ourblok loyalty rewards
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Everything You Want to Know About Loyalty Rewards!TRANSCRIPT
REWARDS
Everything You Want to Know About Loyalty Rewards
2 OurBlok Winter
EDITOR’S NOTEThis book is a very simple idea. With a goal of helping you sort out the evolving myriad of data on how to properly engage your customers with today’s Loyalty programs and if these are even a good idea for your business. Today more than ever “Loyalty Matters.” We hope that this collection of published articles will provide you with the information you need to make an intelligent decision for your business. If you think about it, large organizations have advertising budgets, ad departments and typically hire ad
agencies and they still make very expensive mistakes! I have thought for years that this puts many small businesses at a real disadvantage. I hope that this information can be an equalizer.
Bottom Line loyalty improves the performance of your businesses and your bottom line! This is not a book we wrote but a compilation of published articles from experts in the field, all are referenced as to the actual source.
Our goal is to help every business owner gain significant personal insight into the role loyalty can play in their business. As the world has evolved loyalty has as well, these articles hopefully will provide the data you need to make an intelligent decision.
We’ve been thinking about putting this together for some time. We are committed to helping you grow your business and will be adding interesting and worthwhile articles as they come our way. Overall, we believe that a properly executed loyalty solution involves a number of factors. We’re hopeful that this book can be part of growing your organization and helping you engage with your customers like never before. At the end of the day, it is about increasing frequency of your customer visits and the amount they spend. When you add the ability to automate marketing for customer birthdays, anniversaries and special occasions, rewards can play a key role in your business.
We hope that you find this helpful!
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this issue
ALL ABOUT REWARDS
4 Unclear About Rewards?
5 Top 9 Ways To Increase Loyalty 6 Restaurant Rewards Solutions
8 Punch Cards Don’t Work
10 Rewards Solutions in Restaurants
12 Retailers Seek to Customize
18 15 Benefits of Loyalty Initiative
24 Back to Basics
26 Cause Marketing Study
28 Loyalty Rewards VS Daily Deals 30 Deloitte Research for Business
32 Cardless Rewards with OurBlok
30Deloitte Research
Unclear About Rewards?
8 Why Punch Cards Don’t Work
Lack of loyalty is one of the major causes of failure in every walk of life.
—Napoleon Hill (1883–1970) excerpted from Think and Grow Rich OurBlok Rewards 3
4
IF YOU ARE UNCLEAR ABOUT REWARDS
According to the Economist Intelligence Unit, companies with engaged customers enjoy: improved customer loyalty (80%), increased revenue (76%), and increased profits (75%). Furthermore, research from industry analyst firm Aberdeen Group shows that leading organizations with effective employee engagement strategies in place are seeing a 22% year-over-year improvement in customer satisfaction/loyalty and a 21% year-over-year improvement in turnover/retention.
Positive Impact of Customer Engagement on Financial Performance
• 60% and 80% of defecting customers describe themselves as “satisfied” or “very satisfied” just before they leave. ~ Source: Business Week
• It costs between 5 and 10x more to attract a new customer than to keep an existing one. ~ Source: The Council on Financial Competition
• 70% of the reason customers leave a company has nothing to do with the product.~ Source: Forum Corporation
• Each year the average company loses 10-15% of its customer base. ~ Source: Bain & Company • “84% of customers who leave, do so because of poor service.” ~ Source: Forum Corp • “A typical business only hears from 4% of its dissatisfied customers—the other 96% leave, 91% for good.” ~ Source: Jim Barnes, “Secrets of CRM”• Every 1% increase in loyalty intentions is associated with a 17% higher likelihood of repurchasing. ~ Source: Lariviere, 2008 banking study
• “Executives are finding that the winning differentiator is no longer product or price, but the level of customer engagement relative to the competition.” ~ Source: Rama Ramaswami, Senior Editor, Economist Intelligence Unit
• “One of the biggest business growth opportunities today is to focus on engagement. Companies that make it fundamental to their business cannot be touched by competitors. They enjoy more profits during tough times, and grow faster during good times. It truly is an untapped opportunity just waiting for those who will grab it.” ~ Source: Adam Edmunds, CEO, Allegiance, Inc. • High levels of customer engagement are associated with improvements in many financial metrics, including return on assets (ROA), return on investment (ROI), return on equity (ROE), gross margin (GM), and earnings per share (EPS). ~ Source: PeopleMetrics
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Todd Wilkerson of Allegiance www.allegiance.com has just released a new white paper on the Top 9 Ways to Increase Customer Loyalty. It's excellent work, visit the website for your free copy.
If you don't have time to download and read, you can see the top quotes from the paper below. Customer Engagement or Customer Loyalty is extremely important for any business model.
It does not matter if you own a bowling center, restaurant or tidily winks arcade, those who realize the Voice of the Customer has changed and these types of programs are required in the digital age will prosper for years. Competitors who ignore the mounds of research coming in to business owners will do so at their own risk.
TOP 9 WAYS TO INCREASE LOYALTY
Get Your Free Copy Today!www.allegiance.com
BASIC CONCEPTS 1. Satisfy your customers with product quality2. Build loyalty by exceeding expectations and building opportunities for repeat business3. Engage your customers by reaching out to create a dialog TECHNOLOGIES 1. Complaint Management 2. Proactive Surveys 3. Enterprise Feedback Management BUSINESS OUTCOMES 1. Descriptive Statistics 2. Predictive Analytics 3. Alignment with Business Outcomes
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Restaurants everywhere are rushing to implement customer loyalty programs. We’re all familiar with the concept — the “Buy 10 Get 1 Free” punch card is nothing new. What is new, now, is the high tech approach, the more sophisticated methods of tracking customer behavior, and the combination of loyalty with marketing automation programs to dramatically increase customer frequency.
But restaurant owners wonder — do these high tech programs really work? Are they proven to pay off? I’ve worked with many independent restaurants and chains implementing a combination loyalty & marketing automation solution. We’ve found significant results that really pay off.
