Monday 12 July 2010

Creating a pointless loyalty programme


Many brands would love to have a loyalty programme, but don't see the point as they feel they can't make it work for various reasons such as low purchase frequency, low margins or brand fit.  Worse still, other brands simply run head-long into creating a programme without giving due consideration as to what they want to achieve or even whether the programme will be valued by or add value to their customers.

However the mistake here is to simply assume that a loyalty programme means a points programme.  That providing recognition to customers for repeat custom requires some form of currency and reward catalogue.  This is not the case.

Loyalty is all about customer retention and anything which encourages customers to make that next purchase - and to continue to make purchases - is in essence a loyalty programme.

Creating a pointless loyalty programme (one without points) does not mean creating a programme which is simply pointless.  Instead it's about looking at where your brand can facilitate and build upon customer interactions - creating deep engagement and participation, and ultimately increasing and maintaining loyalty.

So how do you provide added value without giving points?  Below are a few recent examples of brands doing just that.

Exclusive Access/Content

Starbucks in the US announced recently that it is looking to use exclusive content to recognise and reward customers.  Providing free WiFi, customers will be able to access a content network called Starbucks Digital Network which in partnership with companies like Yahoo will provide local content that you can't read anywhere else.  Commenting on this, CEO Howard Schulz said

"Free WiFi is in my mind just the price of admission - we want to create.. new sources of content that you can only get at Starbucks, this is a thing that doesn't exist in any other consumer marketplace in Amercia."

This also fits well with their brand as they consider Starbucks "a third place" - somewhere between work and home - and the local, exclusive content may add to this.

The hope is that this will create loyalty with customers through content that is "so compelling that it drives incremental traffic"

Exclusive access and content is well used by many brands, such as O2 in the UK which provides their customers with priority access to concert tickets.

Social Currency

In a previous blog I discussed how people all want to feel a little special some of the time and that creating a means to let people set themselves apart can be a great way of gaining additional loyalty and increased motivation.  A recent article in McKinsey Quarterly showed this working in a social networking context - discussing how providing people with a means to publicise their activities, whether this is through the award of badges as used on foursquare or the publication of achievements from sites like SportyPal.

The article pointed out:-

"Recognition from peers is a powerful motivator, and brands that allow users to gain it deliver real perceived value.  When users publicise that recognition, it translates into word of mouth"

The author Michael Zeisser, VP of Liberty Media discusses how they have taken this one step further and actually look at word of mouth as a distinct form of media - allowing it to be treated as a form of content to which can be applied tried and true content management practices and metrics.  Going on to say:-

We see this phenomenon daily—for example, on the forums of our site. When members boast of reaching their target weight or other goals with help from workouts, we receive authentic and credible word-of-mouth endorsements at almost no cost

This works to create loyalty in two ways.  Firstly, it taps into peoples desire to chase goals, such as achieving/beating a best performance time - and being able to brag about it to others.  Second it taps into the idea of Social Proof, letting people know that others are taking part and keeping them on track - helping them stay loyal.

Interaction Loyalty

Increasingly it is more important to recognise and reward customers for their interaction, not just their transaction.  This means creating tools that allow these interactions to be captured as unlike a purchase there isn't usually a POS transaction.

Obviously it's possible to capture online interactions such as reading/responding to an email, logging into a website or recommending a friend.  However some brands are beginning to experiment with linking offline interactions such as store visits with loyalty - and seeing great results!

In the UK for example, Dominos Pizza has linked up with foursquare to reward customers who check-in at Dominos outlets, essentially letting Dominos know that they have visited - even if they didn't actually make a purchase themselves.  Whilst this is a very new phenomenon, Dominos feel they are really seeing the success of it, reporting that they have seen:-

A 29% surge in pre-tax profits to £17.5m, buoyed by a strong performance from e-commerce sales and attributing its link-up with Foursquare as key to its recent performance.

Competitor location based social network Whrrl in the US has also looked to link a customers physical location with a brand through its Society Rewards programme.  Working with US petrol retailer Murphy USA, if a customer checks-in at any of their 1,100 locations they will immeadiately be in with a chance to win up to $50 of free fuel.

While at a basic level this programme is simply a sales promotion mechanic, where it starts to get clever is that the more a customer checks-in - and others act on their recommendations - the higher levels they achieve, providing additional opportunities to earn.  In essence, the more a customer interacts with a brand, the more they get back.  Whrrl describes this by saying:-

Whrrl’s Society Rewards is based on a person’s ability to inspire friends to try new ideas at real-world places. Users receive additional points when others “Want To” try that idea, actually do try the idea or pass on the recommendation to their friends. Users also earn points by getting others to join the Society and by checking in at qualifying locations.

These are just a few examples of brands creating pointless loyalty programmes which recognise, reward and engage their customers.

When thinking loyalty, don't just think points - there are many more creative ways to interact and engage with customers.

However points can provide a strong motivator, allowing customers to easily see what is expected and helping to shape ongoing behaviours - utilising any of these ideas as well as points will simply create even deeper engagement and make your currency that much more rewarding.

Either way it's a win-win.

1 comment:

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