If you're into CRM, I just want to say one word to you: 'plastics'

And judging by the loyalty cards I have in my wallet, this advice is still being taken to heart by bookstores, video outlets and banks (real and virtual).

It seems there's still money in plastic...

This said, in the 2002 HBR article, 'The Mismanagement of Customer Loyalty', Professors Reinartz and Kumar caused the market to reevaluate the role of loyalty programmes: "No company should ever take for granted the idea that managing customers for loyalty is the same as managing them for profits."

So, do loyalty cards work?

Maybe.

The HBR study found that long-term customers extract their fair share - and what they want sometimes outstrips what they give: they don't necessarily pay higher prices or provide enough word-of-mouth to earn their keep. Sometimes a new customer can be a lot more lucrative than someone who feels that they have spent so much with you that you owe them something (beyond the trade). It would seem that the advertising industry has had an intuitive sense of this - when they win a new account they have a party, but seldom celebrate the anniversary of the relationship in subsequent years.

Brian Woolf, in his book, 'Loyalty Marketing - The Second Act', proposes six key areas of focus that can move you from the 'maybe' to the 'money':

1. Commitment. Getting the whole organisation physically and emotionally involved in the programme.
2. Differentiation. Of the company in the customers' eyes, and differentiation of the customers in the company's eyes.
3. Simplicity. People first need to understand and then remember, not the other way around. If you can't articulate it quickly and simply, don't expect your customers to.
4. Flexibility. Customer desires and expectations change - you should be able to take advantage of the trends.
5. Measurement of results. You need to know how you're doing.
6. Behaviour follows reward. People buy into something because they expect a return that's meaningful for them - not to you - to them.

Like any relationship that you want to take to a new level, you need to provide a clear idea of what the rewards for the new behaviour are. In 'The Most Wanted Benefits of Membership Clubs 2004', a survey undertaken by Razor's Edge, South African consumers were found to place little value in extreme rewards, such as, balloon safaris and wildwater adventures. In contrast, they highly valued free holidays, movie tickets, discounts and cash prizes.

People perceive greater value in rewards they can relate to.

The plastic has spoken.

Additional Resources:
For current research on Membership Clubs and Loyalty Programmes, contact Bruce Conradie at Razor's Edge.
For further reading, browse our Loyalty Programme Collection here.
Brian Woolf's free ebook can be downloaded here.