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Loyalty trends and best practices

Crafting Your Loyalty Programs Business Case: 8 Non-Obvious Benefits

by Dave Louie
December 16, 2013

Dave Louie
Like most execs running omnichannel retail brands, you're probably thinking about the business case for loyalty — either to launch a new loyalty program or expand an existing one. Having helped many omnichannel retailers run those numbers, I'm always surprised by the ways in which loyalty acts as a kind of force multiplier, amplifying the benefits of your other marketing efforts. When crafting your loyalty business case, be sure to take these potentially huge — though not always obvious — benefits into account.

1. Higher gross margins The biggest benefit of a loyalty program is that it trains your customers to buy — not to expect discounts. Margin contribution typically grows over time as more members enroll and your team gets smarter about how to most effectively substitute loyalty offers for straight discounts.

2. Higher rate of omni-channel engagement If you've invested in a mobile app, you want customers to download the app so your brand can become a part of their everyday lives. Use your loyalty program to reward downloads and increase the rate at which customers engage with your brand through multiple channels.

3. Higher success rates for acquisition marketing A loyalty program can significantly boost the success rate of acquisition marketing tactics such as display advertising, SEM, and retargeting.  When people visit your site, offer them loyalty rewards (cash back on next purchase, points, etc.) for registering their email addresses. However, as much as  possible, present these offers only after users engage with you (view some product pages, etc.) so the offers feel relevant, not pushy.

4. Lower rate of attrition — without discounting Loyalty programs, of course, are about creating repeat customers, who will always be more profitable than new ones. A good loyalty platform lets you get very tactical in this regard. For example, we've seen tremendous success with campaigns using 500friends LoyaltyPlus to target non-returning buyers with messages such as, "Your points are expiring!"  That's going to be a lot more profitable than mailing out a discount coupon.

5. Increased social sharing Your 2014 budget likely includes an outlay for social marketing, with a corresponding estimate of the value consumers will create when they engage with your brand through social media. By using your loyalty program to incent social login and sharing through Twitter, Facebook, Pinterest and other networks, you can boost the benefits of your social spending by double-digit percentages or more.

6. Higher direct mail effectiveness Add a loyalty reward code to your direct mail catalog to boost response.  Typically, the code lets customers earn extra points when they enter it and make purchases.

7. Increased likelihood of repeat purchase Reward key purchase-driving behaviors such as product page views, product review writing, and video views. Where possible, I advise retailers to "surprise and delight" customers with rewards  after they perform these actions; otherwise, you simply attract reward-hunters who generate sub-par content. Rewarding these activities can boost SEO results for your product detail pages as well as keep customers engaged, so that when they're ready to buy, they're more likely to buy from you.

8. More valuable data for CRM and analytics Loyalty programs let you get more out of your analytics platforms because they increase the likelihood that you'll be able to track a customer's activity across omni-channel touch points. Use your loyalty program to reward customers for creating user profiles and sharing relevant personal information with you.

Of course, the magnitude of these benefits will vary. I recommend conservative estimates up front, which you can modify as you measure your loyalty program's success.

Questions about building your loyalty business case? Contact me at dave@500friends.com.

Dave Louie is the Director of Product at 500friends, where he is responsible for product strategy and roadmap execution for the 500friends LoyaltyPlus platform.


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