Archive for the ‘Mktg – Loyalty Programs’ Category

Forget Membership Points…..Your Reward is a Surprise!!

February 23, 2012

Punch line: Best Buy is differentiating its membership rewards with a “surprise and delight” approach.

Sure beats cold cash discounts, right?

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Excerpted form AdAge: “Surprise! Here’s a Ticket to a Movie Premiere, on Best Buy”

Best Buy invited a handful of top shoppers and their family members to an exclusive preview of “Twilight Eclipse.”

The reward, which went to select members of Best Buy’s Reward Zone loyalty program, was part of a “surprise and delight” approach that’s becoming a mainstay in loyalty strategies.

“Surprise and delight” plays off the principle that a dollar bill is always worth more when you find it crinkled up in an old pair of pants.

At Best Buy, surprises have taken the form of movie premieres and exclusive shopping invites on Black Friday.

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Panera builds loyalty .. and, oh yeah, keeps prices high.

March 21, 2011

TakeAway: Panera Bread investors are hoping the company’s new loyalty program and additional menu items will lead the way for continued sales and traffic growth.  The loyalty program, MyPanera cards, is a way for the company to build deeper relationships with people who are already engaged with the brand.

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Excerpted from WSJ, “Panera Bread Sees Loyalty, Innovation Bringing in the Dough” By Annie Gasparro, February 11, 2011

On the heels of launching its customer-loyalty program, Panera is bringing in steak as new protein for its sandwiches, which, bolstered by extra marketing, are expected to help continue the trend of increasing sales, especially in the dinner and catering businesses.

The move to add steak to the menu comes at a time when beef prices are at all-time highs and rising, putting additional commodity pressure on Panera. But the company remains confident.

Panera’s loyalty program, MyPanera cards, is expected to be a key driver in future traffic growth, as it allows the company to track what its customers are buying, when they buy it and how much they spend. The free program was launched in the fourth quarter and presents members with “soft rewards,” like complimentary items, that match their buying habits.

This kind of insight can be used to make marketing substantially more effective, analysts point out. By giving a free bakery item to a customer who normally buys just coffee, Panera could create a higher-check customer long-term. In the same way, it could bring breakfast frequenters, for instance, in more regularly for lunch or dinner as well.

Panera isn’t afraid of raising prices coming out of the recession. The bakery chain says its overall commodity costs, about 80% of which are locked in for the year, will be up about 3% this year, causing the company to raise prices 2%.  Panera’s bottom line improved through much of the recession, having increased every quarter in nearly three years largely due to customer loyalty. While competitors discounted to lure customers during a slump in dining demand, Panera’s aversion to price cuts succeeded among its base of mostly upper-middle-class customers and revenue growth never reversed.

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Mr. Retailer wants to get chummy with you … what’s your 12-digit customer ID?

March 14, 2011

TakeAway: Retailers are trying to recreate images as companies that know its customers and gives them what they want.

Stores are leveraging loyalty programs as a way to use the customer information and customize marketing for each person. 

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Excerpted from AdAge, “Retailers on a quest to Rekindle the Personal Touch of a Bygone Era”  by Natalie Zmuda, February 14, 2011

… retailers knew their customers. Sales clerks sent invitations to store events, called when items of interest arrived… Rolodexes crammed with notes about shoppers’ favorite brands and styles. That style of shopping — an intimate experience, not an anonymous one — has long been thought dead… now retailers are hoping to recapture some of the old magic.

… by updating and expanding loyalty programs, …customers are highly educated …more demanding than she’s been in the past, … and wants to go to a retailer that understands her, is really relevant to the lifestyle she’s living, and really does pay attention.

My Macy’s, now in its third year, seeks to be more relevant to consumers by stocking shelves with items popular in local markets — … also extends to marketing. Events celebrating the Kentucky Derby …And big wins for local sports teams are recognized… This month, Macy’s Star Beach Party program will launch in Chicago, targeting college students from 10 area campuses … pairing texting and pop-up events to lure students shopping for spring break fashions and, eventually, interview suits, the retailer hopes.

