Effective Loyalty Programs – Recognizing & Rewarding Most Valuable Customers

The second in a series around features of successful loyalty programs that have helped certain companies stand out from the rest, with program offerings that are recognized as best-in-class.

You can download PDF version of this whitepaper here.

Recognizing & Rewarding Most Valuable Customers

Too often, companies that run loyalty programs take the easy road in designing them, offering a simple package of benefits and services that are not customized in any particular manner to the various customer segments. Of particular concern is the lack of attention given to the high net worth segment of customers, a group which generally accounts for just 1 or 2 percent of the overall customer base, but brings in over 15% of the company’s revenues.

One engagement conducted to redesign a loyalty program found that just one customer in the top segment (1% of the overall loyalty card holders) brought in as much revenues as 16 of the customers in the bottom segment (58% of the overall loyalty card holders). Essentially, for the company in question, losing that one top segment customer was equivalent to losing 16 of their low segment customers. This begs the question – why doesn’t every loyalty program give more back to their most valuable customers?

At the heart of differentiating loyalty programs for high value customers is offering exclusive benefits & services tailored to meet their particular needs. Companies need to strive to make such customers feel that their business is valued, and that they deserve to be treated differently. Some examples of such differentiated treatments in different sectors around different benefits & services could include:

  • Offering a rapid checkout line in a grocery store to be used exclusively by top tier customers
  • Providing exclusive discounts at golf courses and spas, guaranteed reservations at top restaurants and shows for high net worth banking loyalty program members
  • Offering reserved parking spots / valet services at the airport for valuable airline loyalty program members
  • Gifting shares of telecom company stock in lieu of points to an exclusive group of valuable loyalty program members

The benefits & services that can be customized and offered exclusively to top customers is endless. There are some ground rules however that should be followed when designing such features for the loyalty program:

  • Don’t Give Away the Bank – The added offerings should be proportionate to the value of the customers in question. As a general rule, if the “payback ratio” of the program to the masses is 2%, such customers should be receiving at least double that. Such a tactic would only take the overall payback ratio a little over 2%, as the customer base receiving preferential treatment is minimal.
  • Listen to the Customer – The differentiated offerings should be in essence designed by the top customers. Surveys and focus groups need to be utilized here to truly understand how to customize the program to meet the needs of these exclusive customers in a manner they will truly appreciate and value.
  • Pilot – While surveys and focus groups are a decent enough gauge to predict the impact of the differentiated offerings, a pilot is truly the way to go when launching new features. These new benefits and services should be tested with a small segment of valuable customers to see whether the desired results are achieved – fine tuning or even cancelling the offerings may be the outcome.
  • Innovate – Keeping the benefits & services fresh by gradually adding new ones to the mix will maintain customer interest and excitement. Offer too many alternatives at once and not only will it confuse customers, but will prevent you from being able to focus communications enough on one specific benefit or service.

Ultimately the litmus test on how effective these benefits & services are is measurement – measuring the impact and change in retention, satisfaction, and share of wallet is a must. Control groups should be designated for this effort.


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