McKinsey Thinks Bland, Generic Loyalty Programs Are Killing Business – And They May Be Right!

A recent Forbes article by McKinsey, “Making Loyalty Pay: Six Lessons From the Innovators,” showed loyalty program participation has steadily increased during the past five years (a 10 percent annual rate of growth), with the average household now having almost 25 memberships. For all of that growing popularity, there are huge questions for marketers: Are the programs contributing to increased sales? And what is the impact of loyalty programs on enterprise profitability?

A recent Forbes article by McKinsey, “Making Loyalty Pay: Six Lessons From the Innovators,” showed loyalty program participation has steadily increased during the past five years (a 10 percent annual rate of growth), with the average household now having almost 25 memberships. For all of that growing popularity, there are huge questions for marketers: Are the programs contributing to increased sales? And what is the impact of loyalty programs on enterprise profitability?

Overall, companies with loyalty programs have grown at about the same rate as companies without them; but there is variance in performance value among industries. These programs produce positive sales increases for hotels, for example, but negative sales impact on car rental, airlines and food retail. And, companies with higher loyalty program spend had lower margins than companies in the same sector which do not spend on high-visibility loyalty programs.

McKinsey has noted that, “Despite relative underperformance in terms of revenue growth and profitability, over the past five years, market capitalization for companies that greatly emphasize loyalty programs has outpaced that of companies that don’t.” This, as they see it, may be indicative of hope among companies with programs that long-term customer value can be generated.

Within the McKinsey report, several strategies are offered for helping businesses overcome the negatives often associated with loyalty programs. Key among these are:

  • Integrate Loyalty Into the Full Experience
    Companies can link the loyalty program into the overall purchase and use experience. An example cited in the article is Starbucks, which has created its program to reflect the uniqueness of its café experience. Loyalty is built into the program by integrating payments and mobile technology, which appeals to its target audience.
  • Use the Data
    This may be the most important opportunity represented by loyalty programs. Data collected from the programs can offer competitive opportunities. Tesco, the largest supermarket chain on the planet, has been doing loyalty program member number-crunching for years through DunnHumby. Similarly, Caesars Entertainment has rich databases on its high-rolling program members. One retailer has combined its loyalty program with a 5 percent point-of-sale discount, building volume from its highest-value customers. In another well-documented example, a retailer has used its loyalty program data to identify future mothers before other chains, thus targeting offers to capture both their regular spend and new category purchases as buying habits evolve.
  • Build Partnerships
    As stated on so many occasions, organizations that build trust generate stronger, more bonded, customer behavior. This applies to loyalty programs as well, where there is ample opportunity to build cross-promotion for customers with non-competing products and services. In the U.K., Sainsbury, the major supermarket competitor of Tesco, has partnered with Nectar, a major loyalty coalition. Nectar has more members than Tesco, and participants can collect rewards across a large number of non-competing retailers. Through partnership, Sainsbury’s offers customers a broader and deeper value proposition; and Nectar also generates data from coalition partners, which it uses to better target promotions to customers.
  • Solve Customer and Industry Pain Points
    Numerous customer behavior studies have shown that people will gravitate to, and pay more for, better service. A perfect example of this is Amazon Prime, where additional payment gets customers faster delivery and digital tracking. This is good for Amazon (estimates are that members spend more than four times more with Amazon than non-members), its customers, and its suppliers, who also get access to Prime customers and the positive rub-off of affiliating with a trusted brand.
  • Maximize Difference Between Perceived Value and Real Cost
    Often, program elements can represent high perceived value without adding much in the way of bottom-line cost to the sponsor. The example cited is Starwood Hotels and Resorts where, through its Starwood Preferred Guest (SPG) program, there is a focus on personal leisure travel rewards for high-spending frequent guests.
  • Allocate Loyalty Reinvestment to the Most Valuable Customers
    Many companies have only recently come to the realization that some customers are more valuable than others; and, to be successful, loyalty programs need to target the higher revenue customers. In 2010, Southwest Airlines revamped its loyalty program to make rewards more proportional to ticket price; and this has better targeted the most profitable customers, as well as enabled the airline to adopt a loyalty behavior metric that is closely tied to actual revenue generation.

Loyalty programs continue to grow, but they are also tending to become more closely integrated with brand-building and multichannel customer experience optimization. But, there is also lots of commoditization and passivity were these programs are concerned—sort of the “If You Build It, They Will Come” syndrome at work. And, of course, there’s a mini contra movement among some retail chains, where they have removed established loyalty programs—or never initiated them in the first place—in favor of everyday low prices and more efficient performance.

6 Ways to Use Email Partnerships to Increase Sales

Email marketing campaigns are typically limited to the people who subscribed to the company’s messages. Partnering with non-competitive organizations increases exposure to offers and helps grow your email address database faster. Finding potential partners is easier than one might think. The need to provide fresh content on a regular basis opens the door for partnership development. The key to doing it well is to find organizations that cater to people who match your customer demographics. Conduct extensive research before reaching out to potential partners.

