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Taking Loyalty Beyond the Discount

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by: Dave Walters (@_DaveWalters)
30 April 2012

The term “loyalty” has a convoluted history and wildly different implications for many digital marketers. Plenty of big companies have spent millions of dollars on loyalty programs that often drive sales and customer satisfaction, but sometimes have the undesirable effect of creating discount-happy customers. And even more small- to medium-sized businesses like sandwich shops and car dealers have implemented some form of punch card that rewards repeat customers and spend over time.

This low-fi version of loyalty tends to draw a bit more fraud, and much of the important customer information (visits, purchases, etc.) isn’t captured in a meaningful way. Since early 2006, I’ve championed an approach I call “Experience-Based Loyalty,” which I’ll outline in today’s post.

As a 20-year digital marketer, I’ve spent lots of time in the loyalty and relationship marketing spaces. One of the market’s weaknesses is that the default “offer” has always been a discount of some flavor—even if it required the customer to buy 10 of something or attend three workshops to get the discount. This dynamic creates a customer expectation that they must always have a coupon or discount before buying anything from a brand. The simple existence of promo code aggregation sites is witness to this margin-killing dynamic.

Two solid large-company examples of experience-based loyalty have been built into two category-leading loyalty programs: Delta SkyMiles and Best Buy Rewardzone (both of which we worked on extensively during my time at Digitas). Best Buy was among the first big programs to crack the code on cash back, but they eventually incorporated members-only shopping events that were only available based on your program credentials. More recently, Delta Air Lines has enhanced the reward set for American Express customers by allowing one free bag per ticketed passenger—a “discount” of sorts, but not something airlines charged fees for until two to three years ago.

So how would a small or mid-sized company use Silverpop products to tackle the fundamentals of experience-based loyalty? Clearly, embracing a marketing automation mindset can unlock much of the potential of timely, behaviorally triggered messages without spending millions on POS integration and mailing monthly statements. In fact, I’d contend you could use promo code redemption, Web tracking, lead scoring and automated emails to devise the majority of a game-changing solution.

You can begin by defining the 10 to 15 trackable user actions you know indicate deep interactions with your brand. And yes, they’ll be slightly different by company and industry, but try to stick to natural customer actions—not what you want them to do. Examples would be watching videos on your site, attending an event, redeeming an offer, etc. From there, define a scoring model that quantifies user interactions and trigger emails based on task completion—and in an effort to incent social sharing.

You can even set up a monthly email to each user outlining their actions and associated level within the program. And don’t forget relational table functionality if you want to integrate virtually any flavor of external data into the mix. (See our CARFAX case study for great insight on implementing relational data.) The possibilities are almost endless.

And if you’re a brick-and-mortar, you should definitely be thinking about location-based marketing strategies that track and reward customers who check in at your locations via Foursquare or Facebook. My colleague Adam Steinberg covers these topics in depth here on the blog, but claiming your own venue should be first on your list of things to do. From there, developing offers like early-access shopping days and complimentary services is a great way to get started without giving away your tight margins (remembering you have all those nice leasing costs above and beyond your product costs).

So go ahead and think deeply about what kinds of experiences would amaze your customers. What could you offer that no one in your industry has ever thought of? And consider how the fundamentals of marketing automation can help you leverage their actual behaviors to signal when it’s time to deliver that magic moment.

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