Sunday, October 31, 2010

Reward Programs Are So Important To Retaining Customers

Rewarding your loyal customers is so important. That is to say, it is critical that you make a special effort to ensure your frequent customers feel good about your business.

After all, it is the repeat customers who provide a large share of a firm's sales. They are the low-hanging fruit for every business, both easier to attract and keep. Best practices of businesses suggest that 90 percent of sales should come from existing customers and loyalty programs really do help in retaining your existing customer base.

My new job at the Jim Moran Institute requires frequent travel, and I spend a significant amount of time flying Delta. Because I flew so much last year, Delta upgraded me to the "Silver Medallion" level, which entitles me to a number of perks. There is no charge for my checked baggage, I am allowed to board early, I'm fast-tracked through TSA, and I may choose seats in better locations on the plane.

You will notice that all four of these benefits have zero incremental cost to Delta, but they all have substantial value to me — and to all frequent travelers. What Delta has successfully done is set up a loyalty program that makes their customers feel good about their frequent purchases.

Some friends and I bought a gift for another friend who was in the hospital and we all wanted to split the cost. The decision on which credit card to use for this transaction was a function of who would get the most points from the credit card company by the purchase.

Once we determined the extent of the points this one credit card vendor provided, we all were looking into getting one those cards. In this case, the loyalty program not only retained the customer, but brought in new business as well.

Winn-Dixie and PetSmart are two other companies that get it. They print the savings right there on the bottom of the receipt so customers can see it every time they use their loyalty cards.

Where most loyalty programs fall down is it takes too long to get benefits. Such is the case with both my Best Buy and my Office Depot loyalty cards. I have no idea if I have ever spent enough to get any value from them.

Now go out and make sure that you have a program in place to reward your loyal customers. And remember to build your loyalty program in such a way that customers can see the returns every time they interact with your business.

You can do this!


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