Food Lion has launched My Food Lion, inspired, in part, by My Macy’s … allows customers to create a profile personalized with relevant specials and recipes.

Worth noting: My Macy’s and My Food Lion are separate from those retailers’ loyalty programs, Macy’s Star Rewards and Food Lion’s MVP Card. The former focuses on understanding the customer and delivering desirable products and information, Ms. Reardon said. The latter is meant to reward customers for frequent shopping.

… savvier use customer information. PetSmart uses its database of email addresses to send out targeted emails with editorial content, as well as coupons. …Likewise, Sears Holdings has overhauled its loyalty program in the past two years, morphing it into Shop Your Way. …The program is cost-effective and gives Kmart and Sears the opportunity to build a robust database of consumers.… ongoing power of a very simple, classic idea: rewarding loyalty based on customer behavior,”…

More robust databases and better targeted communications will go a long way toward helping retailers recapture the magic of retailing days past. But it’s not easy or simple. … “What we tried to do was really customize [catalogs] to what the customer is really looking for and her past behavior shows she might want,” … “It was pretty resource intensive. But we learned a lot, and we are going to do similar things in the future.”

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Finding “Good Targets” in the Digital Age

December 6, 2010

TakeAway:  To find the “best” customer targets, marketers need to include digital and social behaviors into the profitability equation.

In addition to revenue measures such as lifetime value, current spending in category in dollars, current brand share, number and types of products or services purchased, and brand switching history/potential, there are also several other characteristics that make one customer more valuable than another because s/he’s easier to get and keep, as well as engage as co-marketers.

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Excerpted from AdAge, “How to Define a ‘Good Target’ in the Digital Age” By Kevin Clancy and Peter Krieg, November 17, 2010

Marketers have to integrate traditional and digital paid advertising with “owned” properties such as the brand’s website, as well as traditional and social “earned” media such as news articles and tweets in a way that gets them the biggest bang for their marketing dollar.

To separate the “best” from the rest, marketers need to find customers who are:

Less price sensitive. Unless you’re Walmart and want to grab share among the folks who put price above all other brand considerations, price insensitivity is another important indication of a buyer’s value to a brand and one particularly relevant these days.

Struggling with big problems. The bigger the problem your brand can solve, the bigger the market response.

Interested in new products and services from the brand. Introducing new products and services can generate the kind of organic growth companies crave. So why not ensure that new products and services will generate bottom-line growth by narrowing in on the customers most interested in considering the latest offerings from a brand or company? Apple’s pretty much got this one down.

Will advocate for your brand. The greater the level of influence a buyer has among her social networks, the more a brand’s marketing ROI will benefit.

Socially connected on the web. Because of the speed and number of tools available to customers to spread information about product and services online, word-of-mouth activity is even more important to capture in a digital environment. The more active and engaged a customer is with different social media, the more valuable he can be to a brand. Ford chose 100 20-something YouTube storytellers who’d developed a fan community of their own and gave them a Fiesta for six months. Each month they shared their experiences on YouTube, Flickr, Facebook and Twitter. Ford received 50,000 requests for information on Fiesta – almost entirely from new-to-Ford customers – and sold 10,000 units in the first six days of sales.

Rather than look at each of these things separately, though, marketers can and should bring together all of these “proxies for profitability” with financial data to calculate a single measure of value.

From an operational standpoint, then, marketers need to look for customers who are:

Distinct in terms of needs and wants. The more homogeneous and anticipated a target group’s needs and wants, the easier time marketers will have developing compelling positioning and messaging that breaks through in traditional and digital channels.

Relevant to traditional and digital communications decisions. Get a sense of how high-value customers use traditional, digital and social-media communications throughout the pre- and post-purchase process, and in particular, how they like to interact with a brand within different communication channels.

