Two consultants have taken wildly different paths about customer loyalty programs to reach the same conclusion: those programs only work with high levels of customer care and low levels of non-business related benefits.
Mark Mitchell writes on Whizard Strategy that customer loyalty programs "were a bad idea in the past, and they are a bad idea today.” In contrast, Steve Kleber, writing for Kleber and Associates, argues that loyalty programs can be beneficial to manufacturers. Both comments come just a few months after a Principia survey found customer loyalty programs are an underused way to boost sales.
What’s so bad about the loyalty programs, Mitchell says, is that they are expensive and it can be easy for competition to get out of hand. Warring loyalty programs that focus on trips and prizes can become an “arms race,” Mitchell concludes and, in the end, the programs aren't always effective. He writes:
We then did a little research on the contractors. We found that more and more of them were choosing who they bought from based on the trip that was offered. Each year, they would consider which offer they liked the most and shift their business to that company. Any differences in products or companies were irrelevant.
If customer loyalty programs are expensive and customers only want to reap the glitzy benefits, then what’s the point of them? Mitchell seems to feel that while customer loyalty programs aren’t always necessary, obtaining and maintaining customer loyalty is. He suggests manufacturers make sure they offer the best customer service, make sure their staff knows everything there is to know about the product, and that the manufacturer’s website can be the go-to resource for afterhours information about the products.
Kleber argues in favor on having a customer loyalty program, but, like Mitchell, cites that the most effective programs “offer more meaningful benefits.” Kleber argues that a manufacturer’s customer loyalty program should provide education benefits not only about the company’s product, but also about proper use and installation. In addition, another great benefit for a program is to help your contractors run and showcase their business. “Some manufacturer loyalty programs provide benefits and services that streamline business operations so the contractor can spend more time getting customers and doing the work,” Kleber writes. Kleber also says that contractors might not have the time or resources to devote to creating a snazzy website, so “To give their contractors more exposure, some manufacturers showcase their work on their channels.”
While both Mitchell and Kleber have opposing views about customer loyalty programs, they arrive at the same conclusion: no matter what manufacturers decide to do, they should remain customer-focused. Customers will be more loyal to the company who answers their questions, helps them out day-to-day, and solves minor product problems than the manufacturer who puts them on a plane to Fiji.
Customer loyalty is a symbiotic relationship, and customer loyalty programs can be a good way to encourage that association, though the programs aren't widely used, a Principia survey found. Of the 1,100 contractors Principia surveyed, around half of the pros were enrolled in a dealer loyalty program, while anywhere from 45% to 70% of contractors were involved in manufacturer loyalty programs, depending on the type of product. To get customers to participate in loyalty programs, Principia advises looking to the smaller contractors who might not be members of loyalty programs and cater to their needs, instead of the larger contractors who might already be members several programs.
Do you have a customer loyalty program? Are you considering starting one? Let us know in the comments below.