Building Topnotch Loyalty Programs
loyalty programs are among the most effective investments that consumer brands can make. They facilitate the creation and development of a more intimate dialogue between brands and their customers and, in so doing, drive more frequent purchasing, lower attrition, and make it far tougher for competitors to get their messages across. The bottom line is that the basic loyalty scheme of tracking behaviors and rewarding loyal members consistently delivers measurable increases in lifetime customer value.
However, a basic program — even one that offers generous rewards and benefits — can be significantly enhanced when marketers supplement it with a more customized, differentiated experience that reflects segments of customer value, behavior and preferences.
There are three primary ways that best-in-class loyalty programs target promotions to unique customer segments:
-
Promotions targeted exclusively to members at different stages of their lifecycles (e.g., new-member experiences, members who have attained elite tiers)
-
Promotions targeted exclusively to members who have exhibited certain behaviors (e.g., promotions based on prior purchase history, promotions targeting members who are highly viral)
-
Promotions targeted exclusively to members who have self-selected (or are invited into) unique affinity groups
GREETINGS
New-member programs are an obvious investment for loyalty marketers, but are seldom well executed beyond a generic “welcome” e-mail. The quantifiable impact of a programmatic, segmented and thoughtful new-member promotion is five-fold:
-
Higher rates of bounce-back purchases — probably the single most pressing issue for marketers
-
Higher rates of customer profiling — which lead to better personalization
-
Lower rates of unsubscribe and spam-blocking
-
Increased effectiveness of viral and referral programs
-
Longer, higher value relationships over the lifetime of the customer
A well-structured new-member promotional program is phased without being overwhelming, is customized without being intrusive, and is relevant without being overly commercial. A strong new-member promotion often includes a sharp “bounce-back” offer for a complementary product, an incentive for returning to and completing the program’s profiling, and an invitation to refer the program to friends.
Members of a loyalty program’s elite tiers make up another group to target with unique promotions. Loyalty marketers — especially the pioneers in the travel and hospitality industries — realized that elite members valued the perks and benefits of their programs as much as, if not more than, the actual rewards. For example, frequent flyers who had spent much time in the air redeemed their mile accumulations for shorter lines and upgrades rather than for another flight.
Promotions targeting elite members deepen the perceived value of loyalty programs even more for a company’s best and most valuable customers. Examples of successful promotions include:
-
Point auctions for once-in-a-lifetime experiences — and this has a secondary benefit of burning points off program balance sheets
-
Earning accelerators for particularly competitive products — essentially raising the barriers to competitors’ efforts
-
Elite-member-only events — mingle with like-minded customers, shop the day before the sale, meet the team behind the products
A GOOD FIT
Nothing drives loyalty-program performance more than relevance. When a marketer presents the right offer to its members, response rates often double or triple versus non-targeted promotions. When loyalty-program managers have access to a deep member profile of prior behavior — behavior that often goes beyond just transactions — their ability to focus promotions becomes part of everyday marketing.
Keeping in mind that investments in promotions are intended to drive purchases and activities that lead to purchases, the following types of promotional targeting are highly effective:
-
Complementary product purchase promotions Make the purchase of a product the ticket for entry to the promotion (though be aware of alternative means of entry).
-
Promotions targeted to lapsed customers The hardest customers to sell to are those who have not recently purchased. A promotional event is a great way to get noticed by this group when the regular communications are ignored.
-
Promotional programs built around highly viral advocates of your brand Nothing promotes word-of-mouth behavior like hosting a promotional party.
JOINING IN
A recent trend in loyalty marketing is the inclusion of member clubs. Loyalty clubs are essentially ways for members to self-select into a richer set of communication, rewards and benefits based on the products they like or their personal preferences.
A great benefit to differentiate club membership from basic membership is a promotion targeted exclusively to these customers. Whether it is a sweepstakes with prizes that are more relevant, online contests that speak more exclusively to this segment, or simply a members-only sale, clubs require unique promotions to make them attractive options for busy, distracted customers.
EXCLUSIVITY IS NOT A DIRTY WORD
We’ve grown accustomed as marketers to launching promotional programs and events that are available to all of our customers, but it is critical that we rethink that assumption. It is not necessary to make every promotion open to everyone.
By targeting promotions, marketers can make this type of activity more a part of everyday marketing rather than twice-a-year blowout events. Focus your efforts on your more valuable customers (while keeping an eye on revenue and margin), and you’ll see your promotional efforts generate a higher and more sustainable return on that investment.
David Rosen is senior vice president for Loyalty Lab. He can be reached at [email protected].
For more articles on premiums and incentives go to www.promomagazine.com/incentives
