Many Loyalty Programs Aren’t Realizing Their Potential

merkle-500friendsOriginally posted on Merkle’s Retail blog:

While there are now more than 3.3 billion loyalty program memberships in the U.S., only half of enrolled consumers are active. Why is that?

Since the purpose of a loyalty program is to influence consumer behavior, companies need to plan and execute their programs very strategically and wisely to achieve the goals they want. Among the growing selective member base, this is where many leading organizations may fall behind. Make sure to think about providing a “fair exchange of value” – I’ll give you my personal contact information if you deliver additional value – as the consumer strategy upon which all loyalty programs are developed. Creating an ecosystem of engaging content, enticing brand experiences, and preferential valuable services that go beyond the core product or service is where loyalty programs can have a huge impact. Points are a tactic, apps an operational enabler. It’s time to take a step back and think strategically about your consumers’ loyalty before your competitors do!


Many retailers have loyalty programs in place, but without effective planning, more and more may end up struggling to prove their ROI – driving sales or retaining healthy margins. While the underlying goal of many loyalty programs may be to keep customers away from competitors, Merkle’s recent consumer survey found that less than one-fifth of consumers cite today’s loyalty programs as a main differentiator between competitors.

On the flip side of the coin, when done correctly – strategically guided and well executed – retail loyalty programs can have a huge pay-off. In one example, a major retailer’s loyalty program was successful in increasing average spend by 20% per member, program enrollment by 45%, and repurchase rate by 14%. Retailers who master a personalized, omni-channel approach to loyalty increase their revenue upwards of 10X.

Deep Dive Example

One major luxury footwear company used their retail outlet to actively solicit consumer’s contact information, rewarding associates based on how many consumers they individually acquired. When queried about how they used this information, they proudly reported that they sent them a promotional email every week. Customers who visited branded retail locations are likely high-value customers. Bombarding them with promotional messages not only erodes the brand’s luxury positioning, but could be perceived as annoying spam and worse yet erode margins of full-price customers.

What was the missed opportunity?

  • Engaging Content – High-quality leather shoes need TLC if they’re to last. My grandfather used shoe trees to keep his shoes stretched out – should we all be using them too? How do we get these annoying winter salt stains off our uber expensive shoes?
  • Analytic Insights – Transactional data could be used to upsell and cross sell. If you love your black loafers/boots, then how about a pair in another color? Geolocation could help you highlight the retail locations that carry your brand which are closest to that consumer’s home address.

Loyalty Program Best Practices

1. Start With Specific Behavioral Objectives – Think about “shift, lift, or mix.” Do you want to shift the relationship to a broader base and transform top customers into devotees and advocates? Or is your goal to lift customers into higher LTV tiers? Expanding your mix of products and services across your portfolio can improve margins, decreasing operational costs associated with seasonal demand spikes, increasing average order value, and more.

2. Use Analytic Insights to Inform Loyalty Marketing – We have data at our fingertips and it needs to become an integral part of your loyalty program. You want to ask your customers what they want in their program and what perks or rewards are most compelling for them. Then use these insights to segment loyalty program members and begin personalizing their treatment.

For example, don’t keep sending lapsed users more coupons. With an integrated view of the customer, use the data to understand:

  • Department – Personal-shopping request may indicate either “fashion challenged” or like “high touch”
  • Spent $X – LTV Tier ‘Most Growable’
  • Customer Service – Complained to the store manager about the atrocious service levels.

So what reactivation or win-back message would be the “Next Best Offer”?

3. Operational Entanglement – Starbucks and Dunkin’ Donuts have done this right. Apps that enable people to pay and order from their smartphones make these coffee chains easier to do business with. When I tweet my order to my neighborhood barista, my coffee is ready and waiting for me when I arrive.

4. Add Value – Preferred access, like airlines use, is a great example of added value. We all like to board a plane first because there is actually room for our carry-on luggage. The three magazines I still subscribe to have increased my readership because they’re available anytime and anywhere I have a moment to read – improving their stickiness by providing omni-channel content. Think about your consumer’s journey. Identify opportunities and touchpoints where you’re able provide additional value – first to loyalty program members and then, perhaps, beyond.

Loyalty done right is fertile ground for changing consumer behavior by engaging and immersing your customers in an enriching brand experience. This creates true competitive advantage and measurable results, not to mention happy, loyal customers!

