Perspectives & Strategy

Discount cards, air miles, and reward cards are examples of various schemes for building customer loyalty. These schemes have been running for many years, primarily with large national retailers. They serve three purposes: firstly to drive repeat business, second to reward the customers, and thirdly to collect data about the customer and their buying patterns.

All businesses want repeat business, we have heard the maxim of it being easier to sell to an old customer than a new one. There is much psychology and academic study in the area of repeat business. The last of these is often forgotten, but can drive so much business value.

Over the last couple of years there has been much discussion about how there is no such thing as loyalty any more. Particularly as the youth, or gen-Y and millennials, as some insist on calling them. Yet this writer has observed that loyalty is still important; it is simply driven by a different set of values than at earlier times. The value system today includes friends and on-line social contacts, they all have something to say.

The psychology of the customer has changed a little. Today the customer knows they are in command of the relationship. The psychology of buying is all about trust. This is one of the keys behind much of the move to adopt social media by such a wide audience. This is one reason why any business that is looking to build customers needs to think about engaging through that medium. it is all about demonstrating expertise and building trust.

There is much business intelligence to be drawn from loyalty programmes. Knowing what purchases a customer makes in order to drive appropriate offers is a key aspect. A supermarket sending money off tokens for meat produce makes no sense to a vegetarian. How does the store know they are vegetarian? Well one way may be through buying patterns – if they have never purchased a meat product that may be a clue, another method is through surveys – all add to the details we know about the customer. Relevance of the reward is an important factor for the customer.

Remember for a rewards programme to be successful it must focus on the needs of the customer.