When it comes to customer incentives, every dollar you spend is not equal. Learn how to choose promotions that will translate into repeat and new business.
By Chad Preston
Customer loyalty/incentive programs are everywhere now. Whether it’s a stamp card for a free sandwich, downloadable coupons or reward-filled e-newsletters, these kinds of programs can be essential for picking up new customers, retaining old ones and most importantly, finding out what your customers really want from you. Here is some advice from small business experts on how to offer promotions that your customers, both new and existing, really want.
What to Do
What customers are looking for more than anything is a reason to come back, says Ross Shafer, speaker and author of The Customer Shouts Back! and Customer Empathy. He says that the ubiquitous punch card, such as one for a free car wash after 10 paid ones, works because you are rewarding the customer’s loyalty with something that is related to your product or service—it’s what they want more of anyway and so these kinds of promotions are a good deal for the customer.
The offer must be something related to the business for the customer to truly benefit and recognize that your business provided that extra touch, Shafer says. He gives an example of a first aid/emergency center in Florida that offers a coupon for a free bowl of chicken soup at a local café. It fits because chicken soup is often synonymous with illness and its remedies, he says. If that same center offered a coupon for a free cup of coffee, the promotion wouldn’t necessarily work, he adds.
For Shafer, no matter what kind of promotion you’re thinking of using, he says it is about fostering an emotional connection between the customer and the company. “Some of the better promotions and incentive programs are when you actually involve the customer,” Shafer says. Jones Soda, for example, creates enormous loyalty, he says, because customers can submit photos of themselves or a pet, or something interesting they shot and it could very well end up on the soda bottle.
“There’s nothing more emotional or better for word-of-mouth than being able to tell your friends, ‘Hey, you should get some Jones Soda, I’m on it,’” he says.
Steve Kaplan, founder of The Difference Maker, Inc. in Chicago, and author of Bag the Elephant: Getting and Keeping Big Customers, and Be the Elephant: Build a Bigger, Better Business, says the two main goals when starting an incentive program are often bringing customers to your franchise and building loyal, valuable customers forever.
“There are different modes and tactics, but they are doing the same thing,” Kaplan says. “For me, it depends on the type of business you are. In order to be effective at incentive programs these days, because there are so many of them, you have to stand out, be innovative and offer something a little bit different and make the customer’s life easier.”
“You have to look at what your objectives are,” Kaplan says. “If it’s to maintain your existing customer base that may be one thing. If it’s to engage other customers and incite customer change between a competitor and you—that’s something different—you might have to offer a different incentive to them. They work well when you look at your goals and objectives in the right context of what you’re trying to make your incentive programs do.”
What Not to Do
Rewards programs won’t work unless a business provides some emotional connection between itself and the customer, Shafer says.
“The punch card, the air miles, the return visit doesn’t in itself create loyalty,” he says. “I think that loyalty cards in general, so many organizations offer them, everybody thinks they have to offer them and it’s not true. Sometimes the savings aren’t incentive enough; if you offer a loyalty card and then offer bad service, it renders the card useless.”
You have to make the reward worth the consumer’s business. He cites an example of larger big-box retailers where if you spend thousands of dollars at one of them, you get a reward card for $5 or $10 off. It just doesn’t seem worth it to customers because they’ll think, “‘I signed up for a loyalty program and that’s all I get?’” he says. “It actually has the reverse effect, it makes [the customer] a bit disloyal.”
Also, try not to set an expiration date on your promotional items. “When there’s an expiration date on [customer] loyalty, that just doesn’t work at all,” Shafer says. “If you have to use your service within a certain amount of time, that’s loyalty under pressure and people respond to that [negatively].”
What to Take Away
The best incentive programs obtain and retain customers, but also consider the data that can be mined from the offered promotion, Kaplan says.
“Understand the real, true needs of the customer by using the incentive programs, as customers keep re-engaging with your business, to keep upgrading your products and services,” he says. “Keep making them better, not necessarily just in a sales mode, but also in a business development mode, to find out what they need, how they’re using your products, what they like and don’t like and it becomes like a feeder to your business development. In the long run you’re going to be more effective with new products because you know they already resonate with your existing customer base.”
Your incentives should evolve based on customer feedback. “Unfortunately, organizations think they have all the answers,” Kaplan says. “The customers are the ultimate judge of whether you’ll be successful or not, so pay attention to everything they say.”
Customer input should not only shape your incentive programs, but also create and develop them, Kaplan says.
“We shouldn’t say that we know exactly what our customers want,” he says. “We should go to them and extract data from them, do some research and learn from them and see what kinds of things they value. And that will begin to give you a framework that you can develop incentives from that are going to be meaningful.”
“[Incentives] have a real place in the customer satisfaction and ongoing loyalty arena that we all play in,” Kaplan says. “Everybody likes to be acknowledged for being a good customer.”