How sub-programs are maximizing customer loyalty
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty marketing publishing, education and research since 1990.
An increasing number of companies, particularly retailers, are launching sub-programs that target specific sectors of their loyalty base.
When well executed, these initiatives, such as Kmart’s recently launched Shop Your Way Pharmacy Rewards, Best Western’s Ride Rewards with Harley-Davidson or GameStop’s PowerUp Pro, can increase memberships, goose up shopper frequency and encourage positive word-of-mouth when well executed.
The question of execution has been the challenge, however, and often a roadblock for many loyalty marketers. In an increasingly crowded field, organizations tend to catch "me-too" fever and roll out new concepts before completing due diligence, experts say.
"A lot of people rush into creating a lot of sub-programs," said Rachel MacQueen, vice president of marketing at LoyaltyOne, operator of Canada’s Air Miles coalition loyalty program. "You need to have careful consideration before you do that. It adds complexity to your program; it adds complexity to your messaging."
Avoiding major slipups requires making two key steps: first, determining if a viable sub-loyalty market exists; and second, charting out a brand-tailored implementation strategy.
A key attraction of sub-programs is that they help to distinguish broader loyalty programs from rivals while encouraging members to concentrate their spending on one brand, said Oleg Urminsky, associate professor of marketing at the University of Chicago Booth School of Business.
"A sub-program makes sense when it allows you to better target a segment for whom the current program is not working so well," he said.
A sub-program can also play up the benefits to more dedicated members, while also meeting the needs of the organization, said Suzanne Tameler, director of loyalty at GameStop.
GameStop’s PowerUp Rewards Pro, for instance, is a fee-based ($14.99 a year) offering of its larger PowerUp initiative designed for more dedicated gamers. Among the added benefits are bonus points, special discounts and a subscription to Game Informer magazine.
"Loyalty does not exist in a vacuum; a loyalty program must be part of the overall shopping experience, it does not fix a bad product or poor customer service," Ms. Tameler said in an e-mail.
She adds that it is important to understand the financial components, revenue implications and the associated expenses of the initiative. Once a need is determined, the organization can establish whether the difference in the group’s behavior would deliver the volume a program requires, Ms. Urminsky said.
What do you see as the pros and cons of sub-programs in improving customer loyalty? What are some steps for stores to avoid conflicts and complexities with existing loyalty programs?