"Your Loyalty Program is Betraying You"
Harvard Business Review
April 2006, pp. 124-131
In recent years, many organizations have gotten rid of their customer loyalty programs. This article says that there are five realistic loyalty program goals:
- Keep customers from defecting
- Win greater share of wallet
- Prompt customers to make additional purchases
- Yield insight into customer behavior and preferences
- Turn a profit (in conjunction with partner programs with other organizations)
The following Levers of Loyalty are identified:
- Divisibility of rewards—"the number of discrete reward redemption opportunities a program provides"
- Sense of momentum—customers need to feel they are making progress towards their goal
- Nature of rewards—"the most successful loyalty programs often feature less functional and more pleasure-providing rewards"
- Expansion of relationship—rewards should give the customer experiences that expand their repertoire of possible purchases
- Combined-currency flexibility—points can be redeemed for a reduction in currency cost to make a purchase
The following Mistakes to Avoid are discussed in the article
- Don't create a new commodity
- Don't reward the disloyal
- Don't reward volume over profitability of individual customers
- Don't give away the store
- Don't promise what you cannot deliver
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