Measuring Loyalty Marketing

For brands itamp8217s more critical than ever to have onetoone relationships with customers That provides the ability to collect customer data and insights and market directly to customers in a way which can be tailored to a customeramp8217s loyalty status and often loyalty members are a brandamp8217s best customers Loyalty is the gateway to enabling personalization and contributes to overall customer lifetime valueThe ANA report Loyalty Marketing The Good the Bad and the Ugly provides a deep dive on the benefits challenges and watchouts of loyalty marketing One of those challenges is measuring the ROI of loyalty programs At our recent event ANAamp8217s LoyaltyCon we asked each speaker the question amp8220How do you measure the effectiveness of your loyalty marketing programamp8221 The following summarizes the learning without attribution to specific brands in order to maintain confidentialityOverall there were the obvious metrics the number of loyalty program members growth of that membership the size of the active base engagement of members including frequency and the dollar amount of their respective transactions and how their transactions compared with nonmembers of the loyalty programDrilling down there was consensus that loyalty programs divide their members into amp8220tiersamp8221 and work to move those members to higher tiers over timeMember 1 amp8220We divide customers into three different mind states engage in the program loyal to the program and then an advocate for the programamp8221Member 2 amp8220The core thing we39re trying to do is break our customers into segmentation by frequency that goes from super loyal to not that loyal so we call it platinum gold silver bronze For context our platinum customers are visiting us about 35 times a month on average Gold silver and then our bronze customers have lower frequency of visitsamp8221Member 3 amp8220Our loyalty program provides an understanding of how much to invest at every single step of that life cycle to say what39s it worth to us to move a customer from non member to member from member to silver tier from silver up to gold tier to encourage more usage of our products and services Because we have that really clear understanding of value at every step we39re able to make really informed decisions regarding how much to invest along the wayamp8221Member 4 amp8220We came up with what we call our continuum segmentation of customers The first tier we call curious They know the brand and probably have been once or twice through their lifetime but they don39t have a high passion for the brand and they39re certainly not frequent customers There we have the casual customer who are medium frequency and medium fandom around the brand They probably just need different triggers to create an additional visit Then we have what we call our committed Those are the people who have super high fandom and visit frequently Our strategy is to drive increased frequency from those who were not coming as much in our casual group to move them to the committed groupamp8221One participant summed this up as follows amp8220Our main KPI is are we migrating our loyalty members Are we maintaining those platinum and gold and silver customers And how many of the bronzes are we migrating up for us That is the North Star Are we converting a customer to somebody that shops more frequently with us That for us is the number one thing we measureamp8221Overall then as one speaker said amp8220Itamp8217s about graduating loyalty members into a higher tier in the programamp8221There was also discussion about customer lifetime valueamp8220We see at least a 30 increase in those participants in our engagement programs above and beyond all nonloyalty members What we39re building toward is customer lifetime value That39s the metric we really want to measure It39s wonderful to convert someone to our business It39s wonderful to grow that customer but if their head is turned by a competitor and they leave it39s all for nothing really And we39re just going to be on that hamster wheel So we have to think about customer lifetime value We take snapshots of three to five years of businessamp8221amp8220I love the concept of lifetime value as we build relationships with customers that generally last for their lifetime And so we need a lifetime view of the customer aligning the company around how we measure that We are looking to maximize value And it might be buying more of a certain product or it might be increasing the number of products in your basket or it might be buying a higher margin product and moving a customer up into a higher yielding product So all of these design considerations come into playamp8221According to one speaker amp8220Members of our loyalty program shop 40 more than nonmembers and spend 20 more So if we were to annualize that in six months that is providing us with a 60 higher volume of business than nonmembers That drives customer lifetime valueamp8221Other insightamp8220Our loyalty programs allow us to build deeper more meaningful relationships with our customers It39s so much more than discounts and rebatesamp8221These loyalty programs fuel retail media networksamp8220The business value proposition is as we get the customer to identify themselves we get better data to run the business because we understand the customer frequency the price elasticity brand loyalty product substitute ability things that we could not do or would be impossible if the customer was not identifying themselvesamp8221amp8220Thereamp8217s whatamp8217s called the retail math equation and it39s pretty much valid for every business There39s only four ways to make more sales You can get customers to buy more things You can get customers to buy pricier things or things that give you a better margin You can get customers to come in more often Or you can get new customersamp8221Finally our closing thought is provided by Luc Bondar COO ampamp President at United Airlines Mileage Plus amp8220Thereamp8217s never been a more exciting time to be involved in running building and operating loyalty programs They offer tremendous valueamp8221Posted at MediaVillage through the Thought Leadership selfpublishing platformClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNet

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