Retention, Part 33: Putting a Price on Loyalty

By Sanya Weathers

Offering rewards to loyal customers has been covered in this series, and because my blogging in general is aimed at small businesses without a big budget, I’ve emphasized low cost loyalty rewards – virtual items (free), key chains and mouse pads (buy in bulk – and skip the t-shirts, stick with things that the customer looks at every day), and public recognition (free).

But if you suddenly get a budget, or if you’re acquired by a corporate overlord with shekels to burn, a whole world of more powerful options is available to you. Real-life gatherings with affordable prices for attendees. Blogger tours where you fly in influential community members. Special customer service for community leaders. Fancy swag. In game events. Contests with snazzy prizes. Real world birthday gifts for your regular customers?

Which of these things will have the greatest long term effect? Just how much more effective will these programs be than virtual items?

The answer is “it depends.” It depends on the shape your product is in (you might be better off spending the money on a bigger QA team, for example). It depends on how old the product is. It depends on the profile of your ideal customer. It can even vary depending on the time of year.

If you’ve got a newsletter, you’ve got a pretty decent experimental method you can use to determine the best course of action. Newsletters can be a good retention tool, as we’ve discussed before, but only when you make them into such tools. They are not in and of themselves useful indicators of customer engagement, with one exception.  The people who, post-launch, choose to get your newsletter are not more engaged customers. They are just the customers who forgot to uncheck the newsletter box.

(The exception is, of course, the pre-launch newsletter subscriber. That customer is very engaged, and probably subscribed to the newsletter so he could be among the first to know when the product went into beta or launched.)

So whenever you want to find out how effective your new loyalty program is, run the pilot version of your program through your newsletter and not your website. Identify a group of subscribers (who signed up for the newsletter after launch) who take advantage of the loyalty program, and compare their spending habits with customers who do not receive the newsletter and didn’t know about the new rewards.