Findable in syndicated media databases. The “best” communications channels – either current or prospective – are the ones with a disproportionate number of high-value customers.

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Amazon’s impressive numbers … prime numbers, that is.

December 1, 2010

TakeAway: Customer loyalty can be a difficult thing for a retailer selling undifferentiated goods, especially on the internet.

But marketing revolves around people and forming relationship bonds with customers through effective loyalty programs can reap big rewards.

Just ask Amazon …

Amazon’s Prime customers account for only 4 percent of customers but account for as much as 20 percent of overall sales.

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Excerpted from Bloomberg Businessweek, “What’s in Amazon’s Box? Instant Gratification,” by Brad Stone, November 24, 2010

Amazon Prime may be the most ingenious and effective customer loyalty program in all of e-commerce, if not retail in general.

It converts casual shoppers … who gorge on the gratification of having purchases reliably appear two days after they order, into Amazon addicts.

Analysts describe Prime as one of the main factors driving Amazon’s stock price—up 296 percent in the last two years—and the main reason Amazon’s sales grew 30 percent during the recession while other retailers flailed.

At the same time, Prime has proven exceedingly difficult for rivals to copy: It allows Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while also keying off that faintly irrational human need to maximize the benefits of a club you have already paid to join. …

Amazon relentlessly promotes Prime in press releases and on its home page, and this year started offering free Prime trials to students and parents.

The company declines to disclose specifics about the program, though analysts estimate it has more than 4 million members in the U.S., a small slice of Amazon’s 121 million active buyers worldwide.

Analysts say Prime members increase their purchases on the site by about 150 percent after they join and may be responsible for as much as 20 percent of Amazon’s overall sales in the U.S.

The company’s executives acknowledge only that the program gets people to buy more—and more kinds of items—on the site. “In all my years here, I don’t remember anything that has been as successful at getting customers to shop in new product lines,” says Robbie Schwietzer, vice-president of Amazon Prime and an eight-year veteran of the company. …

Amazon now offers Prime in the continental U.S, Britain, Germany, France, and Japan, and Schwietzer says the company is moving toward guaranteeing Prime shipments within a day instead of two days.  …

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Puttin’ on the Ritz

October 5, 2010

TakeAway: Responding to the sharp decline in rates consumers will pay for luxury hotels during economic hard times, Ritz-Carlton will join airlines, credit-card companies, and many other hotel chains in offering a loyalty program to its customers. 

“Ritz-Carlton Rewards” will let guests earn free nights at other hotels.

The high-end chain had long held that its customers weren’t interested in anything as pedestrian as “points,” but the recession has hit luxury hotels even harder than the rest of the industry.

The new points program is one of a number of actions taken at Ritz hotels to try to attract more business and leisure travelers.

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Excerpted from the Wall Street Journal, “Ritz Carlton Bows to Recession, Adds Rewards” By Alexandra Berzon,September 14, 2010


“We always said in the early days, we’re not going to give you a toaster, we’re going to give you service,” said Ritz President and Chief Operating Officer Herve Humler. “That was part of the philosophy.”

The occupancy problems for luxury hotels have been compounded by what is known within the hotel industry as the “AIG effect“: Corporations that were the beneficiaries of taxpayer dollars or were laying off workers were criticized by politicians for booking expensive conferences in luxury resorts, and so they started to pull back. Recently, that problem has begun to ease slightly.

Even before the recession, the Ritz found it necessary to make changes in its high-class veneer, becoming more relevant for younger generations that were put off by the traditionally stiff service at many of its hotels.

That led to such changes as making the greetings from staff members less scripted, adding more technology to the rooms and removing the traditional piano and harp players from the lobbies in favor of, in some cases, pop music.

After spending years studying whether to include Ritz in its loyalty program, Marriott executives said that focus groups in the last year and a half began to show that customers were demanding enticements, particularly in Asia where Ritz is expanding. 

