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]500friends.com 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.

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:

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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 justin@500friends.com.

Loyalty + Predictive Analytics = Personalization: The 500friends / AgilOne Partnership

In this video, recorded at IRCE 2014, 500friends Director of Strategy and Development Arif Damji talks about how 500friends LoyaltyPlus and AgilOne’s predictive analytics help retailers personalize customer experiences and offers.

500Friends + AgilOne from 500friends on Vimeo.

500friends + IBM WebSphere, Unica, Coremetrics @ IBM Global Summit 2014

As an IBM Smarter Commerce partner, 500friends makes it easy to integrate a loyalty program using IBM WebSphere Commerce, IBM Campaign and IBM Interact (formerly Unica), and IBM Digital Analytics (formerly Coremetrics). In fact, 500friends will be at next week’s IBM Smarter Commerce Global Summit 2014, where we’ll be showing off our joint loyalty solution. Stop by the Marketing and Merchandising’s Innovation Zone and say hello!

Meanwhile, watch this video to learn more about how 500friends and IBM team up to deliver innovative customer loyalty solutions for brands like 1800Flowers.com.

Don’t see the video? Click to watch 500friends + IBM.

500friends Receives Strategic Investment from Leading Retail and Loyalty Executives

500friends recently received the support of key executives in the loyalty and retail space.  Here’s the press release 500friends issued with details about our new strategic investors. 

April 28, 2014 (SAN FRANCISCO) — 500friends, which arms retail brands with data-driven customer retention and loyalty solutions, has received a strategic investment from key retail, loyalty, and e-commerce leaders, including executives who were previously 500friends customers.

The new 500friends investors include Matt Howland, former CEO of LoyaltyLab; Neel Grover, former CEO of Buy.com; Michael Butler, former head of e-commerce at HP; Jim Keller, former CMO at Shoebuy; Abdul Popal, SVP at CafePress; and Brandon Proctor, CEO of Ice.com and former CMO of Build.com. Both Keller and Proctor were previously clients of 500friends.

“Now more than ever, leveraging loyalty program data to create personalized experiences has become a strategic imperative for retail brands,” said Howland, who also joined 500friends’ board of advisors. “500friends has rapidly emerged as a market leader, and I am excited to be involved with the team as they execute on their vision to help companies tap loyalty data to increase customer lifetime value.”

With institutional investors including Crosslink Capital, Intel Capital, Fung Capital USA, Silicon Valley Bank, and Y Combinator, 500friends was not actively seeking more financing. However, the company considered the experience and perspective of these strategic investors too valuable to pass up.

“Interest from this esteemed group of retail and loyalty leaders is a testament to their confidence in our team and our solution,” said 500friends CEO Justin Yoshimura.

500friends completed its Series B round in early 2013. The company plans to take advantage of the connections and expertise of its new investors to expand its customer base, which already totals over 50 leading omni-channel and e-commerce brands, including 1800Flowers.com, Omaha Steaks, and Kabam. These brands have achieved revenue gains of up to 12% and boosted purchase frequency by up to 60% using the 500friends LoyaltyPlus suite of SaaS solutions.

Beyond his team’s passion for helping retail brands perform better, Yoshimura attributes 500friends’ success to the growing number of CMOs who recognize the strategic importance of loyalty data for increasing customer lifetime value. These forward-thinking marketers are shifting budgets away from their traditional reliance on customer acquisition and devoting more resources to maximizing the value of customers they already have.

“Every retail brand now understands that acquisition is just the first step,” said Yoshimura, “and that retention is a top priority for achieving sustainable profitability.”

About 500friends
CMOs engage 500friends to maximize the profitability of their customer relationships. The 500friends SaaS lifecycle marketing suite, LoyaltyPlus, makes it easy to execute omni-channel loyalty programs and personalized customer retention campaigns. Learn more at http://www.500friends.com.

