Myths About Customer Loyalty Programs

Building customer loyalty makes good commercial sense but as with most aspects of highfalutin marketing, there are certain myths surrounding the ethos of the sculptured and much vaunted program approach. Here are a few.

Loyalty Myth 1:

Loyalty Rewards Programs Prevent Customer Defections

You can't apply a loyalty reward 'sticking plaster' to a customer defection problem that is in need of stitches. No matter how good the loyalty currency, it cannot make up for deficient produce, uncompetitive pricing, or servicing problems. When customer defections are endemic, the root causes must be identified and treated accordingly. Loyalty programs won't do it. The solution lies in asking customers what they want, listening to their feedback, and implementing solutions focused on resolving issues.

Loyalty Myth 2:

All Customers Are Equally Valuable

Some business owners mistakenly believe that all customers need to be treated with equal levels of service and attention. Yet, are all customers equal in their levels of value to the business? Are some customers unprofitable? Do they deserve the same attention as profitable customers? In the context of customer loyalty it is acceptable to play favourites, yet many designer loyalty programs set out to provide something for everyone. The sensible loyalty reward program should be structured to attract and motivate profitable behaviours and nothing less.

Loyalty Myth 3:

Acquiring New Business Costs More Than Retaining Existing Customers

This statement would be accurate if all customers were equally profitable but the hard fact is that not every customer is worth keeping. Some customers are worth losing to the competition if they are causing the business to lose money. Interestingly though, some operators have a hard time letting go of the revenues from under-performing customers because they fail to appreciate that revenue does not equal profit.

Successful loyalty programs should not only be capable of retaining preferred existing customers but (when marketed to the competition's clientele) have the propensity to attract profitable customers from them as well.

Loyalty Myth 4:

Customer Loyalty & Incentives Programs Are One And The Same

There may be similarities but they are not the same; they are representative of two different customer strategies. Incentives programs function primarily as customer acquisition tools and are generally characterised by low award values such as small amounts of cash, coupons and merchandise. They do not have the power to drive long-term customer loyalty.

Loyalty Myth 5:

If You Reward Customers They Will Return

Oh yes? Try telling that to operators that invested sizeable chunks of money in loyalty programs and got nothing back in return. Creating a loyalty program is not as simple as choosing a reward and giving it to loyal customers. Most designer programs make the mistake of failing to offer rewards that are sufficiently motivating - and then they wonder why the program takes a nose dive.

Loyalty Myth 6:

Customer Loyalty Hinges On Strategic Marketing

No it does not. The most successful loyalty program is the one that has highly empowered leadership from the top and is fully supported by all members of staff.

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