Online loyalty programs attract members who may or may not be connecting to brands.
The Internet hasn’t even reached its marketing potential yet, but online loyalty programs already are a dime a dozen.
The dynamics of the Web have pumped new blood into an old strategy, offering faster turnaround for both merchants and consumers and the ability (for the former) to collect detailed data more efficiently. That has lead to the development of numerous “loyalty” or “points” programs, which offer members a variety of free or discounted products and services in exchange for providing personal information, visiting Web sites, viewing marketing messages, or making purchases. It’s the standard brand loyalty program – American AAdvantage, Marlboro Miles, Pepsi Stuff – broadened for mass appeal.
Leading programs feature colorful names such as MyPoints.com, CyberGold (acquired recently by Mypoints.com), NetRewards, eIncentives, and FreeRide. Each of these programs boasts exclusivity and distinctive features, although most merchants are participating in more than one program – as are many consumers. And many of the programs can certainly boast broad reach. (Netcentives has more than four million members; FreeRide claims to facilitate 300,000 transactions daily.)
The question for marketers is whether these generic, aggregate services really build loyalty to a specific brand, or simply engender a new breed of consumers who expect to be rewarded for their actions.
That, of course, has been a traditional problem with loyalty programs both online and offline. Consumers aren’t necessarily participating out of brand loyalty, but simply to amass enough points to get the promised reward; once they get what they came for, they’re gone. But broad-focused rewards programs compound the problem by placing the next, more enticing offer only a few clicks away.
Procter & Gamble, Cincinnati, OH – a trendsetter in both the promotion and e-marketing arenas – recently addressed this question in regard to online sample clubs (March promo). The company was concerned that third-party aggregators were building databases of consumers hungry for freebies regardless of the brand. P&G ultimately decided to eschew those operations and integrate sampling measures into the online marketing efforts of its own brands.
TAKING CHANCES
For companies without established brands, rewards programs often aren’t as much about winning loyalty as they are about creating awareness and building critical mass – priorities that can be a good fit with broad-based rewards services. Rewards entice consumers to gamble on an unknown product, which lets the brand gather information on its prospective audience.
Start-up luggage retailer eBags (ebags.com) uses Netcentives, San Francisco, to offer purchase incentives for its products, but also to collect customer responses. “The biggest advantage of an online loyalty program is that we get valuable, unedited feedback on our products,” says eBags vp-marketing Peter Cobb. The Netcentives program offers one airline mile for every dollar spent, so “if they buy a $300 bag, they get 300 miles.”
One month after the customer makes a purchase, eBags follows up with an e-mail offering 100 additional miles for rating the product. Customers earn 100 more miles if they fill out a testimonial. “That’s worked really well. We’ve had some products garner 700 ratings and 500 testimonials,” says Cobb.
Last fall, eBags ran a Million Miles sweepstakes through Netcentives that attracted 60,000 registrants over a 90-day period. “The big question is, do they then stick around to buy, and they did,” says Cobb. “It was a self-liquidating promotion.”
To avoid brands taking a backseat to the loyalty program itself, a number of services are providing clients with infrastructures that limit their own involvement to a small logo on the client’s site. Rather than offering a generic, flat-fee program across the board, these companies are tailoring programs (and prices) to the client’s individual needs.
Perks.com, Los Angeles, offers PerformancePerks, an automation tool that fits seamlessly into a client’s corporate site, and features a rewards catalogue from which clients can create their own programs. Perks.com charges a $30,000 startup fee that covers application, set-up, training, and service support. Monthly application fees range from $900 to $1,900. Rewards and additional services, including sweepstakes and e-mail marketing, are priced separately.
Nissan’s Infiniti Motors division uses Perks.com to cater to the upscale crowd the vehicle attracts. The Infiniti Owner Extras Web site offers discount travel, event, and merchandise opportunities such as 35-percent discounts on stays at the Four Seasons in Hualalai, HI, or diving vacation packages in Belize. The site also offers free subscriptions to Business Week and Fast Company (indicative of the corporate-mindedness of Infiniti drivers).
“I view Perks.com as an extension of my marketing department,” says Infiniti vp-marketing Steve Kight. “Basically, we’ve used them to shift our marketing efforts from direct mail to online.” The system lets the Infinity brand be the main attraction; Perks.com is the facilitator.
DOING IT FOR THEMSELVES
Some brands are bypassing middlemen entirely and developing their own online incentive programs, thereby building directly off existing consumer loyalty. In April, Battle Creek, MI-based Kellogg Co. launched a points program called Eet and Ern (www.eetandern.com).
Kids collect 15-digit alphanumeric codes from cereal boxes, then plug those numbers into the Web site. (Children over 13 can sign up on their own, but those younger need parental permission.) Participants receive 30 to 50 points just for registering, and additional points for visiting the site and entering codes.
The points can be redeemed for toys, sporting goods, and school supplies. Rewards come from such charter partners as sporting goods retailer fogdog.com and schoolpop.com, a site that lets members raise funds for their school through purchases. (Eet and Ern hit a bump in the road, however, when Walt Disney Co. abruptly shuttered toy partner toysmart.com in May. Kellogg is pursuing other partners.)
“We chose to create our own site so we could fully leverage our strong existing equities,” says Kellogg marketing communications director Karen Kafer. “In addition, there currently are no online rewards companies offering rewards for offline purchases. We pioneered the technology and programs. Eetandern.com is a long-term relationship-building program, [not] a limited-time promotion.”
The program also explores uncharted territory. “This is the first loyalty program targeted to kids, so we didn’t really know what to expect,” says Carlos Costa, group head of projects for Capps Digital, the graphic design firm that created eetandern.com, and a limited partner of Chicago-based Leo Burnett USA, Kellogg’s ad agency of record. “We set a goal of 250,000 sign-ups by yearend. As of May 22, we already had 102,000 users signed on.” The site features games as well as educational activities.