How to Craft an Award-Winning Loyalty Campaign (case study)

SpaWeekBlogThumbLooking to leverage your loyalty program to drive more sales, boost margins, and enhance your brand? Then you’ll definitely want to take a look at the award-winning loyalty campaign from Spa Week, the health and wellness brand whose loyalty program, MyWellness Rewards, recently won the Loyalty360 Award for Best Creative Campaign in Loyalty Marketing.

With its goal of engaging shoppers throughout the year across multiple channels, Spa Week rolled out a yearlong campaign with seasonally themed installments. Starting with January’s “Resolve to Relax” and ending with December’s “Shop to Unlock,” Spa Week used these campaigns to increase brand engagement while luring in shoppers with real added value. For example, the Thanksgiving campaign, titled “Thanks-Giveaway,” feautred a 1,000 Wellness Point giveaway, with entries granted as a reward for social referrals via Twitter, Facebook and email. Spa Week also made a charitable contribution for every new loyalty program enrollment.

“The cause marketing component fit the spirit of the Thanksgiving holiday and increased cohesion for the campaign, helping our message go viral,” said Spa Week Program Manager Anne Hanson. “Also, explicitly rewarding advocacy aligns with our brand positioning that encourages individuals to give and enjoy the gift of wellness.”

For a full inside look at creating an award-winning loyalty campaign, download the new Spa Week campaign case study:

GET THE SPA WEEK CASE STUDY

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Loyalty Makeover: Abercrombie & Fitch

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Abercrombie_Fitch_Logo

In this installment, we look at the loyalty program at Abercrombie & Fitch, the $4.1 billion fashion retailer with over 1,000 stores, and brands including Abercrombie Kids, Hollister, and Gilly Hicks. 500friends Loyalty Makeovers offer suggestions to retail brands for making the most of their loyalty initiatives.

What Abercrombie & Fitch’s loyalty program looks like today

Abercrombie & Fitch’s loyalty program, known as the A&F Club, distinguishes itself from cookie-cutter loyalty programs by embodying the brand’s tone and effectively addressing core customers. Benefits include free streaming of A&F music playlists, the chance to skip lines at events, and members-only birthday offers. Limited-time promotional offers keep the program fresh and relevant.

First impressions

Abercrombie & Fitch is attempting a turnaround, with revenue dropping 12%, to $4.1 billion, and profit falling 77%, to $54.6 million, during fiscal 2013. To counteract sliding sales and rising expenses, Abercrombie & Fitch’s reorganized management team will need to leverage the A&F Club loyalty program to retain and grow the brand’s most profitable customer segments (without increased discounting). We think A&F Club is on the right track, but we offer a few ideas we think the Abercrombie & Fitch team should consider.

Makeover ideas:

  1. Leverage loyalty to drive mobile engagement
    Given Abercrombie & Fitch’s young customer demographic, mobile experiences will be important for reaching and engaging the brand’s shoppers. While responsive design of the company’s website is a positive, opportunities remain to thoughtfully leverage A&F Club via the brand’s mobile app. For example, members could unlock an exclusive sweepstakes entry upon completion of the app’s style quiz. With geo-fencing or mobile beacons, Club members could receive personalized, limited-time gift-with-purchase offers while shopping in stores.
  2. Power Cross-Brand Customer Views
    Abercrombie & Fitch can increase its share of wallet by offering A&F Club members an exclusive offer or benefit in partner brands. While delivering more value to members, such cross-brand promotion would create a more unified view of customers, allowing Abercrombie & Fitch to target relevant opportunities through follow-on lifecycle marketing.
  3. Clarify the benefits of loyalty
    While we think A&F Club’s focus on insider benefits is right for its demographic, the company currently does a poor job explaining those benefits to customers. The dedicated A&F website page lacks details, and when we called a customer service representative to learn more, she directed us back to that page. The challenge is that most benefits are tied to limited-time campaigns, so it’s difficult to describe them clearly. Adding tangible benefits — along with clear, consistent messaging — is an opportunity to make the program more compelling. For example, early access to new styles and collections or special access to limited edition items wouldn’t burden the program with incremental rewards costs but would still complement the A&F Club’s positioning.

