Loyalty RewardsFor the modern retailer this is becoming an ever larger question. Should we be implementing a loyalty system within the business and if so how will this actually benefit me? Most small to medium retailers have already allocated a portion of their budget for marketing. Traditional methods include print media advertising and flyers though we are seeing a shift towards social and electronic avenues such as twitter and Facebook. However this is usually directed towards one portion of your potential customer base and that is the new customer.


The obvious question then is what are we doing for our existing customer base and how are we enhancing their shopping experience, if at all? While growing your business is key to longevity and success it is important to take note and understand the value of the existing customer base.  Their loyalty to us at some point needs to be acknowledged. And because each customer is different how do we reward each of them in a way that reflects their individual buying behaviour and have it still based on the value of their relationship with you?


“Win greater share of wallet” (Nunes & Dréze, 2006)

By providing extra incentives, a loyalty system and programme encourages consumers to direct more of their purchases toward a business and less at competitors.


The good news is that studies show that customers want to be marketed to! Joe Public enjoys the idea of receiving extra value with each purchase and being rewarded by their relationship with you. There is of course a complete new article that can be written on the psychological aspects of reward based buying but for now let’s simply state that it works in favour of the business owner. What is important is that the value received occurs in such a way that the customer acknowledges its value and the business can afford it.


There is a huge upside to all of this since by customers registering with the loyalty system so we can understand their individual or collective buying and return patterns better. The impact of this to the business is immense. We can understand from our loyal customers what they are buying and what they are not thereby adjust our buying patterns and stock holding accordingly. It may also give us insight into items that customers associated together, helping us realise new markets and growth strategies. These patterns will also allow us to focus our marketing in areas that may either require more attention or to increase the exposure of other items.


“Yield insight into customer behaviour and preferences(Nunes & Dréze, 2006)

Loyalty program customer relationship management (CRM) systems provide a tool for collecting customer data and tracking behaviour.  This lets a business know what a consumer buys, how much, and how often.  Using CRM can determine which customers to focus marketing resources on to maximize returns, reduce overall marketing costs, and improve the efficiency and effectiveness of marketing efforts.


Businesses understand the association items have with each other like shoes and polish or couches and leather treatments. Not all of our customers who purchase one item are aware that you may sell the other and as many business do these “upsell” products are generally good profit turners. By tracking the purchases through the loyalty program we are given the opportunity to sell these products back to our customers knowing that they need it. And as they have loyalty points to spend and a rewarding relationship with us this should not be difficult at all.


In almost all scenarios the cost of losing an existing customer is high. Many companies spend a large portion of their budget trying to lure new business with specials and promotions often forgetting how many of their existing clients are being ignored. The existing customer costs us less to keep, already likes what we sell and hopefully how we do that! Best of all they will probably tell others!


Retailers must make sure that they can integrate their end-to-end processes (supply chain, financials, CRM and POS etc.). Otherwise it’s impossible to realise the full benefits of a comprehensive loyalty program – and that means you’r losing good business.