Email marketing campaigns are typically limited to the people who subscribed to the company’s messages. Partnering with non-competitive organizations increases exposure to offers and helps grow your email address database faster. Finding potential partners is easier than one might think. The need to provide fresh content on a regular basis opens the door for partnership development. The key to doing it well is to find organizations that cater to people who match your customer demographics. Conduct extensive research before reaching out to potential partners.

When considering opportunities, clearly define your objectives, know what you have to offer, start small, and build from successful experiences. Choosing partners that have similar corporate values contributes to the trust level. Recipients who trust your partner tend to automatically trust your company and vice versa.

Google Offers
Google’s promotions are designed to work with Google Plus Local. It uses email and an android app to deliver messages to the people who have joined the program. The app delivers messages to subscribers when they are close to the location of participating companies and when chosen offers are nearing expiration.

Partnering with Offers is free at this time. There are minimal requirements for participation: Your business must have a physical location in the United States that serves customers, it must be verified using Google Places for Business, and the product line must be eligible. This partnership is easy to set up and cost effective.

Pinterest
The rich pins option for Pinterest has a new feature that sends emails to users when items they have pinned go on sale. The emails include good imagery and a simple marketing message that reads “Good news! Today your [item] pin from [company] is [discount]% less.” The message is followed with a “See Pin” call to action button and “Happy Pinning!”

Using rich pins is limited to movies, recipes, products and articles at this time. The products category is the only one that includes pricing making it eligible for the sale email notifications. Participation is free, but it requires oEmbed or semantic markup on your website for information collection purposes.

Non-Profits
Helping others is good for business. Non-profits have supporters that may not be familiar with your company. You have customers that may not be familiar with specific non-profits. Partnering with these organizations increases awareness of their cause and your company.

When partnering with non-profits, create multichannel messages that benefit all participants. One approach is offering a discount coupon when someone donates a minimum amount to the non-profit. Make it appealing to supporters by offering savings greater than the amount donated. Your objective is to gain new customers that will stay with your company. Monitoring the activity of newly acquired customers after the initial purchase validates the partnership. If you are acquiring hit & run shoppers, a different non-profit may be a better choice.

Publications
Keeping up in a high demand for original content arena is challenging. Partnering with publications, online and off, works well for companies that offer informational products. Create mini-guides from your larger offerings that can be given to readers.

Choose partners with content that matches your products well. Offering to host the distribution of the mini-guides gives you the opportunity to capture email addresses. (Test with and without gating to see which works best.)

Educational Organizations
Companies offering products that appeal to students or parents can partner with campuses to increase exposure and capture new customers. Credit card companies have this process down to a science. Learn from their processes so you can appeal to the people participating.

Choose to partner with campuses that offer degrees in the fields that match your product line. For example, if your company sells teacher supplies, choose a campus that teaches education. Giveaways, sweepstakes, and contests work well for students. Design them to appeal to the students and open the door for a long-term relationship.

Non-Competitive Businesses
No company offers everything people need to live their life. Test partnering with companies that offer complementary products. This introduces your company to people who are highly targeted. In return, your participation provides reciprocal information.

Monitor all messaging to insure that your partner’s communications are consistent with yours. Create an agreement that includes limits and the ability to verify accuracy in the information exchange. Choose partners carefully because you don’t want to provide your customer information to a potential competitor.

List-building 2.0: 7 Tips for Using ‘Power’ Polls For Prospecting

Most people know Web 2.0 is simply the evolution of the Internet into an environment of interactivity, reader participation and usability. Web 2.0 opens up the dialog between user and website or blog. This connection can help generate traffic and a viral buzz.

Most people know Web 2.0 is simply the evolution of the Internet into an environment of interactivity, reader participation and usability. Web 2.0 opens up the dialog between user and website or blog. This connection can help generate traffic and a viral buzz.

But from a search engine marketing (SEM) standpoint, the benefits are clear and measurable: More traffic and frequent interactivity (or posts) equal better organic (free) rankings in search engine results. Getting good organic rankings is a powerful way to find qualified prospective customers.

So what online tactic encourages Web 2.0 principles as well as helps with search engine results page rank, visibility and listing-building efforts? Targeted online prospecting polls, also known as “acquisition” or “lead generation” polls.

Based on the specificity of your poll question, online acquisition polls can help you: collect relevant names and email addresses; gauge general market (or subscriber) sentiment; and generate sales (via a redirect to a synergistic promotional page). Polls also allow for interactivity, where participants can sound off about a hot topic.

I’ve been including strategic acquisition polls in my online marketing strategy for nearly a decade now and have rarely been disappointed with the results. Some websites, like surveymonkey.com, allow members to set up free or low-cost surveys and polls. However, it may not allow you to include a name-collection component or a redirect to a promotional or “thank you” webpage, which is essential for a success.

If that’s the case, either ask your Webmaster to build you a proprietary poll platform or use a poll script. You can find examples at hotscripts.com, ballot-box.net/faq.php, and micropoll.com.

Here are seven ways to help create a winning prospecting poll campaign:

1. Engage. Your poll question should engage the reader, encourage participation, pique interest and tie into a current event. And be sure to have a “comments” field where people can make additional remarks. Sample topics: politics, the economy, health, consumer breakthroughs, the stock market, foreign affairs.

