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Loyalty trends and best practices

Loyalty Makeover: Keurig

by Arif Damji
January 15, 2014
Loyalty Makeover: Keurig

 keurig_logo

Loyalty Makeover offers suggestions to retail brands for making the most of their loyalty initiatives. In this installment, we focus on the loyalty program at Keurig, the single-cup coffee manufacturer, whose annual pod sales have climbed to nearly $1 billion.

What Keurig's loyalty program looks like today

ClubKeurig

The Club Keurig program rewards members with points worth 1% of their total purchases, in addition to special product offers. Everyone who makes a purchase on Keurig.com is automatically enrolled in the program, and points never expire. The program has two tiers:

Gold Members: All new members start here, receiving 10% off Keurig beverages.

Platinum Members: Gold members who spend $500 attain this level, where they receive 15% off Keurig beverages.

First impressions

The substantial 10% discount for Club Keurig Gold members clearly eclipses the value of the program's points giveaways, and given that all customers are auto-enrolled at purchase, the program is close to a straight rebate. The incremental 5% discount for Platinum members is relatively small — given that it costs $500 to reach the Platinum tier. The flat, across-the-board discount model, along with the high bar for the Premium tier, suggest Keurig has an opportunity to do more to spur additional purchases through its loyalty program.

Loyalty makeover ideas

  1. Keurig could drive more incremental purchases by shifting reward value from straight discounts to points or cash back. Instead of 10% off every K-cup, consumers could earn 10% in point value per dollar spent, which would go towards future purchases. Keurig could even tie the higher points reward to a subscription model for pre-purchasing K-cups.

  2. Keurig could institute a points expiration policy to build a sense of urgency and create additional opportunities for engagement. For example, Keurig could approach members as their points expirations approached to drive incremental sales. ("Your points expire this weekend. Visit us now and you'll get double points on your next purchase.") Points expiration is key to managing rewards liability, and consumers are generally accepting of it as long as terms are reasonable and clearly communicated.

  3. Keurig should consider boosting the benefits of the Platinum tier or lowering the tier's spending threshold. Given that many Keurig home brewing machines cost between $100 to $200, a lower entry point for the Platinum tier might be more effective in stimulating purchase. (Keurig should perform segmentation analysis to identify the right level). Other Platinum benefits could include a points multiplier (higher than the Gold tier's), or free expedited shipping for customers whose lifetime value (LTV) justifies it.

keurig500friends
By the way, the Keurig machine here at 500friends (above) is quite popular.


Is there a loyalty program you'd like to see featured in Loyalty Program Makeover? Send me a note atarif@500friends.com.

Arif Damji is the Director of Strategy and Development for 500friends, which delivers sophisticated loyalty solutions for retail brands. 


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