VOL. 0048 – FLORIDA, TUESDAY, MAR 27, 2024
Juan F. Arjona Harry
President & CEO Strategee
One of the objectives sought by a brand (whether of consumer products, massive demand services, or retailer, and also by the products and services for industrial and institutional sectors), is to achieve customer loyalty and repeat purchases.
This objective is critical to the survival of today's corporations
Although loyalty is different from purchase repetition, as it may be a repetition of a customer that is not really loyal (ie no choice, location, the desire or the purchase decision was urgent and bought what was seen first, among many other causes).
The competitiveness of today requires that manufacturers, as part of their relational marketing process and as part of their pursuit of loyalty, have a retention plan or loyalty plan, which is generally known as points plan or miles plan.
Loyalty is different from purchase repetition, to make it clearer, the formula of loyalty can be expressed as:
Loyalty = Satisfaction + Affinity + Commitment
However, retention plans, which generally support or contribute to the processes of purchase repetition, can contribute somehow to loyalty when they are excellently well-handled, derived from a greater satisfaction with the brand, which in time may be developing the basis of affinity.
Here are some key aspects of retention plans, which must be taken into account:
1. Gratuity rate: is the rate at which a customer / consumer gets the prize (mile or point), every time a purchase is made. Or each time they meet certain parameters of their relationship with the company (eg years of being a customer, payment compliance of bills or debts, referral of clients, etc.).
2. Redemption rate: the rate at which the company can redeem the points earned, ie what will allow customers / consumers to do with the points they have accumulated, redeeming them at a conversion rate of how much money per point earned. Or, redeeming, in the case of the miles-rewards or airfare whose journeys are priced at a certain number of miles.
3. The Frequency Marketing: based on the instrumental learning theory, the company can generate a schema or stimulation matrix to increase purchases through the following instruments:
3.1. Reinforcement fixed rate: when for every act of purchase is donated a point or mile (or a given and known number of them).
3.2. Reinforcement at variable rates: when for every act of purchase is donated a point or mile (or a certain but unknown number of them). This is where the customer / consumer begins to reason, saying, "I best keep buying here, because suddenly I could earn more points for some special offer the store is giving".
3.3. Fixed-interval reinforcement: when over a period of time (for purchases that consumers / customers do in that period of time known),
3.4. Variable interval reinforcement: when over a period of time, which is unknown for the consumer / customer, the store gives him certain number of points or miles.
3.5. Incremental Reinforcement: when for purchases up to a certain limit, points or miles earned are worth a magnitude, but from there, there are double or triple points, and each point has a higher differential value by achieving the top interval.
These elements described, allow structuring a comprehensive retention plan, whose efficient administration must take the brand to increase customer satisfaction and from the latter, the development of certain affinities with the brand or store and at the end, get full commitment from clients, this is the final stage in the complex purpose of obtaining loyalty.