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Customer loyalty marketing programs have been around for over 25 years. You might think that they are powerful tools for increasing market share. However, research by Lars Meyer-Waarden and Chrisophe Benavent of the University of Toulouse in France proves otherwise.

Discounts Don't Change Buying Behavior Their research shows that most retailers adopt a one-size-fits-all approach. The problem with most loyalty marketing programs is monetary discounts do not change buying behavior because once your competitor sends out a coupon the next week; this customer will merely shop elsewhere.

In the long run, shoppers value things like personalized service, convenience and a pleasurable shopping experience.

Don't Make These Dangerous Assumptions About Customer Retention

1. Assuming Customers Want A Relationship. Customers value solutions rather than products or services. They will accept a relationship if you can offer a solution to their problems. A more effective way to maintain a loyal relationship with a customer is to offer them personalized rewards based on their preferences and values, instead of on what you perceive they want or need.

2. Assuming Customers Are Willing To Work. If your frequent buyer program or customer loyalty program is too complicated, people won't bother signing up. Their response might be,"I've lived without it until now, and I'm not willing to put in work to master your complicated instructions. This is why it is critical to set up a simple system that is easily understood.

3. Assuming Customers Will Be Fair. A satisfied customer will tell 3 people when they have a wonderful experience. A dissatisfied customer will tell as many as 15 people. Your customer service has to be perfect, you don't. Today people shop for frequent buyer programs like they are discount coupons. The average consumer belongs to 4 competing programs. When they become dissatisfied, disgruntled consumers sue the very companies that are rewarding them for their loyalty! Only in America.

4. Assuming Customer Satisfaction is Sufficient. Today loyalty programs all look a like and those that are different aren't creating enough difference to separate themselves from their competitors.

The next and great frontier is in developing exceptional customer service based on customer experiences. Satisfying a customer is just not enough. Customers expect to be satisfied when they do business with you. They don't expect world class customer service. So when you give them exceptional customer service they remain loyal.

Try all the loyalty programs and marketing tricks you want, but until you are customer centered and focused nothing will change. Recent surveys show that in today's market place 80 percent plus businesses are product focused and so are the marketing, branding and loyalty programs that drive them.

5. If They Have to Buy It from You, That's Not Customer Loyalty Survey your frequent customers to find out if they're truly loyal to you or you're the only game in town. Loyalty builds barriers against competition. Although those barriers today are becoming more and more penetrable. Customers who buy from you out of necessity will more easily defect when they have a competitive choice. Therefore, while it is necessary to have a loyalty program in place to match competition, the challenge is to differentiate your program from the others.

Another Use For Customer Loyalty Marketing Programs

Perhaps the best reason today to institute a loyalty program is to use it to gather customer information... demographics, monetary information, how often they shop with you, their shopping preferences and the types of promotions they would more likely respond to.