4 best practices social loyalty

4 best practices for social loyalty

table of contents03 Introduction

04 #1 | think strategically about the program

07 #2 | identify & enable brand advocates

10 #3 | THINK BEYOND THE TRANSACTION

13 #4 | DESIGN, EVALUATE, & OPTIMIZE FOR ROI

16 conclusion

© 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 3

“Retailers need to optimize a long-term relationship with their customers and maximize the value created by each and every way customers interact with their businesses.”

Kristine JacobsVP Customer Success, 500friends

These are challenging times for retail. Although ecommerce is growing rapidly and offers a vibrant opportunity to reach new customers, the gains have not been equally distributed. In fact, Amazon accounts for 30% of all product searches and continues to grow at twice the rate of ecommerce as a whole. At the same time, the cost of acquiring customers is increasing year-over-year while margins continue to get squeezed. Given these realities, retailers have to find new and creative ways to maximize the lifetime value of their customers.

The key according to Kristine Jacobs, Vice President of Customer Success at 500friends, is for retailers to “optimize a long-term relationship with consumers and maximize the value created by each and every way customers interact with their businesses.”

One of the ways retailers can accomplish this is through a well-designed and executed social loyalty program. A social loyalty program gives retailers a powerful tool for building durable relationships with their customers while leveraging their social connections and actions to effectively reach new audiences. More loyal customers mean greater lifetime value per customer and more profitable customer relationships, which give a retailer more opportunity to invest in growth.

Introduction

think strategically about program design

best practice #1


Before discussing what makes a social loyalty program successful, it’s important to understand what a successful loyalty program is not. Too often, a company’s loyalty program will consist of a microsite and a few simple promotions that offer all of its customers the same discount. Although such a program may be easier to implement than a robust, multi-channel incentive program, it is also unlikely to create the sort of sustained, long-term relationships with customers that retailers need to thrive in today’s competitive marketplace.

In order to design and implement a successful social loyalty program that creates and sustains long-term relationships with customers, retailers must think more strategically. A social loyalty program is not an isolated feature; it has to be an integral part of a brand’s overall marketing and growth strategy.

#1 | think strategically about program design

imagine a Program that Meets Your Objectives

Strong Program Objectives Include...

1

2

3

INCREASE

OVERALL LTV &

SHARE OF WALLET

GROW ACTIVE

CUSTOMER LIST

GAIN INSIGHT

INTO CUSTOMER

SEGMENTS


The first step in defining a winning strategy for a loyalty program is to think about whom it is for and what will appeal to them. In other words, design the social loyalty program for specific populations. A first-time customer has different needs and expectations than a lifelong customer. Rather than blanket all of a site’s customers with a one-size-fits-all program, a well-designed program will target key customer segments with compelling and relevant rewards. For example, a first-time customer might receive a special discount on their next purchase to encourage them to return to the retailer while a well-established customer might be offered an exclusive gift to reward them for their continued loyalty. Before choosing rewards, think carefully about who is receiving the reward and the behavior it will drive.

Match Customer Populations with the Right Rewards

INVITATION

TO AN EARLY

ACCESS SALE

REWARD

EMAIL AFTER

PURCHASE

MEMBERSHIP

UPGRADE

TO VIP SERVICE

INACTIVEMEMBERS

1ST TIMEBUYERS

3RD TIMEBUYERS

#1 | think strategically about program design

design for your audience

IDENTIFY &ENABLE BRANDADVOCATES

best practice #2


Word-of-mouth marketing is as old as business and it is more important today than ever before. This is as true for the smallest boutiques as it is for the largest retailers in the world. Jeff Bezos, CEO of Amazon, predicts that “more and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful. If you offer a great service, people find out.”

“More and more money will go into making a great customer experience, and less will go into shouting about the service. Word of mouth is becoming more powerful...”

#2 | identify & enable brand advocates

At a time when customers are constantly inundated by offers and discounts, whether in the form of banners, emails, or targeted Google or Facebook ads, word of mouth represents a powerful means for retailers to reach customers directly. A successful social loyalty program must find ways to amplify the impact of a personal recommendation online. This requires retailers to appeal to brand advocates and make word-of-mouth marketing in all of its forms one of a loyalty program’s central goals.

jeff bezosCEO, Amazon.com

recommendations as a marketing engine


Social loyalty programs should be designed around the customer’s journey. Retailers must be able to place themselves in the minds of their customers in order to create a compelling customer experience. A key part of creating that experience is removing all friction to sharing. Writing a review, referring a friend, or sharing a purchase to Facebook should be an integrated, natural part of the customer experience, rather than an irritation or impediment. At the same time, retailers must have the right tools to measure their customers’ engagement in order to identify potential brand advocates.

#2 | identify & enable brand advocates

understand the customer’s journey

The Customer Journey

STA

ND

AR

DO

PP

OR

TU

NIT

Y

VISIT SITE

VIEW PRODUCT INFO

ADD TO CART

PURCHASE

CREATE ACCOUNT PURCHASE CONFIRMATION

SHIPMENT NOTIFCATION

ENROLL IN PROGRAM

1ST TIME BUYER REWARD EMAIL

CONNECT SOCIAL ACCOUNTS

SHARE PRODUCT PURCHASE

MONTHLY PROGRAM EMAIL

SURPRISE BADGE IN EMAIL

POINTS FOR PRODUCT REVIEW

think beyondthe transaction

best practice #3

Too many retailers think their work ends once a customer has clicked “Buy.” Rather, they should be finding ways to connect with customers in new and dynamic ways that will increase customer lifetime value. One of the goals of any social loyalty program must be to deepen the retailer’s relationship with its customers by engaging them beyond the purchase.


