Aug 6, 2008 6:02 AM, PROMO P&I

When it comes to maintaining customer loyalty, retailers need to beef up customer retention and acquisition strategies, according to a new report.

Some said 93% of retailers execute loyalty programs for their Web, store, or catalog channel customers. Such campaigns include point perks, rewards, frequent buyer offers, or private label credit cards, according to Vesida Corp., a provider of loyalty, marketing and merchant network services, and the Aberdeen Group.

But of those, nearly three-fourths (74%) report “partial or no tangible improvement” in their programs compared to competitors, indicating a need for further review of loyalty processes and solutions, the report suggested.

What’s the top need to drive loyalty-related decisions? Some 58% of retailers said its lifetime customer value, which is defined as the present value of future cash flows through long-term customer relationships.

“In times of stagnant growth, retailers need to develop lifetime customer value through improved customer retention, re-activation and acquisition strategies to improve long-term stakeholder value,” Sahir Anand, senior analyst and chief author of the Aberdeen report, wrote.

Profitability and competitive advantage followed at 39% and 38% respectively, the report found.

The report defines the characteristics of “Best-in-Class” retailers, companies that run successful loyalty programs, as those which average year-over-year same store sales increases of 7.4%, report improved customer orders by an average of 21.8% and develop cross-channel marketing programs. Some 51% of respondents who met that criteria use loyalty elements such as rewards, the study found.

On the flip side, retailers without a loyalty program can have weak sales and customer retention results compared to those companies with such offerings.

“This research underscores the importance of participation in comprehensive loyalty programs which enhance a retailer’s ability to sustain market differentiation and develop new customer segments,” Peter Davis, president of Vesdia, said in a statement.

The report recommends retailers take the following steps to improve loyalty program performance:

* Develop loyalty scenarios by focusing on business attributes of the brand.
* Make loyalty a top priority in the retail CMO’s strategic agenda.
* Develop segmented customer profiles for long-term customer relationships.
* Improve pre- and post-loyalty campaign analytics.

Aberdeen surveyed 231 retailers between May and June to determine the loyalty-related pressures and strategies companies face. The full report is available at http://www.aberdeen.com

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