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By: Alan Park

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Friday, 20-Apr-2012 08:32 Email | Share | | Bookmark
Growing Your Business Online With Loyalty Programs

This is the first in a series of articles we will be publishing relaying thoughts and ideas from the Internet Retailer Conference in Chicago, which occurred June 5th through June 7th. Mark Goldstein, CEO of Loyalty Lab (a company that implements loyalty programs for merchants), and Gary Korotzer, CMO of Red Envelope (a company that specializes in selling gift items), delivered a presentation about loyalty programs. Red Envelope currently has a loyalty program managed by Loyalty Lab.

Loyalty programs are taking off. If you have a retail web site and you don't have some kind of loyalty program...chances are that by the end of next year you will. Jupiter Research expects that by the end of 2007, 78% of retailers doing business online will have a loyalty program, compared to 24% now. So what's the big deal?

It costs a lot more to generate a new customer than to sell to a repeat customer. Loyalty programs allow you to build a customer base that is loyal to your products, and will continue to purchase from you, rather than your competitors. A loyalty program is some kind of program that allows your customers to build up credit to apply to further purchases, or to redeem for cash. For example, a retail web site could grant a customer "points" for every purchase he makes. When he has enough points, he can redeem them for a discount on more merchandise, or possibly redeem them for cash.

To implement a loyalty program, you need some way to keep up with your customers' accrued points (or whatever kind of measurement you use). This should be done by keeping records of a customers' transactions in a database. Goldstein and Korotzer recommended tying the information to a customer's credit card number. Every time a customer makes purchases with a particular credit card, a record of the purchase is recorded along with the credit card number. In this scenario, if a customer used a different card than in previous purchases, her existing loyalty account would not receive additional credits.

You should try to make it easy for a customer to know how many points they have. Out of sight, out of mind, as the old saying goes, so make sure your customers are aware of how many points they have and how many more they need to redeem their rewards.

When you begin the process of deciding on the details of your loyalty program (exactly what participants will receive, and how much they have to purchase for redemption), Goldstein and Korotzer argue that you should explore your company's economics as deeply as possible. Two important statistics to examine are the lifetime value and acquisition cost of your customers. This will better help you determine how much you can afford to give to your customers. Another critical consideration is exactly who gets to participate in the program. You may choose to only extend an invitation into the program to the top 20% (or whatever percentage generates the majority of your revenue) of your customers. If there is a segment of your customer base that represents the majority of your income, then it makes sense to concentrate your marketing dollars on that group.

Another point that Goldstein and Korotzer emphasized is that your loyalty program should be cross-channel. In other words, if you operate a physical retail location and take orders by phone in addition to your web site, the loyalty program should extend to all of the channels. Avoid confusing your customers. Make it easy for them to gain credits and cash in on their loyalty regardless of what channel they use to make purchases.

Loyalty programs have been around for years in certain industries (i.e., airline frequent flyer miles) but are just starting to gain traction with a lot of retailers. If you sell retail, you should begin the process of researching the implementation of a loyalty program now - before your competition does. Feel free to contact Work Media for information on implementing a loyalty program for your web site.

For a large selection of customer reward programs, including best loyalty programs, you will want to examine the ShareRewards, which can be found at

Friday, 20-Apr-2012 08:29 Email | Share | | Bookmark
How To Keep Customers Loyal

Business analysts know that it costs a company much more money to get a new customer than to keep doing business with their existing ones. Thus, to be as profitable as possible companies are urged to have loyal customers that keep coming back again and again. Unfortunately, this is easier said than done, and focusing all of your efforts on keeping existing customers is a sure way to ruin your company as truth be told people don't live forever and companies have to look to the next generation of buyers eventually.

1. Nobody Is Loyal Anymore

No thanks to the internet, loyalty is lower than ever before. In just a few mouse clicks, customers can compare the prices of you and a dozen or more of your direct competitors for the same product. Not to mention online auctions where prices can go even lower. This means that people have literally no loyalty - they will choose thatever retailer offers the lowest price.

2. Bidding Wars

This means retailers often engage in bidding wars. This can escalate to nonprofitable proportions - often retailers sell products for the exact amount they purchased them for from manufacturers. Of course, in order to do business retailers have to pay expenses like rent so they can have a physical store open at all. In addition, utilities, shipping, labor, not to mention possible losses from theft all come into play.

3. Making Money

With all of these costs, youd wonder how they make money at all. Retailers often sell products that require other products in order to function - for example a toy that requires batteries or a printer that needs a printer cable in order to work. Manufacturers could make printers that connect wirelessly using bluetooth, but retailers won't buy them because then there wouldn't be any money to be had. The same is true for the automotive industry - hardly any money is being made on the cars themselves, and the cost of gas is skyrocketing.

4. Cutting Losses

This leads to a worst case scenario - your retail operation has overstock of last months technology and there's already new products out there that customers will select instead. It becomes urgent to sell off your products at a loss just so you have the shelf space to put the new items out for customers to look at.

5. Building Loyalty

Many retailers will offer customers a membership option that will save them money on select purchases within the store. Of course, every retailer has some sort of program like that and so, again, it doesn't matter where consumers shop. Lost leaders can draw customers in, often in the hopes of having them buy more than just the lost leader, but that rarely happens. The same is true for first-time customer offers.

6. Perfection Or The Highway

Customers now demand absoloutely flawless service. Everything from the price to how the product is packaged needs to be, for lack of a better word, immaculate. With a dozen major competitors to your business just a click away, you have to give them some reason for doing business with you other than your price is cheaper. Sell customers on brand awareness or, better yet, offer free extended warranties and free technical support on everything you sell.

For a large selection of customer reward programs, including best loyalty programs, you will want to examine the ShareRewards, which can be found at


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