Is your Loyalty Program A One-night Stand?
In this guest post, Bonnie Roche (pictured below), senior manager at Metrix Consulting, argues that when it comes to loyalty programs, we need to stop talking about love and start talking about logic – particularly in the age of data.
Unsurprisingly, loyalty programs claim to be about increasing loyalty or love for brands and retailers, but with consumers typically having 3.8 loyalty cards in their wallet, can we expect these cards to be an indication of, or vessel for fostering emotional connections with a brand? We say no!
Now, before you assemble the troops, we are not saying that loyalty programs are void of emotional attachment… simply that this emotion is only a small component of what a successful loyalty program is and can be, so hear us out.
Let’s stop talking about loyalty programs as a one-dimensional measure and indicator for consumers’ emotional connections with brands and start thinking about them as a rational tool. One that consumers can use to get a better experience and one that businesses can use to better understand, anticipate the needs of, and communicate in a personalised way with their customers – all of which can be achieved through the understanding and strategic use of data.
Why data? Because data is the tool that helps us improve the effectiveness of our marketing spend (ROI). By leveraging this data to communicate with our customers in a more relevant way, we improve our chances of them visiting us or buying us more often and spending more with us over time. Whilst reports indicate 57 per cent of Australians are more likely to return to a retailer if they have a loyalty program, in reality, consumers are going back to the retailers who are able to target them effectively, about things they’re interested in or see value in, and in a way that they find engaging.
Businesses today have access to more data than ever before, but without a clear strategy regarding its collection and use, it has little value. You need foresight to identify what needs to be captured, how you will capture it, and finally how you will transform it to create real value.
Let’s focus though on the quest for better customer data. From my perspective, there are two key questions you need to ask yourself:
- What can I get?
- What can I do with it?
What can I get?
The data that you get from your customers can be classified in two ways:
- Inherent data: this is the information that is collected upon sign-up (sign-up data) or from the customers’ day to day interaction with the company (passive data), such as number of visits, time and day of visit.
- Volunteered data: this is the type of data that can be asked of your customers without the need to pay them for the information. This information is beyond the day-to-day interaction (things like feedback and preferences).
The amount and type of data you can get within each of these categories is driven by the quality of your relationship with your customers. Specifically, how ‘committed’ consumers are and your share of their wallet. Whilst share of wallet is an easy enough metric to calculate, ‘commitment’ is a multi-faceted measure which depending on the category, can be comprised of:
- Category involvement (personal interest in the category).
- Existing brand relationship (emotional attachment or loyalty to the brand).
- Frequency of purchase in the category.
- Perceived longevity of relationship (which encompasses time to reward or benefit).
- Perceived loss of non-commitment (loss of rewards or benefits).
This commitment element is where we start to see emotional attachment play a role, but as can be noted from the list above, emotion is only one element of a multifaceted measure.
Why do we need this definition of commitment? Because it not only shapes the types of rewards that your customers are going to expect from you, but also the data that customers are willing to give you.
For us, the easiest way to conceptualise the ‘quality’ of a relationship you might have with your customers, is to think about it in human terms:
To bring this to life, let’s apply the quadrant to two different categories.
Imagine an ‘everyday’ worker with no strong preference regarding where they buy their coffee. Let’s say they visit a coffee shop that has a 10-for-one coffee loyalty program and they ‘sign up’. This customer has low category involvement, no relationship with the coffee shop and risks nothing if they don’t go back frequently to the coffee shop. This is a low commitment, small share relationship – a one night stand. In this relationship, there is no data collected on the customer and no communications, but given the nature of their relationship, this isn’t required or expected by the customer.
Compare this to someone who is a member of the Qantas Frequent Flyer program. Customer commitment to the program is stronger given the longer-term reward structure and the risk of ‘loss’ if they exit the program. In this relationship, there can be a lot of data collected (particularly if the customer has Qantas credit cards or travel cards) and regular communication between the airline and the customer. Given the nature of this relationship, this expected and permissible.
