What IS a Loyalty program? (Part 2
Hopelessly Devoted to you --
Loyalty is a Powerful Two-Way Street!
There are several major components to make a loyalty marketing program
function properly. Let's walk through them one-by-one.
First is the CREATION and MAINTENANCE of the DATABASE.
Let's define database: Database marketing is a gathering, saving and
using knowledge about your customers and prospects, for their benefit and
There are several key words here. The first set is " ... gathering,
saving and using ... ". Because of the ease of the gathering and saving part
these days, many have done that. Many know lots and lots of "stuff" about
their customers. When they elect not to use it, the database is useless.
The next key word is "knowledge". Contrary to what computer gurus would
have us all believe, we are not in the information age. I have never met
anyone who wanted (or needed!) more information. We have so much in our
inbaskets now we can't get through it all.
What we all need more of is "knowledge". Knowledge is something we know
and can use. It is beneficial. It is not just facts and figures and words on
paper. It is knowing about our customers and prospects so we can talk to
them like real people.
A database should be a knowledge bank. Filled with things we know we can
use. This is The Knowledge Era -- how we use this knowledge will have a
major impact on our marketing success.
Okay, how do we use this knowledge?
Two ways. First, to offer benefits to our customers. The next key word is
benefit. If there is little to no benefit to the customer, then why should
they be our customer? Customers have to gain from your database knowledge
And second, to determine who we need to talk to about our products and
services. That is, who in the marketplace, both our current customers and
prospects, are most likely to buy what we have to sell. The knowledge you
maintain in your database allows you to make intelligent decisions about who
and where and when to go to market.
Profit is the last word. And as important as all the rest. Why? Because
unless you make a profit -- a measurable bottom line profit from your
database, your knowledge bank -- why have one?
What Database Marketing Does for Marketers
This is my list of 7 things you can count on when you build a marketing
- Every contact becomes valuable knowledge for all future contacts.
Every personal visit, every telephone call, every piece of direct mail,
every fax, every trade show visit or branch/store visit ... they all
provide knowledge opportunities.
- An accurate, targeted presentation to your marketplace is readily and
reasonably available within your database. Yours! You talk with your
customers and prospects as people, one-on-one.
- GI / GO ... garbage in / garbage out. A computer term which fits.
Quality input will allow you to gain quality output. And those important
measurable results. The opposite is equally true!
- If you can't measure it you can't improve it. Database direct
marketing allows you to learn more, to do more, to serve more. And most
importantly, to earn! more, too.
- By measuring your results and recording that record, not only will you
earn more, you will save more. All the costs of doing "mass" marketing go
away. Why? Because your business isn't for everyone -- it is only for the
chosen. You'll spend less to reach them with your database knowledge bank.
- Database marketing makes possible analysis of profitability of
individual products/services. And of those lines vs. each individual
customer and prospect you have. This is a key element in sending the right
message to the right people at the right time.
- Database marketing allows you to be a market driven, not a product
driven -- organization. By incorporating knowledge about your customers
habits and your prospects needs, your marketing by database allows you to
reach your audiences with special campaigns aimed specifically ...
directly ... "solely" for them!
How to Use This Database Knowledge for Loyalty Programs
The foundation of all loyalty programs is a customer database ... a
knowledge bank. A database that has marketing knowledge about each of your
customers / members. And records each transaction ... at least each purchase
This transaction knowledge is kept and used for all future promotions.
Combined with that gained at the time of the original "member" registration,
your database has become a powerful marketing too.
You put together basic facts about customers, combine that with real,
live action by that customer, and use that knowledge to make decisions about
when and how to market to that customer. Truly individual and personalized
Is it possible to get too personal? Sure it is ... which is why there is
a privacy concern. The information you ask for at the time of "registration"
for your database should be the minimum necessary to communicate
effectively, in a personalized way, with your audience.
Some people do not wish to be on mailing lists. Your loyalty marketing
program needs to offer a benefit -- an incentive -- that will motivated your
customers to want to hear from you. So the "mailing list" is no longer an
issue. Instead, it is a company / customer relationship.
Experience over a number of years has taught that the offer of a small
"present" does motivate people to fill out registration forms. Obviously,
the benefits of "membership" need to be clearly spelled out, simple to
understand and easy to take advantage of.
Another detail of maintenance of your database is keeping it clean. Up to
date. As accurate as reasonably possible. On a continuing and on-going
basis. All member / customer addresses must be checked to be certain they
meet standards for delivery.
And ... it is like a bath: you have to do it over and over!
7 Mistakes to Avoid When Building Your Marketing Database
Thinking you can "test" before doing.
Really, you cannot "test" a database. You can only "do" a database.
This is news to many direct marketers. Why? Because of the ancient axiom
that you always test / test / test. This is true enough for product and
service offers, for lists and media ... for many marketing arenas.
It is NOT so for a database ... you either do it -- or you do not.
Not getting total commitment from management.
This is true of any marketing program -- probably any "new" program in
any company. If the top is not behind the effort being made, there is very
little likelihood that effort will be rewarded. Or successful!
Management -- upper management -- must be into the establishment of a
Thinking you can stop your database marketing loyalty program at any
Not so. Once you step in the water, your are in, you are all the way in.
You do not start by sticking only a toe in -- you jump in up to your neck.
As your program grows and develops you will need to make changes. So,
make a change. But don't even think about stopping.
Why? Because once your customer base gets with your program, they will be
very reluctant to stop participating.
Not making certain everyone inside your organization understands what is
It is close to a disaster when you begin an exciting program, launch it
successfully, drive your customers to you ... and they get left hanging.
Because your team -- your entire team! -- was not 110% informed as to
what was going on. Make certain everyone ... and I really do mean everyone
... knows about your database marketing program. It will be worth the effort
many times over.
Expecting immediate results.
Immediate meaning within a few months. In most cases successful database
loyalty programs are 9 to 12 months out before you enjoy some profitable
Oh sure, long before then you will see some trends. Get some action.
Recognize what is happening. Have generated some happy customers. Built some
loyalty. Increased both frequency and retention.
Still, it takes longer to get measurable results than you might
experience with the "normal" campaign to campaign effort. Plan on it taking
a little time.
Not planning to measure your results.
It has always been a mystery to me why measurement standards are not
built into marketing programs from the beginning. All programs! Yet, sadly,
often that is the case.
Understand Life Time Value is a key element in knowing what happens with
loyalty programs. LTV is not a cute collection of letters ... it means
If you are not sure what it means for your company and product line --
then you need to find out. A database program can help. Having the up front
knowledge certainly makes measuring the back-end a lot easier. So, build
into your total program a way to measure ... and then do it.
Building your database, and then not using it.
Why this happens is beyond any understanding ... yet it happens. Why? Not
sure. Hear all sorts of "excuses" (excuses are different than reasons,
usually they are just that -- nothing more than excuses!).
Since a database is only valuable when it is used -- use it! Certainly
seems basic to me. There is an investment of money, time, equipment ... and
most importantly -- people. You will not gain the profits you are entitled
to if you do not use the knowledge available to you.
Use your database.
This article is part two of four in a series.
About Ray Jutkins, October 3rd, 1936 — January 6th, 2005. Ray was one
of the NMOA’s most generous contributors. Over the years Ray supplied the
NMOA with hundreds of tips and articles for members. This is just one of
many. Ray worked with B-2-B and Consumer clients throughout the world ...
including USA, Canada, Mexico, Asia, the South Pacific, Europe, the
Middle-East, Central & South America, Africa. Keep an eye out for more of
Ray’s marketing tips and how-to articles in the pages of Direct Marketing
Digest and the article archive on the NMOA website.