Zach Woith is Head of Loyalty Strategy at 500friends, which helps retail brands maximize the value of their customer relationships. Email him at zach@500friends.com. 

 

Retailers with Private Label Credit Cards Also Need Loyalty. Here’s Why.

???????????????????????????????In his new post on DMNews, 500friends Director of Strategy and Development Arif Damji talks about how retailers with a private-label credit card (PLCC) can reap big benefits from also having a robust loyalty program. The major points Damji makes are that:

  • Loyalty programs make PLCCs look more attractive
  • Loyalty programs positively impact churn and lifetime value of mid-tier customers
  • Loyalty programs allow for direct, flexible communication with program members

Read the FULL post on DMNews here:
http://www.dmnews.com/got-plcc-what-it-is-and-3-reasons-you-also-need-a-loyalty-program/article/338520/

Ashley Bienvenu is a Customer Retention and Loyalty Analyst at 500friends. Email her at ashleyb@500friends.com.

Loyalty Makeover: Office Depot

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office_depotIn this installment, we look at the loyalty program at Office Depot, the $17 billion office supplies retailer with 1,900 stores that recently merged with Office Max. Loyalty Makeover offers suggestions to retail brands for making the most of their loyalty initiatives.

In late 2013, Office Depot completed a $1.2 billion merger with competitor Office Max. In this Loyalty Makeover we’ll look at both programs, and we’ll examine the opportunities in merging them.

What the Office Depot and Office Max loyalty programs look like today

Office Depot Rewards lets members earn rewards for purchases of ink, toner, paper and copy/print/ship services. Members can also earn rewards for recycling used ink cartridges and completing member profiles. Members who spend at least $200 in a calendar quarter achieve Choice status, which allows them to earn extra points through purchases, made either in-store or online, for products in up to 5 categories they choose. (Choice status is revoked if spending falls below $200 in a quarter.) For every 1,000 points earned, members receive a $10 rewards certificate applicable towards future purchases.

In contrast, Office Max’s MaxPerks program is more straightforward. Members get 5% back when they spend at least $500 in a one-year period. Recycling ink and toner earns members $2 for each cartridge brought into the store, up to a limit of $20 per calendar month.

First impressions

Expenses from the merger of these office supply giants, coupled with weak gross margins, led the combined company to declare a $205 million operating loss in 2013. Critical for the combined company’s future success will be boosting gross margins, which fell to 23.4% last year (vs. 26% for Staples), and a strong, unified loyalty program could play a major role.

Makeover ideas

Merging programs on this scale will be a huge undertaking for Office Depot’s executive marketing team. We humbly propose some ideas that could be helpful:

  1. Personalize rewards. The Office Max loyalty program provides the same level of rewards for everyone, regardless of spending (above the minimum threshold), whereas Office Depot recognizes high-spenders with premium (Choice) benefits. The combined company should maintain the premium tier as an incentive for customers to spend more, but should carefully analyze the spend of its mid-tier customers to see if $200 per quarter is the right threshold. (It should be just higher than the average spend of those mid-tier customers, so that it effectively encourages them to spend more.) The chain should also send personalized, automated loyalty offers (“Double points if you shop this weekend”) to members who have not purchased for a while. 
  2. Expand earning opportunities. Today, Office Depot members who have not reached Choice status can only earn points for purchases in certain product categories. This provides little incentive for these shoppers to buy other products at Office Depot. The combined company should allow points earning across all product categories to capture a higher share of wallet. For strategic product categories, Office Depot could offer bonus rewards. Office Depot could also use its loyalty program to engage with shoppers between purchases, by rewarding actions such as reviewing products, browsing strategic categories, and linking social accounts. Similarly, the chain could reward people who always buy online for visiting a store, or vice-versa, to boost omni-channel engagement. 
  3. Expire rewards based on inactivity. Office Depot gives members a calendar quarter during which they can earn rewards and only 60 days to redeem rewards coupons. Office Max’s reward cards expire 90 days after issue. Office Depot should switch to an expiration policy triggered by inactivity — for example, rewards could expire some number of days after last purchase. This way the chain can send personalized, automated rewards expiration notices and offers (“Your rewards expire at the end of the month. Buy now to keep them and get an extra point reward.”)  This structure better promotes long-term loyalty and can be used by sales staff to upsell (“You’re just 10 dollars away from your next reward level.”) An  effective expiration period should be just shorter than the average purchase frequency of mid-tier customers.
  4. Merge programs for cross-brand loyalty. It appears that, for some time anyway, both the Office Depot and Office Max brands will live on under the Office Depot corporate parent. If that’s the case, Office Depot should launch a unified loyalty program that promotes spending across the brands. One example of a company that does cross-brand loyalty well is 1800Flowers.com, whose Fresh Rewards spans brands including The Popcorn Factory and Cheryl’s (sweets).