Once you have determined the type of customer relationship that you have, the other lever that impacts the amount and type of data your customers will give you is the incentive you provide them for doing so.
Incentives and quantity of data can be thought somewhat like a linear relationship (of course, there will be exceptions) but simply, the more incentive you provide, the more data you can get.
Continuing with the coffee example above, you’re unlikely to give up your name, email and address for a low value, delayed reward such as a free coffee after you purchase 10.
But if a coffee shop (like one we know in Byron Bay) was offering a free coffee right off the bat, if you sign up to an app that provides them with your name, age, address, payment details and access to your location and order history, you might be willing to give up your details. This immediate and tangible incentive gives customers enough of a reason to provide information that would otherwise not be captured.
But let’s be honest, there is absolutely no point in even collecting data if you don’t know what to do with it. Which brings us to question two…
What can I do with it?
So, now that we understand the type of data that customers might be able and willing to give us, it’s time to think about what can be done with it from a reward, targeting and communication perspective.
Rewards is the simplest of the three to explain. What you can do with your data to reward and incentivise your consumers must abide by the boundaries of the relationship you have with your customer. Is it appropriate for a one night stand (coffee shop) to wish you happy birthday? Never, creepy!
Do you expect Qantas to change the rewarded points based on the value of your flight? Of course.
When we consider the rewards that are expected and deserved by customers, the status of the current relationship and the projection of what it will look like in the future needs to be considered (moving from one box to another).
Perhaps one of the best examples of a business correctly identifying the boundaries and status of a relationship, and using their data to create real value for the business and their customers (targeting and communicating), is Woolworths via their Everyday Rewards (EDR) Program.
Example:
Each time I shop with Woolworths I swipe my EDR card and in turn, receive a point value equal to my commitment (i.e. per dollar spent). This incentive is adequate for me to swipe my card every time I go into the store… a committed relationship.
The result is that Woolworths knows what my ‘typical’ basket looks like. For example, that every Sunday I buy a two-litre Great Ocean Road Milk, fresh bread and nut bars. They also know that given my typical inter-purchase intervals, I am due to buy toothpaste this week (a purchase I make every three weeks) and that I usually buy Sensodyne regardless of what is on sale (inherent data).
But imagine this Sunday – no transaction registers against my card. Monday rolls around and this is picked up by the Woolworths data system and so on Monday, I receive a tailored (one-to-one) email with a unique set of promotions to match my needs:
- Great Ocean Road milk is on special
- Edwards Sourdough bread is on special
In addition to these known behaviours, the algorithm also gives me specials based on what other people with similar behaviour have bought (think about the famous case of Target in the USA predicting a girls’ pregnancy:
- Butter and dental floss earn you double points this week (data analysis).
But it doesn’t stop at me receiving a tailored email, because a good loyalty program should continually learn from the data it collects.
The Woolworths data system runs 70 million queries each week to develop one-to-one communications, with all 50,000 products ranked daily to determine which offers would be most relevant for the customer.
You’ll notice that a Sensodyne offer didn’t make it into my promotional email. This is because the system has learnt that I buy this same brand no matter what the price.
On Tuesday when I finally make it to Woolworths, I buy the Sensodyne toothpaste, the Great Ocean Road Milk, the dental floss and the butter, but don’t purchase Edwards Sourdough bread – I opt for my regular fresh bread instead. It’s unlikely I’ll see another offer for packaged bread until my behaviour indicates I’m interested in it… a continual test and learn process.
And what about volunteered data? Well, whilst Woolworths doesn’t currently incentivise customers to gain additional data from them, in the relationship we have detailed, if I was offered dollar rewards for my feedback on a store layout or customer experience, it would be within the bounds of our relationship.
