Database: Spoils for the Loyal
If implemented effectively, loyalty-marketing programs can boost response and customer lifetime value rates.
Retailers and airlines have long recognized the lifetime value of loyalty-marketing programs, which keep their best customers faithful only unto them. So why don’t more catalogers implement such programs?
Bill Dean, president of the catalog consulting firm W.A. Dean & Associates, thinks the average cataloger feels he or she doesn’t get enough repeat purchases to support such a program, which can be expensive to start and maintain.
“Most catalogers don’t really know their mix of customers,” Dean contends, “nor do they know what percentage of their 12-month buyers have made more than three purchases. For all the talk about RFM [recency, frequency, monetary value],” Dean continues, “most catalogers don’t move past recency and frequency. They select 90-day multibuyers.”
If more catalogers did an analysis of their customer files, Dean says, they’d find that the top tier is responsible for most of their sales. “Why not run a program just for them?” asks Dean, who points to studies that show the amount of dollars spent by the average catalog shopper keeps up only with the rate of inflation and remains at 6 percent to 7 percent of retail sales.
While more catalogers certainly should explore loyalty programs, Alan Weber, CEO of DataPlus Millennium, a data-driven marketing consulting firm based in Shawnee Mission, KS, suggests these programs may benefit only specific types of catalogers. Here’s how to determine if such programs are right for your catalog company.
The Loyalty Continuum
The product you sell largely dictates your need for a loyalty-marketing program. Therefore, the more unique your products, the less your need for a loyalty program. The most successful loyalty-marketing programs are those in which the product or service is a commodity, and there’s a clear cost for customers who switch from one provider to another. The obvious example is an airline frequent-flyer program wherein a consumer forgoes travel by another carrier.