Frequent buyer programs have lots of names. The core idea is a program for customers that entices them to keep buying your product, ideally at a greater frequency than an average customer. There are lots of examples of these types of programs, ranging from the punch-card you get at the local ice cream shop to get “a free cone when you buy 10” to the My Coke Rewards program from Coca Cola, which rewards customers from collecting bottle caps and redeeming the unique codes under the caps. In any manifestation of a frequency program, the idea is that a brand sets a purchase threshold, either by amount spent or by number of items purchased, and determines a reward commensurate with the customer’s effort. In the end, most frequency programs require the customer to do the heavy lifting. The customer often forgets the punch card, bottle caps, loyalty card, etc. and questions whether the effort is quite worth it.
Most customers value time and money. Frequency programs often require more time from the customer. The hope is that the money saved in the form of rewards is worth it, but often is not. Another frequent criticism of frequency programs is that it’s a one-size-fits-all strategy for customers and isn’t tailored to specific customers, their tastes, preferences, or buying habits.
For example, with most typical frequency programs, there’s a uniform “get one free when you buy 10” or “Get a $10 rewards certificate for every $1000 you spend.” These programs are typically structured around what the average customer buys or how many times the average customer buys. If a marketer figures that an average customer spends 6 times a year, they might implement a frequency program to nudge that average closer to 10. However, that doesn’t address the real issue at a customer level. The real question is how can a marketer get each customer to buy just one more time, or spend just $10 more dollars.
Often, it’s either impossible to figure that out or not worth the time to do the manual analysis and program administration. However, technologies exist to deliver personalized loyalty programs so that each customer gets a program tailored to her specific patterns. For example, if somebody buys 3 times on average a year, they’re unlikely ever to get a reward if they have to meet a threshold of 10 purchases. However, if a program could entice her to spend 5 times to get a reward, the marketer would increase purchase frequency by over 50% for that customer. Delivered against each customer, a marketer can realize massive gains.
Frequency programs in many cases also fail to capture rich customer data, which will allow the marketer to understand unique customer needs and tastes. To build buyer loyalty, it is important to gain a deeper understanding of one’s customers or shoppers and the various data around a customer’s interaction with your brand. If you don’t have a customer database starting with names, emails, addresses and basic preferences, now’s the time to start. It’s the cornerstone for creating and building buyer loyalty. Many frequency programs are used by anonymous customers because the marketer’s goal is purchase frequency on the margin, not intended to learn more about customers and drive customer-specific behavior. It’s important to capture the right data on who your customers are, such that you can tailor a program over time and drive optimized results.
Theoretically, if customers are using the frequency programs and buying more frequently, the program is a success. But does that equate to customer loyalty? Buyer frequency and loyalty are not the same. Buyer frequency is an outcome of a buyer being loyal because a loyal customer will typically consolidate spending with one brand versus many. However, frequent purchases don’t mean your customers are loyal. It’s often the case that customers will game these programs or take advantage because it offers the best deal, for now. These customers are not necessarily loyal to you as much as they’re loyal to the deal and the game. If another marketer offers a better program with a better reward or lower purchase threshold, that customer you thought was loyal is gone like the wind.
Frequency programs lack personalization, which is a major theme today in the loyalty and marketing sphere. Frequency programs often lack the data that other loyalty initiatives capture, which means most retailers deploying frequency programs aren’t building richer customer databases. Even for those retailers who have robust customer databases, most aren’t using their data to deliver personal experiences because they lack the human touch. It’s not that hard.
Brands often thinking that the best way to build customer loyalty is to create and launch a loyalty or frequency program for customers. Customers can sign up and get rewards, such as points, for shopping. Loyalty programs are big business but don’t often solve the underlying problem. There are so many ways to build buyer loyalty without the gimmicks. If marketers focused on understanding what customers buy, what they won’t buy, and how they want to be reached (communication preferences like email, SMS, Facebook, etc.), marketers can expose customers to special offers and merchandise at the right time for that customer. This is the big area marketers need to focus on getting right for building customer loyalty. Blasting coupons out to millions of people at a time or giving everybody something for free if they buy a certain number of times are now what most customers want. You can reward loyal shoppers with coupons and offers and delight them by helping them save money when they don’t expect it. Even the best designed loyalty programs hurt buyer loyalty because they can be confusing to understand and make customers jump through hoops. Alternatively, frequency programs are very simple to understand for customers. However, they lack the personal touch many customers want from their favorite brands.
Frequency programs can be an effective tool at increasing purchases by customers. However, they can be even more effective if marketers capture customer data to deliver more value to that specific customer based on that specific customer’s preferences and desires. Technology, data and personalization solutions can help automate and scale a customer-centric frequency program. Often, in most businesses, human beings are the difference-makers that create buyer loyalty and increase frequency. Technology and data, when applied thoughtfully to complement the human element, can drive profits and long-term business results.
If you are interested in discussing how frequency programs and customer loyalty strategies can be leveraged to personalize the customer experience and build customer loyalty, please contact us today. We partner with forward-thinking marketers like you to bring strategic thinking and digital innovation that build the type of customer relationships that empower meaningful growth.
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