Loyalty marketing is an approach whereby a company focuses on growing and retaining existing customers through incentives and rewards.
Discuss the basis, use and impact of loyalty programs as a personal selling and sales promotion tool
- Some loyalty marketing industry insiders, such as Fred Reichheld, have claimed a strong link between customer loyalty marketing and customer referral.
- In recent years, a new marketing discipline called “customer advocacy marketing” has been combined with or replaced “customer loyalty marketing”.
- The early part of 2010 saw the rise of Card Linked Offers (CLOs) as a new loyalty marketing technique for brands, retailers and financial institutions, stemming from a rise in popularity of both mobile payment and coupons.
- Many consumers in the US and Europe have become quite accustomed to the rewards and incentives they receive by being a “card carrying” member of an airline, hotel or car rental program.
- Card Linked Offers: Card Linked Offers connect offers or discounts directly to a consumer’s credit card or debit card, which can then be redeemed at the point of sale.
- customer advocacy: Customer advocacy is a specialized form of customer service in which companies focus on what is best for the customer. It is a change in a company’s culture that is supported by customer-focused customer service and marketing techniques.
Loyalty marketing is an approach to marketing, based on strategic management, in which a company focuses on growing and retaining existing customers through incentives.
Branding, product marketing and loyalty marketing all form part of the customer proposition – the subjective assessment by the customer of whether to purchase a brand or not, based on the integrated combination of the value they receive from each of these marketing disciplines.
The discipline of customer loyalty marketing has been around for many years, its value as an advertising and marketing vehicle have made it omnipresent in consumer marketing organizations since the mid- to late-1990s.
Some loyalty marketing industry insiders, such as Fred Reichheld, have claimed a strong link between customer loyalty marketing and customer referral. In recent years, a new marketing discipline called “customer advocacy marketing” has been combined with, or replaced, “customer loyalty marketing. ” To the general public, many airline miles programs, hotel frequent guest programs and credit card incentive programs are the most visible customer loyalty marketing programs.
Modern Consumer Rewards Programs
On May 1, 1981 American Airlines launched the first full-scale loyalty marketing program of the modern era with the AAdvantagefrequent flyer program. This revolutionary program was the first to reward “frequent fliers” with reward miles that could be accumulated and later redeemed for free travel. Many airlines and travel providers saw the incredible value in providing customers with an incentive to use a company exclusively and be rewarded for their loyalty. Within a few years, dozens of travel industry companies launched similar programs.
Card Linked Offers
The early part of 2010 saw the rise of Card Linked Offers (CLOs) as a new loyalty marketing technique for brands, retailers and financial institutions, stemming from a rise in popularity of both mobile payment and coupons. CLOs connect offers or discounts directly to a consumer’s credit card or debit card, which can then be redeemed at the point of sale.
To receive and use CLOs, consumers must willingly opt in to a CLO program and provide their credit/debit card information. When consumers see relevant CLO-enabled advertisements and product offers while browsing online, using a mobile device, watching TV, reading a newspaper or magazine or listening to the radio they can click, text or scan a QR code to link the CLO-enabled ad directly to their credit/debit card. After consumers make a purchase at the designated retail location, the savings appeared are credited directly to their bank, credit card or PayPal account. As such, CLOs eliminate point-of-sale integration, mail-in rebates and paper coupons. Offers are typically based upon consumer preferences and previous purchase history.
Prior to 2010, static CLOs existed for many years in the form of bank-issued loyalty offers, such as points or savings on travel purchases.
Consolidated Loyalty Programs
Recently there has been a move away from proprietary loyalty schemes to a more consolidated approach, where a single registered account can link a consumer to any number of participating merchants. The principal advantage of this approach is that it minimizes the number of discrete relationships between consumers and merchants and only requires a one-off registration.
One prominent example is the US-based Punchd, which became part of Google in 2011. Others, like MazeCard, have offered consolidated loyalty marketing schemes in other continents.
Loyalty Marketing Impact
Many loyalty programs have changed the way in which consumers interact with the companies that they purchase products or services from and how much the consumers spend. Many consumers in the US and Europe have become quite accustomed to the rewards and incentives they receive by being a “card carrying” member of an airline, hotel or car rental program. In addition, research from Chris X. Moloney shows that nearly half of all credit card users in the US utilize a points-based rewards program.
In recent years, the competition for high income customers has led many of these loyalty marketing program providers to provide significant perks that deliver value well beyond reward points or miles. Both American’s AAdvantage program and Starwood Hotels’ Preferred Guest program have received industry awards, called “Freddie Awards” by Inside Flyer Magazine and its publisher Randy Petersen for providing perks that customers value highly. These perks have become as important to many travelers as their reward miles, according to research.
In his book, Loyalty Rules!, Fred Reichheld details the value of customer referral on the growth and financial performance of dozens of leading US firms. Reichheld purports that the measurement of company advocates, or promoters, is the strongest single measurable correlation between customers and corporate performance.
Similarly, Chris X. Moloney has presented new findings (Loyalty World London 2006) that showed a magnetic value to a company to promote and measure customer referrals and advocacy via research and marketing.