Turning new customers into regulars
It’s the magic elixer of success for any restaurant — the ability to take a first-time customer and turn them into a regular. You’ve got to deliver on the service, the food, the value and the experience overall. And you’ve got to do something that’s even harder — change a customer’s habits. So we wondered, would the loyalty program help turn new customers into regulars?We studied a 9-store pizza chain that serves a lot of slices for lunch as well as
full delivery of pies. Because we have records on delivery customers, we can analyze the behavior differences between those who joined the loyalty program and those who did not. What we found was, of all the first-time customers who tried the restaurant and joined the loyalty program (receiving a welcome message with the offer), 27 percent were back again within a short time period, and 14 percent ordered at least two more times within the 3-month study period. But for those first time customers who did NOT join the loyalty program, only 12 percent returned once and only 3 percent returned two or more times. Active communication by the restaurant via the rewards system appears to have had significant impact on turning these new customers into returning customers.
In another example of a 5-store chain, new customers who joined the loyalty program were 3.4 times more likely to order a second time (41 percent of them did, vs. just 12 percent of non-loyalty customers) and were five times more like to order three or more times (22 vs. 4 percent). Increasing customer visit frequency
You may spend a lot of marketing
RESTAURANT REWARDS HAVE SURPRISING SOLUTIONS
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dollars to attract new customers, but it’s a universal marketing truth that it’s much easier and more profitable to get your existing customers to just spend more. Can the loyalty program pay off in this important area? We compared loyalty members to non-loyalty members, again looking at delivery orders only so we could track customer-specific behavior. We found that loyalty members ordered, on average, spent 0.49 more in a three-month period than did non-members. Over a year, that’s two extra orders per member. Multiply that by 1,500 members and a $25 ticket average and you’ve got $75,000 in ROI to play with!
Increasing ticket averages
Do loyalty members spend more than non-members? Or do all those rewards and offers cost me money? We set out to find out. In one 4-store study, we found that across all order types (dine in, delivery, to go and pick up) the loyalty members spent an average of $2.14 more per transaction, even after accounting for all the discounts or rewards they may have applied to the order. In a second study, we found that even with an aggressive welcome offer worth $9, loyalty members had a ticket average of just 77 cents less than non-members. With a small adjustment to the offer value these members would also be spending
more.Enrolling more customers
Many restaurants have been trying to capture customer data — e-mail addresses and the like — so they can communicate with customers. Most websites include an online sign up form for e-mails, and this is often promoted in-store as well. We recently converted a restaurant client from an e-mail only program, with online sign up, to our integrated loyalty solution. We found that monthly enrollments quadrupled. That’s right, 4 times as many customers signed up when asked by the cashier at the point-of-sale, with the added incentive of rewards. Increased customer data means more opportunities to promote your brand. And these days, an active, sizable customer list with identifiable customer demographics adds to a restaurant’s value.
It’s common sense — getting to know your customers, nurturing them, communicating with them, keeping in touch — it’s bound to pay off, right? Turns out we have solid evidence that it does pay off, with increased conversions, increased frequency and increased ticket averages.
Article Published by:www.fastcasual.com/blog
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WHY PUNCH CARDS ARE NOT THE SOLUTION
Consumers are visiting quick serves less frequently these days, and restaurants are desperate to secure some customer loyalty to help offset traffic declines. But too many chains use buy-nine-get-the-10th-free punch cards to try to win customers’ loyalty—and they’ve got it all wrong.
Punch cards and similar transaction-based promotions may seem simple and convenient, but using them not only causes quick serves to miss out on valuable opportunities, but also works against their efforts to foster profitable, brand-building customer loyalty.
That’s because these tactics are generic, one-dimensional, and self-interested.
Generic Loyalty Tactics Don’t Build Brands
The default loyalty tactic is the punch card. According to the “Consumer Loyalty Study” conducted by First Data Competitive Intelligence last April, 50 percent of consumers who were members of fast food rewards programs indicated the program used punch cards. The stacks of punch cards that accumulate in people’s wallets only serve to make the stores they came from seem generic and interchangeable.
It’s no surprise, then, that these tactics don’t work. That First Data study also found that only 4 percent of fast food rewards program members indicated their membership was very influential in their choice of which restaurant to visit.A loyalty program should give people compelling reasons to choose your restaurant by positioning and differentiating your brand. It should
be a vehicle through which a brand communicates its uniqueness and delivers differentiating benefits.
The Little Black Book program from apparel retailer White House | Black Market, for example, is designed to resemble a socialite’s little black book. It makes members feel like they’re part of an inner circle by offering exclusive invitations and special offers.
Instead of thoughtlessly copying competitors and defaulting to category conventions, a loyalty program should be considered a brand touchpoint that creates just as much of an impact as advertising or customer service—and should be designed accordingly.
Loyalty Programs Should Involve More Than Discounts
Punch cards and other transaction-based discounting programs are really nothing more than one-off tactics with limited long-term value. Because so many quick serves offer these types of discounts, consumers no longer place much value on them. The rising tide of consumer expectations necessitates that companies develop more innovative programs.In fact, some customers have become trained by chains with so-called loyalty programs to have a sense of entitlement to rewards. And because these kinds of programs are usually conceived as promotions separate and distinct from other aspects of the customer experience, they can detract from and devalue the experience by focusing on price and free food.
If planned and executed appropriately,
Most quick serves don’t understand that building loyalty takes more than handing out punch cards and promotions.
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though, loyalty programs can facilitate relationships that are valued by customers and companies alike. The key is to utilize them to get to know customers personally and to engage in dialogues with them.
For larger chains, this might involve setting up a technology infrastructure to profile and segment customers and then provide targeted offerings. For smaller ones, it can be as simple as collecting customer contact information so they can be reached through e-mail or social media.
