here is the article below.
Loyalty Programs Improve Bottom Line
Aberdeen Group research confirms the importance of well-run loyalty programs.
MINNEAPOLIS (April 17, 2009) - New research conducted by Aberdeen Group once again demonstrates the importance of well-planned and well-executed loyalty programs to the financial success of retail companies. The best retailers improved repeat customer orders by 21.8 percent. Best companies increased net profits 50 percent more than their peers.
The entire report – “Cutting Edge Customer Loyalty: Retail Best Practices for Acquiring, Retaining, and Re-engaging Customers” – is available free of charge on line at Complimentary Report from Aberdeen Group.
“We believe that having the capability to build relationships with customers is a critical driver of success in today’s tough business environment,” said Luc Bondar, vice president, Loyalty, Carlson Marketing. “We sponsored the report because we believe in its core message.”
During the first quarter of 2009, Aberdeen surveyed 165 retailers to discover key customer loyalty attributes in that sector.
The best companies were defined as the top 20 percent with the best financial performance. Year over year they generally increased the average sale by 19 percent, increased customer retention by 16 percent, and decreased customer attrition by 5 percent.
Key findings include:
• Ninety percent of the best companies indicated successful results from their loyalty programs compared to less than a third of other companies.
• Best companies’ compound annual growth rate is 96 percent greater than their peers (2003-2008 data).
• Best companies are 1.8 times more likely than the bottom 30 percent of companies to develop customer behavior-based promotions (that drive improved loyalty).
• Best companies are five times more likely to be tracking, storing and analyzing customer data … and creating promotions capitalizing on insights derived from the analysis.
• Best companies are 70 percent more likely to develop multi-tiered rewards plans for their most profitable customers.
While the study has different recommendations for companies at different levels of success, it recommends that for companies to achieve the “Best in Class” status, they should:
• Create a customer loyalty roadmap including multi-tier programs for the most profitable customers
• Apply rules-based and point-of-sale/service integrated customer loyalty systems
• Conduct customer wallet share and market basket analyses
• Measure the net profit margin impact of customer loyalty programs
• Upgrade loyalty infrastructure on an annual basis.