Loyalty trends and best practices

How's Loyalty Program Builds Profits

by Arif Damji
January 21, 2014
How's Loyalty Program Builds Profits

Leaders in Loyalty shares the insights and experiences of executives who run loyalty programs. In this installment, Brandon Proctor, VP of Marketing at online home improvement powerhouse (#80 on the IR500), talks about how loyalty program data can improve acquisition and profitability. 

Why launch a loyalty program at

Loyalty programs give you the data to make all kinds of better decisions because you can assign value to — and track — activities outside of a purchase. For example, you can reward customers for posting a product review, for social sharing, or just for coming back to your site a few times each month. All these activities give you the profile data to identify actions that ultimately drive more sales, helping you understand who your customers really are. Retailers love to throw around terms like CLV (customer lifetime value), profile-based marketing, and Big Data, but few do these well. Loyalty programs — executed properly — are a big step towards giving you the data and insight to change that.

How does loyalty boost yield from your acquisition budget?

A loyalty program arms you with data that lets you bid more accurately for keywords. Let’s say I use my loyalty program to offer special rewards to general contractors (high value customers for us), and I see that each one spends an average of $1000 with us a year. Then let’s say that, based on the data, some keywords are driving 80% of our general contractor visits. I would be willing to spend $100 to get $1 in immediate revenue from one of these keywords because I know that’s going to turn into customers worth thousands of dollars in the months to come.

How do you structure loyalty rewards?

We designed the VIP program tiers based on at least a year’s worth of past behavioral data. We plan to let customers choose from a bunch of reward options at each tier. For example, in one tier you can choose 5 of 10 types of rewards, such as members-only discounts, free shipping, and points that never expire (because you’re that awesome!). In some tiers, you get anniversary gifts and bonus rewards for every 500 points earned. It all goes back to making sure that customers who reach each tier are providing you the gross margin dollars to support the rewards — via properly calculated customer lifetime value metrics.

How did you rally support for loyalty among your team?

As a site for home improvement, we had a pre-existing Pro Program, and some colleagues were afraid the new loyalty program would clash with that. In order to alleviate their concerns, we grandfathered the Pros into appropriate loyalty tiers based on their value to our company, so they received all of their previous benefits and more. We also held internal training sessions where we gave employees an overview of the program, answered their questions, and solicited their feedback so we could incorporate it into how the program evolves.

How has 500friends helped?

The flexibility and agility of 500friends LoyaltyPlus, especially compared to legacy vendors, was most enticing. For example, to reward the non-purchase behaviors I talked about, we’re using 500friends LoyaltyPlus Convert, which lets us do all that stuff out of the box. And the integration is unbelievably easy. The 500friends team is incredibly sharp, and they treat us like a true partner, working closely with us to make sure we're positioned for success.


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