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Frequency or Loyalty? Which should it be?

Posted @ 4:53 pm by Zain Raj | Category: Community & Social Media, SolutionSet | 0 Comments

I had a spirited debate with a senior marketing person recently over lunch — a debate that almost involved us chucking salad at each other. (This person, who I agreed would not be named in any of my writings, is a very good friend.) What was this debate about? What could get two fairly relaxed professionals excited enough that they would consider having a food fight at a respectable Italian restaurant?

A simple question: Is a loyalty program needed?

There is a belief that loyalty programs are critical in today’s undifferentiated marketing environment, that without some way of rewarding customers continuously, they will defect. U.S. Cellular just launched the Belief Project, a loyalty program where they give their customers points for their regular behavior with the brand. Pay your bills and earn points; change your phone and earn points.

Is this loyalty? I beg to disagree.

This is frequency marketing, where marketers provide their customers with incentives for the behavior they seek. There is nothing wrong with this! In many cases, it can even be a smarter marketing approach than developing an expensive loyalty program.

Jos. A Bank Clothiers proves this model. They use frequency marketing principles overlaid with a high-low promotional approach to continue growing their business, even in this challenging economic environment. What also makes this work for them is that Jos. A Bank has good quality products, good assortment and good customer service, all at convenient locations.

Most customers do not behave loyally in many categories. As I wrote in one of my earlier blogs, a high number of “loyal customers” are merely the results of a sort of superficial Stockholm Syndrome — that apparent devotion will dissolve as soon as they reacquire freedom of choice.

What most marketers call loyalty, then, is nothing but consistent frequency from their customers. If you come regularly and buy frequently, then by the current paradigm, you are considered to be a loyal customer.

Are you? Really?

Just because you use/buy the same product regularly doesn’t necessarily mean that you have deep emotional feelings about it, only that the product is fulfilling its promise consistently and therefore you, the customer, continue to use it. The day it doesn’t is the day you will look for an alternative.

My advise to marketers, in most categories, is to not get seduced by the whole idea of a loyalty program. If all you need is more frequent visits from your customers, execute a simple frequency marketing program.

It is easier, cheaper and will deliver positive ROI very quickly.

Warning: if you have similar lunch partners, this opinion may result in some lettuce with vinaigrette on your shirt.

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