Frequency Marketing: Definition, Advantages and Examples

What is Frequency Marketing?

Frequency Marketing is a promotional strategy that rewards customers for the volume or frequency of their purchases or when they buy in larger quantities. The way to facilitate this is via discounting, or other promotional activities such as giving rewards.

The main objective of Frequency marketing is to get recurring sales and to increase customer loyalty. As the company is encouraging repeat sales, more and more customers buy the products resulting in higher sales volume. This activity also increases the profit contribution of every individual customer.

We can also apply the Pareto Principle to frequency marketing. Just focus on the top 20% of your customers who are driving 80% of your firm’s revenues and ensure they are buying repeatedly. This can be done via loyalty programs which help with customer retention and encourage repeat purchases.

Loyalty programs are another name for frequency marketing promotions. Here too the strategy is to keep the customer hooked on the products and services so that he or she keeps buying from the company. As per this study, an average US consumer is a part of 16 different Loyalty programs at any given point of time. Which proves that frequency marketing is very attractive to customers as well.

Advantages

Here are some advantages of frequency marketing

• Customer Retention – The loyalty programs ensure that there is high customer retention and low customer churn.
• Customer lifetime value – Because the customer is retained for a longer duration, there is a high customer lifetime value because of frequency marketing.
• Higher sales volume – You get higher sales volume because the same customers are buying higher quantities of products from you in a recurring fashion.
• Cost savings – Retaining a customer is much cheaper than acquiring new customers. Thus, a lot of costs is saved when using frequency marketing.

Disadvantages

• Customers will always expect freebies – Due to their very nature, customers will always expect freebies from the company and ask for the same to be retained by the company.
• Loss of customers if loyalty programs closed – There can be an immediate loss of existing customers if companies turn down a loyalty program, thereby opening up the market for the customer where another competitor can swoop in and acquire the loyalty of the customer.

Example of Frequency Marketing

Frequent flier miles is an excellent example of Frequency Marketing. The more frequently you fly an airline, the more frequent flier miles you accumulate. You can then later exchange these miles for freebies such as free air travel or free onboard services. The services may include a free beverage or lunch, a free journey, upgrades to business class, or hotel books depending on your value to the airline.

Retail and E-commerce segments also work on frequency Marketing. Retailers like Walmart give various discounts for buying over a period of time. Alternatively, they may give a discount if your purchases cross a certain value. The famous Scratch and win cards are also used in retail to generate excitement and delight customers.

Here is an excellent video and an example of how to use frequency marketing in a restaurant

https://www.facebook.com/watch/?v=774484613072659

Conclusion

When used correctly, Frequency marketing or Loyalty programs can be very useful to the company as they help the company focus on the most valuable customers – The ones who are already giving revenue to the company.