Go Beyond Points for Retail Customer Loyalty

The CEO wants a customer loyalty program refresh — now. He's pushing a modern points structure as the end-all, be-all. But you're wondering: Are points still the way to go?

If your instincts tell you there's more to building customer loyalty in today's world than points and prizes, you're right.

Retailers shouldn't rush into points programs right away. Why? Because while points programs can certainly work well for retailers, they aren't the only way — or always the best way — to create those brand ambassadors all companies want and need.

Points programs can be expensive and legally cumbersome — not to mention complicated for your customers — even at their best. And in the end, they may not be delivering that "wow" factor that will keep your best customers coming back over the long term.

Who's Doing Points Well?
Here are just a few examples of retailer points programs that have continued to resonate with customers: Hallmark Gold Crown Rewards; Best Buy Reward Zone; Neiman Marcus InCircle.

Who's Doing Well Without Points?
These retailers are gaining leaps and bounds in customer loyalty without the legal/fiduciary responsibilities of issuing promotional currency in the form of points: REI; My Starbucks Rewards; PETCO PALS; SuperFresh Live Better Wellness Club Card.

How Can You Do Well Without Points?
Here are five methods that can help you develop better customer relationships and increase loyalty — all without tracking points.

• Build aspirational momentum. Create simple benchmarks that reward customers at certain pre-defined levels. The easiest benchmark for both you and the customer is cumulative dollars spent within a given period of time (e.g., one year). The customer learns that if she spends X, she'll receive Y benefits. If she spends 2X, she'll receive even more rewards.
• Know who your best customers are and focus your resources on them. It's not unusual to discover that 75 percent of your profitability comes from 20 percent of your customer base. Therefore, why spend precious rewards dollars on less-than-profitable customers, when directing your budget toward top-tier customers could increase return on investment immediately? Delve into your customer data and use sophisticated modeling tools such as market basket analysis or predictive modeling to get a firm grasp on how your best customers behave or will likely behave.
• Be spontaneous and show appreciation to your best customers. Unexpected "surprise and delight" rewards can make a huge impression with your most valuable customers. Similarly, recognition is one of the most powerful yet underused benefits in a marketer's arsenal.
• Communicate. You probably have promotional communications down to a science, but what are you doing for customers that add value to their relationship with your brand? Give your customers reasons to come to you for information, entertainment and insider scoops. Give them plenty of opportunities for meaningful two-way dialogue and you'll be the one rewarded.
• Integrate your data. In today's multichannel world, retailers with integrated data across all shopping channels are prevailing. After all, your best customers are likely purchasing online, in-store, via your catalog and connecting with you via social media. Capturing all of that data gives you a complete customer profile from which you can make informed loyalty-generating decisions.

The most important advice for creating or revisiting a loyalty program? Getting a three-dimensional view of your customers, primarily through your data, will go a long way toward telling you what could make them more loyal.

Discovering what they like and dislike about your service, your products and the buying experience can lend important insight into how you can create benefits and add value. However, remember emotional and rational likes and dislikes vary by customer segment, so don't rely on averages across your entire customer base.

Of course, customer loyalty isn't a static condition, but rather a continuum — with a customer's rational interests at one end and emotional interests at the other. The most successful loyalty initiatives encompass both ends of this continuum. They create ties that emotionally and rationally bind customers to your organization. That's the best formula for developing long-term loyalty.

Sandra Gudat is president and CEO of Customer Communications Group, a full-service loyalty and marketing agency with a consultancy approach and a dedication to providing measurable, sustainable results.