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Small Business Tip Tuesday: Don’t Penalize Your Loyal Customers

Loyalty Marketing

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In this economy, the business climate has become even more competitive as businesses seek to grab every customer they can. One decision that every business has to make is how they will spend their time and money on customer acquisition efforts. Some businesses focus more on customer retention, while others are always looking for ways to get new customers.

Both of these are important, but in a world of social media (read: online word of mouth), retention of existing customers takes on greater significance.

Clearly, for any business to sustain itself, both new and return customers are needed. But where a lot of small businesses miss out, is how they treat their existing, loyal customers. Sadly, I see many businesses using social media to create and reward new customers, while not rewarding regular customers for their loyalty.

I think any sort of reward program needs to be thought out well so that it attracts new customers, but not at the expense of your loyal customers.

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Case in Point

I have a few credit cards for gas stations that I use from time to time. I’ve had my BP card since 1986, and my Sunoco card since 1988. I’ve been a customer of both for quite some time, and while they are both offering new discount programs for card holders, one of them is actually making it harder for existing, loyal customers like me.

Please understand, this post is not about gas stations and their rewards cards. I offer this only as an example of what you should and shouldn’t do.

BP

With the BP Pump Rewards program, I can earn a 5-cent per gallon reward for every $100 I spend, either at the pump or in a BP store. They also have a BP Visa Card that offers a discount of 15-cents per gallon! But with my regular old BP card, I can start saving now. No need to do anything else.

The program is designed to get people to sign up for a BP card, but also does a good job of rewarding me as a long-time customer.

Sunoco

Sunoco, on the other hand, isn’t doing so well. You see, Sunoco also has a rewards program, and on the surface it is very similar. The Sunoco Rewards Card also offers you 5-cents off for every gallon of gas. A nice perk, eh? Well, not so fast. First, with BP, my current card already qualifies me. I don’t need a new card.

So I went to the Sunoco website looking for how to register my Sunoco card or convert it to the new rewards card program. I couldn’t find any information on how to do that. The next step was the dreaded call to the toll-free number to find out how to make this happen. To my dismay I learned that my card wouldn’t work. Sunoco is requiring everyone to go through the full credit card application process in order to get the new discount card.

When I questioned them on this, I was told it was company policy, and when I asked why I, as a long time customer, had to go through the entire credit approval process again, I was again told it was company policy. I asked to speak to a higher up, which I did, and got the same message.

What’s the Deal?

If BP can turn my existing card into a rewards card, why can’t Sunoco? Why must I go through the process again when they already have all of my information? Do they really need to pull a new credit report on me for a new card that merely replaces my old card? It doesn’t make sense.

Needless to say, I’m not very happy with Sunoco right now. Making a long-time customer jump through hoops isn’t smart marketing or good customer service. This wasn’t thought out very well.

As small businesses, we need to learn from this. There is nothing wrong with offering proper incentives to attract new customers, but it should never be done at the expense of your existing customers. It reminds me of the promotions a lot of small businesses run on their Facebook pages (in violation of Facebooks Terms of Service, I might add) where they offer a prize or discount to the 1000th fan, or some other landmark number. By doing so, you reward the newcomer who might not even be interested in your business. But the other 999 who were there before, including perhaps your most loyal customers, are penalized because they can’t win.

I love promotions. I love discounts. And I love creative use of gamification to draw in customers and develop loyalty. Foursquare is one platform that is perfect for this, as you can create multiple offers at multiple levels. But no matter what you do, no promotion that should penalize your existing customers. Instead, why not come up with a promotion that rewards your loyal customers for telling others about you.

Part of this is getting the proper social media mindset, which understands that customer service is more important than marketing.

How are you rewarding your loyal customers? Are your attempts at attracting new customers actually penalizing your existing customers?

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