing so you know which mailing is working -- anniversary promotions or birthday promotions, for example. Know who is redeeming them -- the once-a-year customers or your regular customers. Then you'll know how to market to these people in the future.
Make your size work to your advantage. Small businesses sometimes find it easier to create an emotional bond and cater a little bit more to their customers. For example, a bed and breakfast could partner with a local restaurant to offer a loyalty program.
Ensure your members' privacy. Don't sell your lists.
Allow your program to continually evolve based on ongoing results.

Don't

Don't communicate too much or send the same mailing to everyone. You want your communications to be viewed as valuable. Understand your customers' preferences and habits, then send communications that relate to them. This helps develop a tie between you and the customer because they learn that each time they get something from you it's of interest and it benefits them in some way.
Don't offer award structures that aren't good enough to generate excitement or involvement.
Don't just offer a discount or a freebie. You need to get more information from your customers. Simply offering a free cup of coffee after a customer buys 10 cups at your shop is not recommended because the retailer obtains neither customer information nor competitor information. A solution is to ask customers to fill out a short application form, then enter and track the information and sales data in a simple marketing database.
Don't offer awards that are unrealistic or too costly for your company to maintain. Offer "soft benefits" instead. A retail store is having a sale. It sends a mailing inviting customers to a preview sale the evening before the sale is open to the general public.

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