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Do customer loyalty programs work?

By Justine P. Castellon |

How do you keep customers happy and loyal? In highly competitive markets where products and services have become more and more similar, businesses need to be always on the lookout for effective ways of retaining their customers’ patronage.


Of course, the four P’s of marketing—product, price, place, and promotion—will always be crucial to the customer retention effort, but a business has to pursue highly focused strategies and tactics to increase the lifetime value of its current customers through a long-term interactive relationship.

This is what customer loyalty rewards programs are all about. The beauty of running a loyalty rewards program is that it not only can increase overall product or service usage but also offer elements of exclusivity and personalization. It has the power to reinforce the desired market behaviors and buying patterns of the customers even as it strengthens their relationship with the company or product.




For fear that it’s too complicated and expensive, however, many start-up or small companies are hesitant to run a customer loyalty rewards program. Yet maintaining a simple, graded points system is all it really takes. This is actually what National Book Store’s “Laking National” or Mercury Drug’s “Suki Card” is doing, and it is well worth the effort and cost. For as marketers only know too well, it is much cheaper to retain old customers than acquire new ones. In fact, research has shown that it costs five times as much money to find a new customer than to get a current customer to come back and do business with you.

Of course, if yours is a small business and you want to start a customer loyalty initiative, you need to first identify your most important customers—which  means your repeat, regular customers. Use whatever tools and data-mining techniques are available to locate them.


When it comes to the motivational aspect of your program, however, be careful not to overspend. You have to know your profit margins and mustn’t offer discounts for loyalty points until you know their precise impact on your bottom line.

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