Monday, August 2, 2010

What We Can Learn From Customer Loyalty Programs

Since 2004 my company has provided customer loyalty programs to several very large financial institutions.

You know the type of program I mean… the ones where you pull out your credit card, pay for your latest purchase and earn points which can be redeemed for travel, merchandise and gift certificates.

Needless to say, we have learned a lot over the years about this type of business. One of the most surprising things is how many similarities there are between what we do for our customer loyalty clients' cardholders and for our employee performance clients' recipients.

There have been a couple of surprising lessons concerning the number and type of rewards offered in a customer loyalty program.

Typically, customer loyalty programs often feature less than a thousand different rewards… usually only several hundred rewards. Turns out research shows that thousands and thousands of merchandise rewards aren’t necessary, regardless of the size of the program. Cardholders appreciate a carefully selected and balanced merchandise rewards selection tailored specifically to them.

Another lesson is the limitation credit card companies put on the number of gift cards featured in their programs. Gift cards reduce program brand equity! For example, when cardholders select a gift card to an electronics store versus selecting the electronic, the cardholder will associate the reward with the store they used the gift card at, not from their rewards program!

These are very sophisticated marketers who specialize in Customer Relationship Management (CRM), a well established science. So what can we learn from these experts and how can we apply their lessons to employee performance programs? I asked these CRM experts the very same question.

Their response might surprise you!

They told me that they do their very best to know and understand who their customers are and what rewards excite them. In other words, they try and create a merchandise rewards catalog that is personal and relevant to cardholders. When they heard that in our employee focused industry sometimes tens of thousands and in some cases hundreds of thousands of different rewards are offered, their response (and this came from several different companies) was identical… “I guess companies don’t know their employees very well!”

And you know what, they are right!

Offering tens of thousands of reward options really is making a statement… we (the company) don’t really know you (the employee) very well! So here, choose from a gazillion different options and hopefully there will be something you like.

I believe that for recognition to be effective it must be personal. Could it be that for rewards to be effective they too should be personal? Credit card companies have invested millions of dollars trying to reach customers on a personal basis. The same holds true for employees!

I think we can all learn some very valuable lessons from these CRM experts and apply it on the work we do for our clients' employees.

Perhaps it’s time for a new science… Employee Relationship Management!