Empowering the Lonely Loyalty Champion
Not too long ago I spent a day teaching a group of marketing professionals about loyalty marketing. Fun it was not. These sessions often have a few individuals who are pessimistic about loyalty, but this time it seemed everyone was. Everyone, that is, except the Loyalty Champion, valiantly trying to help the group see the benefits of loyalty marketing using examples and anecdotes from within their corporations. It was all I could do to not jump on a table, skip ahead a couple of weeks in the project, and paint a picture of just how amazing their loyalty marketing program could be.
I realized that almost every minute of every day was like this for the Champion, who had to build internal acceptance of a sweeping new addition to the company’s marketing efforts.
This moment of empathy (and restraint–me on a table is not a pretty picture) crystallized my perceived need for a set of talking points: tidbits that the Champion could drop into conversations around the water cooler as he slowly worked a large organization around to his view. So for all of you out there trying to build business cases and support for your loyalty initiative, here’s some insight into loyalty benefits beyond the obvious.
Loyalty programs can be very cost-effective, especially after breakage. That 5% reward program looks a lot different once all the numbers are in. Factor in points that expire, rewards that expire unused, the incremental transaction needed to use a gift-card reward, and in reality it is more like a 1.5% -2% reward program.
Loyalty programs get you more e-mail addresses of buyers. Most companies are unhappy with the percentage of e-mail addresses they have for customers, given the extremely high ROI from e-mail marketing. Loyalty programs regularly require e-mail for statements and other support communications, lifting the overall e-mail coverage rate. Collecting 99% of loyalty members’ e-mail addresses would be reasonable.
Points programs let you promote without actually lowering prices. Points are really a type of discount, one that is accrued over time and converted after reaching a threshold or when it is traded in for rewards. Double- and triple-points promotions increase the level of the discount without touching the retail price of a product or service–very handy for promotion-sensitive vendors. It’s pretty much the only way you will ever get a discount on (legitimate) Baccarat crystal, anywhere.
Loyalty programs build lock-in, especially important for easily substituted businesses. A well-designed program with effective communications will keep customers constantly reaching for that next reward. It doesn’t take much to reduce the consideration set down to just your company, forcing competitors to raise their value proposition in order to take a customer away from you.
Loyalty programs improve the customer tracking rate. For some companies, connecting purchases to individual customers is difficult. Loyalty programs provide a strong incentive for customers to ensure that their transactions are properly tracked, increasing data quality and improving the analytic value of your customer database. The greater the use of cash among your customers, the more important this becomes.
Loyalty programs make it easier to reward nonpurchasing—but valued–behavior. Most companies know of a few key behaviors that are highly correlated with long-term customer value. Bonus points provide an incentive for those behaviors without having to buy them with cash or announce them to the general public. Setting gift reminders is a great example.
Loyalty programs let you give status to your best customers. Your long-suffering top customers, who see low-value shoppers get equal or preferential treatment (the most blatant example being the supermarket express line), will receive newfound respect throughout the company when there is a platform for identifying them and treating them special. Note your subconscious reaction next time you see someone pull out a Platinum American Express card.
Loyalty programs greatly increase the likelihood of a message being read. The casual customer tends to read your messages only when he is ready to make a purchase in your category. Loyalty customers have many more calls to action in their messages and have much more incentive to open your message to see what new benefits are coming their way. I’m a big fan of Mandalay Bay in Las Vegas, so I always open e-mails from the resort, wondering if this month there will be a good excuse to hop on a plane for the weekend. (The wave pool and the Lazy River are awesome…sneak in someday and check them out.)
Surprise and delights appeal on a very deep level. Sticking with the Vegas train of thought, research on gambling has shown that frequent yet unpredictable rewards are the most psychologically compelling, which explains the appeal of slot machines. Applying the same psychology to a loyalty program can generate strong results. A surprise store-manager reception or a no-strings-attached gift card in December to top customers goes a long, long way.
Loyalty programs tend to attract those who are most likely to respond to them. There is always selection bias in any voluntary program, and loyalty programs are no different. People may join thinking they will act the same way and get an extra discount (the “rewarding people for buying things they would buy anyway” argument), but our tracking of dozens of programs show that overall, behavior does change, substantially and consistently. This point is a hypothesis, not a proven fact, but one that explains the results we see very, very well.
Now the Lonely Loyalty Champion has more options at his disposal when selling his vision internally. With a comment here and an e-mail there, he may just yet have a room full of excited and engaged co-workers cheering his every move next time.
Michael Greenberg is vice president of marketing for Loyalty Lab, a San Francisco-based developer of customer loyalty programs for the retail industry, and writes a monthly column for CHIEF MARKETER. He can be reached at [email protected].
Other articles by Michael Greenberg:
Microsegmentation for Macro Returns
Balancing Visible and Hidden Relationship Programs
Evolving Loyalty: How to Stay Current
The Best Marketing Investment You Can Make
The Case for Simultaneous Concept Testing
Planning for the Coming Online Standard
Why Do You Have High-Value Customers?
