Run a membership program - or thinking of running a membership program? Be prepared: depending on what you offer, your member may only stay with you for an average of 3-4 months, based on what various Internet marketers who run membership programs have experienced regarding membership longevity.

This has two major implications for you if you want to maintain, let alone grow, your membership base. You’ll need to:

1. Actively recruit more members to overcome member attrition (otherwise you’ll eventually have no members); and
2. Do what you can to retain members longer and/or motivate them to renew.

When it comes to the latter, it may be tempting to “buy” members’ loyalty by offering them an incentive to stay on as members. Banks, credit card companies, telecommunications companies, ISPs and numerous other businesses are among those that are quick to offer customers incentives - e.g. discounts, freebies, upgrades, etc - to stay with them instead of leave.

But offering people incentives to renew or continue with their membership won’t always be appropriate. It may, for example, devalue your product offering. Well, the good news is that it IS possible to increase member retention without “buying” members’ loyalty. It may just take some time and effort to find and implement the right strategy.

MarketingSherpa recently profiled a professional organization that seems to have hit the bulls-eye - or is, at least, getting closer to it. The Society for Marketing Professional Services has worked hard to develop a multi-faceted, email-anchored member renewal strategy that has lifted its retention rate from 71 percent to 82 percent - an impressive 15.4 percent increase.

Some of the key tactics the organization used to lift retention were to:

• Avoid using a discount or offer to entice members to renew;
• Scrub their email list by removing “bad” email addresses. What’s more, before doing so, they first attempted to contact members by phone to see if they wanted to renew and to update their correct email address;
• Send a formal “business letter” style email 60 days out from a member’s membership expiry date reminding them to renew;
• Send a friendly postcard 30 days out from the expiry date; and
• Send an formal email and a cute postcard a few days before the expiry date.

Whether or not a similar strategy will work for you is something you’ll need to test. But this case study certainly reinforces the ideas that:

1. It takes concerted effort - beyond relying on the quality of your membership program - to retain a portion of your members. That being so, think about how best to time and send reminder notices, and the optimal medium for each message. Is email enough … or are you better off reinforcing several emails with a phone call, some postcards, or some other forms of communication?
2. You don’t necessarily need to offer discounts or freebies to retain members. Doing so may actually devalue and commoditize your offering.
3. Continue to test. Is an email 60 days out from expiry optimal… or is an email sent 45 days before expiry better? Should you follow up with a postcard… or a letter… or a phone call? You won’t necessarily achieve your desired results with your initial approach… so keep on changing, tweaking and testing to achieve ongoing improvements.

Source: MarketingSherpa, “Member List Going to the Dogs? Simple Email-Postcard Strategy - Not Incentive - Brings Back 15% More”, MarketingSherpa, September 3, 2008

Loyalty programs are big business in the offline world. If it’s not frequent flyer programs… it’s credit card points programs… or loyalty cards to be stamped, punched, swiped or signed. All designed to bring customers back into the store to buy more, and in so doing “buy” their loyalty.

I’m guessing that at least some of these are cost-effective. After all, why else would companies pour so much money into them. Then again, having worked in and with corporate marketing departments, cost-effectiveness is not always the number one priority.

So is a loyalty card - or the equivalent - something to consider for your online business? For example, you could introduce a points system where customers earn points each time they buy from you and get a discount or reward from you when they’ve accumulated a certain number of points.

I’m sure there are many more variations you can try too. But before you jump in, consider the argument against using a loyatly program.

In fact, consider the move made by Muffin Break, the biggest muffin franchise in Australia, to cease its loyalty card program of many years.

I don’t know why Muffin Break dumped its loyalty card… but I do know this: I’ve been a loyal Muffin Break customer for several years. (I have a penchant for their blueberry muffins!) Throughout that time, I’ve never bought muffins from Muffin Break because of their loyalty card. And there’s no question that I will continue buying their muffins without their loyalty card. To me, the card was simply a nice-to-have - an opportunity to get a free muffin every now and then.

You see, I am a true loyal customer. The kind of customer you really want - who buys from you week in, week out, because you offer a quality product that I love, not because of added incentives… or “bribes”. I won’t disappear because you no longer offer a loyalty card. I’ll only disappear if you fail to deliver a quality product or service at a reasonable price.

Maybe Muffin Break has realized that it’s best customers are just like me. And that if it continues delivering a quality product, it will continue to attract our business, and it’s revenues and profits will continue to grow… without the need for a loyalty card.

I’m not against loyalty cards per se. I think they have a place. Especially for start-up retailers. But a business that delivers a quality product and great customer service will get loyal customers anyway. It won’t need a loyalty card. And the corollary is this: no great business can afford to rely on a loyalty card for its customers. True, long-term loyalty is earned… it cannot be bought.

Again, I don’t know why Muffin Break dumped its loyalty card. I hope it was for the right reason: that if it focuses on delivering top quality muffins, it will please its customers without having to “bribe” them with a loyalty card.

So when it comes to your business, by all means consider how a loyalty program could work… but also consider the power of delivering quality products and services, and superb customer service, that generate true customer loyalty.