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Episode in a Tweet: Use these 4 essential ideas to craft an engaging customer loyalty program and generate BIG business.
Quick Background: Most companies would love to have the kind of customer engagement, retention, and repeat business that Costco pioneered in the 1990s.
Ginnie Roeglin played a big part in fine-tuning this innovative strategy. She led Costco’s corporate marketing for nearly ten years and also helped grow Costco.com to $4 billion in e-commerce sales.
On today’s show, Ginnie discusses the essentials to crafting a loyalty program that will keep your customers coming back for more and lead your business to BIG growth.
Transcript: Download the full transcript here.
Key Insights on Creating a Customer Loyalty Program
1. Identify something your customers want.
Amazon figured out that its customers wanted cheaper shipping. Starbucks lets its loyalty customers trade in “stars” for free drinks. Costco gave its executive members a 2% rebate on their purchases.
“I think the loyalty programs really are all about engagement and trying to pay attention to your best customers, get them even more engaged, make them feel even more special, reward them for really being your best customers,” says Ginnie.
She also believes that part of your loyalty program value proposition should be baked into your brand to begin with. “Whatever the promise is your brand makes should really extend into this loyalty program so that you’re furthering your brand and not somehow misaligning with it.”
Amazon Prime’s free two-day shipping and digital content delivery certainly build on the company’s mission statement: “to build a place where people can come to find and discover anything they might want to buy online.” Costco wants “to continually provide our members with quality goods and services at the lowest possible price.” Ginnie says, “For Costco, it made great sense to give a rebate on your purchases. Effectively the rebate tends to pay for the entire membership. That’s a great value to customers. It’s something that keeps them talking about it and it keeps them coming back to try to maximize that value.”
Your customers should already want what your brand is selling. Your loyalty program should make them want to buy more of it.
2. Keep adding value.
It’s not enough to get customers signed up for your loyalty program – they have to want to keep using it, and in the process, buy more of your product.
“Over time I think adding benefits to a program, always keeping it exciting, interesting, fresh, it’s really a must,” says Ginnie. “But you have to be very careful about that, that you really understand the cost of that and that it’s a sustainable program.”
Netflix provides lessons in both best and worst-case scenarios. After starting as a DVD rental service, Netflix grew its membership program by harnessing the power of expanding broadband internet technology, cell phones, and set-top boxes. They added streaming video, and then original content to keep their memberships active and growing. But their experiment in spinning off physical disc rentals into a separate company wasn’t sustainable, profitable, or popular with members.
Again, start with knowing what your customers want, and then find new ways to give it to them. And if you’re looking for ways to keep your customers excited, watch where technology is pointing. Hilton wanted to make it easier for its best customers to keep staying at its hotels. A loyalty program that started with points redeemable for discounted rooms now includes a phone app that lets you check in, check out, and even unlock your room without waiting in line at the front desk.
3. Focus on your own goals, not someone else’s.
Imitation may be the sincerest form of flattery, but it’s also a terrible way to craft a loyalty or membership program. Remember when Blockbuster, in a panic, tried to launch its own DVD rental by mail service to compete with Netflix?
Maybe there was no saving brick and mortar video stores, but what if Blockbuster had come up with a loyalty program that refocused on its own business goals, rather than trying to copy Netflix’s? What if they’d enticed more members through its doors by doubling down on the pleasures of a traditional video store experience: browsing the aisles, recommendations from knowledgeable staff, etc.?
Similarly, if you’re a mom and pop retailer, offering Prime-style shipping discounts probably isn’t going to make you a national giant. But what kind of loyalty program would drive up your sales and profits?
Your loyalty program might target customers, but it starts with you, your business, and your vision of BIG success. Says Ginnie, “I think the first thing is really to determine what your goals are and why do you want a loyalty program. Just because everybody else is doing it? What are your goals and objectives? Is there something that you’re solving for? Is it a competitive issue? What exactly is it that you want to accomplish?”
4. Test your program and run the numbers.
Increased profit should be high on that list of goals, so make sure your shiny new app or punch card isn’t setting you up for a loss.
“You really have to try to figure out the cost of this program to try to understand your financial liability,” cautions Ginnie. “This is a very complicated situation because you’ve got a lot of due diligence to do. You have to really understand the cost. I suggest trying to estimate a low, medium, and home run response. What does the cost look like for those different levels? There’s a lot of impact to your P&L that you need to be aware of.”
Ginnie also recommends getting your CFO and the rest of your financial team working on these estimates early. Focus testing on a group of high-value customers or a particular market – as Amazon did when slowly rolling out its Fresh grocery delivery – is also a good way of gauging potential customer response.
“Then, certainly, make some adjustments,” says Ginnie. “Continue to measure the results. Then, when you do get to the point that you feel that you have determined what’s working for you, what’s accepted by the customer, begin a phase rollout.”
1. Strong brands generate strong loyalty that your program’s value proposition should help enhance.
2. Don’t follow the leader. Your goals are not the same as your competitor’s.
3. Loyalty should generate profit. If your program isn’t translating into bigger sales, then what good is it?