The program is being promoted via approximately 450 million boxes of 15 to 17 brands through the end of the year. “This includes mostly kids and all-family brands, but we may use some of the older brands if we see grandparents collecting codes for grandchildren,” says Costa.
The eetandern.com site is also building an area where partner merchants can sell goods outside of the promotion.
PAY BACK
A frequent complaint voiced by loyalty program clients is that they don’t have an active role; once they sign on to a service, they have to sit back and wait for results. Saratoga, CA-based iQ.com sought to counter this by approaching the concept from a different angle.
The company, which launched in 1997 but didn’t develop its first committed program until April 1999, offers a Private Label SmartRewards service that lets marketers create their own reward currencies and an Open Rewards platform that lets consumers redeem rewards on their own or through other currencies. “The biggest change in online points programs has been the need to migrate from customer acquisition to customer loyalty, and from generating impressions to generating transactions,” says iQ.com president Richard Mandeberg, a former executive at Chicago promotion house Frankel.
Trivia site Boxerjam.com, Charlottesville, VA (founded by Jeopardy! co-creator Julann Griffin) is iQ.com’s first SmartRewards client. “We looked around at all the other rewards programs, and they were basically just cost centers,” says Boxerjam director of business development Dargan Coggeshall. “With iQ.com, we were able to design a revenue center.”
iQ’s model doesn’t keep marketers mutually exclusive from each other. “We can introduce users to third parties,” says Coggeshall. “We get revenues for referring our members to that transaction. It not only builds loyalty for our site, but provides us revenue as well. That’s something the other loyalty programs haven’t understood yet.”
LEARNED SHOPPERS
As an Internet portal, Palo Alto, CA-based AltaVista has all the eyeballs it wants. Now, it’s giving users incentive to shop through AltaVista Rewards. The search engine bills the program as the first “Web-wide” online rewards program.
Users earn points not only for buying from participating merchants, but also for browsing. Consumers can earn up to 1,500 points for filling out a registration profile, and earn additional bonuses such as two points for a product search or five points for browsing a category. Points are redeemable for a variety of products or can be donated to charity. Participating merchants include online outfits such as eBags and Ashford.com, and more traditional brands like Bugle Boy, Nordstrom, and Macy’s.
“This is not just a points give-away. To really earn a lot, you need to be a shopper,” says AltaVista vp-marketing Ken Neibaur.
Since the program’s May launch, AltaVista’s page views are up 30 percent and page views per user are up 50 percent. “One of the main reasons for this program is to create opportunities to make people loyal AltaVista members,” says Neibaur. “About 80 percent of users are opting for our e-mail program, and 85 percent are providing us with full registration data.”
THE OLD STANDBY
WebMiles, Salt Lake City, runs one of the newest programs, having debuted in January. The company sticks with the tried and true formula of offering free airline miles to consumers.
“We’ve basically taken all the good – the free miles – and taken away all the bad – the restrictions on redemption,” says vp-marketing Jennifer Case. “We go broad, but not deep, by signing up only the top merchants in each category [as partners]. If we sign up everybody in the field, we’d be doing those merchants a disservice.” Partners include Borders Books, CVS, Dell Computer, Disney Store, Hallmark, and JCPenney. Costs for partners vary, but range between two cents to five cents per impression.
One grocer client is using WebMiles to identify frequent customers and target promotions designed by shopping habits. “We’re looking at long-term retention,” says Case. “A lot of companies speak of loyalty and proclaim their focus is getting people in the door. Our focus is to keep them coming back – most loyalty programs have very high turnover rates.”
WebMiles strives to make the program attractive. “Attainability is usually a problem with rewards programs,” says Case. “It takes so long to earn enough points that consumers become demotivated. Ours is designed to be redeemable within 12 to 15 months.”
In June, WebMiles will unveil an offline component, a co-branded MasterCard that will enable members to earn one mile for every dollar spent.
“We asked some of our clients about different rewards programs, and several were very excited about working with WebMiles,” says Cheryl Hathaway, president of Scottsdale, AZ-based Altour, an application service provider for the travel industry. “Our printing costs are down 70 percent since we signed with WebMiles. There’s no question about whether a catalog was delivered or lost.”
“There’s a lot of buzz about online loyalty programs. But not everybody shops online,” says Steve Maritz, head of marketing research and travel service provider Maritz, Inc, St. Louis, and a WebMiles client. “To many people, shopping is a sport. They like the social aspect of it.”
In the final analysis, online rewards programs may ultimately be less about developing true loyalty and more about inspiring online sales, collecting data, and establishing initial communication with consumers. And there’s certainly nothing wrong with that.
Green Stamps are back. But swap that old sponge for a mousepad.
Sperry & Hutchinson relaunched America’s favorite loyalty program in March under a new name, S&H Greenpoints, and new owners including executive vp Walter Beinecke, the grandson of founder Thomas Sperry. Greenpoints bowed in New York City via the Foodtown chain, and S&H is seeking other grocers for regionally exclusive deals. S&H’s 100 online merchants include JCPenney, Lands’ End, ibaby.com, Mattel, Borders.com, and Sony Music Direct. It expects to be available in 400 supermarkets by the end of the year.
The Manchester, MA, company pitches the program to grocers as “u-commerce,” the unity of online and offline loyalty. Shoppers earn 10 points for every dollar spent via bricks-and-mortar stores, an online portal, and a Greenpoints affinity credit card from Fleet Credit Card Services. Members can redeem points online or through a catalog, or donate their points to the United Way.
For the time being, packaged goods manufacturers must work through retailers to participate.
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