How important is a loyalty system to your customers?

Johannesburg, 19 Nov 2014
Read time 3min 50sec

For the modern retailer, this is becoming an ever-larger question. Should we be implementing loyalty systems within the business and, if so, how will this actually benefit me?

Most small to medium retailers have already allocated a portion of their budget for marketing. Traditional methods include print media advertising and flyers though we are seeing a shift towards social and electronic avenues such as Twitter and Facebook. However, this is usually directed towards one portion of your potential customer base ? the new customer.

The obvious question, then, is what are we doing for our existing customer base and how are we enhancing their shopping experience, if at all?

While growing your business is key to longevity and success, it is important to take note and understand the value of the existing customer base. Their loyalty to us needs to be acknowledged at some point. And because each customer is different, how do we reward each of them in a way that reflects their individual buying behaviour and have it still based on the value of their relationship with you?

"Win greater share of wallet"(Nunes & Dr'eze, 2006)

By providing extra incentives, loyalty programmes encourage consumers to direct more of their purchases toward a business, and less at competitors.

The good news is studies show customers want to be marketed to! Joe Public enjoys the idea of receiving extra value with each purchase, and being rewarded by their relationship with you. There is, of course, a complete new article that can be written on the psychological aspects of reward-based buying, but for now let's simply state that it works in favour of the business owner. What is important is that the value received occurs in such a way that the customer acknowledges its value and the business is able to afford it.

There is a huge up side to all of this since, by customers registering with the loyalty programme, we can understand their individual or collective buying and return patterns better. The impact of this to the business is immense. We can understand from our loyal customers what they are buying and what they are not, and can thereby adjust our buying patterns and stock holding accordingly. It may also give us insight into items customers associated together, helping us realise new markets and growth strategies. These patterns will allow us to focus our marketing on areas requiring more attention, or to increase the exposure of other items.

"Yield insight into customer behaviour and preferences" (Nunes & Dr'eze, 2006)

Loyalty programme customer relationship management (CRM) systems provide a tool for collecting customer data and tracking behaviour. This lets a business know what a consumer buys, how much, and how often. Using CRM can determine which customers to focus marketing resources on to maximise returns, reduce overall marketing costs, and improve the efficiency and effectiveness of marketing efforts.

Businesses understand the association items have with each other like shoes and polish, or couches and leather treatments. Not all customers who purchase one item are aware that you may sell the other and, as many businesses do, these "upsell" products are generally good profit turners.

By tracking the purchases through the loyalty program we are given the opportunity to sell these products back to our customers knowing that they need it. And as they have loyalty points to spend and a rewarding relationship with us this should not be difficult at all.

In almost all scenarios, the cost of losing an existing customer is high. Many companies spend a large portion of their budget trying to lure new business with specials and promotions, often forgetting how many of their existing clients are being ignored. The existing customer costs us less to keep, already likes what we sell and hopefully how we do that. Best of all, they will probably tell others.

Retailers must make sure they can integrate their end-to-end processes (supply chain, financials, CRM and POS etc.). Otherwise it's impossible to realise the full benefits of a comprehensive loyalty programme - and that means you're losing good business.

Bluekey Software Solutions

Bluekey Software Solutions specialises in the implementation of SAP Business One, the market-leading business management software solution for small to medium sized companies. Bluekey offers a total solution around enterprise resource planning (ERP), including business consulting, system redesign and change management, IT infrastructure, implementation, business intelligence (BI), software licensing, development services, training and support. The company is at the forefront in deployment of complex ERP on cloud and on SAP HANA - the leading in-memory database technology set.

Bluekey is the most successful and fastest-growing SAP Business One reseller in Africa. It has been awarded SAP PartnerEdge Gold status, is a SAP EMEA Pinnacle Award Winner, and has been SAP Business One Partner of the Year for seven years. Bluekey's East African operation was recently ranked number16 in the KPMG Top 100 Mid-sized Companies in Kenya.

Bluekey is also the most technically proficient reseller with the largest number of SAP-certified professionals. It has regional representation in Johannesburg, Cape Town, Durban, Nairobi, Dar es Salaam and Lusaka and boasts a diverse client base incorporating names such as CJ Petrow Chemicals, MTU, AEL, PPC, Hannover Re, Green Cross, Hashi Energy, Mambo's Plastic Warehouse, Prime Fuels, Crown Berger Kenya, Stingray, Soviet, and Stodels. Bluekey has implemented more than 220 SAP Business One sites across 16 countries, with 22 companies on SAP HANA on Cloud, in retail, distribution, engineering, agriculture and many other sectors.

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Editorial contacts
Bluekey Software Solutions Craig Johnston (021) 685 7000
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