Why Loyalty Programs Won’t Work

Filed Under (Uncategorized) by Don on 10-07-2007

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 Ahhh, a few days off for a brief but welcomed vacation.   I hope you had some time with family or friends over the Independence Holiday too.  In a few short weeks schools will begin another year and I am already seeing Staples promoting back-to-school supplies heavily.  In our local paper over the weekend their ad stated $29.99/ctn for Staples brand copier paper, limit five cartons for in store pick-up only.  Isn’t that brilliant?  They require you to come in the store, buy the paper and load it in your own vehicle, knowing that you will most likely purchase something else while you’re in the store.  Of course you could just go to their website and make your purchase and they will deliver it but that point isn’t mentioned in their paper advertisement.  How about Staples venture into the grocery stores?  They can be found selling Staples brand products in select Kroger, Safeway and Aldi grocery stores plus several other more localized chains in other states.  They will apparently continue their experiment in this sector.

Someone asked me the other day about why I don’t utilize some sort of loyalty card or program.  In my humble opinion I think these programs stink!  They tend to segregate customers and in the end the only real value is in the data acquired from their purchasing habits.  In essence it is just another discount program.  According to recent surveys people join loyalty programs to receive special treatment.  Yet, only 7% of those respondents state they ever received any special treatment.  I really hate rebates, prebates and discount cards.  Like I have written in the past if you want loyal customers you have to treat them like they truly are special.  Loyalty programs have been around for a long time but the one thing they don’t create is loyalty.  All you are doing is rewarding repeat behavior.  How does a loyalty program define your value proposition?  It doesn’t, at best it only rewards those who constantly beat you up over being the cheapest in price.

Ideally a loyalty program should capitalize on the frequency of the buying habits of the customer allowing you to better develop your relationships.  You want your customers to be emotionally committed to your company.  If you can create a loyalty program that accomplishes these tasks then your program may have a chance at success.  The data you acquire from their purchasing habits, cycles, products, etc. contain strategic data that can be used to target specific customers and to better create sales programs targeted at their needs.  So my question is why is it necessary to even implement a loyalty program?  Your back office system should have the capability to generate reports that contain similiar data.  Do you really have the extra time to monitor and run this type of program?  Don’t you think that your time is better spent demonstrating your value proposition?

Bottom line here for the independent dealers is we must have loyal, emotionally committed customers.  We accomplish this task with our emotional committment to them by being consultants to their business success, building our relationships and providing them with a unique buying experience where they know, beyond doubt, that we are committed to them.  I have customers that have been loyal to me for over 20 years because I have demonstrated to them time and time again that I sincerely care about them, their families and their business.  Your entire staff has a responsibility to acheive this same committment.  Your delivery personnel, CSR’s, everyone in your organization has a connection to your customers.  Your primary loyalty driver is your smile, attitude and your committment to the customer!  Here is your first loyalty driver idea:  Your delivery people are on the front lines every day and have more personal interaction with your customers than anyone in your office.  That gives you another edge over the Big Boxes, use it! 

What is your opinion and how do you get your customers emotionally committed to you?

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