The Woolworths data processing and one-to-one communication approach is five times more effective than sending the standard ‘weekly special’ email and has improved email open rates by 16 per cent. Talk about impact! Woolworths is a great example of a company knowing the limits of the data they can ask for, providing the right incentives for customers to share their behavioural data and continuously learning from the data they collect.
Summed up as a diagram, the whole process looks like this:
So let’s reframe the way that we think about loyalty programs – let’s make it less about love and more about logic.
Rather than just asking how we can use these programs to encourage customer loyalty, let’s start asking ‘how can I obtain and leverage the right data from my customers, to better target my customers and achieve the desired commercial outcomes for my business?’
Please login with linkedin to comment
Bonnie Roche Designworks disturbing ads Virgin Mobile Australia Western SydneyLatest News
Sydney Comedy Festival: Taking The City & Social Media By Storm
Sydney Comedy Festival 2024 is live and ready to rumble, showing the best of international and homegrown talent at a host of venues around town. As usual, it’s hot on the heels of its big sister, the giant that is the Melbourne International Comedy Festival, picking up some acts as they continue on their own […]
Global Marketers Descend For AANA’s RESET For Growth
The Australian Association of National Advertisers (AANA) has announced the final epic lineup of local and global marketing powerhouses for RESET for Growth 2024. Lead image: Josh Faulks, chief executive officer, AANA Back in 2000, a woman with no business experience opened her first juice bar in Adelaide. The idea was brilliantly simple: make healthy […]
Is Meta’s New AI Chatbot Too Left-Wing?
Meta's chatbot accused of being left-wing after being caught wearing a Che Guevara T-shirt & listening to Billy Bragg.
TV Ratings (23/04/2024): Why Did No One Tell Angela That Farmer Wants A Wife Is Set On A Farm?
As wonderful as this headline is, let's face it, we all know an 'Angela', don't we?
PubMatic Unveils New AI Partnership To Turn Social Posts Into Ads For Any Digital Channel
Here's some nifty tech for turning social posts into ads. Assuming said posts aren't one-star character assassinations.
Intuit Mailchimp Makes A Splash With Its First Australian Brand Campaign
Ever laugh along at a gag you didn't get so as not to appear dumb? Get ready for more feigning with this new work.
GumGum’s Rob Hall: Advertisers Can No Longer “Rely On Binary Descriptions” Of Consumers
If anyone's got their finger on adtech's pulse, it's Rob Hall. He also avoids using the good paper in the office printer
Mastercard Nabs Florencia Aimo From Marriott International
Marriott International's Florencia Aimo jumps from the hotel business to the exploitative credit card one.
Bastion Agency Appoints Cheuk Chiang As New ANZ CEO
Cheuk Chiang takes the reins over at Bastion Agency. But not the rains down in Africa.
Spotlight On Sponsors: Major Sponsorship Wins After A Disappointing Week In Sport
B&T continuing our deep dive into local sport sponsorships & that's despite not a single offer of a free ticket as yet.
Macca’s Marketing Director, Samantha McLeod On Big Mac Chant: “What Was Once Old Is Now Cool Again”
Macca's using the power of nostalgia in latest Big Mac campaign. Well, only for those who've ever eaten one sober.
World Premiere Of Midnight Oil: The Hardest Line To Open Sydney Film Festival 2024
Oil's biopic to open Sydney Film Festival. Here's hoping Molly Meldrum will take his pants down at the premiere.
Entries Are Now Open For The 2024 Brandies, IntelligenceBank’s Annual Brand Marketing Awards
The Brandies are, of course, a prestigious marketing gong and not the mystery tipple favoured by nannas everywhere.
The Fred Hollows Foundation Appoints Ardent For PR
Yes, we all like to have a joke at PR's expense. But sometimes it does important work, like this.
AI, eCommerce & Marketing Specialists Are In Increased Demand By Businesses, New Data From Fiverr Shows
Has your philosophy & anthropology degree left you with nothing but a huge HECS debt? Here's what you should've studied.
