Why Most Loyalty Programs Are Missing the Point Many times, companies reward frequent shoppers for their patronage. But a better way to measure loyalty extends beyond the cash register.

By Irving Fain

entrepreneur daily

There's nothing new about loyalty programs.

One of the first programs was created by S&H Green Stamps, which got its start in the late 1800s. Today, if you check your wallet, favorable odds suggest there will be at least one card attached to your local grocery store, pharmacy or lunch spot. And that doesn't even include membership in airline programs, hotel chains and the myriad of other options available to consumers.

As of last year, there were more than 2 billion loyalty programs in the U.S. -- amounting to roughly 18 memberships per household -- according to a 2011 report from Colloquy, a loyalty-marketing researcher in Cincinnati.

While the idea of rewarding customers for frequent purchases is cemented into the ethos of many companies, new ways of thinking about loyalty are helping fix outdated programs and ensure that they aren't "bad for business." Loyalty programs have never been a one-size-fits-all strategy, but when well implemented, a loyalty program can enhance customer relationships and drive bottom-line results.

Related: What Is Vooza and Why Should You Care?

The trouble is, too often loyalty programs are reduced to transactions. A customer comes in, purchases an item or uses a company's service, and once she has bought enough to reach a pre-determined threshold, she is rewarded with a discount on future sales. Unfortunately, in today's world, that's no longer enough.

The foundation for deeper customer relationships -- and subsequently, actual brand loyalty -- has expanded beyond the point of sale to the various platforms and channels that surround a brand's ecosystem. Relationships are being built and value is being created for brands in more places than ever before. Therefore, creating a loyalty program that simply focuses on transactions is missing so much of the value that comes from customers daily.

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In today's multi-channel world, customers have an increasing number of outlets to express their views and people are paying attention to what's said on those channels. A customer can tweet when they've enjoyed a positive experience with your brand or product. They can "like" a company on Facebook, inviting them into the coveted social feed of that consumer. They can check in on Foursquare at one of your locations, broadcasting out to their network where they are and what they're doing.

On top of this, the consumption and sharing of your website's content is valuable. And these are just social actions which don't include all the other engagement which is equally important across email, mobile, online and more.

These actions and activities can and should be rewarded, as purchases are just one part of the equation. When companies take advantage of all channels where people interact with their brand, not only can they acquire a much more comprehensive understanding of their customers, but they can build stronger relationships and reward them for true loyalty.

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Encouraging and rewarding loyalty is an incredibly powerful strategy that has driven phenomenal results for many companies across various industries for decades. There is not, however, a single recipe that works for everyone, and companies need to look at their business' economics as well as desired results to construct a program that makes sense for them.

Even more important is that companies start to think about loyalty programs in a more holistic capacity. Gone are the days when the only customer interaction which could be measured was the purchase. The ecosystem has evolved and it's time for loyalty programs to do the same.

How do you reward loyal customers? Let us know in the comments section.

Irving Fain is the CEO & Co-founder of CrowdTwist, a multi-channel customer relationship and loyalty platform that gives marketers the ability to incentivize, recognize and reward people based on their combined engagement, social influence and spend -- online and off. Earlier, Fain ran Digital Marketing & Social Platforms for Clear Channel Radio Digital, developing and implementing an online marketing and social strategy for 1,000+ radio stations. Prior to his life as a media entrepreneur, Fain wore a suit everyday in the world of finance. He spent time both as a venture investor here in New York as well as an investment banker, specializing in raising capital for early stage companies. He holds a B.A. from Brown University. You can follow him on twitter at @ifain.

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