Can You Make A Good Loyalty Program Better?

I was shopping a few weeks ago at Chapters book store and my Rewards card was up for renewal. The program called irewards has a $35 annual fee that provides discounts on purchases throughout the year as a member (40% off bestsellers instore; 10% of books instore; 5% off virtually everything else in the store; and up to 5% of books online). With enough spend members can receive enough discounts to cover the cost of the card fee.

Chapters also has a second loyalty program – plumb® rewards. This is a free points based program where members earn 10 points for every dollar spent that can be redeemed towards instore purchases (2,500 points = $5; 4,500 points = $10 … up to 35,000 points = $100). You can’t be a member of both programs so choosing which is better can be confusing for customers and store staff.

I buy lots of books from Chapters each year. During the renewal discussion at the pay point the store associate looked at her computer screen and said the rewards program was better for me. She didn’t explain why so I asked how much I ‘saved’ over the past 12 months. She took a bit of time to toggle to another screen to tell me it was around $90 in discounts received. So for me, the fee based rewards program was the better deal – $35 card fee, earned $90 in discounts = $65 in the black.

I paid my new annual fee but left wondering why did I have to ask how much I had saved? Why was that information on a different screen? Wouldn’t if have been more powerful if the discount total was on that initial screen and the associate’s script went something like this: “Mr Thompson, you received $90 in discounts last year with the irewards program. Would you like to renew again this year?”  

So two things could change at Chapters – programming to bring that information to the first screen and scripts to position the renewal discussion around the amount of discounts received…when it makes sense to do so (more on this later). Once they have that in place here’s what else Chapters could do to get more people to earn back the cost of the program fee:

  • Tell me how I am doing. Let me know when I am at key stages – i.e. the halfway point or the 90% mark of earning back my fee
  • Celebrate. Congratulate me when I reach the point of covering the card fee cost – especially if I do so with lots of time left before renewal
    • And remind me going forward that everything from here on in means I am in the money
  • And if the path I am on looks as though I will be just shy of the mark, let me know early enough so I can possibly do something to get there

Of course this is easier when the customer is on track to hit the target or has already done so. What do you do if it’s clear they won’t? Leave them alone and hope they renew next year anyway? No. Not reaching that goal – earn program fee back in savings/discounts (or retaining some special customer status for other types of loyalty programs), can not only mean they won’t renew, it can leave customers with a bad taste so you lose all of their business going forward (how disappointed would you be to learn you no longer qualify for ‘Platinum’ status and the perks you enjoyed are gone).

Chapters has already done a great job to address this issue. Their plum®rewards program allows customers to get something extra (points) for their spend and it comes with no fee. A great defence is a great offense.

What else could they do for lower spending irewards members?

  • Help them get to the target. If you can tell early on a customer won’t make it to the target, look for ways to help them. Offer this segment a sale or double points on their next purchase. Something to make these customers feel the goal is within reach. Even if they don’t get there, they will appreciate your efforts
    • Send a survey to or contact directly higher value long term customers. Is there a reason they are down this year that you can resolve? Or is it a structural change in their behaviour that you cannot fix – i.e. did I have a set of triplets and have no time to read anymore? If you do put added effort to help this segment of customers, you probably don’t want to spend time/$ on the structural change group
  • For longstanding high value customers who fell behind this year, you could discount/waive the fee or let them retain their status for one year. Perhaps last year was an aberration and a year’s grace will motivate them to get back on track…in your program and not someone else’s.

So what lessons can we all learn from this? Here are a few suggestions:

  1. Make customer value clear. Don’t leave it up to the customer to do the value math. Help them see what they get if they are paying a fee or joining your free program. If the customer isn’t clear on the value they receive, educating them at renewal time is probably too late.
  2. If the value picture isn’t rosy, fix it. If the net benefit for members isn’t going to be positive or if they aren’t going to qualify for their preferred status level, try and help them find more value in your program. And if they can’t reach the target within that structure, be mindful about how they exit – this is a critical time to do something so you don’t lose them for good.  
  3. Treat your customers better. I say better instead of well because I think most companies believe they already treat their customers well. I don’t want to argue the point but rather suggest we can all do a better job. A ball dropped here or an opportunity to assist not taken and customers feel under appreciated. Find easy ways to change that.  
  4. Surprise and delight.This phrase is so overused in the CRM/loyalty community that it’s lost most of its power. Here are two examples of companies using this strategy correctly:
    1. mypanera rewards program rewards customers at irregular times instead of structured intervals.  
    2. Best Buy offers some of their best customers a surprise screening to a big movie release (and yes, BB is not doing well right now but that’s my point – few obvious examples of good S&D)
  5. Do More for your Loyal Customers. Ask your (best?) customers what more could you do? You will surely get answers back that you simply cannot implement or are too costly, but I am confident you will find a few little gems that you can that are affordable. Even if you can only do so for your best customers.