A well-designed loyalty program reward strategy should be built around more than just buying more to accumulate more points. Social media gives retailers many opportunities to engage their customers in new and creative ways, such as rewarding customers for social actions like writing reviews and sharing purchases to help spread the brand’s message. Bestowing branded badges and special recognition on repeat customers deepens their connection to the brand and makes them feel recognized.

#3 | think beyond the transaction

engagethrough actions

Every brand has its own strengths and resonates with customers in different ways. A social loyalty program is an opportunity for retailers to extend and reinforce their brand by appealing to their customers in innovative ways that match business goals. The key is that the content offered by a brand’s social loyalty program should fit into the brand’s identity and appeal to its unique relationship with customers. For example, Spaweek (www.spaweek.com) awards points for sweepstakes entries, spa reviews, and spa check-ins on Foursquare, in addition to dollars spent.

LIST OF ACTIONS:

Purchase

Enrollment

Connect Facebook Account

Connect Twitter Account

Sign Up for Email

Open an Email

Refer a Friend to Purchase

Refer a Friend to Sign for Email

Follow on Twitter

Email a Friend

Tweet a Product

Write a Review

http://www.spaweek.com/


Program reward structure connects point-earning engagement to redemption, a core driver of value and cost for a loyalty program. Rewards should be differentiated by customer segment in order to reward a brand’s most loyal customers and keep others excited and engaged. Early access, free shipping, and other VIP perks are powerful incentives to keep customers coming back. Retailer Kate Somerville’s (www.katesomerville.com) social loyalty program is a prime example of a compelling reward mix: top-tier members get an exclusive weekend skincare clinic.

#3 | think beyond the transaction

engagethrough rewards

Reward Design Tips

MINE CUSTOMER INSIGHTSTO INFORM APPROACH

CONSIDER USING TIERSAS INTRINSIC MOTIVATORS

EXTRINSIC REWARDSALONE WILL NOT DRIVELONG-TERM ENGAGEMENT

SURPRISE & DELIGHT TOREINFORCE KEY BEHAVIORS

1

2

3

4

EXTRINSIC REWARDS

Gift Coupons

Exclusive Products

Sweepstake Entries

Charitable Donations

(Direct Cost)

INTRINSIC REWARDS(No Direct Cost)

VIP Customer Service

Recognition

Badges

http://www.katesomerville.com

design, evaluate,& optimize for roi

best practice #4

An effective social loyalty program is a significant investment of time and resources. A program must have clear objectives and target specific customer segments. Most importantly, a program must be designed for maximum ROI, and it must be measured at the right moments. Ongoing program optimization lays the groundwork for continued growth and success.


From the early stages of program design, ROI is the right context for key decisions. Some retailers make the mistake of making their points too valuable or awarding too many points over time; the rewards can end up being more valuable than the purchases required to earn them. A retailer that gives a customer a $15 reward for $12 worth of purchases might have very loyal customers, but it won’t be in business long. Marketers have to model the financial impact of a social loyalty program and make adjustments to point values and rewards before and after they launch a loyalty program.

#4 | design, evaluate, & optimize for roi

Balance Reward Costs to Ensure ROI

Of course, the design and goals of a retailer’s social loyalty program should also reflect their unique challenges and circumstances. A retailer that finds itself constrained by low revenue per customer, for example, might build its program around rewards that emphasize recognition and exclusivity—such as early access to new products or VIP offers.

The retailer CoffeeTable engaged a member segment with a sweepstakes entry that qualified them for the highest program reward.

The offer drove engagement while reducing the reward cost among their lowest program tier. The team at CoffeeTable arrived at this innovative and effective offer by critically examining the goals of their program and designing a solution that made financial sense for them.


#4 | design, evaluate, & optimize for roi

Success With Ongoing OptimizationA social loyalty program should be first designed for ROI and then optimized for ROI. Even programs with a large emphasis on social components—such as sharing purchases to social networks or writing public reviews—should be evaluated and optimized based on a measurable ROI. Optimization in the long-term is the key component of ROI success, and it is also the most commonly neglected or poorly understood element of program management. It helps to think about the lifecycle of the program and its measurable elements, and then match a timeline of measurement and adjustment initiatives to that lifecycle. For example, in the early months of a program rollout, the critical metric for program performance is enrollment, but as the program ages

engagement metrics become critical for decision-making. And finally, ultimate program impact is what every marketer will want to report on, but it’s a mistake to look for that proof from day one. Moreover, enrollment and engagement remain central

to program impact beyond the program launch—not only in later months but in perpetuity. Successful optimization efforts require this long-term view in order to drive maximum impact on key performance indicators.

Ongoing Optimization for ROI

1-3 MONTHS 3-6 MONTHS 6 MONTHS & BEYOND

ENROLLMENTENGAGEMENT

IMPACT


conclusionIt is no longer sufficient for retailers to focus on conversion rates and new acquisition. Instead, marketers must renew their focus on customer relationships and maximizing lifetime value, the only activity that will drive the profitability needed for growth. The data is clear about the outsize value of repeat customers: they are responsible for 40% of revenue and they drive 3-7 times the revenue per visit as one-time buyers.

A loyalty program gives retailers a powerful tool to identify and engage these incredibly valuable customers. At the same time, the ubiquity of social media has made it more important than ever for retailers to find creative ways to reach new customers. By building social components into their loyalty programs, retailers can leverage the proven effectiveness of loyalty marketing with the burgeoning potential of social networks to solidify existing customer relationships and reach new customers.

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4 best practices social loyalty

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