2. Relevance. Your poll question should also be related to your product, free e-newsletter editorial, or free bonus report (which can be used as incentive). This will greatly improve your conversion rate. Let’s say your free offer is a sign-up to a stock market e-newsletter and the upsell is a redirect landing page promotion to a paid gold investment newsletter for $39/yr. In that case, your poll question should be tied with the editorial copy and product, something like “Where is gold headed in 2013?” Investors who favor gold (your target audience), will respond to this question … and engage. You are gaining these qualified prospects as leads and perhaps buying customers.

3. Incentive. After people take your poll, tell them that to thank them for their participation, you’re automatically signing them up for your quality, free e-newsletter or e-alerts … which they can opt out of at any time. To reduce the number of bogus email addresses you get, offer an extra incentive free “must-read” report, too. And assuming it’s your policy not to sell or rent email names to third parties (and it should be, based on email best practices), indicate your privacy/anti-spam policy next to the sign-up button on your email sign up form. This will immediately reassure people that it’s safe and worry-free to give you their email addresses.

4. Flag. Having your poll question somehow tie into your product makes the names you collect extremely qualified for future offers. Each name should be flagged by your database folks according to the answer they gave by topic category. You can create buckets for each product segment. Using our investing e-newsletter example, categories could be gold, oil, income, equities, etc. Segmenting the names into such categories will make it easier for you to send targeted offers later.

5. Results. Use the poll feedback for new initiatives. In addition to collecting names, online polls will help you gauge general market opinion—and could help you come up with new products.

6. Bonding. Strengthen your new relationships. You need to reinforce the connection between the poll people just participated in and your e-newsletter. So make sure each name that comes in gets an immediate “thank you” for taking the poll. This could be via autoresponder or redirect “thank you” page. On your “thank you” page/email, can be a link for the downloadable, free e-report you promised. Consider sending a series of informational, warm and fuzzy editorial autoresponders to help new subscribers get to know who you are, what you do and how your e-newsletter will benefit them. This will help improve their lifetime customer value.

7. Results. Gratify participants with the results. Don’t just leave poll participants hanging. Make sure you tell them the results will be published in your free e-newsletter or on your website (to encourage them to check it regularly), and then upload the results, as well as some of your best, most engaging comments. This is great editorial fodder, as well as helpful to increasing website readership and traffic.

Marketers have used polls internally (on their own company websites) for years. But now more than ever, with its cost effectiveness and efficiency, polls can be used to collect targeted leads and interact with prospects.

Polls aren’t just for finding leads, either. They are also great for measuring market sentiment, doing competitor analysis and new product development; which, in turn, can help customer retention, customer service and sales.

Short Video Clips—The Early Report of Our Experience

We’ve launched our short video clip campaign and have some early learning to share with you. You may recall that, a couple of weeks ago, we announced this micro video test, and invited your participation. We’ve learned that just because a micro-social video is short—as little as six seconds—planning is still required if you intend to monetize your efforts. In today’s video, you’ll see our first short video clip. This much we have learned

We’ve launched our short video clip campaign and have some early learning to share with you. You may recall that, a couple of weeks ago, we announced this micro video test, and invited your participation. We’ve learned that just because a micro-social video is short—as little as six seconds—planning is still required if you intend to monetize your efforts. In today’s video, you’ll see our first short video clip. This much we have learned six seconds goes by fast. So we have adapted our approach a bit, and in a slight twist we have lengthened our video test by a few seconds with the addition of an introduction and close.You’ll recall that while Vine by Twitter was the inspiration for the micro-social video, we actually are posting the video on Facebook, YouTube and a web landing page.

The series we’re creating is centered around a “name that tune” interactive contest. We’ve allocated about six seconds to the “tune” but added a few seconds to give context for the viewer with a short voice-over and flying graphics to enhance the experience. You’ll see it in today’s video.

(If the video isn’t just above this line, click here to view it.)

In our last blog on short videos, we told you that the idea behind this series was to involve you, our viewers, in developing this campaign and show you how we did it. We also invited you to share your thoughts via comments and emails (and we listened).

In today’s video, we’ll tell you about three critical steps that had to be completed before we could possibly begin the campaign. It’s the kind of planning that you, too, should undertake. Quite simply, even though these videos are short, there are no short-cuts to quality and no short-cuts when it comes to planning how to monetize a big push like this one.

Over the next few weeks, we have much to learn and share with you. The first video in the series (released last week) had hundreds of video views within 24 hours of going live, and the engagement and comments on Facebook, YouTube and our web landing page have been positive. If you’d like to follow along as it unfolds, you can find out how in today’s video.

In our next blog in a couple of weeks, we’ll tell you about something unexpected, and honestly undesired, that happened to us on Facebook. That experience has prompted a bit of a “work around.” All will be fine, however. We’ll share that experience in our next blog.

We’re pioneering here and don’t have all the answers. But you’re going to learn alongside us if it’s a success—or a bust. There’s still time for you to share your input on the development and deployment of this campaign by commenting below, or sending an email.