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By Knight Kiplinger

The Kiplinger Washington Editors

May 9, 2008

No Quick Easing
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Short-term fixes won't help, and it'll take a few years for long-term solutions to kick in. This week's Kiplinger Letter looks at what's in store for food price inflation at home and abroad.

ALSO INSIDE THIS ISSUE: The Outlook for Credit Markets, Commercial Real Estate, Science Education, the Presidential Campaign, Business Tax Breaks, Health Savings Accounts, Trade with South Korea and U.S.-Russian relations.

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How to Reward and Keep Your Best Customers

Understand your customers' spending habits and how you want to change them before starting a loyalty and rewards program. Here's how.

Worth Reading: The Quick Take from Kiplinger

February 2008

Mickey Neuberger

Loyalty Lab Inc.

Mickey Neuberger is senior director of loyalty strategy at Loyalty Lab Inc., a customer management and brand management company that specializes in designing and implementing customer loyalty programs. Its clients include Bally Total Fitness, 1-800-Flowers.Com, TicketsNow and Smith & Hawken.

Customer loyalty programs are proven revenue raisers -- if designed and handled properly. But they can be a financial drain if they are not properly skewed toward your best customers and don't generate enough repeat business.

The key to a rewards program that spurs spending and repeat business, builds brand loyalty and generates positive word of mouth is a careful analysis of customers' behavior, Mickey Neuberger writes in a white paper for Loyalty Lab Inc. He advises businesses to look at customers from three perspectives: How often do they shop? How much do they spend? How involved are they with the company beyond making purchases? "This analysis provides loyalty program designers with a sense of which customer behaviors they will be able to and will want to influence," Neuberger writes. "For example, if 90% of customers only make one purchase, then the loyalty program's sole objective may be to drive the second purchase."

Put special focus on the very best customers. Neuberger says it's common for 10% of customers to provide as much as 50% of revenue. Consider using a system of tiered benefits that give the top customers the best and most exclusive benefits -- member-only sales days or valet parking, for instance. Neuberger urges companies to reward customers whose support of a brand goes beyond purchases -- subscribing to company newsletters, posting product reviews, signing up for a house credit card. "There is usually a very strong correlation between engagement activities and long-term customer value," he says.

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POSTED BY: Harold K. Wilkes (February 11, 2008 12:16 PM)
Thanks for the article. Step 2 is exactly what I've been trying to get across to our marketing director for years. Being a casino, we run a most valuable player club. We do a lot of scatter-shot promotions and get nothing measurable in return. Marketing loves to spend money but hates to be accountable. Maybe your article can help me get something going. Thanks.

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