It seems like you can’t buy anything now without bumping into anoffer to join some type of consumer loyalty club. Retailers havelong adopted loyalty programs as a method of getting more salesout of their customers. Whether they “live” offline or online, loyaltyprograms can and do work when properly executed. Simply issuing acard, offering some incentive and sitting back to wait for the sales toring up is not going to deliver good results. You need to design yourprogram with defined success in mind.

For example, loyalty programs come in many flavors, from the frequent-flyer/buyer/diner/shopper to deep luxury product programs.Jupiter Research claims that 75% of consumers are card-carryingmembers of one program or another. And not all programs are created equally. The key to success is not in simply “having” a program,but structuring that program to collect usable data. Success is in theexecution of slicing the data collected, and using it to build repeatsales. It’s not the data itself, but the trends and actionable insightthat will spell success.

Loyalty programs also vary in purpose. Most loyalty programs arestructured for retention through rewards or other forms of consumerappreciation. Retention programs have a direct ROI, especially thosefocused on decreasing defection rates. Clearly, it’s easier and morecost effective to keep existing customers than to recruit new ones;however, a recent Harvard Business Review study claims that reducing the defection rate by only 5% can double your profits.

Why a Loyalty Program?
Do it for the data. Loyalty programs aredesigned to retain customers and draw themcloser to the brand so that they will buymore, more frequently. Although such programs can certainly work and be successfuloffline, the real cost savings and expandability comes from a strong digital strategy. YourPOS system can collect data that can beused to create direct mail campaigns, but byadding an online component, you haveinstantly accessible data that can be easilysegmented as the foundation for a strongrelationship marketing strategy.

A digital strategy can allow you to definewho your most loyal customers are and create a campaign with messaging and incentives designed specifically for the high valuecustomers. If 20% of your customers are giving you 80% of your sales, find a special wayto communicate and reward those customers. Usethem as yourtrue ambassadorsto spread the wordto their friends. Nowyour online retentionstrategy also assistsin customer acquisition, and sales will spiral upward.

By starting small and adopting a religious fervor for testing, yourloyalty program can demonstrate strong ROI while providing highvalue consumers with the emotional quotient of feeling special – something that all consumers want.