Keeping Up With Today’s Loyalty Demands


Originally posted on IBM’s Smarter Commerce blog:

Loyalty marketing is more and more prominent in today’s retail landscape. It is becoming common knowledge that customer acquisition costs are increasingly rising, and data-driven customer retention is a key area filled with untapped growth potential. But loyalty marketing is evolving and is more intricate than just offering discounts to existing customers. As many marketers realize, there are three common problems that they run into when trying to implement an effective loyalty program:

  1. They often feel stuck offering dollars-off discounts and are losing their margins without sustainably changing their customer behavior.
  2. Personalization is not going further than using much more than a first and last name, and is not connecting to the customer and building customer relationships.
  3. Their loyalty members are not actively participating and being engaged, and consequently not influencing long term results.

Today, there is an average of 29 loyalty programs per U.S. household, but people are only active in about 12, or 41%, of them. Customers are selective about their loyalty programs, which underlines the need to make yours stand out and be as efficient as possible. This requires close attention to 1) increasing customer self-identification, 2) taking personalized communications, opportunities, and rewards to the next level, and 3) extending the program to be omni-channel and connect cohesively across all customer touch points. In executing on those requirements, the loyalty payoff can be huge. One major retailer’s loyalty program was successful in increasing average spend by 20% per member, program enrollment by 45%, and repurchase rate by 14%.

Increasing Self-Identification

Loyalty incentivizes customers to provide more information about themselves and engage across channels, which leads to a richer understanding of your customers and how they interact with your brand. You may be surprised how many of them are open to providing information about themselves in order to receive more relevant communications and offers. Collecting information that they provide through forms, surveys, and feedback can be very useful, as well as connecting customer social accounts. With social accounts, in addition to seeing basic information such as their age, gender, and location, you can also see their likes, actions, and which topics they are posting about. Expanding your repository of customer data is critical to developing a holistic customer view to ensure you are implementing the most effective strategies for your unique customer base.

Taking Personalization to the Next Level

In addition to increasing customer self-identification, you should track and analyze metrics such as order frequency, average order value, and from which channels customers are purchasing. Modern loyalty programs gather this customer data and provide a centralized hub which is used to personalize meaningful incentives and rewards for higher customer redemption and satisfaction, and also to send personalized messages. These messages can be targeted towards specific actions and customer segments, and are used to maintain relevance and build upon customer-brand relationships by making customers feel like you are paying attention to what they want. For example, using loyalty program information, instead of running a general email promotion to all existing customers, you can specifically run it to gold tier members that ordinarily make a purchase every two months, but are now coming close to not making a purchase in two months. By knowing the purchasing habits of this narrow segment, you are able to selectively and more effectively run this promotion. Using personalization, you also do not need to depend on blindly providing dollars-off to all customers without sustaining engagement in the long-term, when you have the insights to segment customers, deliver personalized experiences, and understand how to truly interest and engage your customers.

Keep track of what your customers like and dislike, inside and outside of your company. If it means being presented with relevant offers that match their interests, 64% of people would choose to have their individual activity tracked.

Cohesive Omni-Channel Capabilities

With today’s consumer having the ability to interact with your brand across all channels, it is essential to have cohesive communication, connectivity of data, and customer access to your program and rewards at all touch points. Different consumers like to interact with brands through different channels – whether in-store, social media, or email – and your program should be available in their preferred channel. It is also a quick way to lose an engaged customer from your program if they do not have the access they expect or if they are receiving different information in different channels. Having robust and consistent communication across all touch points is key to providing brand validity, trust, and ease for the customer to solidify their loyalty.

Today’s consumer is accustomed to numerous messages competing for their attention across different channels. It is imperative to stay on top of the evolving loyalty landscape and customers’ expectations and preferences to make the most of your loyalty program.500friends, A Merkle Company, helps retailers build more profitable customer relationships with omni-channel loyalty programs and strategies. We partnered with IBM WebSphere® Commerce for our software-as-a-service (SaaS) loyalty suite, LoyaltyPlus, to easily develop a richer hub of data for better customer understanding with faster time to value for our mutual clients. LoyaltyPlus connects customer data at all touch points, from in-store to mobile, and delivers a seamless, fully branded omni-channel experience.

Moving Away From a Dollars-Off Program

iStockPhotoMany CMOs face the problem of trying to entice customers by providing discounts, and want to use a large enough funding rate to make a significant impact on their customers’ spending, but they also do not want to lose their margins.

Offering discounts is an important aspect of marketing and helps with customer acquisition, but often delivers diminishing returns and does not sustain customer engagement in the long term. What’s more is you’re losing money over providing discounts to customers who are making purchases that they would have made anyway. You’re left with losing money over not consistently changing customer behavior.

