4 brands making customer loyalty programs work

CMO talks to four brands running customer loyalty programs to find out what they’re doing to buck the trend and meet the changing needs of technology-savvy, mobile and less faithful customer

The Share the Love: 2014 Consumer Study into Australian Loyalty Programs report released in February showed an alarming quarter of consumers leaving loyalty programs in recent years.

Disillusioned by the speed of earning or redeeming points, or unappealing offers available, many of these individuals simply stopped using cards or apps, and walk away. According to report authors, Citrus and Directivity, this mass exodus is a clear judgement on brands and something all should be striving harder to curb.

“Make no mistake – if members have defected from a program, they’ve defected from the brand,” CEO of Citrus, Peter Noble, warned. “Loyalty programs are big business and a key touch point for a brand so marketers need to ask themselves: Remove a quarter of your membership and what impact would that have on your brand?”

We talk to four brands running customer loyalty programs to find out what makes them tick and what they’re doing to meet the changing needs of more technology-savvy, increasingly mobile and arguably less faithful customer.

Consumer loyalty versus price sensitivity: Thirsty Camel

In a highly price sensitive market like liquor retailing, customer loyalty is inevitably going to be driven by discounts and special offers. The team at six-year-old national retail brand, Thirsty Camel, also has the added complication of a cooperative network of 450 stores that don’t share a centralised point-of-sale system or database.

Group marketing director, Leah Grinter, said the answer was a simplistic customer loyalty program that tapped into the highly price conscious mindset of customers and delivered transaction-based offers.

The ‘Hump Club’ loyalty program rolled out two years ago and is available in all states Thirsty Camel operates in: Victoria, Tasmania, ACT and regional NSW. Customers sign up using their mobile number as a unique identifier, and can either access discount vouchers via SMS, or print vouchers from the Web portal to redeem at their local retails.

Last December, the company also launched a new app for both iPhone and Android devices to allow customers to redeem offers. To date, Thirsty Camel has attracted 60,000 members in Victoria and Tasmania.

While the recent Citrus and Directivity survey suggests half of all individuals take issue with brands sharing their personal information with third parties, Grinter said it has been able to overcome this by storing information in one platform and providing valuable, customised offers based on an individual’s town or local venue/retailer.

One of the early lessons for Thirsty Camel was around the types of offers members will most likely to respond to. “We started by sending out product-specific offers, but what we found is that our open offers have the highest retention rate, of between 10-12 per cent,” Grinter explained.

In addition, the decision to be mobile phone-oriented was also re-jigged after customers and retailers asked for a Web-based platform. Today, 70 per cent of offers are redeemed as printed vouchers via the Web.

“When we did some research with members last year, 75 per cent wanted an app, but we’ve not seen the take-up yet,” Grinter continued. This insight echoes the Citrus/Directivity survey, which showed just 12 per cent of loyalty members only want an app despite the widespread use of smartphones.

And even though the Hump Club was positioned as a mobile-led program, 27 per cent of customers surveyed also expected a physical card. This again echoes the recent Citrus/Directivity research, which found 57 per cent of loyalty members still prefer a traditional card over a mobile-based app.

“We do have lots of fun with the brand, and for our customers it’s about having that identifier to being in the club,” Grinter said in response. As a result, Thirsty Camel is now looking at whether to introduce a key ring for members to meet that desire for a physical membership identifier.

With 65,000 transactions last year and millions in additional retail sales, the Hump Club has already proven successful. The next step is to better understand customers and their habits through behavioural and purchase data.

“I see an opportunity for a ‘surprise and delight’ capability – for example, we could reward Jim Beam loyal customers with free samples and offers by using their data,” Grinter added.

More on customer loyalty programs: How Supercheap Auto used big data to model customer loyalty
Why Fitness First is dropping its customer loyalty program and turning to data

Today’s customer loyalty game

Building B2B customer loyalty: BlueScope Steel

Australian steel company, BlueScope, launched its ‘Constructor’ loyalty program for B2B customers as a way to increase its share of wallet with small to medium-sized organisations. Thanks to the success of the program, it is now looking to expand out to appeal to more medium and larger-sized customers.

Manager of sales and marketing, Peter Zafiris, said the initial Constructor points-based program, which launched eight years ago, was invitation only. “What we were finding was that we had a lower share of wallet with these customers, so we hand picked 1200 from our 8000-strong customer base to try and drive more sales,” he told CMO.

Much like a credit card program, BlueScope offers a point per dollar spent up to the value of 120,000 points, which can then be spent through its catalogue. The easier the company made it for customers to enquire about rewards or access them, the more they understood the size of the prize. To do this, the team set up a regular newsletter, Rolling Steel, highlighting new product offers, specials, launches and triple points opportunities.

Another key learning was keeping the customer data up to date, Zafiris said. To do this, the company has outsourced database management and hired teleworkers to manage the customer database, which is then merged with transactional reporting data to personalise offers to customers.

Since the program’s launch, BlueScope has seen share of wallet across the 1200 customers more than double from 18 per cent to 42 per cent, Zafiris said.

With customers put into the program, we found we no longer have to lower margins to win the business

– BlueScope Steel's Peter Zafiris

“With customers put into the program, we found we no longer have to lower margins to win the business,” he continued. “They’re happy to be part of the program, but understand it comes at a premium. These customers are much more profitable.”

A key finding of the Share the Love report is the desire for loyalty member holders to share their points or offers with family, friends and others. Zafiris said this was a particularly relevant trend in the B2B space.

“What this has taught us is to be more flexible with B2B companies and give them as many choices [to share] as possible,” he said. For example, BlueScope’s loyalty team now helps customers organise charity days where products scored through points can be given away as prizes, or donated to local community groups. It is also giving customers the opportunity to transfer points into sponsorship of local clubs.

Technology is another increasingly important program foundation, and BlueScope has developed a website portal for its loyalty program so customers can view points and offers. It is also working on an app, expected to launch in May.

Given its financial success, BlueScope is looking to expand the loyalty program to 5000 customers in the attempt to improve share of wallet with larger-sized organisations. To do this, it is looking to add more layers of rewards to the program and offer up to 500,000 point limits.

UP NEXT: AMERICAN EXPRESS AND ACCOR HOTELS

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