“We have a more empowered and educated consumer, and we have the mechanism to listen to and engage in real time the voice of that customer,” says Ernan Roman, founder and principal of Ernan Roman Direct Marketing, a customer-relationship marketing consultancy. “Let’s turn the thinking around and recognize that at the beginning of a strategy, the first step is to get the voice, or the wisdom, of the customer in a disciplined way and use that to drive the rules of engagement.”
By actively seeking out customer input and feedback, chains can learn which rewards and benefits are most valued. Instead of offering discounts that have become table stakes, quick serves might discover they would achieve better results by offering different levels of service, exclusive offers and experiences, or early access to upcoming new products or promotions.
Fast Feeders Should Be More Loyal to Customers
Quick serves have a real opportunity to stand out by turning the concept of loyalty on its head. Instead of focusing on how to increase customer loyalty, companies should identify ways to be more loyal to their customers.
They should offer real benefits and appreciation for their customers’ loyalty.
Going out of the way to serve people, holding the line on prices, and taking the time to thank customers personally are just a few ideas for doing so.
David Murphy, copresident and director of brand innovation at the advertising agency Barrie D’Rozario Murphy, encourages companies to “get close to your best customers. Offer them real economic and emotional benefits. They are most likely to buy and most likely to talk up the brand.”
Indeed, true loyalty is usually reciprocated. Customers express their loyalty not only through continued patronage, but also through referrals and advocacy. By rethinking your stance on loyalty, you can turn your loyal customers into brand ambassadors.
Loyalty programs can produce more than incremental visits. Programs that facilitate a mutually beneficial relationship between customer and company will give you a sustainable competitive advantage.
Article Published by: www.qsrmagazine.com
True loyalty is usually reciprocated. Customers express
their loyalty not only through continued patronage, but also
through referrals and advocacy.
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RESTAURANT LOYALTY PROGRAMS
Identifying, rewarding, and retaining your best customers is one of the hardest challenges for any restaurant. It’s both a marathon and a sprint, and with loyal customers spending 67 percent more than new ones, it’s a race you can’t afford to lose. The right loyalty program can help get more customers across the finish line.
Traditional plastic-card loyalty programs have long been the gold standard for restaurants, but recent data suggests that consumers simply aren’t engaging with them like they used to.
According to Colloquy, 54 percent of loyalty memberships are inactive (almost all within the first year), and many restaurant programs are performing even worse. One California quick-service chain, for example, gave out 37,000 plastic cards over the last two years (at a cost of about 50 cents per card). Only 56 percent were ever used, only 26 percent were registered with an e-mail address, and only 18 percent were still active six months later.
As consumer demands have changed, the greatest enemy of the traditional loyalty model is program churn. When earning rewards takes effort, many
customers ultimately stop trying. And if you can’t keep your customers “in the game,” you can’t hand out any medals.
For consumers, earning a reward in a loyalty program is like running a race. You have to run around the track (make purchases), and only when you make it to the finish line do you earn a reward. Some customers will never make it to the finish line because they weren’t dedicated. But most are running the race (making repeat purchases) with the finish line (reward) in their sights.
Traditional loyalty programs put hurdles all the way around the track. Forgot your card? Oops, you’re out of the race. Have to remember to print out a coupon? Sorry, that’ll trip you up. No wonder churn is so high. The same customers may still be spending money with you, but you wouldn’t know it because they took off their bib number. Or worse, maybe they really did stop coming altogether.A 5 percent increase in customer retention can produce as much as a 100 percent increase in annual profit.
This is a problem for two reasons. First, you actually want your best customers to make it to the finish line. Just like an Olympic runner accelerates on the final
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100 meters, when your customers are nearing a reward, they run significantly faster. A properly engaged reward program can generate a 25 - to - 45 percent increase in visit frequency..
Similarly, you actually want those rewards to be redeemed; customers redeeming cash-back rewards spent 10–15 percent more on that transaction than their historical average ticket.
And finally, recent reward recipients are twice as likely to refer a new customer once they have redeemed a reward.
The second reason you should tear down the hurdles: High customer churn ruins your data quality and undermines the value of your entire program. When you can’t tell the difference between a true churned customer (one who stopped patronizing your business) and one that just ditched the loyalty program, can you really trust the insights generated by the program? According to Fred Reichheld, author of The Loyalty Effect, a 5 percent increase in customer retention can produce as much as a 100 percent increase in annual profit.
So how do you create smooth sailing around the track? How can you encourage more of your customers to reach the finish line? Fortunately, there
are some exciting new technology trends making loyalty a whole lot more accessible to your business and less painful for customers.
A 5% increase in customer retention
can produce as much
as a 100 % increase
in annual profit.
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RETAILERS SEEK TO DIFFERENTIATE, CUSTOMIZE LOYALTY PROGRAMS
Loyalty initiatives — including discounts, free products, and exclusive access to events and offers — have successfully captured consumer attention for generations, and continue to do so. In 2012, loyalty program memberships totaled close to 2.65 billion in the U.S., a 27% increase over 2010, according to research from COLLOQUY. Additionally, the average U.S. household now participates in 21.9 programs — up from 18.4 in 2010.
A number of retail segments are experiencing significant increases in loyalty program sign-ups: Department stores (+70%); Drug stores (+45%); Specialty stores (+26%); and Mass Merchants (+8%). This is an opportunity for the retailers that can deliver compelling loyalty programs to members.
To compete in today’s tech-savvy marketplace, companies must find unique ways to differentiate and customize their loyalty programs. Companies like Office Depot, Sephora, Gilt Groupe and Starbucks have found success using innovative approaches to loyalty. These retailers are tapping the latest mobile, social and local tools to pique consumer interest.
Retailers are faced with an ongoing challenge to not only guarantee their loyalty programs pique interest but also are used consistently by consumers, according to The 2013 COLLOQUY Loyalty Census report. This challenge is confirmed in the research: While loyalty program memberships across retail categories experienced a surge between 2010 and 2012, only 9.5% of members currently are actively using their accounts and redeeming offers. This somewhat lackluster participation “suggests some staleness in the value propositions of retail programs,” the report stated.
