Loyalty as a differentiator
 

In the current climate, obtaining and retaining customers and keeping them loyal is key to survival. Exactly how to foster this relationship is a challenge facing many directors, managers and CEO's - especially those who offer products perceived as nonessential or luxuries. With consumers cutting back on 'indulgences', offering your customers a way to maintain their preferred lifestyle, while delivering value for money is one way to attract attention and keep it.

According to GI research, 95% of finance directors and managers consider loyalty programmes key in preventing customer defection, maintaining a competitive edge and supporting commercial prosperity in the global financial crisis. An indication that customers also see the value of loyalty programmes comes from a recent survey by Wyndham finding that one in five holiday makers could not currently take a holiday without redeeming loyalty currency.

There is little doubt that well managed loyalty propositions are increasingly valuable in the current market, and provide a key platform from which to understand customer needs, helping build long term and profitable relationships now and in the future.

But there are some points to consider. Firstly, developing a long term relationship with customers requires a strategy not reliant on meeting needs, but realising how to exceed them, above and beyond your core product or service. Many leaders in loyalty programmes have recently demonstrated this by revitalising their proposition. For example, Boots has just announced an overhaul of its 16million strong Advantage Card database in an attempt to increase the number of co-branded promotions to do just this.

Secondly, co-branding and utilising partnerships can also provide a successful strategy to differentiate between loyalty programmes. Best Western and Virgin Blue are two brands to recently expand their loyalty offerings by partnering with companies such as Debenhams, Apple and Nike, utilising a platform which allows customers to earn points or cash-back in a trusted and secure brand environment.

Additional reward platform such as these allow loyalty programmes to be further differentiated by offering customers added value successfully in a sector currently under increasing pressure. In fact, a recent study by Colloquy found that loyalty programmes in the travel sector have seen a 31% decline in active participation since 2007. This signifies that the general population actively participate in 1.5 travel-related loyalty programmes in 2009 compared with 2.18 in 2007. This indicates travellers are no longer experiencing the benefits that come with being an 'Executive Flyer' or 'Preferred Guest'. As these consumers are accustomed to a lifestyle with these kinds of perks, allowing them to maintain it for a small annual or monthly fee may be a solution to offer value, as well as making them feel valued.

Innovative solutions and products help companies realise and deliver value and satisfaction. Businesses using cost cutting tactics to entice loyalty may work well in the short term, but after the recession is over and the dust settles, for businesses to maintain any kind of ongoing loyalty with customers they need to focus on strengthening the relationship and offering more.

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