Can’t buy my love: building loyalty

Australian retailers are constantly looking for ways to stand out from the crowd. Loyalty programs are one way to stand out - but how can you craft a program that really packs a punch?

Retailers are locked in an everyday battle to win the hearts and minds of Australian consumers.

Loyalty programs can be a hugely successful approach to winning repeat business. According to the Australian Privacy Commissioner, 80% of us are part of a loyalty program – and Roy Morgan research puts the figure at three quarters of Australian shoppers.

As business.gov.au points out, the benefits of a loyalty program include keeping your existing customers, increased sales and brand recognition, better business reputation, positive word of mouth and it could also help you attract new customers.

“A loyalty program without good research and strategy is just giving away margin.”

How can you stand apart?

Brian Walker, Chief Executive of the Retail Doctor Group, says too many businesses don’t think about the core of their loyalty program: value.

“What is your unique offer to the market? What is your point of difference?” he says.

“A loyalty program without good research and strategy, and targeted segmentation, is just giving away margin on the premise of increased volume.”

Your offering may be cheaper goods, but it also might be the ability to reserve goods in-store after booking online. Or you might offer discounted shipping rates to win loyal customers. Other offerings could include:

  • Benefits through a VIP program
  • Discount codes
  • Competitions
  • Rewards for referrals

Walker says you need to pick the offer that will bring the most value to your customer - which won’t necessarily equate to the biggest discount.

Consider the cost of your program, and that some are cheaper to run than others. Setting up a program with physical gift cards may cost only a few hundred dollars in the beginning, but the amount of money lost by giving out discounted products will add up over time. On the other hand, a referral program may benefit you in the long-term, as you gain a new customer, even when discounting.

Where to start?

You don’t have to create a loyalty program on your own. There are consultancies and businesses around such as PointsShop, Loyalty and Rewards Co and The Loyalty Point, who offer program building services.

But be aware of your risks

Many businesses end up using dedicated software to track loyalty programs, as servicing dozens or even hundreds of customers data can become complex. Customer databases such as Salesforce or Simplicity CRM also have plug-ins that allow you to track benefits and discounts given over time.

But, beware of the risks. For example, the Australian Securities and Investments Commission can insist that you honour gift cards, even if you’re no longer operating the business.

Another risk is what you do with all the data you gather as part of the loyalty program, as this carries legal responsibilities.

The Privacy Commissioner regulates laws you should comply with to handle private information.

Did you know, cybercrime is now the number one economic crime in Australia? It is estimated that over 60% of all targeted cyberattacks struck small and medium businesses. And while, the recent WannaCry ransomware fortunately did not affect many in Australia, we are now all on notice.

According to research by BAE Systems undertaken last year, the cost of a cyber attack can reach more than $600,000. It also found that a quarter of all businesses don’t know if they have the security controls in place to defend against a cyberattack. 

This is why a cyber insurance policy makes good business sense. It can help safeguard your business against data breaches or email fraud, which could jeopardise your loyalty program. It can also cover expenses related to forensic investigations, business interruption, legal and / or public relations costs associated with potential extortion or blackmail.

To learn more about cyber insurance and ways to protect your business and loyalty program, contact a Steadfast insurance broker. They will be able to offer you tailored advice and help make sure you get the right insurance, to suit your growing business needs.

 

     
   

How to build a successful loyalty program

1. Start by understanding your key proposition: what do you offer that no other business can?

2. Understand your market through customer research. Who are they?

3. Then target your most loyal customers. Who are they, and what do they want?

4. Build your program on that proposition. Constantly measure cost of acquisition to ensure profitability – and make sure you have the infrastructure to support the program.

5. Protect customers’ information according to Australian privacy laws.

Source: Brian Walker, CEO, Retail Doctor Group

   
     
                 
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