“If you look at typical loyalty programs across retail, travel and hospitality, they have a combination of rewards, recognition and customization,” said Jonathan Copulsky, Principal at Deloitte, in an interview with Retail TouchPoints. However, there are several issues with the way many retailers approach these three tiers, he noted. “What we now know is rewards only work for certain people. In addition, the rewards that may matter to one segment may not matter to another. Retailers need to develop differentiated rewards. Recognition also tends to be a one size fits all, which hinders program adoption.”
Additionally, with e-Commerce, 12 OurBlok Rewards
RETAILERS SEEK TO DIFFERENTIATE, CUSTOMIZE LOYALTY PROGRAMS
mobile and social media holding more influence on consumers’ browsing and buying behaviors, retailers are considering how to revise their loyalty strategies to address omnichannel shopping strategies. Amping Up Loyalty Programs To Engage Tech-Savvy Shoppers
By offering consumers valuable and relevant experiences across all channels, retailers can drive sales without focusing solely on discounts and price, according to Shep Hyken, Bestselling Author, and Chief Amazement Officer of Shepard Presentations.
“We have to attack customer loyalty in a completely different way than we ever have before,” Hyken explained. “Ultimately, the goal is to make price less relevant. But currently, when looking at loyalty programs, it is evident that many consumers are loyal to some programs, but not necessarily the retailers.”
Best-in-class retailers are creating more compelling loyalty programs by integrating mobile, social, local and gamification elements into their loyalty programs and initiatives.
For example, Office Depot has implemented a new rewards program to provide consumers with a variety of incentives based on their overall engagement. Members can earn points for purchasing ink, toner, paper and printing services, and even for recycling ink and toner cartridges.
Consumers also can earn points by sharing personal information with Office Depot and “connecting with the brand,” according to a company press release. Points are rewarded based on the amount of information customers provide in their member profiles.
Mobilized Loyalty Programs Allows Instant Connectivity
As consumers become more savvy and connected to technology, they are asking that retailers provide instant access to loyalty programs and coupons.
To keep pace with this demand, The Melt, a fast-casual restaurant chain specializing in grilled cheese sandwiches, has adopted the Perka platform to create a mobile loyalty program called “The Melt Perks.”
Consumers use mobilized punch cards to earn a free melt for every nine they purchase via mobile or the company web
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smartphones, the loyalty card appears automatically.
One of the first retail partners of Passbook when it launch in September 2012, Sephora saw more than 400 thousand Beauty Insider loyalty program passes created in the first 90 days. Johnna Marcus, Director of Mobile and Digital Store Marketing at Sephora shared insights on the success of this implementation during the Mobile FirstLook conference. As a result of this burst in interest and activity, Sephora plans to focus more on promoting consumers’ abilities to redeem and store gift cards, as well as store loyalty account information on Passbook.
However, seamless mobile redemption processes sometimes is not enough. It also is imperative that content and offers are personalized to specific consumers and their unique relationships with retailers, according to Copulsky.
“A key best practice for loyalty initiatives is customizing and creating a differentiated experience by taking customer data and making programs meaningful,” Copulsky said. “The overall experience with a loyalty program is important — from the rewards to the recognition — but the
site. Loyal customers also are able to earn “Perks+” status when they buy at least one melt in five separate orders within 30 consecutive days.
However, the intersection of mobile and location presents an even better opportunity for retailers to connect with consumers while consumers are in-store, or even in specific aisles.
“The mobile-local connection is very powerful,” said Larry Freed, President and CEO of ForeSee Results. “Using these two methods together presents another way for retailers to engage and market to consumers.”
Apple Passbook, for instance, provides consumers with more seamless access to their loyalty membership cards. When shoppers visit store locations, they open the Passbook app and store associates scan a digital loyalty card barcode, allowing consumers to instantly collect loyalty points, and redeem coupons and offers at the point of sale.
With location-based technology, Passbook also disseminates real-time updates and alerts to users for passes they own. All loyalty cards are stored on the iPhone lock screen so that when shoppers are near a specific location and unlock their
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stakes to be relevant are much higher.”Harnessing structured and unstructured data across channels will provide retailers with an in-depth look into shopper preferences, which will empower organizations to create more relevant and timely rewards, according to Esprit Smith, who is retail industry expert at Lenati, a customer loyalty consultancy.
“Cookies, geo-fencing, and other tracking technologies allow retailers to gather data including shopper purchase history, spend, and browsing behavior,” Smith said. “As a result, retailers can create incentives that are targeted to an individual customer, which helps acquire new customers — particularly younger generations with a stronger affinity towards ‘me-marketing.’” Using Social To Engage Advocates And Tastemakers
Most (78%) U.S. Internet users said they show their loyalty to brands by spreading the word on their experiences, according to research from ClickFox, a customer experience analytics company.
As consumers become more willing and eager to share their past retail experiences, retailers should consider how they can make social media a core
component of loyalty programs and initiatives, according to Smith.
“Social media is a natural engagement driver, so it is important for retailers to identify how networking channels can fit into their programs,” Smith said. “Retailers should think about all the ways it can enhance their loyalty initiatives and overall customer engagement.”
Retailers can harness social media to track and analyze customer perspectives, as well as identify key brand influencers. Then, organizations can create unique and compelling experiences for these shoppers by having one-to-one conversations with them, and offering unique offers and opportunities. Using this strategy can help brands and retailers drive word-of-mouth among advocates and in turn, boost brand awareness in new segments.
For example, Gilt Groupe has established a loyal following across social networks by providing brand followers and advocates VIP access to sales and offers. The loyalty program for the flash sale eTailer also provides mobile app users and social followers with a variety of rewards and incentives such as entry to exclusive events and sales, Smith explained. Finally,
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if consumers participate in the online referral program, they have the chance to earn a $25 credit if they share their favorite products on Facebook, Twitter and Pinterest, and friends join the site by clicking on social posts.
