How do you quantify loyalty?

14Jun11

A few weeks ago, I heard that one of my favorite retailers was planning to introduce a customer loyalty program. They didn’t provide any details at the time, but I recently came across a page on their website that explains how the loyalty program works.

In short, you can qualify for the loyalty program benefits by doing one of two things:

– Spend more than $XYZ per month, or

– Place multiple orders every month, regardless of total dollar volume.

The first option makes sense to me, since you want to reward customers who buy a lot of products from you. However, the second option is counterintuitive, since it encourages people who don’t spend a ton of money to split up their purchases into more transactions than necessary. This costs the customer and the retailer more time and money.

A better approach is to define loyalty based on total spending amounts over time (like in the first option above), and then offer a second qualifying method for people who are regular customers but simply don’t have a need to spend that much. For instance, you could allow someone to qualify if they place at least three orders during a six month period. That way, you’re encouraging people to shop with you regularly, without driving them towards buying patterns that waste their time and yours.



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