A safety TV spot from Australia…with 24MM views.

AdPitch Blog

Considering this is an advert, and it was only released on the 14th of November, it has all ready gained over 10million views! It’s not the usual kind of advert I post, but it amused me, and I just love the guy who dies of superglue eating! It’s a bit of fun, even if for such a serious matter, with a different death each time it makes you want to stay and watch right until the end, wouldn’t have guessed it was by Metro though!

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Why Would Anyone Use Direct Mail?

Why Direct Mail?

Have you ever asked your self this question when it comes to where to invest your marketing budget? Based on my 15+ years using DM with a variety of different companies and industries and over the past two years working with hundreds of clients across Canada and the US the simple answer to the question is … it works.

Why then do I get asked the question from time to time? Here’s a quote from my previous VP that might help explain: “Direct Mail has an image issue. Everyone knows it works, but fewer marketers care anymore. They exhibit ‘mail’ Chauvinism”

Direct mail is not sexy to some marketers – it’s not the shiny new kid on the block. Let me talk to just two points that if you’re a DM doubting Thomas, should give you pause to reconsider.

1. Response Rates

The Direct Marketing Association (DMA) in the US reported the average response rate was 4.4% in 2011/2012.

http://www.dmnews.com/dma-direct-mail-response-rates-beat-digital/article/245780/

And for Canadians and those marketing to Canada, the news here is even better. Past research found that response rates were higher in Canada than in the US – 25% to 40% higher (mailbox in Canada is less cluttered so better response rates). 

Is a 4% response rate good? If you are new to direct mail, you might look at that figure and say that’s low! Do you know what your response rate is for your TV? …print …your website…email…social media? Most you can’t measure and if you can, DM comes out looking very good. 4% is a good number for many businesses and frankly it’s more important to compare these channels from an ROI perspective. If you are selling cars or credit cards you can have low response rates and still make money off your mailing because your lifetime value is large. If you are a pizza shop or a burger joint you need higher response rates to make a buck. Automotive and credit card companies are as longstanding users of dm and I see double digit response rates repeatedly for fast food clients.

2. Preference Research

Which channels do customers prefer companies use to contact them? You might think that is a bit of a misnomer in itself but here what we (Canada Post) heard in 2010:

  • Mail is preferred over email, telephone and other means of communications for general / advertising correspondence (79%)
  • 93% are reading their mail as soon as they receive it
  • 72% look forward to what’s in the mailbox (even I was surprised by this one)
  • 63% say receiving mail is a pleasure

So preference is a big thing. Makes sense when you think about advertising this way: traditional broadcast media is push – TV, radio and print interrupt the consumption of the media. Online is pull – something consumers search for on their own. Direct mail fits nicely in the middle. It’s neither pure push nor pull communications. Your customers get their communications when they pick it up amongst their bills and other letter mail. They decide whether or not to read it and when.

Further when we looked at the data by age group, as you would expect the older you are the more likely to want to receive communications through direct mail, but even those aged 18-24 reported appreciating direct mail.

So maybe I’ve convinced you that response rates are good with direct mail. And that consumers told you it’s the preferred channel to receive advertising, it still costs too much right? Again even though I now work for the post office, when I was a client, I wasn’t frivolous with my marketing budget. I allocated the best I could based on ROI. It may cost more than email or social but as marketers we aren’t paid to reduce cost or maximize impressions – we’re paid to maximize ROI.

So next time you are in a planning meeting and you are talking about where to place your advertising $ don’t dismiss direct mail without digging a little deeper. You may be surprised by just how good a tool it can be for your business to drive more people in the door.

MPG Gate – Korean Auto Manufacturers Overstate Mileage Estimates

Do you check the mileage estimates when you buy a new car? Did you buy a car recently? If you did and you purchased a Kia or Hyundai over the past two years, some of those mileage numbers were wrong.

On Friday November 2nd, we learned that the EPA discovered Hyundai/Kia overstated gas mileage on several of their models from 2011 to 2013.

They have agreed to reimburse owners of the affected models through a prepaid card that will reimburse them for the difference in the combined fuel consumption rating. And they will add another 15% as an acknowledgement of ‘inconvenience’.

There has been suspicion over the Korean carmakers mileage claims for some time and those complaints prompted the EPA to open an investigation. The audit found almost 35% of their cars to have over represented mileage performance. As a result, the two automakers will have to reduce mileage posted on the window stickers of most of their models anywhere from 1 to 6 miles per gallon down.

Affected models for Hyundai include:

  • Elantra, Sonata Hybrid, Accent, Azerra (not sold in Canada), Genesis, Tuscon, Veloster, Elantra coupe, Elantra GT and the Sante Fe Sport

Affected models for Kia include:

  • Rio, Sportage, Sorento, Soul, Soul ECO and Optima HEV

Depending on the cost per owner, the bill to these companies will be hundreds of millions of dollars (a CLSA estimate pegged the annual cost at $81 million/year). That of course does not take into account the cost of class action lawsuits and any sales impact to the brands in the coming months. Share prices fell on Monday by 7% but clawed some of that back on Tuesday.

