Friday, March 21, 2008

Customer loyalty programme. How it can work for or against you.

It never stops to amaze me how many stories I hear about customer service related incidents on a daily basis.

Just today my own wife tells me of a rather bad experience she had with a well....quite reputable department store. This incident revolves around a kind of customer loyalty/reward promotion which has become common place in the depatment store chains throughout the country.

To put things in perspective, let's try and understand the general scene in most department stores that run such a programme. When a customer purchases anything above say RM100, a cash voucher to the value of RM5 or RM10 would be given to the customer. The value is usually around 5 to 10 percent of the purchase made. This voucher as I understand is as good as cash and the customer can use it towards the purchase of any other item in the store. Let's say you have a RM10 voucher, and you wish to buy another item that costs RM50. After deducting the value of said voucher, one needs to only pay RM40. Great.

This is apparently so common now that my wife actually enjoys browsing around the store more so she could use up the cash vouchers-usually ending up spending more! No problem. The experience in itself gives a positive effect on my wife and she doesn't really mind ending up buying more stuff than she really needs. Since the vouchers can be used storewide, it encourages her to browse through different sections where she might normally not have gone to. Perfect.

Great customer reward and marketing plan all rolled into one. The customer feels valued and appreciated while the store gets the customer to spend more time and money at their outlet. Win-win for both parties. Which explains why most stores run this type of programme.

Now let's get back to the rather unpleasant experience my wife had at this "reputable" store.
She had gone in to buy some cosmetics and was rewarded with a cash voucher. As usual she would browse around the store to see what else she can pick up and also to use up the voucher. She finally saw a hairclip and decided to buy it. When she wanted to use her voucher to offset the cost of the item, she was taken aback when told that it cannot be used for the hairclip.
The staff explained she could only use it at the cosmetics section and not any other section in the store. Wife's reaction. Disappointed. Wife's decision. To buy her cosmetics at another store next time. Why? She can go to another store nearby to get her cosmetics and be given the same voucher value that can be used storewide. This store probably just lost a customer and future sales at their cosmetics section. Amazingly, even the staff could not understand why the store opted for such a programme with such strict limitations.

Lesson. If you are to implement a customer programme successfully, you've got to be up to date with what your competitors are doing. If you don't do your research, your programme will fall flat. And it would be fair to say that you might be better off without a programme than to have one which irks customers.

Beware: Customer loyalty/reward programme can work AGAINST you if you can't offer the same privilege or better than your competitors.

No comments: