More than an email list: using your customer loyalty data effectively

A couple of days ago I was at Bed, Bath and Table. Maybe I should explain that it was just after Easter and my partner loves holiday decorating, so this is a special time of year where she can stock up on even more decorations that we can store in the attic for 11.5 months of the year.

Anyway, I digress. As I was waiting patiently to purchase my new treasures I overheard the sales assistant explaining to another customer that they were no longer part of the Bed, Bath and Table loyalty program because they had unsubscribed from the newsletter. The whole interaction really made me think about Loyalty Programs, their purpose and their value for a retailer.

So what really is a Loyalty Program?

Maybe we should start with what a Loyalty Program isn’t. It isn’t a generic email marketing list that you can use to send generic email marketing campaigns. Loyalty Programs serve three main purposes:

1. To build brand loyalty with your customers and drive repeat business.

2. To collect transactional and customer data that can be used to drive store performance.

3. To provide a link between instore and online browsing and purchasing information.

You could argue that the third point is really just part of point two, but I believe that understanding how different channels are operating together is so critical for retailers that it is a key element of a Loyalty Program in its own right.

What makes an effective Loyalty Program?

A Loyalty Program is about a long-term relationship between your customer and your business. It needs to be beneficial for both sides. It also needs to be an easy, frictionless experience. Let’s just imagine that you are on a first date, there is some chemistry there. If you think the next best step is to ask your date for a bunch of personal information then you probably don’t go out on a lot of second dates. It is the same with your Loyalty Program, you need to think “What is the minimum piece of information that you can ask for to start to build the customer profile?”

My recommendation when creating a new customer loyalty account is to start by asking for their first name and mobile phone number. My thinking here is that it is a lot easier for a customer to give you their mobile number than an email when they complete their next purchase, meaning that more transactions will be correctly linked to a customer profile. Many customers will also have multiple emails, but generally only one personal phone number, making it easier to ensure a customer has a single profile. Finally, we all know that if a customer gives you their email address, you are going to immediately begin spamming them because that’s just what we do. But the main point is, think of your Loyalty Program as a long-term relationship, you don’t need every piece of information right now, let it build organically over time.

The first step is to ask for the minimum information and just create a profile that can be used to link transactions to. That serves your purpose as a retailer to begin to collect customer transaction data. You also need to think about the upside for the customer - WIIFM (what’s in it for me?). Depending on what retail segment you are in will impact the value proposition for the customer. An excellent example is JB Hi-Fi. When you make a purchase, the cashier will ask you for your phone number to send you the receipt. This is great for tax purposes or more expensive items where you might need the receipt months from now. Within seconds the customer receives a text like this:

Awesome in so many ways:

1. You created a profile, even if the customer doesn’t elect to setup their JB Perks account you can still keep this transaction history associated with the mobile phone number and if they later sign up, their full history would be available.

2. The customer has an electronic receipt they can find in future if required - WIIFM!

3. The customer has a $10 coupon if they elect to create their Loyalty account.

If you are in a retail sector that wouldn’t suit the electronic receipt then you need a highly converting offer to incentivise the handover of the mobile number. Again think about this as a long-term relationship. Would it matter if you made a very small or even zero profit on this transaction, if you think about the LTV of a customer? Would it be worthwhile to offer a 10% discount on this purchase, if you signed the customer up right now?

The key is you need to make it easy to sign up and make it worthwhile for the customer to sign up. Think about other ways you can make it easy. How about a QR code near the entrance and also near the check-out of your store? The QR code will take the customer to a landing page that just asks them for their mobile number and first name and can be completed in less than 30 seconds.

Constantly delivering value for your customer

A Loyalty Program must provide stability and excitement, just like a good relationship. The stability part is the core offer of the Loyalty Program, for example:

• A free coffee after 10 purchases.

• A 10% off voucher for every $250 spent.

• 1 point for every dollar spent.

This is the part of the Loyalty Program that doesn’t change. It is dependable and it is your agreement with the customer. They provided some personal information in exchange for the core offer.

The other part of the Loyalty Program is intended to keep the spice in the relationship. It is something that can change. It might be a simple gift voucher on their birthday. But, this can also mean that it doesn’t necessarily have to be a financial exchange. For example it might include:

• Access to a Loyalty Customer event - i.e. an author talk at a bookstore.

• Exclusive merchandise - i.e. Rapha Cycling Club members only jersey

• Early access to a sale event

• A donation to a charity that aligns with their values

The cool thing is that this offer can be anything, the key is to mix it up so the Loyalty Program stays interesting, to drive repeat transactions and ensure ongoing brand loyalty with your customers.

Delivering value for your business

The data that is created through a Loyalty Program is gold for a retailer. The data can be used to understand many things about your customers including:

• Lifetime customer value

• Categorisation of a customer - i.e. value driven vs premium product

• Frequency of purchase for different categories

• Items that are purchased together

• Cross over between online browsing, online purchasing and in-store purchasing

As a starting point you can think about:

1. How can you increase the frequency of transactions?

2. How can you increase the average order value?

3. Which products should be bundled together?

4. What should I price this product at?

5. What markdown should I apply to this product?

6. How much of my marketing spend is attributable to in-store purchases?

So what really is a Loyalty Program?

A Loyalty Program is a long-term relationship between a customer and a business. To work well, it needs to be frictionless and easy. It needs to deliver value to the customer and to provide data to the business that they can use to improve operational performance.

You could talk to my partner endlessly about Loyalty Programs… If you have a Loyalty Program, but if you aren’t taking full advantage of your data, then feel free to drop me a line at info@pivotanalytics.com.au or call 1300 475 510 and I can help you with a few approaches to deliver more value for your business.