The decreasing identification of new generations with brands or products for their attributes. The increasing number of available products and services has overwhelmed consumers with an unprecedented range of options of all styles and qualities in everything they would want to purchase. Have you visited a mobile phone store lately? Have you noticed the number of brands of automobiles, or examined the offerings of consulting firms in the market? If you have, you know the vast offering of products, brands and options that consumers have available. If you haven't, do it and you will see that the significance of the support of a brand is not the same that it was for your parents and grandparents.
While people in the past used brands as definitive guides for the quality and functionality of a product, nowadays consumers see beyond this and evaluate their options in terms of attributes of a product and the additional benefits that are given to them. How many times have you made a decision between buying two mobile phones with similar characteristics because one included some headphones or free calling minutes, while the other one didn’t? This behavior of searching beyond the brand and the product seems to begin since early ages, with experiences like the ones at fast food restaurants. If you have small children and you have taken them to one of those restaurants, you may know that the main factor in the election of the meal is not the food, but the free toy that comes with the meal.
Loyalty programs are the only way to establish a link and a channel to offer clients the treatment they deserve and to exceed their expectancies. Actually, if you have had any direct contact with a consumer at the moment of a purchase, you were probably asked whether you offered any loyalty program. Clients ask for them openly by their name.
Virtuous Spiral
The main benefit and the reason for the implementation of a loyalty program is client retention. At this point, we mention again the fact that clients need more than just being satisfied with a product to make a repeat purchase. They want to feel appreciated, valued, and rewarded for their preference, and a loyalty program is the only way to honor their wishes. The formula is really easy: the higher the frequency of purchase, the higher the accumulated value for the client. The higher the accumulated value, the higher the stimulus to continue with the repetition of purchase, thus keeping and increasing the accumulated value. The higher the accumulated value for the client, the higher the amount realized for the company. It's as simple as that.
From this basic formula, we derive the other benefits that are added to create a virtuous spiral. Repeat purchase of a customer is increased, and purchases to your competitors are proportionally reduced. With this plan in place, you can beat the competition.
When a good loyalty program is developed, it is important to use it to open a dialogue with your clients. It is through communication and collateral materials of the program that members get to know their benefits. Apart from using this to communicate with them, you also have to take advantage of this to obtain additional information about them. What products do they prefer? How do they like to consume their products and what uses do they give to them? Do they have relatives and friends who can benefit from your services? Which products and services do they need today and which will they need tomorrow? Once you have satisfied a client by showing him appreciation and value in his relationship with you, you can collect from him all types of strategic information in order to improve your products, grow your market share, and strengthen your relationship.
A consumer who appreciates the relationship with his vendor is willing to pay for the added value he receives. With a good loyalty program, companies can focus on developing and giving value, instead of deteriorating their margins and spoon-feeding their clients with frequent and aggressive discounts to move products.
If the consumer is happy with the relationship that he has with you, he will recommend you when the time comes, and a referral is worth more than a thousand ads.
Costs and return on investment
One thing that is widely misunderstood about loyalty programs is their cost. When you make an investment in your best publicity campaign, what is your return on the investment? Surely you develop a sophisticated algorithm to try to calculate the impact made, referrals obtained and sales made. Once these have been calculated, you compare them with your investment and you contrast them with your minimum rate of return.
You probably even include in the return an additional quantification for the creation of a brand that you developed along with the campaign, independently from the derived consumptions. When you assess the return on investment of your loyalty program, the calculation is very similar, but with an important difference: The impacts made, the referrals obtained, the incremental sales, and even the creation of value are inferred, known, and calculated clearly by your program. Additionally, the effectiveness of your efforts improve significantly thanks to the focus you choose based on the information you have about your clients.
As a reference, depending on the industry, the field, and the audience to which it is directed, a loyalty program contributes between 1% and 5% of the gross sales of the product or service.
The return on investment depends on the desired goal, but, as a reference, just remember that obtaining a new customer costs five times as much as retaining an existing customer costs. How many promotion strategies bring you a 5 to 1 return?
Mostrando entradas con la etiqueta loyalty programs. Mostrar todas las entradas
Mostrando entradas con la etiqueta loyalty programs. Mostrar todas las entradas
miércoles, 12 de mayo de 2010
jueves, 3 de septiembre de 2009
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!
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!
jueves, 27 de agosto de 2009
Is this the perfect time for loyalty programs?
Despite this year’s grey economic landscape, experts note that there will be a surge in consumer loyalty. Consumers, who know what they like, are looking to have their money work more for them and get them the greatest value possible.
Last December, in the midst of news about disastrous financial losses, falling stock markets and bank collapses, Airmiles (the oldest loyalty program in the United Kingdom) issued a little-publicized but very promising press release. The header read: "Airmiles predicts loyalty boom for 2009."
English style
In the press release body, the company supported the headline with the results of its latest market research conducted in United Kingdom during November 2008, which uncovered the following findings:
• 95% of Britons have collected points in loyalty programs.
• 9 out of 10 people plan to redeem their points during 2009.
• 61% plan to take advantage their loyalty programs to stretch their budgets this year.
