Igniting Loyalty In Low-Frequency Categories
The convergence of big data, social media and omnichannel are causing a tectonic shift for marketers.
The convergence of big data, social media and omnichannel are causing a tectonic shift for marketers.
As a result, a greater number of companies with low-frequency look to embrace loyalty as a strategy to smooth the ebb and flow of today’s economic cycles.
If you count yourself among this crowd, consider the strong engagement garnered by the loyalty industry. Studies consistently show the average consumer household belongs to over 15 programs, but most of these programs are focused on appealing to high-frequency customers and are not designed to meet the needs of the low-frequency customer. There is an opening created here, as customers demand relevance to drive their loyalty. This demand for relevance in exchange for action provides opportunity for brands with low-frequency to imagine and adopt new levers to cultivate loyalty with an often fickle and unpredictable customer.
Matching Competitors, Leveraging Technology and Attacking Low Frequency
Designing a strategy that keys in on effectiveness is especially critical for categories where purchase patterns are uneven, including many where low purchase frequency is typical. A well-crafted low-frequency loyalty strategy must first understand that what works for higher-frequency categories will not work equally well in low-frequency categories. Our experience developing and sustaining successful customer loyalty in low-frequency categories can be attributed to the following three best practices:
Communicate for Engagement As Much As For Sales
The overall communications strategy nurtures and sustains member engagement with the program, especially in low-frequency plays. But be careful. Too often program operators are guilty of communicating too frequently, pushing for sales without the needed relevance. This can result in either an ineffective use of marketing dollars or, more often than not, will cause members to passively or actively opt-out of communications. Once the member ceases to listen, dialogue is short-circuited and engagement is nearly impossible. To be sure, there’s sort of a prisoner’s dilemma going on here—non-stop program communications flooding member inboxes and cluttering the pixels in mobile devices punishes the ability of programs to connect and engage. In contrast, an approach that unilaterally sits on the sidelines can hurt a program, despite its good intentions. Finding the right blend of cadence and content is key.
Communication needs to foster the relationship with the help of appropriately timed offers and benefits. This is common place in pure CRM, and can be quite effective. Early on, a loyalty program needs to work hard to get to know the member, but also must avoid the trap of the lengthy profile questionnaire. Single-question surveys are effective provided they immediately display results and are easy to complete. If the topic is relevant and interesting, the response rate can be high simply because members want to see what others think and how their perspective fits in comparison. Pictures are even better. As an example, showing a small set of pictures to a member and asking her to select one that she identifies with most closely can be a fun and easy way to gain valuable profile information. Most importantly, you must develop a way to capture and use member responses. Take the small data provided by your member and use it in a big way. It sounds pretty simple, but remember that your members are volunteering their time and effort, along with their personal information. While their expectations may be modest, deliver them something in return and the relationship is off to a good start. This is especially critical in keeping a member engaged even though her next purchase may be off in the future. Finding a reason to keep connected will ensure that when the future arrives, she will return.
Of course it’s critical to be able to predict when a member is likely to purchase, and act accordingly when the time is right. But if even the best members purchase unevenly or infrequently, it’s particularly important to make sure they stay engaged until they’re ready to purchase again. This requires an engagement strategy that is non-promotional and will be the communications workhorse with the member.
If you’ve checked your email lately, it’s fair to say the vast majority of communications are highly promotional. If purchase behavior is uneven or infrequent, sending multiple promotional emails per week is just as likely to damage the relationship— and connection to the brand—as it is to lead to sales. Unfortunately, this approach seems to be the rule, not the exception.
To be sure, an effective engagement strategy that balances promotional and non-promotional content can be tricky. But it’s key to overall success. And it forces brands to really think about what members care about, what the brand legitimately has to offer, how these assets should be structured within the program itself, and how they should be communicated so they are authentic and cultivate the relationship for the long run. As a simple example, Sunglass Hut may have customers who are infrequently in the market for a new set of shades, but understanding who is fashion forward and who is into sports and performance will drive the dialogue and will ensure the customer has a connection to their brand of choice when the time is right to purchase. The silver lining here is that these things are highly measureable, and easy and inexpensive to test. It doesn’t take long to understand what works so that it can be integrated into the fabric of the communications plan.
Amplify With Social Loyalty
The biggest mistake by companies whose customers purchase unevenly or infrequently is to implement a traditional points-based loyalty program where, to ensure profitability or minimize liability, award attainability suffers. To make matters worse, excessive promotional communications can add insult and further damage the relationship with the customer. In a low-frequency play, this kind of program design and communication is simply inconsistent with member behavior. Its structure is designed to encourage and reward more predictable and regular purchase behavior, similar to travel programs where better and best members purchase weekly, or bankcard programs, whose members often transact daily. Instead, the most innovative companies recognize the uneven and infrequent purchase nature of their customers, and design their programs to drive advantage with these patterns.
