Ensuring customer loyalty

Ensuring customer loyalty

As you watch another customer walk away with their new computer or software package, or even a colour-co-ordinated mouse and mouse pad, do you wonder whether that's the last you will see of them? Do you have anything that would pull them back (apart from your great service and friendly nature, that is)? If not, perhaps a loyalty scheme is what you need.

If you've heard of Fly Buys then you've heard of loyalty schemes. These schemes are used in many ways with different rules and benefits. The aim is to create an ongoing relationship with the customer, and in order for it to work the scheme has to be attractive. People must want to be a part of your customer base.

American Express is a good example of how some loyalty schemes can be elaborate. Its reward system encourages customers to use the American Express credit card as opposed to the other cards that they may have in their wallets. With every purchase customers gain points for the dollars they spend. Once they have accumulated a certain number of points they are eligible to claim rewards. These include free nights in hotels, airline tickets, cruises, movie passes, and so the list goes on.

Closer to the computer industry is Microsoft Communique. This is a club for users of Microsoft products. The annual fee ranges from $49 to $299, depending on the options users choose. There are different levels of service ranging from Standard Communique to Communique Pro, with benefits including a monthly magazine, discounts, support services plus a certain number of free support calls. Communique was originally set up in 1989 for the purpose of "providing a link between Microsoft and its customers", said Pam Seccombe, senior marketing manager, Customer Loyalty. "Microsoft works through a distribution chain and so it has no contact with its customers otherwise," she said.

The implementation of such schemes on the retail side can be seen at Dick Smith Electronics. Kate Burleigh, public relations manager for Dick Smith Electronics, described its VIP club as "not so much a loyalty scheme as a way of keeping in touch with our customers". Buyers automatically join the club when they purchase a computer. "Considering our customers are mainly first-time owners of computers, the club serves as a way of making sure that they don't become dissatisfied with something that can be easily fixed," Burleigh said. She added that through the club Dick Smith Electronics "is able to follow up any queries quickly and efficiently, rectifying them before they become insurmountable".

Smaller resellers have also established loyalty schemes. Tom Queally, the owner of Meghead in Chatswood, developed a club for his customers which costs $5 to join and entitles the customer to a 10% discount on any latest release software that is not already discounted. This only applies if the customer is paying cash. Otherwise the discount is 7%. Queally said that he directed the club at his more regular customers in order to ensure their loyalty. He now has around 1,500 members. "It works!" Queally said.

Big successes

Suzie York, public affairs coordinator at American Express, said that their scheme was also very successful in a short time. In fact, offering such attractive rewards would not be possible if the scheme was not flourishing. The point system was launched in May last year and already over half of American Express's customers have enrolled. "There has been around a 30% increase in spending and we are attributing this to the rewards scheme," York said. She believes the success of the scheme lies in the fact that it is easy for customers to join, and there is no membership fee.

Microsoft has also found that its loyalty scheme works. Communique has around 80,000 members and, as Seccombe said, "generates loyal and more high-spending customers". Seccombe pointed out that members of Communique spend around three times more than non-members.

Setting up

Loyalty schemes are not easy to implement. It's not just a matter of setting up a discount club or reward scheme and hoping that your customers will join. The customers' needs and wants, as well as the benefits to you as reseller, must be fully researched. For example, before embarking on the rewards scheme, York said that American Express thoroughly researched what their customers wanted and would respond to. They already had a Membership Miles program, but found that the travel rewards were not attractive to a large number of their customers, she said. The fact that the reward scheme has a variety of rewards solved this problem, according to York.

The VIP Club at Dick Smith Electronics also entails hard work. Burleigh pointed out that the effort is offset by the fact that "membership is growing at a very nice rate and although it is a lot of work running something like this, it is work that we would have to follow up and do anyway".

Loyalty schemes can be beneficial. They ensure that you keep your customers happy, and may help you to gain custom. However, they do require planning and, possibly, money to implement. In such a competitive game, it is perhaps something worth considering.

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