• 96% of Britons are members of a loyalty program.
• 64% belong to three or more loyalty programs.
• More women than men have a high probability of taking advantage of most of loyalty programs in 2009: 65% women vs. 59% men.
• Belonging to three or more programs is more popular among women than among men: 72% women vs. 51% men.
• Membership loyalty programs are more common as age progresses: 46% of people between 18-29 years belong to three or more programs, vs. 56% of people between 30-39 and 67% for people 40 and older.
• 25% of the population expected to take fewer vacations in 2009, vs. 14% for Airmiles members.
Although the details of the information disclosed on British loyalty have little relevance to the Mexican market, the general sense of its release does. England, being one of the hardest-hit countries by the global economic crisis, is seeing this as the perfect time to prove the relevance and effectiveness of its loyalty programs.
Andrea Burchet, the Director of Relationship Marketing for Airmiles, reported: "In this adverse economic climate, people are looking for ways to make their money work more for them and get the most value possible. The loyalty programs are ideal for expanding the value of your spending.
"We have begun to see an increase in the number of new members joining the program ... and predict that members who have forgotten their Airmiles balances will return in 2009 to see the benefits of receiving rewards ... for their daily spending."
More value
Like the UK's Airmiles, in Mexico and the rest of the world there are hundreds of companies that are tackling this difficult year with optimism, knowing that their loyalty program is a key tool for retaining customers.
American Express, Hotel Fiesta Americana, Mexicana and Soriana, are just some examples of companies in Mexico that will benefit most from their loyalty programs to retain customers and even gain market share from their competitors.
Similarly, a greater number of companies that currently do not offer the added value of a loyalty program to their customers are accelerating development of such programs. Although this latter group will not see the same extensive benefits as will companies with programs already in place, in the long-term, their results will be great.
Consumers that are aware of their spending appreciate the rewards that come with their purchase. This year’s circumstances can set, re-affirm or destroy the lasting relationships between consumers and businesses.
Mexico is still far from reaching the levels of penetration and relevance revealed by Airmiles in United Kingdom. Here the figures are found only in the dreams of the most ambitious marketers that will take the time to get there. However, this year has already seen more and more companies in all industries use this economic crisis to position themselves in the market.
Is your company taking the boom that Airmiles predicted seriously for 2009?
Last December, in the midst of news about disastrous financial losses, falling stock markets and bank collapses, Airmiles (the oldest loyalty program in the United Kingdom) issued a little-publicized but very promising press release. The header read: "Airmiles predicts loyalty boom for 2009."
English style
In the press release body, the company supported the headline with the results of its latest market research conducted in United Kingdom during November 2008, which uncovered the following findings:
• 95% of Britons have collected points in loyalty programs.
• 9 out of 10 people plan to redeem their points during 2009.
• 61% plan to take advantage their loyalty programs to stretch their budgets this year.
• 96% of Britons are members of a loyalty program.
• 64% belong to three or more loyalty programs.
• More women than men have a high probability of taking advantage of most of loyalty programs in 2009: 65% women vs. 59% men.
• Belonging to three or more programs is more popular among women than among men: 72% women vs. 51% men.
• Membership loyalty programs are more common as age progresses: 46% of people between 18-29 years belong to three or more programs, vs. 56% of people between 30-39 and 67% for people 40 and older.
• 25% of the population expected to take fewer vacations in 2009, vs. 14% for Airmiles members.
Although the details of the information disclosed on British loyalty have little relevance to the Mexican market, the general sense of its release does. England, being one of the hardest-hit countries by the global economic crisis, is seeing this as the perfect time to prove the relevance and effectiveness of its loyalty programs.
Andrea Burchet, the Director of Relationship Marketing for Airmiles, reported: "In this adverse economic climate, people are looking for ways to make their money work more for them and get the most value possible. The loyalty programs are ideal for expanding the value of your spending.
"We have begun to see an increase in the number of new members joining the program ... and predict that members who have forgotten their Airmiles balances will return in 2009 to see the benefits of receiving rewards ... for their daily spending."
More value
Like the UK's Airmiles, in Mexico and the rest of the world there are hundreds of companies that are tackling this difficult year with optimism, knowing that their loyalty program is a key tool for retaining customers.
American Express, Hotel Fiesta Americana, Mexicana and Soriana, are just some examples of companies in Mexico that will benefit most from their loyalty programs to retain customers and even gain market share from their competitors.
Similarly, a greater number of companies that currently do not offer the added value of a loyalty program to their customers are accelerating development of such programs. Although this latter group will not see the same extensive benefits as will companies with programs already in place, in the long-term, their results will be great.
Consumers that are aware of their spending appreciate the rewards that come with their purchase. This year’s circumstances can set, re-affirm or destroy the lasting relationships between consumers and businesses.
Mexico is still far from reaching the levels of penetration and relevance revealed by Airmiles in United Kingdom. Here the figures are found only in the dreams of the most ambitious marketers that will take the time to get there. However, this year has already seen more and more companies in all industries use this economic crisis to position themselves in the market.
Is your company taking the boom that Airmiles predicted seriously for 2009?
Suscribirse a:
Entradas (Atom)
