Last year Rainbow Rewards, a loyalty plan designed to boost local businesses in Denver, increased enrollment 150 times — from 2,000 to 300,000 members — through organic growth and alliances with credit unions and Frontier Airlines' MasterCard program.
The program is running in the Denver, Boulder and Fort Collins areas, but plans call for expansion this year to Colorado Springs, as well as Portland, OR and Seattle.
In 2006 Denver consumers were encouraged to enroll piecemeal, either through take-away cards left with local merchants, or via its Web site (www.rainbowrewards.com). But the program showed significant gains when financial institutions began offering it en masse to their credit or debit cardholders. The card companies were happy to do so, since enrollment generally increases card use.
“In future markets, we'll enter with one or more [financial] partners,” says Jen Sanning, Rainbow Rewards' CMO.
The fees Rainbow Rewards charges merchants for participation are more than offset by the jump in sales. And the more data-savvy retailers can receive monthly summary transaction reports, which let them know which customers are using the card, and how they're using it.
Rainbow Rewards is in the enviable position of having a wealth of potential markets to choose from: Financial institutions in Utah, New Jersey and other locations have petitioned for on-the-ground presences. So how did the program pick Seattle and Portland as its next expansion targets?
It turns out that these two cities have consumer profiles fairly similar to those in Denver. But the areas it chooses also have a number of local credit unions, regional bank partners and a concentration of cardholders from national credit/debit card issuers.
In addition, the locations have strong affinity between local retailers and consumers, something the program is designed to enhance. While Rainbow Rewards includes 100 national retailers among its participating merchants (many of which offer online discounts), its primary focus is on small businesses with established ties to the local community.
The program uses a mix of feel-good rewards and cash incentives. With every purchase, Rainbow Rewards gives a small donation to local charities and public schools. Currently, its chief beneficiary is the Mile High United Way.
Consumers earn cash back on their purchases, which they can take as checks mailed to them, or in Frontier Airlines Early Returns miles.
“Cash back as a prize or motivator is always in the top three potential rewards,” says Sanning. “But we differentiate ourselves in the cash-back space because we are not a faceless, nameless entity coming in and offering cash back. We are a coalition of local businesses that give consumers cash for supporting their neighborhood and community.”
Because consumers may register their preferred credit cards, Rainbow Rewards operates in conjunction with other card loyalty programs.
Besides everyday discounts, which usually range from 2% to 10%, more than 200 merchants offer a first-purchase discount of 20%. Sanning recalled one Denver furniture retailer that used the program to close sales. The sales staff's pitch: “You're purchasing this bedroom set. If you sign up for Rainbow Rewards, I can take an additional 20% off the price,” has proven wildly successful.
Rainbow Rewards consumers who opt in for e-mail blasts get two every month. The first, the Community Buzz newsletter, is personalized with the member's name, current cash reward balance, and a sampling of merchants based on the member's transaction history and street address.
The second, Hot Deals, showcases limited-time special offers from participating merchants. Though primarily a traffic builder, Sanning has found that some merchants have disposed of excess inventory through Hot Deals.
Furthermore, all members receive twice-monthly paper mailings which tout similar deals, provide balances, contain rebate checks, include merchant guides, offer tear-off sheets with names of participating merchants close to their homes, and otherwise arrive in different formats with a variety of messages. This allows small merchants to have an advertising presence without needing to manage individual campaigns.
The plethora of contacts is justified, according to Sanning. “Retail brands are always looking for ways to improve loyalty,” she says. During her time as vice president of marketing at Quiznos Sub, she saw that consumers would choose a competing brand located just half a block closer.
The loyalty program “shows that if you give consumers a thank-you for their business, and create a high-touch relationship, their frequency and purchase levels will increase,” Sanning says.
Rainbow Rewards also expects to leverage the transaction database it's building. Offers currently are targeted based on a consumer's home address. Eventually a mapping program will determine where members make most of their purchases to enable more precise targeting.
But this is second-generation database work, according to Sanning. For now, the focus is on the program's westward-bound expansion plans.
