The limitations of loyalty programs: And how to achieve genuine loyalty

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loyalty programs
Do formalized loyalty programs make sense? Mark Mitchell suggests "no" at least for building products manufacturers. I think the points he raises are relevant for any business contemplating participating in an awards-based program, however.
loyalty programs
Do formalized loyalty programs make sense? Mark Mitchell suggests “no” at least for building products manufacturers. I think the points he raises are relevant for any business contemplating participating in an awards-based program, however.

Mark Mitchell, who specializes in building products manufacturers marketing (which means many readers of this blog would be the potential customers, rather than sellers), takes a rather large shot against gift-providing loyalty programs in a recent blog post.

He argues these deals, where the vendors offer merchandise prizes or expensive vacations in return for loyalty really don’t work and in fact result in a race to the bottom, as the potential clients focus not on the value of the relationship but the value of the prize — and the clients attracted to these offers are hardly the best customers. (Usually the most financially strong and secure potential purchasers have healthy businesses and can afford the trinkets and trips quite easily with their own money.)

What really works? Mitchell suggests these three alternatives to the structured loyalty program.

1. Customer Service Leader

Improve your customer service until you are recognized as having the best customer service in your product category. Best customer service is defined by the contractor and not you or an online survey.

2. Knowledge Leader

Your sales reps should know more about your category of products than your competitors.  They should be the go-to person for information not just about your products but everything about your type of product.

3. Online Leader

You should be the online leader. Your website should be the contractors preferred source of information and the best place to get an answer to any of their questions about your type of product.

Foundationally, these characteristics apply to successful initiatives for virtually everyone reading this blog. Note (as I’ve said many times before), being a “customer service leader” does not mean saying in your marketing materials and communications: “We are customer service leaders.” This is one circumstance where action counts far more than words, and your customers should be the ones saying you are the leader, not you!

As a business, you can spend a lot or a little of cash on these three qualifying success resources.  Creating a spirit of communication and respect and genuine knowledge need not blow budgets, and if your niche is focused enough, leadership in the online space can be done without massive resources. However, ultimately, you may elect to spend significantly larger sums on expediting tools such as marketing automation and really thorough client service and product/industry knowledge training. These expenses, however, will be far more effective than scattergun marketing efforts.

Have you tried loyalty programs or other incentives?  If so, I welcome your thoughts as a comment or in an email to buckshon@constructionmarketingideas.com.

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