Club programs engage the consumer in a long-term, contractual purchasing plan for non-exclusive merchandise offerings. The consumer generally agrees to purchase an established minimum of products over a set length of time and is rewarded with discounts and special offers. Examples include BMG Music Club, PhotoWorks (formerly Seattle Film Works) and Hosiery Corporation’s Silkies Club.

Pros

Cons

• Target large interest groups (wide potential customer base).
• Encourage purchasing behavior by providing bonuses and rewards to customers.
• Produce steady, reliable revenue for company
• Customer expects and is receptive to ongoing marketing and purchase offers.

• Contractual purchasing commitment creates ongoing relationship between vendor and consumer.

• Limited product/service applicability.
• Non-exclusive merchandise – customers may obtain products through other channels.
• The Internet facilitates comparison shopping, reduces the attractiveness of reliance on one provider.
• Sometimes plan mandates negative purchase option (customer must act to opt-out, unpopular).

• The Net has heightened customer expectations of speed and convenience, thus such programs require highly responsive customer care, fulfillment and CRM. If not provided with excellent customer service, the member will swiftly cancel his/her membership and shift to another provider that appreciates his/her business. The customer is committed – not a one-time shopper – and expects the vendor to serve him/her accordingly.

Continuity programs are similar to club programs in that they encourage a long-term relationship between customer and vendor, but these programs generally do not mandate purchasing levels. Continuity programs develop loyal customers by being the sole provider of certain exclusive products, such as gourmet coffee or collectible figurines. Their exclusive offerings entice consumers into ordering a continuous supply of the product (i.e., monthly shipments) or ordering regularly in response to catalogs and special offers. Examples of continuity vendors include Gevalia Coffee, Reader’s Digest Select Editions Book Club, National Geographic Video and Franklin Mint Collectibles.

Pros

Cons

• Positive purchase option (opt-in) and flexible purchasing levels, therefore less contractually rigid/controlling than clubs.
• Produces steady, reliable revenue for company
• Customer expects and is receptive to ongoing marketing and purchase offers.

• Exclusive (often collectible) product offerings – customer enjoyment of hard-to-find products (product loyalty) drives loyalty to provider.

• Continuity programs generally target niche interest groups – reduced potential customer base.
• Somewhat limited product/service applicability (replenishibles and collectibles).

• The Net has heightened customer expectations of speed and convenience, thus continuity programs require highly responsive customer care, fulfillment and CRM. The customer is committed – not a one-time shopper – and expects the vendor to serve them accordingly.

Private-label programs are designed to reward faithful customers for their ongoing purchasing behavior. The programs are brand-centric and although they may include a few affiliates, the focus is on returning value in a way that emphasizes their brand to their customers. The programs are communicative, personal and geared toward encouraging on-going, progressive buying behavior. Examples include American Airlines’ AAdvantage Club, Hallmark’s Gold Crown Card and the National Car Rental’s Emerald Club.

Pros

Cons

• Internal database of repeat customers allows RFM targeting, segmenting, monitoring, etc.

• Brand/vendor-specific rewards develop brand/vendor-specific loyalty in customers.
• Ongoing communications create familiarity, affinity and trust for brand or provider. Also deepens merchant understanding of customer and improves ability to serve his/her needs.
• Gives customer an incentive to return and increase purchasing activity by returning value to him or her.
• No dilution of customer base or allegiance, as in coalition programs (See: Coalition Points Programs).
• Ongoing return of value to customers lessens the chance of defection, even when competitors drop prices.
• Increases vendor switching costs to the customer.
• Unlike one-time promotions, internal points programs encourage sales now and in the future.

• May require extensive marketing to gain customer awareness (lacks coalition presence and other partners to drive traffic).
• Mandates extensive record keeping, customer support and contact management.

• Strictly a loyalty tool – effective only after acquisition (may not drive first purchases, but will drive successive).
• If rewards are not truly valuable and targeted, may only serve to insult the customer into going elsewhere with his/her business.
• Must be supported by effective CRM or customer will see program as a mere bribe, not a relationship.

Coalition points programs are multi-merchant reward plans that grant points or cash to consumers as an incentive for their attention or purchasing behavior. The programs have thousands to millions of members that have volunteered to view and respond to marketing materials. While each of the programs has different partner merchants and perks, they are all based on the same premise: Pay customers (in points, cash, or some e-currency) to view or purchase from a program partner. Examples of coalition programs include MyPoints, S&H Greenpoints and ClickRewards.

Pros

Cons

• Relatively low marketing expenditures – points are inexpensive and the coalition program drives customer traffic.

• Point/cash rewards may drive repeat customers, especially if coalition program vendor offerings do not overlap (example: customer can earn points by buying a CD from any one of three featured music vendors).
• Coalition program develops strong customer loyalty to the program itself, as it is the coalition brand that is in constant contact, doling out prizes and discount offers to members. It’s possible that customers may transfer their affinity for the program to the partner merchants, and be loyal to these vendors.
• A "delightful" purchasing experience begun via a coalition program may produce loyalty in some customers (high-impact acquisition).

• Coalition programs spread thin customer attention and business across all partner merchants (hundreds of advertisers and related vendors).
• The program member (customer) often views the merchant advertiser as only the means by which to earn points/cash. Even if the customer pays attention during his/her mandatory click-through, after receiving the reward, he/she has no incentive to ever return.
• Coalition program members are among the most advertising-overwhelmed individuals around – extreme mind "clutter" may lessen the impact of advertiser’s message (or it may be quickly forgotten given the ongoing deluge of ads and offers to their in-box).

• Impersonal, one-time offers do not create loyal customers.
• Coalition program members (customers) may be comparable to swing buyers – difficult to retain, prone to disloyalty.
• Plan primarily promotes deal loyalty – members love the rewards, indifferent to the advertiser.
• No incentive for the customer to remain vendor-loyal – member receives points for visiting/purchasing from any partner vendor.
• Coalition programs provide only the opportunity to create loyal customers – they are acquisition (not retention) tools.

Coupons are cheap, popular promotion tools on and off the Net. More than 300 billion coupons are distributed in the U.S. each year, all with the intent to encourage trial or return purchases. Examples include a 25-percent discount coupon, a certificate for $10 off a purchase of $25 or more, or free shipping on ordered items.

Pros

Cons

• Drive customer traffic, encourage purchasing.
• Cheap to produce and disseminate – can be mass-mailed or e-mailed.

• May assist in the creation of loyalty if the purchasing experience and product "delights."
• Existing customers may return to vendor/site to redeem a new coupon; coupon serves as a reminder of its offerings and their prior purchase.

• Only prompt a one-time trial (true for on- and off-line coupon promotions).

• Almost zero customer loyalty effect, as documented on and off the Net.

Prizes and incentives are exciting, limited-time offers of give-aways, trips and sweepstakes designed to entice customers into purchasing, visiting, or surrendering personal information. Examples include a free goodie bag with purchase or the chance to win a sweepstakes merely by visiting a Web site or filling out a survey.

Pros

Cons

• Advertised incentives drive customer traffic.

• Gift offer with purchase improves look-to-buy ratio and may "delight" customers into returning.

• Costly promotion option.

• Short-term incentives offer no reason for the customer to return: one-time offers produce only one-time shoppers.
• May attract primarily swing buyers (prone to disloyalty) seeking freebies.