Customer Retention: Strategies for keeping your best customers for the long term.

Promoting Loyalty and Retention through Frequency Marketing

Frequency marketing is a term generally applied to any program designed to generate brand or customer loyalty which results in a long-lasting relationship with customers. Specifically, it encourages and rewards the ongoing purchase of products and services.

Often online, most frequency marketing programs offer more extensive and sophisticated reward possibilities than the popular early versions of this type of customer incentive program, and these days the goal is more than loyalty: the goal is to get permission from consumers to market to them over time, and to make them feel appreciated for loyalty.

By providing customer incentives that encourage consumers to allow their purchases to be tracked, frequency marketing programs enable marketers to target promotions in a way never before possible—based specifically on consumer requests and business needs.

They can help increase store traffic (online or on-premise), influence the size of purchases, stimulate faster purchase cycles, and/or add value, etc. They can prompt consumers to load up on product to thwart a competitive launch or encourage referrals. Best of all, because this type of customer incentive program targets a specific, defined audience, you can precisely measure the results.

The growth of Internet-based marketing has given a whole new life to loyalty marketing. It’s a medium that allows organizations to build extensive, permission-based databases, segment customers by pertinent characteristics, and communicate frequently to receptive customers with customized messages at costs far below traditional advertising. A marketer can send an e-mail to one million highly pre-qualified, opted-in consumers for far less than the comparable cost of print, radio, and television advertisers, with results that can be precisely tracked.

Types of Frequency Marketing Programs

Because of their long experience with frequency marketing programs, incentive companies have developed a number of different variations—both traditional and online—suitable for a variety of different needs and goals. For instance:

• Continuity premium programs are long-term customer loyalty programs that reward consumers with brand-logo merchandise or with premiums that can be associated with the product.
• Free or pay-to-join club programs are formal membership programs geared to generate significant incremental purchases of sponsored products.
• Collect-and-win games are designed to operate over a short period of time to generate four or five repeat visits or product purchases. Participants generally qualify for prizes at various levels.
• Escalating rebate offers are designed to stimulate multiple purchases of a variety of brands. The more products purchased, the greater the rebate.
• Credit-card or ATM automatic-entry sweepstakes: Every time you use a credit card to make a purchase or use your ATM card, you’re automatically entered into a sweepstakes.
• External group programs entail joint participation by two or more sponsoring companies. The program rewards consumer loyalty by offering points, such as air miles, based on purchases of a wide variety of products or services.
• Time-release programs provide the required coupons upfront, but encourage purchases over an extended period of time by staggering the valid dates of the price offers.

Don’t forget to communicate.

Whatever your choice of customer incentive program, don’t forget that communication is one of the keys to a successful customer retention strategy, and communication is a two-way street. You are advertising and marketing to external customers, who in turn communicate with the internal employees they encounter on a day-to-day basis. The feedback customers give to employees about your program may be one of the most overlooked areas of business intelligence in helping organizations better understand what they can do to please customers and promote retention over the long-term.

When to Use Loyalty Marketing

Some businesses have characteristics better suited than other businesses for loyalty/frequency customer incentive programs, according to Jill Griffin, author of Customer Loyalty: How to Earn It, How to Keep It. Her book includes the following questions to help determine whether a frequency marketing program makes sense for your company:

• Does your product or service have a frequent and regular repeat purchase cycle? Successful customer incentive programs target customers who have an ongoing need.
• Do your customers perceive little differentiation between your product or service and your competitors’? If customers perceive your product as replaceable and if they can be persuaded to buy from a competitor, then a frequency marketing program may help.
• Will your customers perceive the rewards as valuable? Your customers must consider your frequent buyer benefits to be valuable and worth the effort.
• Will you communicate with these customers on an ongoing basis in order to build a long-term relationship? You’ll need a monthly statement by which you communicate new customer incentives, information and special offers.
• Can you afford the program? The rewards, tracking, regular communication, and customer inquiries connected with the program will require significant time and monetary resources.
• And, most importantly, what do you intend to do with the data you receive? Do you have a comprehensive relationship-building strategy and a means to measure it?

Read the full Executive White Paper for more insights into the economics of customer retention and strategies for increasing customer loyalty.