Ashley Bienvenu is a Customer Retention and Loyalty Analyst at 500friends, which helps retail brands maximize the profitability of customer relationships. Is there a loyalty program you’d like to see featured in a 500friends Loyalty Makeover? Send her a note at ashleyb@500friends.com.

Loyalty Makeover: JCPenney

loyaltymakeoverjcpenney_logoIn this installment, we look at the loyalty program at JCPenney, the $12 billion department store chain with 1,100 stores and $1 billion in online sales. 500friends Loyalty Makeovers offer suggestions to retail brands for making the most of their loyalty initiatives.

What JCP Rewards looks like today

JCP Rewards members accrue one point for every dollar they spend. For every 100 points they earn in a calendar month, they receive a $10 coupon towards future purchases (up to a maximum of ten $10 coupons per month). At the end of every month, point balances reset to zero.

First impressions

With a 2013 operating loss of over $1.2 billion, investing in customer retention and loyalty may seem like a luxury for JCPenney. However, to really get back on track, the embattled department store chain will have to prop up its gross margins, which fell to 29.4% in 2013 (typical department stores gross margins hover in the mid- to upper-30s). That means finding an alternative to discounting, which means boosting loyalty is critical. Compared to other department store loyalty programs, JCP Rewards is remarkably simple, but by eschewing a more robust loyalty program structure, JCPenney is missing out on important loyalty benefits.

Makeover ideas:

  1. Personalized loyalty rewards: Currently, JCPenney invests in loyalty at the same rate for first-time shoppers and the chain’s established, high-value customers. JCPenney has the opportunity to increase spend among its best customers by introducing one or more premium program tiers. This would allow JCPenney to show appreciation to its best customers while offering benefits (a higher rate of point accrual, for example) that encourage mid-tier customers to spend more. In addition, the company could send automated, personalized loyalty offers to customers who haven’t shopped for a while (“Double points if you buy this weekend,” for example), which can be highly effective at reducing churn.
  2. Extend point expiration: With the current reward structure, a customer loses all of her loyalty status every month. A more liberal point expiration policy would help JCPenney better drive incremental sales and long-term engagement by giving customers the incentive to make an extra purchase down the road. The right expiration period depends on an analysis of the purchasing frequency of the chain’s mid-tier customers, and should be set so that expiration reminders effectively shorten average time between purchases.
  3. Leverage loyalty to boost omni-channel engagement: Given that JCPenney’s online property, jcp.com, is a crucial piece of the company’s turnaround effort, JCPenney could do more to incent customers to engage through multiple channels. For example, JCPenney could offer double-points bonuses to in-store shoppers who make their first purchase online, and vice versa for online-only buyers who start transacting in stores. Making point balances and tier status available at point-of-sale would empower in-store personnel to upsell (“You’re just $10 away from your next reward,” for instance).

Questions? Or is there a loyalty program you’d like to see featured in Loyalty Makeover? Send me a note at zach@500friends.com.

Zach Woith is Director of Loyalty Strategy at 500friends, which helps retail brands maximize the profitability of their customer relationships.