How good is your loyalty program? What would happen if you cancelled it?

The following is from Chuck McKay... go to his blog by clicking on the title above

In Their Own Best Interest
In the 1960s Country music was a true niche radio format, with only a few hundred radio stations in the U.S. playing the music.

Country radio managers and programmers claimed their listeners were “loyal.” They claimed it so loudly and so long that all through the 70s the loyalty of Country listeners to their favorite station was accepted as fact.

In the early 80s Country became mass appeal, and the number of radio stations broadcasting the music grew to the thousands. Care to speculate what happened to all of those loyal station listeners?

Like radio listeners of every other format, they migrated to other stations which played a better selection of the songs they wanted to hear, and had disc jockeys who spoke about things the listeners related to.

Perhaps you can relate to radio listeners. Perhaps not. The principle is the same whether we’re discussing radio listener loyalty or customer loyalty programs.

The principle hasn’t altered since Adam Smith first proposed it in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations: When given a choice, people will always do what’s in their own best interest.

That means that customers are never truly loyal. Shall we look into your customer loyalty program?

* Will people truly be loyal to your store because you saved them seventeen cents on a can of tuna? Remove the incentive and see how many remain “loyal.”

* Will people keep buying CDs from your record club just to earn the membership points?

* Will they fly your airline exclusively because you made them members of your club? Or do they also have all of your competitors’ club cards?

So, it appears that you’re not buying loyalty with your customer loyalty program. You’re offering a discount to your regular customers. You think this is good business?

What’s that? I misunderstood? You’re using the program to attract new customers?

Cool. Will they stay after you remove the incentive?

It could happen. You stand a much better chance of them staying, though, if your customer service is spectacular. Of course, if your customer service was truly that impressive, you wouldn’t need the customer loyalty program. The resulting word-of-mouth would keep bringing in new shoppers.

Nope. You can never buy loyalty. It can only be earned.

What are you doing to earn it?

Please don’t tell me you’re discounting the tuna by seventeen cents.


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