Jerry attended the Internet Retailer conference in Chicago and will be writing a series of articles about it. The first one is below. Also, we recently released our first book, an online marketing guide entitled “Aggressive Online Marketing Fundamentals: the Work Media approach.” More about that below.

Notes from the Internet Retailer Conference: Growing Business with Loyalty Programs

This is the first in a series of articles we will be publishing relaying thoughts and ideas from the Internet Retailer Conference in Chicago, which occurred June 5th through June 7th. Mark Goldstein, CEO of Loyalty Lab (a company that implements loyalty programs for merchants), and Gary Korotzer, CMO of Red Envelope (a company that specializes in selling gift items), delivered a presentation about loyalty programs. Red Envelope currently has a loyalty program managed by Loyalty Lab.

Loyalty programs are taking off. If you have a retail web site and you don’t have some kind of loyalty program…chances are that by the end of next year you will. Jupiter Research expects that by the end of 2007, 78% of retailers doing business online will have a loyalty program, compared to 24% now. So what’s the big deal?

It costs a lot more to generate a new customer than to sell to a repeat customer. Loyalty programs allow you to build a customer base that is loyal to your products, and will continue to purchase from you, rather than your competitors. A loyalty program is some kind of program that allows your customers to build up credit to apply to further purchases, or to redeem for cash. For example, a retail web site could grant a customer “points” for every purchase he makes. When he has enough points, he can redeem them for a discount on more merchandise, or possibly redeem them for cash.

To implement a loyalty program, you need some way to keep up with your customers’ accrued points (or whatever kind of measurement you use). This should be done by keeping records of a customers’ transactions in a database. Goldstein and Korotzer recommended tying the information to a customer’s credit card number. Every time a customer makes purchases with a particular credit card, a record of the purchase is recorded along with the credit card number. In this scenario, if a customer used a different card than in previous purchases, her existing loyalty account would not receive additional credits.

You should try to make it easy for a customer to know how many points he has. Out of sight, out of mind, as the old saying goes, so make sure your customers are aware of how many points they have and how many more they need to redeem their rewards.

When you begin the process of deciding on the details of your loyalty program (exactly what participants will receive, and how much they have to purchase for redemption), Goldstein and Korotzer argue that you should explore your company’s economics as deeply as possible. Two important statistics to examine are the lifetime value and acquisition cost of your customers. This will better help you determine how much you can afford to give to your customers. Another critical consideration is exactly who gets to participate in the program. You may choose to only extend an invitation into the program to the top 20% (or whatever percentage generates the majority of your revenue) of your customers. If there is a segment of your customer base that represents the majority of your income, then it makes sense to concentrate your marketing dollars on that group.

Another point that Goldstein and Korotzer emphasized is that your loyalty program should be cross-channel. In other words, if you operate a physical retail location and take orders by phone in addition to your web site, the loyalty program should extend to all of the channels. Avoid confusing your customers. Make it easy for them to gain credits and cash in on their loyalty regardless of what channel they use to make purchases.

Loyalty programs have been around for years in certain industries (i.e., airline frequent flyer miles) but are just starting to gain traction with a lot of retailers. If you sell retail, you should begin the process of researching the implementation of a loyalty program now – before your competition does. Feel free to contact Work Media for information on implementing a loyalty program for your web site.

Announcing the Release of “Aggressive Online Marketing Fundamentals: the Work Media approach“

Jerry and Chris have just released their first book, an online marketing guide that is a high level primer on implementing an aggressive, multi-pronged Internet marketing attack. Although the book does not go into great detail about the specifics of implenting the techniques, it will definitely give readers knowledge about online marketing and ideas to try. The book is a free pdf download on the front page of www.workmedia.net. Work Media may release an expanded, more in-depth version of the book later this year.

Work Media is Nashville’s premiere Internet marketing firm. Jerry has been the Manager of Search for Shop at Home TV, a top 200 retail web site, and Chris has been the Director of Online Advertising for a highly successful advertising firm that specializes in promoting law firms. Call us today at 1-888-299-4837 or email us at info@workmedia.net to talk about creating an aggressive marketing plan for your business. We do one thing: we drive targeted traffic to web sites.