Redefining the customer reward strategy
Reward programs have been around since 1793, but it would be a mistake to believe that we as businesses and marketers have mastered the concept.
It isn’t that we are world-record slow on the uptake. We clearly have been better than that. Just look, for example, at the success of airline loyalty programs where tens of trillions of points have been rewarded and redeemed.
Instead, the interests, motivations and expectations of today's consumers have grown exponentially, especially in the last decade due to a huge behavior shift that has moved eyeballs to ultra-personal mobile devices.
We are in the era of customer-driven reward programs that amplify experiences and one-to-one interactions. Yes, an opt-in is valuable, but the consumer expects, even demands a business to know him or her and to act accordingly.
Sending a meatball sandwich offer to a vegetarian is no longer laughed off — it often is being taken as an insult and a signal that a business doesn't care enough to reach out appropriately.
However, the retailers and brands that are hitting the mark are themselves being rewarded with more consumer loyalty, stickiness, and sales.
This takes more than 18th century thinking and technology. These days, it often involves proximity and predictive analytics for businesses to deliver on the implied promise of the brand.
Starbucks, which is among the most progressive and successful in evolving its dealings with patrons, says mobile enables a "direct, real-time, personalized, two-way digital relationship." How? There are more than 12 million customers enrolled in Starbucks' U.S. rewards program, yielding rich and actionable data. This represents 23 percent year-over-year growth in the program.
For instance, Starbucks might know that an opted-in customer makes a purchase between 8 and 8:17 every morning and that once a week, an afternoon visit takes place as well. On a recent visit to Starbucks I asked a fellow customer if she had tried ordering from the mobile app. With a huge smile she replied "it’s hedonistic!" This is just one example of how brands who create an emotional connection to their consumers tangibly benefit.
By acting upon this information, the company can provide more personal and timely rewards that achieve the promise of one-to-one connection. To further increase utility and ease of use for consumers, Starbucks enabled customers to use their Starbucks card or mobile app to pay for their purchases. As of June 2016, 65 percent of purchases were paid with the card or mobile app. Today Starbucks has over $1.2 billion on deposit, nearly $100 per member on average. To put this in perspective, the amount on deposit in My Starbucks Rewards ranks them in the top 10 percent of banks in the United States.
And Starbucks has looked to extend its rewards program in unique and valuable ways, including the opening of higher end and exclusive roasteries.
"The Starbucks Roastery environment honors coffee innovation as a modern day Willy Wonka experience, where customers are only feet away from the theatre and artistry of our coffee craft," chairman Howard Schultz said.
Sephora is another retailer that gets the modern-day reward concept.
It recently introduced its Rewards Bazaar, where loyalty program members have access to new rewards—including samples, services and one-of-a-kind experiences—every Tuesday and Thursday.
Exclusivity is a major part of the effort. Rewards have included a master makeup class at Anastasia Beverly Hills, and a Tory Burch gift set that includes a bag, wallet and perfume.
Wise marketers are also using psychographic data regarding consumers' activities, interests and opinions that provide tremendous insight into both affinity and demand. Brands must use this data to better interpret and anticipate consumers' needs, filtering out the noise and presenting them with the right content or offer at the right time.
There is no partial credit when it comes to personalization. Consumers expect brands to know this and play by their rules.
And businesses are paying attention. The majority of U.S. marketers intend to allocate more of their budgets to customer loyalty next year, eMarketer reported.
Some 44 percent said in a survey they will somewhat increase loyalty budgets, and 13 percent plan to significantly.
Jeffrey Sampson is co-founder and CEO of Upside Commerce, Inc. Prior to Upside, he was co-founder and CEO of a marketing technology startup, a global director of product management at Microsoft and venture capitalist. He is also a data geek, brand ambassador, lacrosse statistician, youth football coach and #foodie. He can be reached at firstname.lastname@example.org.