This crisis do not have to cripple the companies. Look at how Audi moved past the Audi 5000 issue in the 80s (but it took them 5 years). And whereas Toyota has made progress since the 2009 recall, with the Tsunami and subsequent quality errors, they haven`t had a chance to put bad news behind them. What should these manufacturers do? Here are a few ideas:

 1. Admit the mistake

Be out front of the error. Be upfront, candid and own the mistake. It seems as though the announcement (or discovery) came around the same time the EPA made their announcement so they were not that forthcoming. They did admit being at fault but said it was a ‘measurement’ error. Whether that’s true or not, it seems odd a company of this size could get it right on some models and wrong on others. I would give them an F.

2. Compensate affected owners … generously

Today’s owners are tomorrow’s buyers. That makes this segment the most important in the long term (more so than current prospects). So treat these people well, especially those directly affected. Ensure people feel that you are more than compensating them for their loss. It appears they are doing so by working with owners to calculate their mileage individually and with the 15% inconvenience premium. I would give them a B.

3. Talk to existing owners

Hyundai has the #1 repurchase rate in the industry this year (JD Power and Associates, 2012) http://ca.autoblog.com/tag/jd%20power/. All owners need to be contacted directly (i.e. direct mail, short broadcast run, when they come into the dealer) to explain what happened, apologize for the error, talk about what they’re doing to cover the incremental cost to affected owners and what plan they have in place to ensure this never happens again. This point doesn’t need to be belaboured, but each owner should get the story from the manufacturer. Satisfied current owners make future sales more likely.

4. Monitor sales impact and track to brand reputation  

JD Power also discovered this year that more buyers base purchase their decision to b on brand reputation than ratings and reviews. Toyota sales dropped 15% the first month after it`s 2009 and 2010 recall crisis (Forbes). Depending on how step the decline is in these measures will determine how much the next two suggestions need to be worked.    

5. Revise the marketing message

Fuel mileage has been a centrepiece of their advertising for some time. Given the strength of that message has been diluted and because it will be a hot (negative) topic for some time, they need to illuminate other brand and model attributes in their communications right down to dealership sales scripts.

6. Prime the Pump

When my wife and I bought our Sonata this spring one of the features that hooked us was 0% financing for up to 72 months. I suspect they will need to bring back incentives so as not to lose too much momentum in the market. If this error causes people to re-think the brand`s overall value, they need to come up with ways to fill that gap and get people into dealerships.

My ‘First’ Post

My aim in coming (back) here is to learn from others and where I have experience, share that in return. I am a marketer with more than 15 years experience working for brands such as American Express, Sears, Petro-Canada (gas retail), Rogers (telecom), Blockbuster, ReMax and now Canada Post (like USPS). I think I know a fair a bit about marketing but I am aware that I don’t know everything (despite what I tell my mother …  and wife). And like any field of study, we all stand on the shoulders of the giants how preceded us. And so for that reason, I am a learned but humble marketer here to practice and learn more about my craft. 

 

I operated my own blog a few years ago when I was a real estate agent, but stopped when I came back to the ‘corporate’ world. I work as a consultant in the direct mail industry for Canada Post and recognize that I need to get back into digital and more specifically jump back in to social.

I have always been a newshound and lifelong learner so participating in discussions with others is something I enjoy.  Now I just need to make more time to do so here (sorry to the producers of night-time TV).

I took a social media course last week and was re-inspired. I signed up to twitter, sent my first few tweets (no one called me an idiot so I guess I did it right) and registered this blog. I even went out to buy a new iPad mini so I could do some of this in front of the TV (trying CBS, NBC, ABC…). I was not one of the ‘lucky’ 3 million buyers who got to a store on time this Saturday.

As a marketer and certainly as a direct marketer, tracking response and analyzing numbers is in my DNA.  I listened to a podcast today (Michael Stelzner interviewing Pat Flynn) and was motivated even more (@mike_stelzner and  @patflynn respectively – do check them both out). One of the things that Pat said that he discovered was that the more he shared, the more transparent he was in what he was doing online with others, the more he learned from others when they did the same in return. So as a re-born social citizen, I plan to do the same.

Over the coming weeks and months I will track what I do in this space and share it. Good or bad, I suspect I will learn firsthand what to do and not to do. Along the way I hope to have some help from likeminded social compatriots. And that through this exercise, pass along a few valuable lessons learned to others.

So if you become a follower, I am humbled and I thank you. I hope, no expect that we will learn and from each other along this journey and have a wee bit of fun.

 thanks,  David T