More than a year after Best Buy gave IWCO Direct responsibility for its Reward Zone loyalty program, enrollment has mushroomed from 3 million-plus members to more than 7 million members. And as a bonus, IWCO put $2 million in postage savings back into Best Buy’s pocket. Every new relationship should be this successful.
The makeover IWCO gave Best Buy in late 2004 wasn’t extreme: Much of it consisted of streamlining or clarifying pre-existing elements. A welcome packaged featured a new card and welcome letter, which clearly explained how dollars-off certificates ($5 for every $150 spent) could be earned – and would expire, if not redeemed within a given time period.
The latter feature mitigated the likelihood that Reward Zone participants would be alienated if these certificates were not redeemed. Rather than carrying the liability of promised rewards for an unlimited period of time, Best Buy simply made the expiration transparent, and used it as another means of generating interactions within its customers.
The certificates themselves changed as well. Participants were able to choose between low- and high-denomination reward amounts, depending on whether they were more likely to make a series of small-dollar purchases, or one or two large ones. This eliminated the need for consumers to fumble with dozens of small pieces of paper, if they were interested in cashing them in for a big-ticket item.
The newly revamped program also refocused attention on its most valuable participants. Best Buy augmented the dollars-off rewards with a series of soft benefits, including free exclusive CDs; sweepstakes; sneak previews to movies; and a variety of members-only events.
There were back-office changes as well: The certificates, which had cash value, were subjected to more rigorous auditing, including better tracking processes. Communications with higher-value members, which had previously been hand-fulfilled with tailored offers, were automated, reducing the likelihood of mistakes. And IWCO convinced Best Buy to test replacing first class mail delivery with commingling, reducing postage costs while maintaining the redemption windows for the time-sensitive certificates.
Best Buy hasn’t finished tweaking Rewards Zone: It is evaluating moving from a $9.99 registration fee – a level that doesn’t really offset the administration fees — to a free program, for instance. (The company has tested whether requiring participants to buy into the program makes it more valuable or not. The tests have been inconclusive.)
Best Buy is also testing whether personalized product recommendations will add to the program’s worth to participants, whether seasonal messaging will increase frequency and traffic, and the value of delivering category-specific incentives tailored to member purchases.
Mike Oberle, senior manager of customer loyalty marketing for Best Buy, John Wicka, brand services manager for IWCO Direct and Debora Haskel, vice president of marketing for IWCO Direct presented the results of the revamped program during Direct Marketing Days New York.
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