“The combination of social marketing and word-of-mouth is most effective for customer acquisition,” Freed said. “Social media needs to be about consumer-to-consumer dialogue. The viral nature of those conversations is why social media can be so powerful.”
Gamification And The Next Generation Of Loyalty Programs
Taking mobile and social to the next level, retailers are looking to gamification as a way to make their loyalty programs more fun and interactive. By implementing game-inspired elements and mechanics into rewards programs — such as badges, rewards thresholds and titles — retailers can boost foot traffic, engagement and sales.
“Just about every retailer can benefit from using game mechanics in their loyalty programs,” said Darren Brady, Account Manager at BigDoor, a gamification solution provider. “Using gamification is a good way to broaden the sales funnel, and get more people to touch the brand on a consistent basis.”
Because customers today have so many options available across channels, they’re ultimately going to go back to the retailers that provide the most value, Brady explained. With a gamified loyalty program, “retailers can instantly connect with consumers and notify them regarding their current rewards, teach them how they can earn more, and encourage them to participate in the program more frequently.”
Starbucks has amped up loyalty initiatives by integrating the mobile payment app with the My Rewards program. Consumers load funds onto the app, and use their mobile devices to complete transactions. Starbucks then rewards users for these purchases with “stars,” status levels and rewards. Calls-to-action and words of encouragement also are included in the app, which provides customers with an extra incentive to keep using their loyalty cards.
“The folks at Starbucks are geniuses because they created the loyalty program thinking about what the customers want, not about the brand itself,” Hyken said. “If you’re trying to secretly create a marketing program and disguise it as a loyalty program, that isn’t going to work in the long term.”
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Confirming the importance of creating a fun environment for consumers to engage with a brand, Hyken also pointed out how HSN is leveraging gamification on the e-Commerce site. The HSN Arcade offers a variety of games, such as Crossword and Sudoku, on approximately two-thirds of a computer screen. On the remaining portion of the screen, HSN plays a live stream of the company’s television channel. Players receive tickets for each game, which are redeemable for digital badges that showcase their expertise and status.
With this strategy, HSN “gets people to log on every day just to play games, and sometimes they even buy products,” Hyken explained. “The beautiful thing about that kind of online experience is it doesn't really cost much. But it also enables the retailer to create a forum for consumers to have fun and experience what the brand is about.”
Innovative retailers such as Gilt Groupe, HSN and Sephora are extending beyond the boundaries of standard loyalty programs to create compelling customer experiences.
As shoppers become more educated and savvy, retailers must revise their initiatives to keep pace with
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technological trends and evolving shopping behaviors. Only then will they be able to garner long-term engagement and loyalty
Article Published by: www.retailtouchpoints.com
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When justifying a loyalty initiative, too many executives focus ONLY on the financials, but there are 15 major business benefits - each a competitive advantage - that only a loyalty initiative can provide...
Many of the so-called loyalty programmes in operation today are not really loyalty programmes at all. Frequent customer is a more accurate term. To be loyal to a business is one thing, to use it frequently is another - it could be a result of circumstances that there is no other choice. Clearly, if another choice becomes available, then the distinction becomes critical. This means that most prudent businesses aim to create loyal customers, not just frequent customers.
Of course, not all customers are potentially loyal customers, for a variety of reasons. So the ideal loyalty programme would be one in which already loyal and potentially loyal customers benefited, but other customers didn’t.
This means that the customers have first to be sorted into groups, and different approaches have to be made to each group. Or, more likely, a programme has to be designed so that it will appeal to the desired group more than to the other group.
A good point at which to start is at the very beginning - when acquiring the customers. In many typical businesses, as many as 45% of direct, new, one-off purchasers do not go on to purchase a second time. In order to grow and maintain a successful business, three simple rules should be followed:
1. Acquire customers that are likely to repurchase - even though this may be at the expense of initial raw response; 2. Recognise which customers are unlikely to repurchase and limit your marketing spend for this segment accordingly; 3. Focus the marketing budget on those who exhibit the same profile as existing repurchasers but have yet to buy a second time.
The fifteen biggest business benefits that every loyalty programme operator should expect to reap - and use to justify continuing and expanded investment in the programme - are as follows:
1. Retain existing customers The effect of the customer retention rate on actual, bottom-line customer numbers cannot be over-estimated. In five years, a firm with a 70% customer retention rate will have lost two to three times as many customers as a firm with a 90% retention rate.
Not only does a loyalty programme provide a practical, hard reason for continuing to buy (the accumulation of points toward a reward, or higher levels of service) but it also provides information about the customers that allows their needs to be met more efficiently and effectively. This in turn makes them more likely to remain customers. In addition, loyalty programme operators often report that, once a customer starts redeeming rewards, enthusiasm and engagement both increase.
In addition to simply retaining
THE 15 BUSINESS BENEFITS OF A LOYALTY INITIATIVE
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customers, the data from a loyalty programme can be used to better cater for their varying needs. Companies typically use this data to segment their customers for the purposes of marketing, sales and customer services. But customers are more complex than that. Their needs and desires differ from time to time, from occasion to occasion, and depending on the reason for the transaction. In other words, the customer is ‘divisible’. Thus marketing can go deeper than one-to-one; it can identify customers’ changing needs and then provide perceived benefit venue-by-venue and situation-by-situation. 2. Acquire new customers
A loyalty programme should attract new customers to the business; how effectively will depend on how exciting and how valuable the rewards seem to be to the target audience. Acquiring customers is no doubt essential to any business, but it can be expensive if compared to nurturing existing good customers. It should not be the central focus of a loyalty programme; there are cheaper and more effective ways of acquiring customers. However, it is generally far more profitable to retain and up-sell existing customers than to attract new ones.