The company designed the new loyalty program to keep it separately branded from the general Marriott points program, Marriott Rewards, which has more than 30 million members who can earn points, which can be redeemed at any Marriott hotel as well as several airline partners.


Ritz’s top competitor, Four Seasons, has no plans to implement a loyalty program.

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Sorry, you need more loyalty points (and cash on the card) for the free latte …

February 23, 2010

The local shoe store — buy nine pairs; get the 10th pair free. At the pizzeria 10 receipts means a free pie. At The Body Shop eight points earns a tub of  Satsuma Body Butter.

Shell out $25 for a Starbucks card and get two free lattes (one for signing on, one for your birthday) plus a 10% discount on every drink.

That was then.  Now Starbucks is dumping the old card in favor of a new one with a tiered system of rewards involving stars. You’ll get one free beverage for every 15 transactions. (Note: number of transactions, not number of drinks. Buy 2 drinks and sorry, it’s one transaction.)

Starbucks says the new card is free.

Well, not quite free. Loading cash on the card and using it to pay for drinks is the only way to reap the benefits of the new program. Just think of those stars as the chain’s way of thanking caffeinistas for what amounts to an interest-free loan.

Companies that make alienating changes in their loyalty and rewards programs “are playing with fire,” says Allen Adamson, managing director of the branding company Landor Associates.

Consider the trickle-down effect of these shape-shifting programs. A marathoner will complete the 26-mile, 385-yard race only to be told at the tape that the new distance is 27 miles. A couple who’ve been married for a quarter of a century will discover that the new requirement for a silver anniversary — let’s call it super-silver — is 30 years of wedded togetherness.

Excerpted from WSJ: Buyer Be Wary of Your Loyalty Being Betrayed, Feb. 19, 2010

Tropicana customers squeeze more out of OJ

February 9, 2010

Takeaway: When consumers think of loyalty programs, airlines and credit card companies are usually top-of-mind. However, Pepsi recently launched a points program on its Tropicana brand.

Perhaps consumer products marketers should reexamine how these programs could reward them. 

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Excerpt from BrandWeek, “Tropicana Starts Offering ‘Juicy Rewards’” by Elaine Wong, February 1, 2010. 

Freebies are always appreciated, but even more so in a downturn. That’s why PepsiCo rolled out its Juicy Rewards program for Tropicana last week, a move the company characterizes as the largest marketing investment for its orange juice brand. The program offers incentives through a points-based system for every purchase of qualifying Tropicana juice. Rewards include Adidas shoes, TaylorMade golf balls and a trip to the local zoo, said Tropicana chief marketing officer Andy Horrow. In an interview with Brandweek, Harrow, the former global marketing officer for PepsiCo International, discussed how Tropicana hopes to shake up the OJ category with the new rewards program.

Brandweek: What are you looking to accomplish with Juicy Rewards?
The campaign is a really big marketing platform for Tropicana. Juicy Rewards is a first of its kind opportunity to give consumers something more from their orange juice. We’re not only giving people the best opportunity to get the best-tasting and highest-quality orange juice, but 20,000 different ways they can get more value from their orange juice via healthy rewards. It’s an opportunity for us to really engage with our consumer and get them excited about Tropicana.

BW: Juicy Rewards, at its core, is an incentive-based marketing program. But how penny-pinched are consumers when it comes to buying OJ?
I don’t know that it’s about getting people to buy more orange juice. It’s about giving people more value for the OJ they are buying. We’re already America’s favorite orange juice. We have been and always will be. It’s about giving consumers more value and that is what they want right now. We did a survey that helped inspire the development of this program, and 98 percent of participants said they wanted more value from the products and services that they buy. They expected more from us, and [programs like Juicy Rewards] are one of the ways that Tropicana will continue to go to market in the future. It’s not just about talking with consumers. It’s about engaging with them and building a relationship with them, which is important for any marketer.

