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Permalink Reply by John P on February 7, 2013 at 4:01pm

The entire idea is ridiculous.

"Loyal" and "Customer" are congruous. One cannot be a customer without being loyal. The notion that someone would need anything other than an exceptional product and service in order to be a loyal customer is simply not the case. You're not "rewarding loyal customers", you're devaluing your product. 

All relevant data shows that ongoing discount programs of any sort hurt businesses. They increase labor, ultimately slow sales, and only attract "customers" who are loyal to the discount. 

It's about value, not price. In fact, most businesses who raise their prices on a regular basis retain more customers than those who offer discounts.The business knows it's offering something remarkable and sets a price that's reflective of that. But, as in most customer oriented businesses, service plays a significant role as well. And it's that combination of excellence in both facets that creates an exceptional value proposition for the customer. 

If you want to reward your customers, improve your product, make your service even better, and raise your prices. Nothing is more satisfying to your loyal customers than to see you prosper. Because the more successful you are the greater your ability to be there for your customers.

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Permalink Reply by zack burnett on February 7, 2013 at 6:56pm

Well said!

John P said:

The entire idea is ridiculous.

"Loyal" and "Customer" are congruous. One cannot be a customer without being loyal. The notion that someone would need anything other than an exceptional product and service in order to be a loyal customer is simply not the case. You're not "rewarding loyal customers", you're devaluing your product. 

All relevant data shows that ongoing discount programs of any sort hurt businesses. They increase labor, ultimately slow sales, and only attract "customers" who are loyal to the discount. 

It's about value, not price. In fact, most businesses who raise their prices on a regular basis retain more customers than those who offer discounts.The business knows it's offering something remarkable and sets a price that's reflective of that. But, as in most customer oriented businesses, service plays a significant role as well. And it's that combination of excellence in both facets that creates an exceptional value proposition for the customer. 

If you want to reward your customers, improve your product, make your service even better, and raise your prices. Nothing is more satisfying to your loyal customers than to see you prosper. Because the more successful you are the greater your ability to be there for your customers.

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Permalink Reply by Jeremy Perrine on February 16, 2013 at 6:44am

We use Heartland Payment Services as our Credit Card Processor. They offer a 'rewards program.' 

For a monthly fee (which includes all the obligatory fees for processing), they allow you to offer gift cards that will double as rewards card. 

For every $___ loaded you can have $___ added in addition.

For every ___time used you can have $___added

Register the reward card online and get $___added. 

The money added is all cash value so the only cost to you is the cost of the product, not the actual $ added. 

It's a great deal. We have lot's of people keep lot's of money loaded on the card, which saves us in processing fees and keeps our customers 'loyal.'

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Permalink Reply by D. Smith on February 17, 2013 at 12:23am

I am using perka. It's easy to use and my tech savvy customers love it. I still use stamp cards for the old school crowd.

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Permalink Reply by ray peck on February 26, 2013 at 8:10am

Only do business with people that want to pay full price. Then do something for them later. Like a daily promotion. Loyalty card programs lock you in and make it difficult to offer anything else, even on a whim. And, John P. has the most sound thoughts on this subject. I am now faced with discontinuing my Heartland Loyalty Program to customers that never asked for anything in the first place. And, I have not experienced increased foot traffic because of the loyalty program. I actually think there are so many loyalty programs out there that people are now numb to the idea.  

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Permalink Reply by John P on February 26, 2013 at 3:54pm

Ray, Thanks, Here's a detailed answer I posted a few years ago from my friend and 20+ year PR professional, Les Roka.

"Les says, "As we high falutin' academics like to say, pay attention to causality and incrementality. Often, too many places overestimate the revenue impact because they failed to establish a connection between the program and measures of increased sales and customer satisfaction. So, the causality requirement means tracing clearly that link. Otherwise, not knowing what caused the behavioral change in customers is pretty much a useless exercise. How does one know how to improve the program then. 

Incrementality is knowing whether the campaign is delivering the right outcomes. For a loyalty program to show real results, it must show that the results being measured are incrementally better than those generated without the program. Would the consumer have behaved the same way ( e.g., recommended your program) and driven similar benefits (e.g., attracted a new member) if he were not a member of the program?"

2) Are customers loyal to the program or loyal to the product?
Les says, "What matters is the RELATIONSHIP. Loyal customers don't look for discounts. They look for things that bring more value to the business-customer relationship ( e.g. first offerings). Neumeier suggests that if you continue to remain focused on the price/money pit, you will never be able to extrude yourself without major loss or costs.

Loyalty is not programmable. And most of the astute say that it never suffices as a long-term strategy."

Dr. Roka also points us to Marty Neumeier,
http://www.amazon.com/exec/obidos/search-handle-url/103-9552725-550...
who offers this excerpt in his book.
""1) Loyalty programs are based on discounts, which 'train' existing customers to expect low prices and wait out normal prices, 2) They attract loyal customers who would happily pay a premium, 3) they discourage new customers by making them feel punished or excluded, 4) they encourage competitors to retaliate with me-too programs, 5) they reduce profit margins, which 6) reduces the company's ability to serve customers at formerly high levels.

The truth is, loyalty can't be programmed. As soon as customers begin to feel 'stalked,' they choose 'fight' or 'flight.' They either figure out how to game the system, or else they run to another brand.""  

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Permalink Reply by Mike McGinness on February 27, 2013 at 10:23pm

When we purchased our main Downtown coffeehouse location they had a punch card "entitlement" program. That's what I call them, not loyalty programs. You are entitling them to a freebie because they deigned to buy from you X times. We got rid of it after the first year and it was painful. We took away their freebies!

Fast forward a couple years. And through our lovely recession. 2012 saw a 56.7% revenue increase versus 2011. And growth continues with January 2013 up an astonishing 72% versus January 2012 and Feb. 2013 through 27 days today up 43% versus Feb. 2012 full 29 leap year days, final figure end of day tomorrow!

 

John nailed it to a T. Great product paired with great service creates the best loyal customers and hence the best word of mouth advertising. It's much better to now and then surprise and watch them beam and really appreciate it as you "comp" your regulars beverage than to have entitlement based cards of any kind.

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Permalink Reply by John P on February 28, 2013 at 2:46pm

The biggest warning I would have is that you are intentionally devaluing your product and that  will resonate with those who seek to be your "customers."

It will define you.

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