Using a four-year profile of new customer behaviour from a leading retailer, loyalty expert Brian Woolf has shown that, one year after becoming a customer, only two out of each thousand new customers (0.2%) were in the top customer segment and only twelve (1.2%) were in the second segment. Over half were inactive. Between 95% and 96% of the new arrivals were either in the
lowest segment or had left by the end of the year. However, quality of new customers acquired can be raised by careful use of the existing data of a loyalty programme. This can be used to establish the demographic particulars of existing best customers, and then to target prospective customers with similar demographics in acquisition campaigns. 3. Move customers up-segment By grading rewards (for example, offering extra points for exceeding a specified spend threshold in a time period), customers can be moved up from one spend level to the next. A good example of this is The Continuity Company (TCC), a provider of best customer marketing programmes, which skews its rewards to encourage lower spending customers to move up through the spend segments. In one of the company’s recent case studies, the top spending band’s contribution to sales increased by 41%, the next band down increased its contribution to sales by 45% and the lowest spend band decreased its contribution to sales by some 7%. 4. Deselect unprofitable customers
It can be more profitable to lose bad customers than to gain new ones. Cherry pickers (who buy only your discounted lines and nothing else) cost you money, as does any low-spending customer. They cost more money to service than they generate. Designing a loyalty programme that rewards better customers without rewarding this segment at all gives them less reason to stay.
Gary Hawkins, CEO for US-based Green Hills Supermarket, has found that only around three in ten customers actually
THE 15 BUSINESS BENEFITS OF A LOYALTY INITIATIVE
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generate enough profit to cover the cost of servicing them. What about the other seven? Does it make sense to keep them as customers? To a certain extent it does: if they can be identified through a loyalty programme, efforts can be made to move them up through the segments and hopefully they will become more profitable customers. Moreover, while possibly not generating profit directly, they are contributing to the size of the business and also contributing to fixed operating costs (rent, rates, utilities etc.).
However, the ‘worst of the worst’ could probably be profitably lost. So far, it seems that only financial institutions have gone as far as actually closing unprofitable customers’ accounts. The generally adopted approach by other businesses is simply not to reward them in any way and hope that they will leave. 5. Win-back defected & churned customers Customer win-back expert Michael Lowenstein says that the success rate in approaching ‘lost’ customers can be three to four times as high as it is when prospecting for new customers. For example, the rate for converting prospects might typically be 5%, while that for reactivating inactive customers might be as high as 15-20%.
In the book ‘Customer Winback’, the authors point out that there are several reasons why customer win-back has a greater chance of success than acquisition. You have advantages with lost customers that you don’t have with prospects, including information about
their past purchase history, where and how to reach them, and their preferred communication channel. 6. Increase Customer Lifetime Value Customer Lifetime Value (CLV or CLTV) is increasingly being recognised as one of the most important measures of the worth of a customer. It takes into account not only the customer’s value now but the expected value over their projected lifetime as a customer. It is arguably the best way a marketer can demonstrate unequivocally that a programme is working: the CLV of targeted customers must increase. 7. Best customer marketing
Simply put, best customer marketing (BCM) involves spending more time, effort, and money on your best customers in order to maximise the return on marketing investment.
The strategy has been honed to a fine art by leading marketers such as Brian Woolf and Gary Hawkins, and has become the driving force behind the leading loyalty programmes in the world today. 8. Build relationships Building relationships is crucially important but not always as straight-forward as it might seem. It has been said that relationship marketing is powerful in theory but troubled in practice - an unpalatable concept but probably one with which many marketers could identify. If ever there has been an example of “many a slip ‘tween cup and lip”, counting on the building of relationships with all and sundry in order to generate profits
THE 15 BUSINESS BENEFITS OF A LOYALTY INITIATIVE CON’T 2
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must be somewhere near the top of the list. Building a relationship with customers leads to improved behavioural loyalty and thus to increased bottom-line profits. That’s obvious, isn’t it? Well, no. In fact it doesn’t always work like that. It has been argued that attempting to partner with all customers, regardless of their characteristics, might not always be the best way forward.
There are factors that alter the importance of the relationship/behaviour/profits equation quite significantly. Age is just one of these factors. Studies carried out in the UK in the 1990s concluded that customers under 45 were most loyal and those over 65 were least loyal. Yet other studies found no clear relationship between age and loyalty. It used to be thought that older customers were more loyal to brands than younger customers but even that is changing, with some studies finding no clear relationship. 9. Create brand advocates
Advocacy is one of the highest forms of loyalty that a customer can show. Advocates are so satisfied and pleased with your offering that they tell their friends and associates. To most people, a personal recommendation is far more convincing than any amount of promotional material they receive - even if they already trust the brand. 10. Adjust pricing levels A loyalty programme can also help to formulate pricing structure. If enough best customers are happy to buy a product at a particular price there seems little point in reducing that price simply
to attract cherry-pickers.
But aside from helping to decide what pricing changes should be made, the after-effects of changing prices can also be studied by segmenting and testing offers on the loyalty database - for example, which customer segments buy significantly more or less when prices change, either gradually or suddenly. 11. Responding to competitive challenges A good loyalty programme’s ability to tie purchases to individual customers allows quick and accurate identification of customers who defect when new competition opens nearby. They can then be enticed back with customer-specific special offers or even direct contact.
For example, one small store had to face up to a competitor opening a much bigger store on the same parking lot. In anticipation, the small store was extensively remodelled, causing considerable disruption. Over the period of remodelling (a matter of several weeks) turnover dropped by 40%. However, a loyalty programme enabled management to identify regular shoppers and mail them a letter thanking them for their patience and enclosing some special offers. All but 183 customers returned to the store. The store management team then sent handwritten invitations and a US$10 gift certificate to those 183 customers. All but three returned.