BW: How much are you spending on this campaign for Tropicana?
We’re taking a big bet on this. We think it’s the right way for us to go going forward and we’re putting a lot of marketing muscle behind it. We’re being very bold about it and very proud of what this program will stand for. That’s the view going forward. This is the biggest marketing campaign that this brand, I daresay, has ever had—certainly in recent memory—and I don’t like to think of it as a marketing campaign, but as a platform that supports everything we’re doing. It’s a great way for us to get our customers engaged and our retailers excited.

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Mobile loyalty program may destroy the competitive edge of shopper insights

February 8, 2010

Key Takeaway: Motorola is attempting to establish the new decade’s version of a customer loyalty program.

The service will allow the shopper to both receive and use coupons through his or her mobile phone.

The mobile phone will also act as a shopper ID card, eliminating the need for the shopper to carry around club cards for every retail outlet.

In addition to easing the shopping process for the consumer, this innovative system may benefit small retail outlets as well. Smaller chains that do not have the financial ability to lay down the infrastructure for their own loyalty programs will now have access to invaluable consumer information, allowing them to employ more effective product, pricing, and promotional strategies.

Will this upset the big boys, who already have strong shopper insights?

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Excerpted from Brandweek, “Motorola’s Loyalty Solution Targets Shoppers” by Noreen O’Leary, January 19, 2010

Recognizing consumers’ need to use mobile phones while shopping, Motorola launched a Mobile Loyalty Solution, which serves as an extension of existing loyalty card programs or as the basis for new digital ones.

The service, unveiled at the National Retail Federation’s annual convention in New York last week, enables retailers to send offers and incentives to customers’ mobile phones, eliminating the need for membership cards and paper coupons. At the same time, those merchants are using it to build a database of shopper product interests, purchase habits and preferences.

“With a growing number of smartphone users and the enhanced capability of their operating platforms, an era–where a constant digital connection via a mobile phone enhances the consumer’s shopping experience–has begun,” said Dana Warszona, global lead for the m-commerce portfolio, Enterprise Mobility Solutions. “From enabling consumers to easily search for product information to completing transactions, the mobile phone has become a business-critical tool that retailers must incorporate into their strategy to meet the needs of customers, now and in the future.”

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How to Stop Customers Before They Defect

March 27, 2009

Excerpted from Ad Age, “Are Your Customers About to Defect?” By Chris Dickey, March 16, 2009

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In today’s tough economic environment, the most precious asset an organization has is its current customer base. And maximizing returns on that asset begins with a solid retention strategy … it is possible to curb customer defection before it’s too late. Here are three ways to maximize customer value by decreasing defection.

1. Determine the warning signs. This begins by developing a predictive model to identify the behavioral changes that are precursors to defection. The variables that predict defection, churn and other negative behaviors are often, but not always, intuitive: usage (recency and frequency), average ticket, satisfaction, visits, engagement. A model can identify the most significant variables … so the marketer knows which to monitor …

For example, the model may indicate that usage is the most meaningful variable in predicting defection, and that a 20% change in a given time period exceeds the threshold of concern and is, indeed, a warning sign to be concerned about …

2. Track and monitor changes to warning signs. Once marketers know which customer behaviors to focus on and what levels of change should be cause for concern, they can isolate and track behavior changes over time. They can then monitor those changes in real time by setting up automated tracking processes within a data warehouse.

Marketers can monitor behaviors with database-mining software and view them at a macro level using dashboards.

