Loyalty Programs That Work

Why try to rope in new customers when your regulars are far more likely to buy? A loyalty program will keep repeat visitors clicking.
Magazine Contributor
2 min read

This story appears in the February 2007 issue of Entrepreneur. Subscribe »

Everyone knows repeat visitors are more likely to buy from you than new customers. In fact, your regulars are about eight times more likely to order than newcomers, says digital marketing and analytics solutions provider WebSideStory Inc. So if you haven't yet launched a loyalty program--well, what are you waiting for?

"It's long been known that repeat visitors make better customers than new visitors," says Ali Behnam, senior digital marketing consultant for WebSide-Story in San Diego. According to last spring's WebSideStory Index, a statistical barometer measuring technographic trends in millions of daily internet visits to websites, repeat visitors to B2C e-commerce sites had a conversion rate of 12.61 percent, compared to just 1.55 percent for new visitors.

Montana Legend LLC knows the value of a loyalty program: Reorder rates jumped after the $1.6 million Red Lodge, Montana, e-tailer of premium aged beef enacted a rewards program in January 2006. Members earn redeemable rewards every time they shop, as well as special offers and exclusive discounts.

"Since launching the program, we've seen our reorder rate run past 60 percent, tripling what we saw in 2004 and 2005," reports CEO Keith Lauver.

To set up its program, Montana Legend turned to Loyalty Lab, which sells an on-demand loyalty solution. The company's CRM Suite offers retailers and service companies integrated e-mail, campaign management, loyalty programs and incentives from a single desktop. NetSuite Inc. and Salesforce.com also offer loyalty programs.

"People were already loyal to us because of our great product," says Derek Kampfe, 41-year-old founder of Montana Legend. "But without the loyalty program, our ability to connect with our customers would be severely limited."

What's the secret to a successful rewards program? Michael Greenberg, vice president of marketing for Loyalty Lab in San Francisco, offers these tips.

Align your benefits with the needs of your specific customer segments.

Don't use a loyalty program to acquire customers--use it to increase existing customer value. Says Greenberg, "Advertising a loyalty program is a waste unless you're a credit card company."

Offer exclusive promotions. Incentives like free shipping, coupons, gift cards and more can nudge customer behavior in the right direction.

Melissa Campanelli is a marketing and technology writer in New York City.

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