A great example is Sun Country Airlines. As an airline that attracts the leisure traveler with routes to sun and sand markets, travel frequency can often fall on the lower side of the frequency continuum. And while its Ufly frequent flyer program is more generous than those of most competitors, award attainability can still pose a challenge for members that primarily travel for leisure. Sun Country has addressed this issue head on with the introduction of an innovative approach to allow members to engage in point pooling, the option to pool their points with up to nine additional members. This is also a tremendous step toward realizing the potential of social loyalty, where members can attain awards for the group and not just as individuals.
In addition, Sun Country has award travel available on a one-way basis, further increasing award attainability for Ufly members. These changes have resonated strongly with customers and enrollment rates have more than doubled as a result.
The Sun Country example illustrates the concept of an amplified approach to earning. In this case, a single trip by a family of four pooling points earns four times the points of an individual member. The award chart hasn’t changed, but attainability has accelerated dramatically. Importantly, this is not the result of efforts to motivate higher and more regular travel frequency among its members, although that is a secondary objective. Instead, it works by recognizing the behavior of its members, leveraging the fact that many members travel together as families or with friends on vacation, and Sun Country is not trying to squeeze additional individual trips from them when there may be none, instead they are providing a strong incentive to capture share of wallet when they do travel.
There are many ways this approach can come to life in a program design. Regardless of how uneven purchase patterns may be for the membership as a whole, some members may be likely to make a second visit very quickly on the heels of a first one due to the amplified power of the point pooling feature. Leveraging this insight and incorporating it into the program design or through promotional activity is a type of approach that can translate to other industries, especially for retailers. Add in customer insight such as an upcoming birthday and it becomes both easier to predict behavior and to influence it—along with multiple follow-up visits.
Another valuable strategy to adopt is referral. Referral is a staple in many programs, but particularly helpful in low-frequency situations, and even more so to the extent members make purchases in the company of their friends. Again, this is highly characteristic of retailers, especially clothing retailers. The best referral strategies not only deliver new members via unleashed advocacy, but also increase award attainability for the referring members.
Even hotel programs, which have both frequent and infrequent members among their loyalists, understand this. Some are beginning to increasingly reward members for bringing their friends, even though they may not be paying for them. Leading hotel companies like Wyndham hotels have programs like Wyndham Rewards that will reward for multi-room bookings. Las Vegas hotels have also embraced this trend in a not-so-subtle play to market the social side of Sin City.
Extend Beyond The Award
Awards are nice, but they can trip us up. In order to offer them while adhering to sound financial sense, something has to give.
And in programs characterized by uneven and infrequent purchase behavior, it’s usually attainability which gets extended beyond what’s reasonable and required to sustain member engagement. Even worse is the tendency to try to market and communicate like crazy to both drive sales and help get members across the award eligibility finish line, when what we’re really doing is treating the symptom, and not the disease. Designing a program without awards and without points is a great exercise for companies to embark on. As outlined above, it forces companies to think more deeply about what kind of relationship is desired and can realistically be attained with your best customers. It’s also a great way to test a program, since one without awards or points can be easily changed to evolve to early learning or rapidly changing market conditions. Softer benefits like information, insight, access, exclusivity, and experiences are all examples of real value that companies can deliver for their members and that are legitimately valued as benefits of the relationship. In a points-based program, however, it’s all too easy and common for these benefits to become afterthoughts and purely based on transactional behavior. Designing the program around them to connect in an emotional and engaging way can result in more impact, and also makes for a more differentiated program that is harder for competitors to mimic.
Keep in mind this strategy does not require programs to lose the concept of currency and awards entirely. One way to still provide awards is through the use of instant-win games. Gamifying traditional tactics like auctions and sweepstakes introduces the concept of points (at least in the form of bids or entries), but they overcome the uneven and infrequent purchase behavior through a chance-to-win element, which may only take a single visit. Auctions and sweepstakes also add value to a program without overshadowing it. And the awards, points and liability are all gone once the auction or sweepstakes ends.
As technology and capabilities evolve, CRM and loyalty programs are increasingly encroaching on the historical realms of each strategy. Since every company should have a CRM strategy in place, the growth in loyalty programs is a function of designing around the unique wants and needs of a brand’s customers—as they should be—and less likely to be reliant exclusively on points based structures. Hopefully these suggestions can improve the odds of success as you attack the low frequency consumer.
Guy Cierzan views the practice of 1to1 marketing as an immensely rich adventure. His natural curiosity often leads him to the next frontier. Guy has directed marketing programs for retail, travel and financial services clients such as Barnes & Noble, Bloomingdale’s, Best Buy, Luxottica, Regis Salons, Avis, Amtrak, Delta, Hilton Hotels, Northwest Airlines, Radisson Hotels and Visa, among others. His educational foundation includes a B.A. in business from the University of St. Thomas and an MBA in marketing from the University of Minnesota, Carlson School of Business. Guy is currently VP, Client Services at Olson 1to1 in Minneapolis.