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Loyalty programs are a common marketing strategy for businesses of all sorts. From frequent flyer programs for airline, to cards with stamps that mean your sixth cup of coffee is no charge.

These programs work as they encourage you to continue to use the services of a single supplier rather than to spread your purchases around, which may, in fact, be more convenient for you. The business then recognises this and rewards the customer for their loyalty.

However, I have seen from personal experience this used as more a stick rather than a carrot by a telco.  No surprises there you might say.

I was cancelling a service which I used very infrequently It was one of those service for which the monthly charge was relatively low, but over several years mount up. The incremental cost of this service to the telco was about zero so it was pretty much 100% gross profit. So naturally they were mildly alarmed that I might cancel this service.

As I was going through the cancellation process, after hearing my reasons for cancelling the service, they said “Sir, don’t you realise that you have accumulated a lot of loyalty points with this service.” Well this was the very first time I had heard of any loyalty program, let alone received any benefits from it.

Their next statement just shocked me for its sheer cynicism. “Sir if you cancel this service or do not take up another, do you realise that you will lose all your points?” Rather than having the effect that they desired, it just made me more determined to remove myself from the clutches of this telco.

Loyalty programs should be all about rewards not blackmail, reinforcing the positive experience that a customer has with your business. It is certainly not about generating ill feeling. After all, the very purpose is to generate future custom. Do you think I want anything to do with that telco again? It is not as though I don’t have alternatives.

Handy Tip: If you are using loyalty cards, rather giving a first time customer a card which requires 5 stamps to receive that extra cup of coffee, give them the card requiring 6 stamps, but with the first 2 squares stamped. Studies have shown that people are more likely to respond to the incentive as it appears that they are further on the way to that extra coffee. They have a greater investment in the card.

All you need to do now is to Empower yourself and take action …

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May Your Business Be – As You Plan It.

Dr Greg Chapman – The Profit Whisperer

Learn more about how these marketing strategies would work in your business when you request a Free Preview copy of the best selling Small Business book; The Five Pillars of Guaranteed Business Success

 by Helen Chapman

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 by Helen Chapman