After the new competitor opened, the smaller store’s whole customer database was mailed an offer containing US$5-off coupons for US$50 orders in each of the following twelve weeks. Any customer
THE 15 BUSINESS BENEFITS OF A LOYALTY INITIATIVE CON’T 2
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using all twelve received an extra US$10 certificate. The result was that sales actually rose by between 6% and 7% over the months following the new opening. The competitor’s store (which was approximately twice the size) achieved less than half the sales of the remodelled store. This shows the power of knowing who your customers are. 12. Select stock lines effectively Knowing what best customers buy frequently helps choose which lines to stock and which lines to expand on. By way of example, the owner of a small UK-based suburban supermarket had twelve months’ notice that a large national supermarket was opening right over the road from him. He realised that without major changes he would not survive. What he did was simple but clever. The suburb in which he was situated was mixed, having mainly low-cost housing but also a very exclusive area. Many of his customers were low earners who bought their basic requirements every day or two from him - in essence, what they could carry home in a couple of bags. He knew that they would migrate to the lower prices and bigger ranges of the big chain.
However, a considerable number of the more wealthy people would call in on their way home from work to pick up bread and milk and a few odds and ends. He started noting what they bought, and what they never bought. Over the months, he stopped ordering products that they never bought, and increased his range of things that they did buy. Over the year, his store slowly changed from a small supermarket to a very big delicatessen.
His wealthy customers told their friends and the composition of his customer base changed from mainly low earners to mainly high earners. When the supermarket opened over the road, his low earners did migrate, but he hardly noticed the difference. 13. Plan merchandising more intelligently Basket analysis can identify what lines are bought at the same time, particularly by best customers, and planograms can be planned accordingly to encourage cross-purchasing.
The apocryphal story of a retailer (usually said to be Wal-Mart) discovering from basket analysis that men who buy baby nappies also buy beer (the refined version on the internet includes “on Friday evenings”) may be true or not - there is a whole web site devoted to discussing its veracity. But this story, regardless of its origin, does illustrate the potential of the principle in its own bizarre way.
Data similar to this is used widely to plan planograms for store merchandising. Of course, on one level, plain basket analysis without a loyalty programme is enough for this purpose. But add the dimension of knowing who the customer is, how much they spend, and where they live and you can confidently decide whether it is worth putting a display of nappies in the beer aisle on Friday evenings or not! 14. Reduce promotional and advertising costs Because advertising based on segmentation of a loyalty database
THE 15 BUSINESS BENEFITS OF A LOYALTY INITIATIVE CON’T 3
22 OurBlok Rewards
can be highly targeted instead of untargeted, significant savings can be made. There is no need to send out thousands of flyers that will be thrown away unread, or take pages of newspaper space that is irrelevant to many of the readers. Targeted advertising works measurably. The more sophisticated type of loyalty programme - such as the UK’s Tesco Clubcard - can not only target advertising material almost individually to its many millions of members but it can accurately measure the response rates to those advertisements. If Mrs Smith is sent a coupon for money off Whitesmile toothpaste, the system knows whether or not she redeems that coupon. That information is valuable not only to Tesco, but to the makers of Whitesmile toothpaste. Not only does this form of advertising save Tesco money; it actually earns Tesco money. While national UK magazines are reported to charge between £5,000 and £7,000 per page for advertising, Tesco is said to charge up to £37,000 for an A5 page (roughly half the size of a standard A4 magazine) - and brands pay those kind of rates because it works. Buying space in the magazine is an accountable investment toward measurable sales; one particular toilet tissue brand saw a 27% increase in sales after advertising in this way. 15. Selecting new trading sites
Selecting a site for a new store is no longer a case of sticking a pin in a map, or choosing a site on a hunch. The loyalty card enables you to profile the demographics of best customers and - because it is often likely that the
best prospective customers will have similar demographics - choose new locations much more accurately.
In addition, if the addresses of existing customers are known, they can be plotted geographically and sites can be chosen where there are outlying pockets of customers or gaps in coverage.
Where to find more detail...See The Loyalty Guide up-closeThe Loyalty Guide, a comprehensive guide to customer loyalty, explains every aspect of loyalty programmes, best practices, concepts, models and innovations, all backed up with case studies, original research, illustrations, charts, graphs, tables, and presentation material. Find out about the principles, practicalities, metrics, analysis, and bottom-line effects of loyalty, and gain the expert guidance of dozens of loyalty and relationship marketing thought-leaders, worldwide.
It shows you exactly how to use customer data to increase profits, reduce churn, and increase frequency, spend, and share of wallet. See how and why others have already succeeded, what works, and - more importantly - what doesn’t work. The report’s full executive summary, table of contents, downloadable samplers, and pricing/ordering are all available online.
THE 15 BUSINESS BENEFITS OF A LOYALTY INITIATIVE CON’T 3
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Article Published by: www.thewisemarketer.com
According to popular theory, there are two ways to escape the commodity market. On the one hand a company can work more efficiently, making it possible to sell its products cheaper. On the other hand, you can offer a unique added value, thereby reestablishing differentiation so you can charge higher prices again. In today’s society, though, this theory should be revised. Rather than an ‘or’ question, we are now looking at an ‘and’ question. If companies are to survive, they will not only have to work more efficiently; they will also have to build a unique added value for their customers.
Organizations should explicitly ask themselves: what is our place in our customers’ lives? What is our relevance to their lives? The answers to these questions provide the basis for devising a new method of approaching customers.
It all starts by approaching customers with a transparent story that goes beyond mere product information. In addition, modern consumers expect companies to act properly on three levels. Ranked in order of importance
according to the customers themselves, these are:
Treating customers well: customers primarily expect an excellent and proper treatment.
Treating employees well: companies that exploit their employees or use child labor can get into trouble.
Doing good for society: customers like companies with a sound world view. While they don’t expect companies to wear a cassock, they do expect them to make a difference in a way befitting the company’s identity.
