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Article Title: Growing Your Business Online With Loyalty
Programs
Author: Jerry Work
Word Count: 684
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This is the first in a series of articles we will be publishing
relaying thoughts and ideas from the Internet Retailer
Conference in Chicago, which occurred June 5th through June
7th. Mark Goldstein, CEO of Loyalty Lab (a company that
implements loyalty programs for merchants), and Gary Korotzer,
CMO of Red Envelope (a company that specializes in selling gift
items), delivered a presentation about loyalty programs. Red
Envelope currently has a loyalty program managed by Loyalty
Lab.
Loyalty programs are taking off. If you have a retail web site
and you don't have some kind of loyalty program...chances are
that by the end of next year you will. Jupiter Research expects
that by the end of 2007, 78% of retailers doing business online
will have a loyalty program, compared to 24% now. So what's the
big deal?
It costs a lot more to generate a new customer than to sell to
a repeat customer. Loyalty programs allow you to build a
customer base that is loyal to your products, and will continue
to purchase from you, rather than your competitors. A loyalty
program is some kind of program that allows your customers to
build up credit to apply to further purchases, or to redeem for
cash. For example, a retail web site could grant a customer
"points" for every purchase he makes. When he has enough
points, he can redeem them for a discount on more merchandise,
or possibly redeem them for cash.
To implement a loyalty program, you need some way to keep up
with your customers' accrued points (or whatever kind of
measurement you use). This should be done by keeping records of
a customers' transactions in a database. Goldstein and Korotzer
recommended tying the information to a customer's credit card
number. Every time a customer makes purchases with a particular
credit card, a record of the purchase is recorded along with the
credit card number. In this scenario, if a customer used a
different card than in previous purchases, her existing loyalty
account would not receive additional credits.
You should try to make it easy for a customer to know how many
points they have. Out of sight, out of mind, as the old saying
goes, so make sure your customers are aware of how many points
they have and how many more they need to redeem their rewards.
When you begin the process of deciding on the details of your
loyalty program (exactly what participants will receive, and
how much they have to purchase for redemption), Goldstein and
Korotzer argue that you should explore your company's economics
as deeply as possible. Two important statistics to examine are
the lifetime value and acquisition cost of your customers. This
will better help you determine how much you can afford to give
to your customers. Another critical consideration is exactly
who gets to participate in the program. You may choose to only
extend an invitation into the program to the top 20% (or
whatever percentage generates the majority of your revenue) of
your customers. If there is a segment of your customer base
that represents the majority of your income, then it makes
sense to concentrate your marketing dollars on that group.
Another point that Goldstein and Korotzer emphasized is that
your loyalty program should be cross-channel. In other words,
if you operate a physical retail location and take orders by
phone in addition to your web site, the loyalty program should
extend to all of the channels. Avoid confusing your customers.
Make it easy for them to gain credits and cash in on their
loyalty regardless of what channel they use to make purchases.
Loyalty programs have been around for years in certain
industries (i.e., airline frequent flyer miles) but are just
starting to gain traction with a lot of retailers. If you sell
retail, you should begin the process of researching the
implementation of a loyalty program now - before your
competition does. Feel free to contact Work Media for
information on implementing a loyalty program for your web
site.
About The Author: Jerry Work is a partner in Nashville,
TN-based Work Media, an Internet marketing firm that
specializes in helping businesses develop and implement
aggressive, multi-pronged Internet marketing plans. Copyright
2006 Work Media http://workmedia.
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