A loyalty programme is a system for rewarding repeat purchases. It tends to be introduced with the expectation of greater loyalty and often ends up as a blanket discount for customers who would have bought anyway, thereby reducing margin without changing behaviour. To make sense, it must meet three conditions. The reward should be tied to the behaviour you want to change – higher frequency, a larger order, or expansion into another category – not to the purchase itself. The value must be clear to the customer and attainable within a reasonable time, otherwise the programme will not interest them. And the benefit must be measured by comparison with a similar group of customers outside the programme, not by members' revenue, which is high even without it. Non-financial rewards often work better than a discount.
See also: Customer retention, RFM segmentation, Referral programme.