You do not need to rely solely on discounts and high funding rates to motivate customer spending. You can keep your margins and increase customer retention through a different approach, and this approach is engagement-based rewards.

Why non-monetary rewards work

Customers want special offers. The trick is that certain customers value certain benefits as much as monetary discounts, if not more. These benefits have high perceived value. For example, an engagement-based reward may only cost you $5, but have a perceived value of $20 to the customer. The point is to offer engagement-based rewards specific to what the customer values highly. They may want exclusive knowledge about exciting things going on within your company, an exclusive item, or access to a special event with recognition for being a loyal customer. Another example is to offer exclusive access to new merchandise, after the customer purchases a certain amount. Not only are you motivating customers to spend more, but they are rewarded with an experience that brings in more profit. Many options, such as providing exclusive early access, are virtually free. This means that you are fulfilling their wants, in a way that does not eat away at your margins.

Remember to focus on relevance

Make sure to collect data on what your customers are interested in to provide the most relevant rewards. Collecting information from private site exchanges, as well as information that they provide through surveys, feedback, and connected social accounts can be very useful. You want to know what they enjoy within and outside of your company and their interactions with your company at all touchpoints. Reward relevance is important to the customer, and 64% of people would actually choose to have their individual activity tracked if it means they will be presented with relevant offers. Relevant rewards have a higher redemption rate and the customers feel like you are listening to what they want.

Offering a variety of strategic rewards is a win-win situation for both you and your customer. You can lower your funding rates and simultaneously build upon your relationship with satisfied customers to increase their customer lifetime value.

To learn more about loyalty strategies and rewards, and how 500friends can help your company, contact

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As of today, our new office location is:

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We’re excited to join offices with our Experience Design Group in Merkle! Our new office is also in a great location within walking distance to Union Square and numerous restaurants, hotels, and retail stores.


Importance of an Effective Trigger-Based Communication Strategy

communicationOnce you implement a loyalty program, you are not yet finished with your loyalty strategy. In fact, there is a good chance that a loyalty program is set to be ineffective if it does not have an ongoing and robust communication element in place. Successful loyalty programs initiate a behavior out of your customers that they would not otherwise have done, and whatever the initiatives may be, they need to be communicated properly and clearly to be effective and drive results.

This is apparent for many of our consulting engagements, that companies are not making the most out of their current programs because they are lacking simple communications–and many do not even realize they are doing it. They are letting members become inactive because they are assuming the customer has all of the information they need about the program. This may be due to the fact that it is easy for the customer to look up the information on the website or initial signup message. But the truth is that the average customer is unlikely to stay on top of this information in a way to consistently change their purchasing behavior. These customers need a little push in the right direction, and when doing so through trigger-based messages, there are two important aspects to keep in mind:


Customers dislike being bombarded with general messages that do not seem to apply to them. It is impersonal and makes them feel they are being spammed, which no one gives a second thought to. By sending personalized trigger-based messages to individuals in real time, you are recognizing them for their immediate actions or status. It is saying, “Congratulations on earning 75 points–you are now only 25 points away from reaching your next highest reward.” Or you can even say, “We see you looked at this product and think you may enjoy these similar ones…”

These messages do not only apply to when the customer needs to perform an action, but also recognizes them for their positive actions completed. Thank them for choosing your company, for purchasing that product, and for being a loyal customer and reaching that membership tier. They will feel more connected to the company and that they individually are valued.

Sense of urgency

In addition to personalizing your messages, trigger-based messages create a sense of urgency to perform a certain action as soon as possible. If you send a notification for an expiration date approaching, whether it be for points or membership tier, the customer is motivated to perform the action before that date comes. In an example of saying to a member, “You have been inactive for 156 days today, and we are letting you know that you have only 24 days days left until your gold-level membership tier expires,” remind them of what they are capable of receiving in that gold-level tier, and influence them to not want to lose that status in a few weeks. If you do not currently have deadlines, setting some (with effective communication) is a big win for increased incremental purchases and creating a sense of urgency.

Through effective communications, you will build upon your individual relationships with your customers while keeping your brand on the top of their minds. The customer will know exactly where they stand and what they need to do, and the resulting influence on customer behavior will have a huge financial impact.

For more information about how to make the most of your loyalty program, or how to start your own, contact

When Should You Start Thinking About Loyalty?

