Loyalty Marketing
What is loyalty marketing?
Loyalty marketing is a style of marketing which is based on increasing the customer base and retaining that customer base through loyalty-based incentives. Loyalty marketing is often used in conjunction with branding in order to familiarize customers and potential customers with a product and then provide them with the incentive to purchase the product or service. Loyalty marketing is used to create a sense of loyalty among customers in order to ensure that customers will want to return to the business when they need to purchase new products, goods or services. Loyalty marketing can also be linked to the concept of customer referral, or the idea that when customers are highly satisfied, they are more likely to refer a business to friends, family members or even strangers. Although the concept of business or customer loyalty has been around for years and years, the idea of loyalty marketing as a marketing strategy did not truly develop until the mid 1990s. Today, loyalty marketing can be seen in almost any type of product or service market, such as retail stores, commercial airline companies and automobile producers.
The earliest example of loyalty marketing can be found in the 18th century. In 1793, an American merchant began to give out tokens to customers who made purchases over a certain monetary amount. These tokens could be collected by customers and, after a certain number of tokens were collection, could be exchanged for items in the shop. This gimmick soon caught on and was highly used during the 19th century as a way to increase business. In the early 20th century, this was taken a step higher when businesses began to catch on to the benefit of marketing their incentive programs towards children. Businesses began to include prizes with items aimed at children, such as cereals or other foods. Although it was common for companies from the late 18th to the mid-late 20th century to inspire purchases through incentives such as prizes or redeemable merchandise, it was not until the early 1990s that the idea of loyalty marketing as we know it today really took shape. In the 1990s, businesses began customer rewards programs which were not aimed at redeeming prizes but at ensuring customers would return to the business again and again.
A loyalty marketing strategy is based upon fostering loyalty among customers by providing incentives for those customers to return. This can be done in several different ways. The most notable and commonly used way of creating loyalty is increasing the quality of the goods and services provided to such an extent that customers leave extremely satisfied and with the sense that their business (and continued business) will be appreciated. For example, the high level of service provided by Disney employees at Disney theme parks and Disney Store locations can be considered part of Disney’s loyalty marketing strategy: customers are called guests and are treated to quality service that is intended to make their experience ‘magical.’ This experience will inspire customers to return to a Disney theme park or Disney Store location, because they wish to receive that level of service again.
Another example of loyalty marketing is a customer rewards or customer incentive program. Programs which provide customers with discounts or “free cash” for spending their money are one of the most common types of loyalty marketing strategies used today. These types of incentives first became popular in the mid-1990s in the form of punch cards. When a customer spent a certain amount of money at a business, they would receive a certain number of hole punches in their rewards card. When the entire card had been punched, they would usually receive a discount or “free cash’ at a business, depending on the company and rules regarding the card. Today, these loyalty programs based upon money being spent are still in use. Today, they usually take the form of a card which can be scanned or swiped, with the information regarding the customer’s total loyalty purchases being stored in an online account.
The third notable example of loyalty marketing are rewards programs. Rewards programs work in a similar manner to discount cards—when a customer spends over a certain amount of money, they are entitled to certain rewards from the company. Rewards programs are particularly popular among airlines, where rewards such as free miles, free baggage or even free trips are rewarded to customers who frequently frequent their business.
All of these marketing schemes are an excellent way for businesses to create incentives for their customers. Customers are often willing to spend a few extra dollars, if it means they’ll receive great service, get another hole punched, be that much closer to obtaining a discount, or receive a free checked luggage bag the next time they fly. Loyalty marketing is built upon creating incentives.
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