Perth’s First 3D Anamorphic Billboard Arrives Courtesy Of oOh!media
Do you love a buzzword? Now you can add anamorphic to the list as it relates to billboards, not a colleague's ears.
MasterChef Australia & Crown Resorts Launch Unique Dining Experience With ALUMNI
A pop-up restaurant staffed by MasterChef contestants! That's fine dining prices for first-year apprentice chef cuisine!
Amanda Laing Announces Resignation From Foxtel Group
Foxtel's chief commercial & content officer heads for the exits. Read nice things the bosses said about her right here.
The Lost Letters From Our Diggers: News Corp Unveils ANZAC Day Special
It's nice when brands respectfully acknowledge ANZAC Day.
Howatson+Company Acquires Akkomplice
Large indie acquires a slightly smaller indie. Much like a shark eating a tuna, just with less thrashing and blood.
Google Delays Third-Party Cookie Deprecation Again
In good news for the sale of picture library biscuit photos, Google continues to tease over the end of cookies.
Education A Low Priority For Aussies More Concerned With Cost Of Living Forethought Study Reveals
Study finds Aussies cutting back on education due to cost of living. Booze & Uber Eats sales remain largely unaffected.
“I’m Still The Same Person That I Was”: Rikki Stern Says “Fucc It” To Cancer Stereotypes
B&T always happy to promote the anti-cancer cause. Even brands that massively overdo it with the hot pink.
The Unapproved Climate Certification Allegedly Causing Mass Greenwashing
Are you left flummoxed in the canned tuna & free range eggs aisle? Just wait till this green certification gets up.
TV Ratings (22/04/2024): Fans Mock “Over The Top” Reaction To New MasterChef Judges
MasterChef returns for its 2024 season. B&T stands by putting peppercorns in Gravox & no one will be any the wiser.
Dentsu Restructure: Muddle, Harvey & Johnston Take Leadership Baton As Bass & Yurisich Exit
A large broom has swept through Dentsu's local ops this morning, taking with it some big names & the air con's cobwebs.
Industry Shares Trends Shaping The Industry This International Creators Day
B&T's asking adland creators to reveal their top trends. And it's not good news for your Jenny Kee cardigan collection.
Mable Extends HOYTS Sensory Screenings Partnership
Mable has extended its HOYTS sensory screening partnership. Vigorously defends its two-star Oppenheimer review.
Orphan Launches ‘They Need Our Help. We Need Yours’ For Children’s Cancer Institute
Anything to do with childhood cancers has B&T's 110% support. That said, we do ignore the red meat & alcohol warnings.
Smile Team Orthodontics & Keep Left Collaborate On Smile-Inducing Campaign
As parents would attest, given the cost of orthodontics you'd expect this campaign to be a lavish production indeed.
Opinion: How Video Calls Neglect Learning Diversity
Need an excuse to duck out of a video call this arvo? Show this to your boss.
DoubleVerify Achieves First-Of-Its-Kind Responsible AI Certification From TrustArc
DoubleVerify receives responsible AI certification. However, not its robotic vacuum that's been seen menacing the cat.
Smile For A Good Cause: The Social Media Campaign Giving Back To The Community
Are you known as the office Austin Powers? More for you teeth than shagability? Get snappy new fangs with this news.
Elon Musk Mocks Albo After ESafety Wins Court Injunction Against X
Albo's 2024 from hell continues - Rabbitohs in crisis, down in the polls and now feuding with world's richest man.
Real Estate Developer In Hot Water Over “Sexually Exploitative” OOH Campaign
Real estate agents again tops in the 'least trusted profession' polls, nudging used car salesmen & ad creatives.
Epsilon’s Shane Hanby: Post-Cookie Era Relies On “Teamwork” Between Brands, Marketers & Tech
This pro predicts more "teamwork" in a post-cookie era. Which spells bad news for the uncooperative or plain stubborn.