Making Your Loyalty Program an
"Out of Wallet" Experience

In today's fast-paced market loyalty programs are becoming a dime a dozen, and as a result, business owners are struggling to come up with the "next big idea". But do we really need to reinvent the wheel? The majority of loyalty programs are designed to reward consumers for repeat purchases at your business. And if the program is properly structured and executed, it can help retain your existing customer base, attract new customers, deepen customer relationships and even persuade customers to spend more.

Engaging For Customers

What do you need to do to make your program a useful and enjoyable part of the customer experience? The following eight points outline important aspects for making your loyalty program engaging to your customers.

Keep Your Program Rules Simple
We can't stress this point enough - making the program rules and points accumulation rates simple to understand is extremely important. lf your points accumulation schedule is a point per dollar, rather than 1.5 points per dollar, your customers have a much better chance of understanding how they are accumulating points. Customers do not want to carry your card in their wallet or purse if they also have to carry around a guidebook on how they can earn and redeem points.

Let Members Earn at a Reasonable Rate
How often have you looked at a loyalty program, done a simple calculation, and realized that it would take you five years to get a reward in the program, even if you went to that business once a month? How likely are you to sign up for that program? Make sure your program has some rewards or benefits that people can achieve if they visit your business a few times in the first 3 months to reinforce the benefits of the program. This ties in to the next point, which is...

Let Members Redeem in a Reasonable Time
One of the most important things is to have items in your catalogue that people can redeem for within a reasonable period of time. If someone can earn enough points (with reasonable regular purchases) to get a reward 3-4 months into the program, they are more likely to keep participating in the program. Of course, you also have to consider the point hoarders, who may save up their points for a lifestyle reward that they would not normally get themselves, versus the people that want rewards right away.

Let Members Redeem in Real-Time
Instant gratification strikes at the core of what you should try to provide with your program. Then why would you make your customers go online to get their reward, or have them call a 1-800 number, and have the item shipped for delivery at some time in the future? Provide rewards that a customer can redeem in real-time at your locations increases the levels of customer satisfaction for your program members. And best of all, you reduce your costs because you don't have to pay for a call-center or have a warehouse to store the rewards for your program.

Provide Rewards with High Perceived Value
From a rewards satisfaction perspective, one of the easiest things you can do is to provide rewards that have a high perceived value. But this doesn't mean that they have to be rewards that are high cost to you. Airline programs are prime examples of this. Giving away a flight costs very little to the airline, as the plane would have flown with or without that passenger. For hotel programs, giving away hotel nights are the easiest to accomplish. For restaurants, meals are the easiest and lowest cost reward items to provide, and have the perceived value of the of the price in the menu. For retail stores, the merchandise in your locations already has a price tag on it to create the perceived value, but your cost for that item is (hopefully) significantly less than the perceived value.

Provide Soft Benefits that Cost You Nothing
Airlines and hotel programs are leaders in the area of providing soft benefits that cost them nothing to their program members. Does it cost the airline anything to give their elite members priority boarding status? Does it cost the hotel program anything additional to upgrade an elite member to a suite or a nicer room that would have otherwise been vacant? How about a priority seating line for program members in a restaurant? Or giving your program members first crack at a great sale by holding a "members only" event if you are a retail store.

Constantly Communicate With Members
Many merchants who run programs forget about the on-going process of communicating with their program members. Not only will communication on the receipt at the point-of-sale, through email, or via direct mail help you show the program benefits to members, it will reinforce the reason that they carry the card in their wallet or purse. We always encourage our clients to use low cost means, like receipt messaging at the point-of-sale, to let program members know about program enhancements, special events, or new benefits that they get as part of the program. The web is another low cost means of communicating with your customers, so let them log-in at your site and check their point balances, recent transactions and program promotions.

Keep Your Program Fresh
Finally, by providing new incentives or benefits for your members to use their cards, adding new rewards to the program catalogue, or giving limited time offers, you drive additional interest in the program. Make sure you announce these changes to your program through all your communication channels so all your members know about them and want to use their cards as often as possible.

Remember, your reward program may give your customers the reason to go out of their way to come to your location rather than using a competitor that is located closer or has the same offering in the market.

Useful to Your Organization

So far we have been discussing the benefits and incentives that program operators should evaluate when they are designing their program. Some may start to think that this is a one-way street, with the program members getting all the benefits and the merchant having to pay all the costs. However, you should remember that the more reasons you can offer your customers to self-identify themselves, and make the program an out-of-wallet experience, the better it is for you as a program operator.

Your Program Should Reflect and Enhance Your Brand
One of the first things that you should look at for your loyalty program is whether it fits with the position your company is trying to build for itself. Is your business high-end and exclusive? Then don't skimp on the membership card and collateral that goes out to new members. Make the card something that a member would be proud to have in his or her wallet or purse. Having a member website that accurately reflects the program is also important, as it gives your members a resource that they can use to better understand the program and reduces program support calls. Make sure that your program does its part to fulfill your brand promise.

Segment Your Customers and Provide Additional Benefits
One of the top priorities that you should have in your program is to identify your top tier of customers. Ensure that those customers who are spending significant amount of money with you are treated like premium customers. By giving them special treatment or offers, you can ensure their longevity as a customer with your company, and an enhanced lifetime value. After all, it is much cheaper to keep your current customers than it is to market and find new customers for your business.

You should also examine how you can use the data collected in your program to impact the behavior of your middle-tier of customers - the ones that only come in occasionally. Think about the possibilities if you can get these customers to come in one extra time per month? Growing your business's share-of-wallet with these customers is one of the most economic ways you have of increasing revenue for your business.

Well Integrated
Integrating the data that you collect from your loyalty program into your marketing, advertising and real-estate development programs is also beneficial to the business running the program. Use the data to build a profile of your customers and then look for areas of population that are similar in nature to target your advertising, promotions or direct mail in those areas. The more information that you collect from customers that identify themselves, the more accurate understanding you develop of who of these customers are. And the more that you understand who your customers are, the more effective your targeted marketing activities can be. Or use the data to find pockets of loyal customers that might be dying for your business to have a location closer to where they live.

Constant Measurement
Finally, one of the greatest benefits of getting customers to self identify themselves is that you start to get a better idea of the inflow and outflow of customers for your business, and can measure this over a period of time. According to Brian Woolf, a leading retail loyalty consultant, one of the big benefits of a successful loyalty card program is that stores can quantify customer losses and introduce strategies and programs designed to retain the most profitable. ¹

Benefits for All

By creating a loyalty program that is easy to use and understand, and that rewards frequent customers in a timely manner, you are not only creating benefits and rewards for your members. The benefits that your business gets from customers that are willing to identify themselves can create opportunities that most marketers only dream of. So give that extra effort to make sure that your loyalty program is an out-of-wallet experience. You'll be glad you did.

Reminder: Avoid the Card Ordering Rush

Just a reminder that if you are considering ordering additional cards for your loyalty or gift card program, you should probably do it soon. The closer we get to the fall, the likelihood that your card order will be completed in time for the holiday rush starts to decrease. In fact, according to our card manufacturing suppliers, the longer you wait in the year to make your order, the longer it will take to get your order.

For example, in 2005 if you had ordered your cards in May, our manufacturing partners could have returned your order within four to five weeks. If you had waited to make that same order in September, you would have had to wait six to eight weeks. And if you had waited until November, your order would not have been available until January 2006, missing the holiday season entirely.

Consider placing your order early this year. This will give you enough time to get all necessary approvals from your organization and help you avoid last -minute decisions and deadlines. It will also help you avoid any fees for placing a rush order to ensure that you have cards for the holiday season.