Say ‘yes’ to loyalty rewards programs

Every American participates, on average, in four different loyalty rewards programs, just like in Canada and Europe. But there is still much to be done in Mexico, given that there are no formal measures in place for such programs.

It is difficult to systematically identify loyal consumers, but as history has shown, it can be done. Hence, creativity and sense of trade in Mexico should have developed several customer retention programs by now. A simple example of what does exist in our popular culture is the "pilóns" that have been offered at the time of closing a transaction to thank the customer for business and invite the customer to return.

In the contemporary era, there are those who have learned from the loyalty programs of 1896 founded by the Sperry & Hutchinson Company (S & H), marketer of stamps that were very popular in the United States in the 1930s.

Even now there are shops and supermarkets that use the stamps rewards system that are to be exchanged for gifts or merchandise.

However, since the creation of the stamp system, it wasn’t until May 1981 when American Airlines, with his powerful Saber reservation system launched the first program in the automated rewards world: AAdvantage frequent flyer miles, marking the birth of a new era of the loyalty programs.

AAdvantage created such an impact that in that same year, United Airlines, Delta and TWA introduced their own programs.

In January 1983, Holiday Inn launched the first hotel chain program, and just as it was for American Airlines, the competition reacted and Marriott introduced its program in November of that year.

The telecommunications industry followed suit in 1985 when AT&T introduced the first co-branded rewards card 1985. Then, the rental car industry followed in March 1987 with National’s rewards program.

What at one time was an ingenious but simple stamp program, eventually grew and now there are initiatives that reward consumers in virtually any industry and size of business anywhere the world.

Mexico, with no loyalty rewards programs
A survey by the American research company Colloquy conducted in 2007, revealed that the number of membership loyalty programs in the U.S. had an annual growth of 35.5% from 2000 to 2006, reaching 1.3 billion individual memberships in loyalty programs. This would mean that the average American household subscribes to approximately 12 loyalty programs, or that every American, regardless of age, participated in an average of four different programs.
Similarly, Canadian programs have reached up to 75% penetration of households. The same numbers have been repeated in other developed markets such as United Kingdom, Spain and Germany.

While Mexico does not yet have statistics that measure consumer loyalty, it is obvious that much work remains to be done in order to match the levels of success in other developed countries. Evidence of this can be seen in a simple and empirical comparison of the number of such programs in industries such as specialty shops, pharmacies, department stores, supermarkets, gas stations or restaurants. While in developed markets, these industries are considered key players in the loyalty programs market, in our country there exist only isolated or poorly structured emerging efforts that offer limited value for businesses and consumers.

Makeshift advisers
Unfortunately, this situation is exacerbated by the supply of loyalty consultants and solution providers —despite that fact that some players are incredibly professional and cutting-edge— there are many more unprepared advisers that lack any basic loyalty knowledge.
This has led to the relational gap —similar to the digital gap— where businesses and companies seeking dedicated and professional advice, gain access to knowledge and advice from real loyalty professionals.

While those who take initiative lightly, or do not research for loyalty consultants or suppliers, remain ignorant or even worse, many end up failing because of misinformation.

Therefore, development of loyalty programs to date in Mexico seems to be primarily occurring in the airline, hotel and financial services-based industries. And even in these industries, much of their participants do not rate the understanding and development of their initiatives very highly.
Despite the gloomy environment that the relational gap notes, from a strategic viewpoint, it also represents an extraordinary opportunity for those businesses and companies wishing to develop a loyalty program with dedication and professionalism. If you are willing to address the development of a loyalty initiative with the effort, investment and dedication it deserves, now is the best time to do so and gain a strategic position against the competition.

Fewer, but more loyal clients

The companies that survive a crisis are those who have taken care of and strive to develop a close relationship with their customers. This is achieved with excellent service and mutual understanding.

Today, we live in uncertain times; something that is unfamiliar to a generation that has been so accustomed to good times. The scope and depth of the global economic crisis is latent in all areas of business, government and personal finance. Despite the fact that the crisis did not catch Mexico off guard, there are still victims in all sectors.

Why recount the origins of the crisis or ponder how long it will take before the Mexican and global economies recover? We receive the information and analysis shared by specialists on this topic through media headlines on a daily basis. Suffice it to say that things are not good and all indications say that this something we will deal with for a long time; now is the time to handle the situation with great objectivity and a cunning approach.

Not all is lost
In the midst of this environment, there are great opportunities for companies that have managed their client relationships with care or who are willing to make an extra effort at this time. Beyond the basic strategies, which depend on professional ethics and a healthy financial positioning, there is a strategic strength in developing a close relationship with customers.
A hypothetical example is two credit card issuers that offer the same product: same acceptance rate (CAT), line of credit, fees, and even design of the card. However, the first, issuer "A" spends most of its budget on advertising and widespread acquisition of new customers, and a smaller part in giving discounts and special offers to its current customers.
While issuer "B" spends most of its budget on a loyalty program with communication, education and benefits for its customers, and spends the lowest share in advertising and acquisition-focused customer segments. Now that the crisis has arrived, which of the two issuers do you think will do better?

"A" will most likely find that, over recent years, it has accumulated a greater number of clients than "B." Excellent! The issuer has achieved significant market penetration, and therefore has more customers with whom they’ll ride the storm of the crisis period. Now ask, are these quality customers? What is their credit card spending average? What is the rate of delinquencies and how many late payments do they generate? And more importantly, what kind of customer relationship exists? What is the average churn? What is the level of cardholder loyalty?
While issuer "A" devoted its time and expense to fill their portfolio with customers, issuer "B" invested in identifying, understanding and developing a close relationship with its clients—even with the most risky consumer—to ensure that its customers see the product as more than just a credit card, but also as a tool to help them manage their spending.

So, even though issuer "B" will weather the economic crisis with fewer customers than "A," its customers have a better payment history, a higher spending average and a lower rate of past-due bills. These are customers who, thanks to being fully identified, tend to have a low program dropout rate and who demonstrate a high level of loyalty.

Take a risk!

How can you retain customers?

With the right approach, you can develop and implement a loyalty strategy to strengthen the relationship between your product and your customers, and in doing so, raise the profitability of your business.

Believe in loyalty!
If we transport ourselves into the world of management, statistics, major tactics and methods, I’m sure you will read or hear much about focus groups, consumer-focused organizations, one-on-one marketing and many other concepts and models that teach how to create relationships with customers.

If you have read all of these concepts, I am sure that you have wondered exactly how they can be applied to your business or how you can make them work for your clients and your actual business practice.

The truth is that all these concepts can be extremely beneficial for business, but the accurate and systematic implementation of the concepts is not what make them successful. They are successful if they are used as tools to achieve a broader strategy: to connect with customers and create loyalty.

Establish a real connection
In today’s world you can establish a real connection with buyers, meet their needs each day and learn more about their preferences through a well designed and focused loyalty strategy. http://www.8ampersand.com