Tuesday, June 19, 2012

The Loyalty Game – Part I

Old marketing adage: “Your best customer is your existing customer.”  Consequently smart marketers are updating their existing loyalty programs or are introducing new programs to capitalize on current mobile and social technology trends.  Add a dash of gamification – the loyalty game is about to become embedded in our daily lives.

Read On:
Today’s post is the first of a two part series titled The Loyalty Game.  First I would like to provide the rationale of why loyalty programs are a great marketing tool to build customer retention.  In my next post, I will recommend my picks for the best 2012 innovative loyalty programs.

A well designed loyalty program can be the foundation for a sustainable business model.  I have read numerous studies that detail the financial benefits of retaining existing customers.  The Bain Consulting Group once reported that most businesses lose between 20 to 40 percent of its customers each year.  Therefore by focusing on decreasing customer attrition, a company can improve their bottom line profits.  In another study, Northwestern University’s Center for Retail Management projects that 12-15 percent of a business’s most loyal customers contribute 55-70 percent their overall sales.  Loyal customers are also great ambassadors for referring new customers.  It varies by industry, but in Foodservice word of mouth is still critical for sales growth.  Granbury Restaurant Solutions recently indicated that 82 percent of loyalty program guests refer at least one guest; 42 percent refer four or more.

Thanks to smartphones, loyalty marketing is now on steroids.  Gone are the days of punch cards or coded mini-loyalty cards dangling off key chains.  According to Experian Simmons, over 33 million American consumers use their smartphones for shopping, as well as work their loyalty programs.  Location-based rewards applications are the latest rage where loyal consumers can redeem their rewards at the Retailer of their choice.

Unfortunately I am not offering any rewards for reading this post.  However, in my next post you will be rewarded with some insight about new loyalty programs that are beginning to change the playing field when it comes to loyalty marketing.


  1. Loyalty cards are going mobile and app based. Companies developing this are exploding. PERFECT for Foodservice. Related: more restaurants need to reward for Foursquare, Facebook and Twitter checkins. If a customer is going to promote your location, give them something for the effort.

  2. Create a unique product and concept, and treat your customer with respect (and over-deliver) and you will keep them. Non-intrusive loyalty programs then become a mere lagniappe (a little something extra).

  3. Jimmy,

    Marketing has to be concerned about the intersection of a loyalty program and privacy. Outside the U.S., privacy is paramount. It soon may become dominant in a vendor decision here. Striking the right balance, and assuring the customer that there will be no "leaks" is a difficult and expensive task.

  4. This is my mantra. Can't wait to read your next blog!

  5. Hi Jim,

    While I agree with Thomas' comment that providing a quality service and product is the stronger magnet to retaining customers, I'm wondering what your thoughts are on loyalty program overload.

    For example, we've all had to deal with the headache of carrying around all these cards to get a discount or points acrued for some future reward. Certainly mobile apps will take out the hassle part. But I wonder if this won't in a few months simply become a digital version of the current hardcopy loyalty cards. After all, how much are people going to care to rifle through all their apps just to find this one app to get a discount/points? Seems something more disruptive is in order than simply shuffling the transaction to a paperless one.

    In any case, looking forward to seeing where you'll take this discussion.