3. Develop a trigger-based engagement strategy to address behaviors in real or near real time. Marketers can actively intervene before a warning sign becomes a real defection. A trigger strategy must be developed over time, testing and optimizing to see which interventions can most quickly reverse negative behaviors. Interventions should be built around a highly relevant and dynamic message, an offer of relevant and significant value communicated in a channel that takes advantage of real-time data … 

Trigger-based programs are generally easy to set up and automate, and they are highly measurable. They can be geared to a wide variety of customer behaviors, and business rules can be developed to change the message, offer or channel based on other factors beyond just the behavior … By understanding the key warning signs within your customer-behavior data and developing proactive trigger-based programs to intervene, you can more precisely hone your marketing effort to those communications that drive the highest incremental return on investment …

Examples of Warning Signs and Thresholds of Concern

A member routinely visits three times a week for six months. In the past two weeks, usage is down 30%.
A retail customer’s average ticket is in the top 20% range. Her average ticket drops 10% to 20% in a month.
A top customer rates you at five consistently. Overall satisfaction drops from five to four in two consecutive quarters.
A “best” customer visits your website weekly, with an average engagement time of 20 minutes. Average time spent on the site falls 30% in three weeks.

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A Balancing Act for Credit Card Issuers: Cutting Costs While Keeping Customers

March 26, 2009

Excerpted from Reuters, “Credit Card Firms Slashing Rewards to Cushion Losses”, March 11, 2009

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U.S. credit card issuers are slashing rewards, raising interest rates and increasing fees as loan losses mount, taking action to “maintain a certain profit level in the business.”

Reward programs are expensive for credit card companies—for example, Discover Financial Services posted revenue of $5.7 billion in 2008, while the net cost of its rewards program was $710 million—so issuers want to make sure they are worthwhile.

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In a recent presentation to investors, JPMorgan said cardholders using its reward program showed a faster increase in spending, generated higher revenue and had lower credit loss rates.

But that does not mean card companies will keep offering freebies to attract customers. They are trying to determine which customers are good bets. 

In addition, lenders are trying to pass on part of the cost of reward programs to merchants by offering joint promotions that could bring new businesses and customers to battered retailers.

Not only have rewards been cut back—it has become more difficult to cash them in.

Still, losing a few rewards may be the easy part. Other credit card companies are raising interest rates and increasing fees, or simply closing down accounts entirely.

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But this strategy could backfire: Higher costs and fewer rewards could frighten clients away, reducing the risk of default but also cutting into card company revenue.

“The people who have better credit quality have more offers, and if you raise their rates too much they will in fact leave you for somebody else.”

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Feeling special is one thing … really special is another

February 12, 2009

Excerpted from the Journal of Consumer Research, “Feeling Superior: The Impact of Loyalty Program Structure on Consumers’ Perceptions of Status.” by Xavier Drèze and Joseph C. Nunes, April 2009.

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How special does that gold card offered by a hotel or airline make you feel? A new study explores the connection between status and loyalty. Many businesses create loyalty programs to confer a sense of status to their customers. Examples are platinum, gold, and silver charge cards, or red and blue membership levels. The study provides insight for planning programs that enhance consumers’ perception of status.

The authors studied the limits of customer loyalty, testing how far an organization can go in adding status levels to a loyalty program before customers feel they are not so special anymore.The authors tested a variety of options for expanding loyalty programs. They added tiers and people to customer loyalty programs in varying combinations to determine how people would feel if an organization added people to a top-tier program. They asked respondents how they felt when they added more tiers on top of them (platinum on top of gold), or added more tiers below them.

“We find that increasing the number of elites in the top tier dilutes their perception of status, but adding a subordinate elite tier enhances their perceptions of status.”

“Thus, if the firm creates a larger top tier while adding a second status tier rather than persisting with a single small top tier, it can recognize more customers without decreasing the perceptions of status among its most elite.”

In other words, being in the gold level is more special if there is a silver level below.

“A possible drawback a firm always confronts when providing preferential treatment to an elite few is whether it might disenfranchise the masses. Our study shows this concern to be unfounded. We find that given the choice between alternative firms, respondents favor companies that offer elite programs even when it is clear they would not qualify for the lowest elite tiers.”

“In other words, those at the bottom of the pyramid do not begrudge the success of those at the top.”

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