History of loyalty programs
Loyalty programs have been around since the 1950s when S&H Green Stamps began rewarding grocery store customers with small books that could be filled with stamps and then redeemed for appliances or other merchandise. The modern day loyalty program is attributed to American Airlines, who in 1981 began offering frequent traveler miles. This program was quickly duplicated by other airlines, hotels, car rental companies and credit cards. The hospitality industry has been in the forefront of loyalty programs since its inception in 1981.
Retail loyalty programs came into existence when retailers began to realize they did not have a tool that allowed them to identify their best customers. They did not have a tool which would allow them to reward and encourage preferred behavior. In other words, they did not have the customer data bases they needed. The Center for Retail Management at Northwestern University sites that only 12 to 15% of customers are loyal to a single retailer, however, that small percentage of customers may generate between 55 and 70% of that retailer’s sales.
In today’s markets, tangible or not, customers have more added choices than ever before. In today’s economy customers are more penny-wise than ever before. The combination of multiple choices and stringent spending increase the value of customer loyalty programs tenfold. Smart loyalty programs will understand their customers’ expectations and act upon not only tangent expectations but unmet expectations as well. So, how can a smart CRM solution help? CRM puts the customer in the center of the business. CRM provides a universal view of the customer – what they buy, when they buy, how they buy. By using a effective CRM solution, data the retailer can begin to recognize each customer and move them from being a transactional customer to a loyal customer.
Accurate data collection
Intelligent customer segmentation
CRM solutions will facilitate the definition of the customer experience. By defining what interactions are important to the customer, the experience can then be replicated for those customers the organization wishes to retain or grow. CRM enables the on-going evaluation of this experience and allows for the focus to shift to those areas most profitable for the organization and to reduce or revitalize those areas which are drawing down the profitability.
Effective loyalty campaigns
CRM also supports the marketing function – how customer communication is handled. With support of CRM solutions the customer can be spoken to at multiple levels and at all contact points with a standardise and consistent information. CRM empowers the staff to take responsibility for the retention and growth of customers through the personalization of interactions.