How do you know when it’s time to start thinking about loyalty?  Investing in loyalty is a big decision but has great rewards if deployed correctly and efficiently.  Loyalty is a solution for companies who want to drive incremental lift and better understand their customers.  If you are contemplating whether or not loyalty is the right solution for your company, ask yourself these three questions:

1.  Is your cost of customer acquisition high (and your customer retention rate low)?  

Most retailers, if not all, will answer yes to this question.  With methods like search engine marketing and paid search advertising, the cost of acquiring a customer is skyrocketing and hurting profitability.  Today, brands must focus more on retention rather than acquisition.  In the long-run, shifting your efforts towards retention will be more profitable as you will encourage repurchase rather than a one-time purchase with acquisition.  So how do you keep customers coming back for more?  Loyalty programs effectively maximize customer lifetime value by providing highly personalized user experiences and relevant rewards.  In incentivizing a customer to return, you will continue to capitalize on your investment.

 2.  Are you giving away your margin?

Are you constantly relying on discount codes and coupons to incentivize customers to purchase?  If so, this may be the perfect time to start thinking about loyalty.  Loyalty trains your customer to repurchase, rather than to expect discounts.  Substituting discounts and coupons for loyalty promotions will prevent you from giving away your margin, especially to customers who may already be loyal.  An example of a loyalty promotion that preserves your margin is early access to products for members.  While this comes at no cost to you, its initial exclusivity makes your loyal customers feel special and gives them the opportunity to buy.  Offering double points, rather than straight discounts, is another example of a loyalty promotion that can save your margin.  Consumers will earn a percentage in point value per dollar spent, which will go towards future purchases.

 3.  Are you having trouble understanding your customer across channels?

Nowadays, customers have the ability to shop online, in-store, through mobile, etc.  However, the data is siloed and it is difficult to connect the dots between systems.  Omni-channel loyalty programs solve this problem by incentivizing customers to self-identify and engage across channels.  Loyalty is a hub for customer data as it gives customers a reason to say who they are and provides a richer understanding of how customers interact with a brand.  Providing a consistent, omni-channel experience for your customer is mutually beneficial.  Investing in loyalty will give you a complete view of your customers and allow for targeted campaigns.  And in turn, your customers will receive rewards and benefits that are truly geared towards them.

These questions can help you begin to think about loyalty.  Loyalty has an array of benefits, from providing a holistic view of your customer to encouraging repurchase through the data it collects.  A program that encompasses multiple channels has the ability to drive profitability and may just be the solution you need to elevate your brand.

Reach out to Matt Brown, our Senior Director of Sales, at matt.brown[at] if you need help answering these questions or request a demo of our loyalty program platform, LoyaltyPlus, to see if we’re the right fit for you.

Case Study: How U.S. Auto Parts Increased Spend Per Member 20% with 500friends

logo2High cost customer acquisition with no tradeoff of lifetime value defines today’s ecommerce landscape.  As most retailers struggle with customer retention, marketing teams deploy loyalty solutions to gain a competitive edge by connecting with shoppers and incentivizing repurchase. With the help of 500friends, a leading provider of end-to-end marketing solutions, U.S. Auto parts increased its spend per member by 20%, its repurchase rate by 14%, and its enrollment rate by 45% after updating the loyalty program of its flagship brand, Auto Parts Warehouse. We at 500friends published a case study (below) highlighting the success of U.S. Auto Parts in increasing customer retention using the 500friends LoyaltyPlus platform.

Although most ecommerce marketing teams are resource constrained, IR 100 retailer U.S. Auto Parts realized the competitive advantage of loyalty and decided to invest. The company debuted the Auto Parts Warehouse loyalty program, known as APW Rewards, in September 2012 with the help of 500friends.  After its initial success, the company understood the importance of investing in existing customers.  To continue the momentum and elevate APW Rewards, U.S. Auto Parts decided to shift marketing investment from customer acquisition to customer retention and engagement.  Working with 500friends’ customer success team, U.S. Auto Parts began to leverage capabilities such as increased rewards for high-margin products, personalized post-purchase enrollment offers, a status tier, and triggered email campaigns based off of a person’s repurchase history to maximize customer lifetime value.

“The refresh of APW Rewards, which we achieved in collaboration with 500friends, was a huge success, and there’s even more we can do to engage our customers across our brands,” states Houman Akhavan, VP of Marketing at U.S. Auto Parts.

