The loyalty game

With recent cases of identity theft, privacy invasion, credit card fraud and the possibility of opening your mailbox up to spam, consumers have developed a certain level of apprehension for online shopping.

After sorting out security issues and convincing consumers that their websites are safe, the next thing that online retailers need to do is market their websites vigorously in order to keep consumers coming back to the site and attract new ones. One of the things that they need to look at to keep consumers coming back to their websites is a loyalty programme, but not all loyalty programmes work particularly well and consumers have grown wary of loyalty programmes that fail to deliver on their promises.

According to Forrester Research a well-conceived and executed loyalty programme can be the key to turning invisible shoppers into profitable customers. It is logical that satisfied online shoppers shop more often, spend more and tell their friends, which results in more traffic to your website. Online retailers need to rethink their loyalty strategies and make them appeal to a broader audience. The benefits also need to be worth the effort of signing up to the programme and spending money to gain the necessary points needed to claim the discount or prize that is on offer.

Considering that some loyalty or rewards programmes are such a waste of time, for example, a member needs to spend an exorbitant amount of money in order to qualify for something as trivial as 5% discount on the next purchase of R1000.00. In other words the rewards do not counterbalance the spending required to earn them, so consumers do not even bother signing up with the programmes. The value of the programme needs to be clearly articulated to the consumer and the benefits need to be visible and tangible.

Flowers.co.za, an online retailer of flowers and gifts, has a well structured loyalty programme that provides good incentives for members. "The reason why it works so well," says Chris Mason, Managing Director, Flowers.co.za, "is because we consistently look at ways to improve the service offering to keep our loyal customers coming back and the rewards are well worth it". The website also continually updates products and has regular competitions and special offers to keep the site current.

In her book, "The 12 Laws of Loyalty", Jill Griffin says that retailers need to practice the 80/20 rule in building customer loyalty - roughly speaking, 80% of the websites´ revenue is being generated by 20% of customers. Some customers represent more long-term value to the website than others. A smart company segments customers by value and monitors activities closely to ensure high value customers get their fair share of special offers and promotions. Unlike many firms who simply measure overall redemption, these savvy loyalty builders pay close attention to who redeems.

She also states that online marketers need to aggressively seek out customer complaints because for most companies, only 10% of complaints get articulated by customers. The other 90% are unarticulated and manifest themselves in many negative ways, the most damaging of all being negative word of mouth. With the Internet, an unhappy customer can now reach thousands of would-be customers in a few keystrokes. Online retailers need to make it easy for customers to complain, and treat complaints seriously.