Retailers are discovering that the effectiveness of frequent shopper and customer loyalty programs is fading. Findings from research studies at the University of Southern California and the University of Pennsylvania indicate that maintaining customer motivation requires maintaining program momentum.
In one study, the researchers set up an experimental loyalty card program at a car wash. Each customer could receive a free car wash after paying for eight. However, the offer was structured in two different ways.
One group of customers was told they would receive a free car wash after they paid for eight washes; the other group was told they would receive a free wash after purchasing 10 car washes, but they’d start the program with a credit for the first two washes. They had to get eight more.
Of customers in the first group, about 20 percent ended up participating in the program to the point where they received a free wash. But of customers given the "head start" credit of two washes, almost 35 percent purchased the eight additional washes to get their free one. In addition, the head start group completed their quota more quickly and kept coming to the car wash more often than did the group who didn’t get the head start.
Building on those findings, here are some ways to maintain the momentum of your loyalty program:
1. Give head starts to participants in your frequent shopper programs. Head starts motivate consumers to participate and to shop with you more often.
2. Grant frequent shopper program credits to a customer for coming into your store periodically, even if the customer doesn’t make a purchase on the visit to the store that day.
3. Focus customers more on how far they’ve come and less on how far they have to go. For instance, when thinking of a layaway plan as a loyalty program, design the payment record card to resemble a pyramid so that early payments show up as a large base and later payments as topping it off.
Bruce D. Sanders
Want to improve the way you run your business? Entrepreneurs, academics, and consultants from diverse industries offer practical advice on a variety of topics each business day.
To submit a tip for consideration, first check our archive of previous tips to make sure you're not repeating a tip someone has already contributed. Then send the tip to Small Business channel contributor Michelle Dammon Loyalka. Because of the volume of material she receives, she may not respond to each individual.