Loyalty by Invitation Only
When it comes to building loyalty, brands increasingly have one thing top of mind: big spenders.
“There is a growing desire to create programs for the most profitable customers — the upper end, the affluent market,” says Mark Shipley, senior vice president of loyalty solutions worldwide at MasterCard Advisors, Purchase, NY.
To reach these customers, sponsors have stepped up the sophistication of database segmentation.
“There is a much more detailed effort to identify this population and more desire to communicate with them and create emotional ties,” Shipley says.
Brookstone, the specialty retailer, is testing several versions of an exclusive loyalty program among invited customers, but looking to the long term. With In Rewards, members receive one promotional point (called “rewards”) for every dollar spent. For every 200 rewards accumulated, the shopper earns $10 toward future purchases. Variations on this theme include promotional giveaways like merchandise or discount coupon days.
“Anybody planning to do a program should do a test to one, validate customer responsiveness and ROI to make sure it’s profitable, and two, make sure it’s affordable,” says Michael Greenberg, vice president of marketing for LoyaltyLab, the San Francisco-based technology provider behind In Rewards. “Otherwise the company is on the hook for a huge investment.”
Another program targeting elite customers is RedEnvelope’s RedBox Rewards. This program is so exclusive that it is not even marketed on the online gift shop Web site, www.RedEnvelope.com, nor discussed with non-members who phone in their orders. Despite its rollout past the test phase, “RedEnvelope is comfortable with it being a private program,” Greenberg says.
For the past year and a half, invited customers — those with the highest potential lifetime value — earn $20 certificates toward future purchases for every $200 they spend. All communications — via e-mail — include customized content depending on a member’s participation in the program and profitability to RedEnvelope.
Bally Total Fitness also runs an invitation-only loyalty program. In January 2006, Club Bally Member Rewards debuted in just three states — Massachusetts, Illinois and California.
It awards points for going to the gym, referring friends and purchases, including classes, training sessions, retail and food items. Rewards are based on gym visits and purchase activities and range in value.
Brands can test new concepts, products and pricing among their loyal customers, elevating their status not only with rewards but also through influence.
But key to most programs is profitability.
With more effective segmentation of “customers with whom we really do have a strong relationship that drives behavior in ways we really want to drive it,” says Aldy Keene, partner at Customer Loyalty Research Center in Indianapolis, “we are starting to extract more loyalty and profits from the loyal segment.”