Read the full case study to learn more about how U.S. Auto Parts maximized its customer relationships:


About 500friends
500friends is a leader in omni-channel loyalty marketing solutions. Its white-labeled service-as-a-software platform, LoyaltyPlus, offers a comprehensive suite of capabilities empowering retailers to deploy loyalty programs catered to their customers. 500friends works with over 50 of the top 1,000 retailers, including 1800Flowers, Omaha Steaks, and Kiehl’s, to maximize customer relationships. For more information, please visit

About U.S. Auto Parts
U.S. Auto Parts is a leading provider of aftermarket auto parts, with a reputation for quality service and competitively priced products. U.S. Auto Parts’ flagship websites include,, and For the company’s corporate website, visit

Watch-On-Demand: 10 Ways To Personalize The Holidays

Did you miss our recent webinar with Merkle?

The joint webinar is now available to watch below and features Merkle’s VP of Personalization, Zimm Zimmerman, as well as 500friends’ Senior Director of Strategy, Arif Damji, as they both explore ways retailers can enhance personalization for their customers. They highlight how loyalty programs  further enhance personalization for members through the data collected and aggregated.

Learn how to use the holiday season to drive long term loyalty throughout the year!

Upcoming Webinar: 10 Ways To Personalize The Holidays

What sets retailers apart from their competitors? It is the relationship that they have with customers. During this holiday season, it’s not just price that will separate winners from losers. Instead, retailers who can deliver relevant and personalized conversations with their customers —at scale— will realize the true advantage.

During this joint Merkle & 500friends webinar, we will explore consumer expectations for personalization and steps you can take now to improve your customer experience during the Holidays. Learn how to use the holiday season to drive long term loyalty throughout the year!

Title: 10 Ways To Personalize The Holidays (part of the Holiday Connected Consumer Series)

Date: Wednesday 17th September 2014

Time: 9am PST12pm EST

Speakers: Zimm Zimmerman (Vice President of Personalization) & Arif Damji (Senior Director of Strategy & Development)

Click here to sign-up!


Why I Like Facebook’s Ban on Rewarding Likes: Better Data

likeYou might think that, as CEO of a company that powers loyalty programs for over 50 retailers, I would be upset about Facebook’s recent announcement that the company will prohibit rewarding “likes” with incentives, monetary or otherwise.

In fact, I’m a big fan of Facebook’s move. For one thing, Facebook has restricted incentivizing social actions for years, so the new policy language only clarifies that stance. Also, I’ve long advised marketers against directly rewarding likes—500friends loyalty software actually disallows it—not only because it lives in a Facebook policy gray area, but also because it just feels wrong, and not in keeping with most brands’ values.

But the biggest reason I like Facebook’s like-rewarding ban? It has to do with the real value that Facebook offers for retailers. Some would say that’s attention or traffic, but I disagree.

It’s data. All-encompassing, personalization-powering, first-party data.

Just about every retailer I know has figured out that future success depends on personalizing customer experiences. That’s why loyalty programs are all the rage these days, with even Walmart getting into the game: not because rewards alone are retail’s salvation, but because rewards give consumers a reason to share information that retailers need to deliver on personalization. Transaction histories, of course, but also browsing behavior, service interactions, and product preferences. That’s also why you’re seeing more retailers offer rewards for non-purchase actions like filling out preference profiles, writing product reviews, and self-identifying in physical stores.

But even if they collected every possible byte during every single customer interaction, retailers would still be left with a highly flawed view, because those interactions add up to only a tiny fraction of who that customer is, what she does, and what she wants. To really power personalization, retailers need a window into what’s happening in the remaining 99.99% of her life.

And that’s where Facebook—along with other other pervasive social platforms—offers the greatest promise for retailers. When customers link their accounts to social profiles, the resulting customer picture, filled out with detailed lifestyle, demographic, and preference data, is like watching an HD movie after living your entire life with stick-figure drawings. Here’s just a glimpse of the picture that we show loyalty marketers based on social account linking:


Just some of the data that 500friends can offer retailers based on social account linking.

Imagine you’re a clothing retailer who wants to launch a new line inspired by a TV series, and you’re deciding between “Mad Men” or “Boardwalk Empire.” Without a socially enhanced data picture, the best you could do would be to make some guesses, perhaps educated by Nielsen, about the demographics of your customers and how those match the demographics of each show. But if a large portion of your customers have linked their social accounts, you’ll know not only which show is preferred overall by your customer base, but also how your most important segments weigh in.

Which is the real reason I cheer this move by Facebook, and why all marketers should join me. Because in the future, when you make a decision like tying up with “Mad Men,” you’ll be that much more certain that your customers will cheer too.

Justin Yoshimura is CEO of 500friends. Email him at