There's been quite a bit of controversy lately about how to measure customer loyalty. Many large companies seem to be buying in on the premise of the Net Promoter Score (NPS), although the analytical types I listen to don't seem to have a lot of confidence in NPS. Specifically these blog posts from Marketing ROI and Profitable Marketing have some great points to make about the NPS and some alternative ideas on ways to evaluate the worth, or loyalty of a customer.
I guess, overall, I'm pretty old-fashioned and believe in letting hard numbers paint the picture of success, or failure. In short, we've got to be able to quantify (whether it's increased profits from up-sell/cross-sell programs, or a longer customer relationship or referrals) the value we get from each customer. And, then we need to weigh that against the cost it took to acquire and nurture that relationship. Sounds simple, eh? Unfortunately, it's not simple at all...
That's why I love reading about companies who seem to have gotten the equation RIGHT! Take a look at this "AdWeek" article about how the Harrah's database and loyalty program investment is paying off, in a big way.
'Total Rewards' Pays Off for Harrah's
The article cites some reasons why it's working for Harrahs:
- The program is easy to use and offers a variety of ways to redeem rewards. The article talks about how too many rules and too many restrictions on redemption equate to a program that people won't participate in.
- It offers "upward mobility". Tiers of membership are built-in, with better and better perks as people move up the chain. This lets members aspire to the next level, hence they spend more with you.
- Harrah's program maximizes customer communications. "Rewards members look forward to highly targeted promotions. The casino uses information from the card usage to create frequent direct-response promotions that customers would be likely to use. The response rate for such offers averages about 10 percent." As a direct marketer, this touches my heart! I'm thrilled not only with a 10% response rate, but even more so by the fact that these programs are so targeted that customers actually look forward to receiving an offer.
The article concludes with helpful tips on how to design a loyalty program that works.
Bottom-line, Harrah's has proven through hard numbers that their marketing investment (database infrastructure and loyalty program) has paid off. And, that's the kind of measurement I can believe in.