Do Loyalty Programs Really Work?

I believe that well conceived loyalty programs provide both immediate and long-term benefits to the organization. But how should the direct marketer go about proving the effectiveness of Customer Relationship Marketing activities?

As the sophistication of loyalty programs increase, so does the evaluation process.

The increases in customer loyalty budgets should translate into share-of-customer growth and additionally, more cost effective acquisition efforts. These need to withstand the scrutiny of the CFO with quantified results.

But here’s the rub. What would have happened in the absence of any loyalty program?

How does the marketer create a control group that totally isolates customers from the overarching influence of powerful loyalty programs? I have yet to see results that do not create more questions than they answer.

In today's multi-channel environments, it is almost impossible to isolate customers totally from their peers and other indirect influences.

It appears that the changes in the marketing space have placed new demands on direct marketers. We must now confront the same analytical problems that our branding brothers face. It works, but what yield am I getting from my marketing budgets?

We are well beyond the simple cost-per-sale and cost-per-customer indicators with new, more advanced evaluation criteria. We must now begin to apply hard numbers to soft data. Judgment replaces certitude when assigning credit to various media expenditures and complex, interdependent strategies.

In a sense, the promise of strategic integration has outpaced our ability to evaluate it.

There is a crying need to train analytical staff to take on more strategic and broader roles in today’s organizations. We need people who not only know analytics, but individuals who know how to create actionable recommendations from an oversupply of information.

Do you think that loyalty programs generally work? Or are there now too many such programs for consumers to care about anymore?

Posted on October 1, 2007 and filed under Direct Marketing Strategy.