Making Brand Loyalty Programs Succeed

Abstract

For this study, marketers responsible for loyalty programs from many companies shared their views on the successful elements of a brand loyalty program. This information was used to produce a comprehensive summary of the best practices of loyalty programs. A survey was also conducted using a panel of over 100 consumers in order to answer the following key questions: • How can the cost effectiveness of a loyalty program be calculated?• What level of loyalty program is appropriate?• How does a loyalty program influence light and heavy users of a product? • How do different product categories respond to loyalty programs?In general, loyalty programs work best for products and services that have high margins, are heavily invested in over a consumer’s lifetime, and are difficult to differentiate. The best programs not only retain members as customers, but also increase their purchases. Purchase increases can be obtained by obtaining a wealth of information from customers and tailoring products and services to meet specific needs. The best programs offer relevant benefits to the consumer, and avoid self-serving behavior. In addition, the best programs offer rewards that directly support the proposition of the brand. Programs offering benefits with minimal value and average value can motivate light and heavy users, respectively, to increase purchases. Programs offering more would be gaining a small benefit for the extra effort. Average programs appeal to nonusers since they have the right amount of enticement, but do not require as much involvement. As for product categories, sales of convenience foods like cereals respond best to programs with very valuable benefits, while sales of perishable foods like cheese respond better to programs with average benefits.