To meet this expectation, the story needs to be the same on all three levels. A company like Ben & Jerry’s is a prime example. They make delicious, high-quality products. Their employees and customers are treated the same and meanwhile they’ve started working according to fair trade principles. The overall picture fits, which enhances Ben & Jerry’s credibility on the market. No wonder Ben & Jerry’s boasts an above average customer loyalty.
THE SOLUTION: BACK TO BASICS
24 OurBlok Rewards
Conclusion: customer loyalty is declining and we’re not going to solve it through marketing. The solution lies on a deeper level
This means you can’t boost customer loyalty through a simple marketing trick. A new customer program is not the answer and a new ad campaign won’t solve the problem either. The solution is not to be found in the marketing department (alone). Instead, we should look to the company’s top echelon. Those on the highest rung of the corporate ladder should have a clear vision of the added value their company has to offer and they should be able to translate that vision for their employees and customers. Getting your story straight on every level is the first step towards reaffirming customer loyalty.
OurBlok Rewards 25
at work and in their community. Because of that they are the most receptive to causes that are relevant to them," Carol Cone, Managing Director of Brand and Corporate Citizenship at Edelman and founder of Cone, tells Fast Company.
Engaging in cause-related campaigns or purchases may also satisfy multiple needs or desires at once. "Certainly moms tend to have a strong sense of empathy for social issues and a desire to make the world a better place for their children. Buying a product attached to a cause is an easy way to make a small difference and still check a 'to-do' off the list, and since moms do most of the household shopping, they are most in-tune with brand attributes and see their purchase decisions as a direct reflection of how they care for their families," Cone Insights Supervisor Sarah Kerkian tells Fast Company.
So what about the very thing that makes them moms--their kids? "Their kids are also a big influence--but today, it’s not only begging for their favorite sugar cereal, it’s also about collecting box tops for their school or making sure they can recycle the package," says Kerkian.
But women are not susceptible to cheap cause marketing ploys; Women are discerning, says Carol Cone. "It is
A new study from leading cause marketing firm, Cone, has revealed that moms are the most receptive demographic to cause marketing efforts and make the most cause-related purchases. "By all measures, moms lead the way as the demographic most amenable to cause marketing," according to the official press release. Ninety-five percent of moms find cause marketing acceptable, 92% want to buy products that support causes, and moms purchased more cause-related products than the other demographics surveyed. So why is this? Do moms simply have more care and empathy, by virtue of being moms?
"Women by their nature are keepers of the relationships in their lives, at home,
CAUSE MARKETING HITS THE MOTHER LODE OF SUPPORT: STUDY
92% of moms
want to buy
products that
support causes.
26 OurBlok Rewards
important to note that just slapping a ribbon on a cause--the ribbonization of America--a phrase I coined when I was the CEO at Cone, is not enough to inspire a woman to buy, recommend or engage with a cause. The association must be deeper, longer term and have multiple means of engagement." Makes sense, especially when you consider that emotional marketing requires careful planning, studying, and crafting. There are whole groups dedicated to marketing to moms, so let's hope--given the often serious nature of the causes being supported by cause campaigns--that cause marketers more often than not take the time to deeply engage with women on important issues, rather than just "ribbonize" their campaigns.
Article Published by:www.fastcompany.com
CAUSE MARKETING HITS THE MOTHER LODE OF SUPPORT: STUDY
OurBlok Rewards 27
Customer pays full price today You receive 100% of the sales
Provides a trigger to motivatecustomers to return (or whenever you want)
You build your own customer database for future marketing
Completely Trackable: • Who is buying• How much they are buying• How often they are buying
LOYALTY REWARDS
LOYALTY REWARDS VS DAILY DEALS
28 OurBlok Rewards
DAILY REWARDS• Giving a 75% discount (You only bring in 25%)
• Your one time customer looking for the next place that offers 50% off (No Loyalty)
• Building Daily Deals database ie., Groupon, Living Social • Consumers are already using less daily deals
• Very long wait to run promo
• Only can run 1X every three (3) months
OurBlok Rewards 29
What Does A Rewards Program and Loyal Customers Mean for Your Business?
Customers enrolled in Loyalty Programs visit TWICE as often
and spend FOUR Times more money!
4X
A Universal Loyalty Card Tied to Consumers Favorite Causes
* Deloitte Research
• Offer a customized gift for a new customer visit
• A loyalty reward to trigger greater customer frequency
• Track your customers spending habits and buying trends
• Capture customer data for future marketing
88%MORE PROFITABLE
EIGHTY EIGHTPERCENT
Avg Visit
2X
Avg Spend Avg Visit Avg Spend
No Loyalty Loyalty
What Did Deloitte Research Determine A Rewards Program Means for Your Business?
30 OurBlok Rewards
What Does A Rewards Program and Loyal Customers Mean for Your Business?
Customers enrolled in Loyalty Programs visit TWICE as often
and spend FOUR Times more money!
4X
A Universal Loyalty Card Tied to Consumers Favorite Causes
* Deloitte Research
• Offer a customized gift for a new customer visit
• A loyalty reward to trigger greater customer frequency
• Track your customers spending habits and buying trends
• Capture customer data for future marketing
88%MORE PROFITABLE
EIGHTY EIGHTPERCENT
Avg Visit
2X
Avg Spend Avg Visit Avg Spend
No Loyalty Loyalty
*Deloitte Research
What Did Deloitte Research Determine A Rewards Program Means for Your Business?
31 OurBlok Rewards
COSA
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A Sample of OurBlok Rewards Customers
COSA BELLA
CARDLESS REWARDS? A Few Organizations Partnering With OurBlok
Are you part of the rewads program with no card? Get enrolled and get rewarded.
Its simple. Just visit OurBlok.com and join the program. We will enroll you in
the new “cardless” program and you are off and running! Not only will you save at the places you like, you can also help
raise funds for your favorite charity. www.OurBlok.com
Where to go!
A Sample of OurBlok Rewards Customers
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