The importance of loyalty programs – managing customer value

The need to “connect” with the customer is becoming more important resulting in companies revising their approach to marketing, in particular customer loyalty programs and tracking buying patterns.

Traditionally, customer loyalty programs have provided benefits to consumers by rewarding them for their continued support. However, with continued desensitisation to mass advertising initiatives, the need for tailored loyalty programs is on the rise.

Effective loyalty programs now look to track spending patterns and ensure that members receive benefits that are relevant to their specific buying profiles.

The impact on organisations that are strong advocates of targeted loyalty programs can be seen with Tesco in the U.K. and OPSM. Tesco’s loyalty model of coupons and discounts was tailored to specific buying profiles and provided the impetus to streak ahead of its competition to gain 27% of the UK grocery market. OPSM tracked customer spend patterns and used integrated marketing campaigns to target those who were in the market for new contact lenses. As a result, there was a 67% increase in new fittings for contact lenses in 2004 / 2005. These two examples demonstrate that the days when a loyalty program simply meant “buy five coffees and get one free” are fast evaporating.

The development of a loyalty program is a merging of strategy, finance, marketing and technology and the groups that are generating the desired results are focused on both the initial and ongoing development and measurement of the loyalty program.

DC Strategy is the region’s leading specialist consulting and legal firm. Our specialist teams in Strategy, Franchising, International and Legal have developed the networks and brands of many of the region’s most successful businesses. Contact DC Strategy at growth@dcstrategy.com