In the past six issues of Inside Direct Mail, a quarter of all our stories have mentioned the down economy in the lede. Direct marketers always must consider the bottom line, but now that line has become shakier than ever. So we continue to write about ways to strengthen direct mail programs during tight times.
In recent months, many direct marketers have said this is no time to overextend your reach with too much prospecting, but instead, a moment to direct a bigger spend and work harder to maintain your most valuable customers. Loyalty marketing is one of the best strategies to strengthen your organization and hopefully come out of the economic storm as a market leader. Below, experts in loyalty and direct marketing walk through the most effective ways to engage in loyalty efforts and hang on to customers.
Getting Started
Loyalty can and should be an undercurrent that runs through your entire direct marketing program. However, loyalty also can be applied as a specific tactic, with a system of rewards and exchange of value between company and customer. "It comes down to what we call the value exchange; essentially you're exchanging value for information," says Rick Ferguson, editorial director for COLLOQUY, a research and consulting firm devoted to global loyalty programs. "You create a loyalty program and put some value on the table and say, ‘Hey, if you sign up for this program, I'm going to give you some stuff ... and in exchange for this free stuff, I would like to be able to build a relationship with you,'" he describes.
The goals of a loyalty program are to create a positive change in customer behavior-i.e., increased spend, increased engagement-and improve your chances of retaining that customer in the future. "The fundamental difference between traditional direct marketing and loyalty marketing is in demonstrating that continuity of that relationship and making it more valuable over time," Ferguson says.
It's important to remember that loyalty programs are designed to solve specific business problems. "You need to define what the program objectives are. What do you really want to do? Do you want to increase spend or increase interaction?" asks Paul Walczyk, senior vice president of client services for Carlson Marketing, a global marketing services company. Once you define your program objectives, Walczyk stresses the importance of budgeting by creating an economic model around your objectives. "It does always boil down to economics in that ... there are some customers who you can afford to spend more money on to keep than other customers," agrees Gary Hennerberg, creative director and copywriter for Hennerberg Group, a direct mail agency based in Colleyville, Texas.
