Retail Marketing And Loyalty Incentive Strategies

According to research, only twelve to fifteen percent of customers are loyal to a particular brand. However, companies generate fifty-five to seventy-five percent of their sales from this small percentage of shoppers. Retail marketing strategies including customer loyalty programs enable retailers to identify individual customers, to measure and understand their behaviors, and reward them for desired behavior.

A reward program offers benefits to retailers and customers. One benefit to retailers is shift, or the ability to acquire new customers. Another benefit is lift, or the increased spending of existing customers, which often results from a shift in spending to higher-margin products. Reward programs also improve customer retention, by offering them long-term benefits, and by providing recognition for a company's best customers.

Some retailers employ rebate programs. Rebate programs offer cash or gift certificate rebates based on the dollar value of a customer's purchases, or based on a certain percentage of their purchases. Rebate programs are easy to communicate and to understand, and fairly cheap and easy to administer. Rebate programs may be expensive compared to other loyalty programs, however, and have the disadvantage of rewarding both profitable and unprofitable customers.

Retailers may develop discount programs, which often involve loyalty cards. Discount programs are easy to administer, and easy for customers to understand. Discounts programs also offer instant gratification at the point of purchase, and allow retailers to tactically manipulate deeper discount offerings. On the other hand, discount programs carry the implication that everyday prices are too high, and discounts negatively affect profit margins.

Points programs are also popular among retailers. Points programs allow for targeted and flexible promotions, in which retailers offer more points for a particular purchase. Points programs avoid the need for discounting, and also reap the benefits of breakage, which means the difference between points issued and points redeemed. However, points programs are more complex to put together and to manage, and are even more expensive than rebate programs.

To develop a program, retailers should decide on the program's core objectives. Retailers should identify the core customer to be targeted, and should analyze how the program fits the company's brand and culture. Also, retailers should study the loyalty programs of their competitors, and their own past efforts, to identify best practices. In addition, retailers will have to identify the human resource and technology issues that may arise from rolling out a loyalty program.

Every loyalty program should be clearly defined. Enrollment should be easy, and the currency, benefits, and rewards should be easy to communicate to customers. Retailers will need to analyze methods for cost recovery, including entrance fees, annual membership fees, and co-branded credit cards, along with their estimates for increased sales.

Companies may consider creating their own loyalty program, or outsourcing to another company. Loyalty One, for instance, is a company which provides strategies for loyalty programs, along with other customer relationship management products. Perhaps the greatest advantage of incorporating loyalty programs into retail marketing is the acquisition of a customer database. A database helps companies to identify their best customers, and to try to influence their spending habits, for both customer satisfaction and profitability.

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