Going the Distance: Four Ways to Build a Better Customer Loyalty Program for Your Brand

It’s easy enough for a customer to join your loyalty program, especially when you’re offering an incentive such as discounts. All your customer has to do is give out some basic information, and voila! They’re in the fold, a brand new loyalty member with your company. From there, it’s happily ever after. You offer the perks; they stand solidly by you, bringing you their continued business. Simple. Or is it? In reality, just how many of those customers are act ively participating in your loyalty program? Do you know? Sure, loyalty program memberships are on the rise according to market research company eMarketer, having jumped 25 percent in the space of just two years. However, that figure may be a bit misleading. The truth is that, while loyalty program sign-ups may be more numerous, active participation in such programs is actually in decline. At the time of the study, the average US household had memberships in 29 loyalty programs; yet consumers were only active in 12 of those. That’s just 41 percent. And even that meager figure represents a drop of 2 percentage points per year over each of the preceding four years, according to a study by loyalty-marketing research company COLLOQUY.

When discounts just aren’t enough

So what’s a brand to do? How can you make your loyalty program worth your customer’s while—as well as your own? After all, gaining a new loyalty member doesn’t mean much if your customer isn’t actively participating in your program. Consider this: Does your customer loyalty program offer members anything different from what your competitors are offering? Chances are your program includes discounts. That’s a given. And what customer doesn’t appreciate a good discount? But when every other company out there is providing this staple benefit in comparable amounts, it becomes less and less likely that customers will remain loyal to any one particular brand. Frankly, it’s all too easy for customers to get lost in a sea of loyalty member discounts. They’re everywhere. In fact, just under half of internet users perceive that all rewards programs are alike, according to a 2015 eMarketer survey. The key to success, then, is to differentiate your business from the crowd. If you can offer your customers something unique and valuable beyond the usual discount, chances are they’ll be more likely to stick with your brand. Here’s some inspiration from companies who get it.

Virgin: Reward more purchases with more benefits.

That’s not to say you need to get rid of discounts entirely. In fact, nothing could be further from the truth. Customers still love a good discount. The goal is to be creative in terms of the loyalty perks you offer. Take the Virgin Atlantic Flying Club, for example. As part of its loyalty program, the airline allows members to earn miles and tier points. Members are inducted at the Club Red tier, from which they can move up to Club Silver and then Club Gold. Here, it’s not just a discount. It’s status. And people respond to feeling important, elite. Still, even where the rewards themselves are concerned, Virgin is motivating loyalty customers with some pretty attractive offers. At the Club Red tier, members earn flight miles and receive discounts on rental cars, airport parking, hotels and holiday flights. But as members rise in tiers, they get even more. At the Club Silver tier, members earn 50 percent more points on flights, access to expedited check-in, and priority standby seating. And once they reach the top, Club Gold members receive double miles, priority boarding and access to exclusive clubhouses where they can get a drink or a massage before their flight. Now that’s some serious incentive to keep coming back for more. Discounts are still part of the equation – but they are designed with innovation and personal value in mind, elevating them to more than just savings.

Amazon Prime: Pay upfront and become a VIP.

What if your customers only had to pay a one-time upfront fee to get a year’s worth of substantial benefits? It may not sound like the smartest business idea at first glance. But take a closer look. Amazon Prime users pay a nominal $99 a year to gain free, two-day shipping on millions of products with no minimum purchase. And that’s just one benefit of going Prime. It’s true that Amazon loses $1-2 billion a year on Prime. This comes as no surprise given the incredible value the program offers. But get this: Amazon makes up for its losses in markedly higher transaction frequency. Specifically, Prime members spend an average of $1,500 a year on Amazon.com, compared with $625 spent by non-Prime users, a ccording to a 2015 report from Consumer Intelligence Research Partners.

Patagonia: Cater to customer values.

Sometimes, the draw for consumers isn’t saving money or getting a great deal. The eco-friendly outdoor clothing company Patagonia figured this out back in 2011, when it partnered with eBay to launch its Common Threads Initiative: a program that allows customers to resell their used Patagonia clothing via the company’s website. Why is this program important to customers? And how does it benefit Patagonia? The company’s brand embraces environmental and social responsibility, so it was only fitting that they create a platform for essentially recycling old clothing rather than merely throwing it away. The Common Threads Initiative helps Patagonia build a memorable brand and fierce loyalty by offering its customers a cause that aligns with deep personal values. OK, so their customers get to make a little money, too. Everybody wins.

American Airlines: Gamify your loyalty program.

If you’re going to offer your customers a loyalty program, why not make it f un? After all, engagement is key to building a strong relationship with your customer. And what better way to achieve that goal than making a game of it. American Airlines had this very thing in mind when it created its AAdvantage Passport Challenge following its merger with USAirways. The goal: find a new way to engage customers as big changes were underway. Using a custom Facebook application, American Airlines created a virtual passport to increase brand awareness while offering members a chance to earn bonus points. Customers earned these rewards through a variety of game-like activities, from answering trivia questions to tracking travel through a personalized dashboard. In the end, participants earned more than 70 percent more stamps than expected – and the airline saw a ROI of more than 500 percent. The takeaway: people like games.

Stand out from the crowd.

Your approach to your customer loyalty program should align with your overall marketing approach. Effective branding is about standing out, not blending it. Being memorable is key. To this end, keep in mind that loyalty programs are no longer a novelty. That means that yesterday’s strategies won’t work moving forward, so look for ways to rise above the noise, setting yourself apart from the cloying drone of countless other cookie-cutter programs.

Dos and Don'ts for a Successful Groupon Promotion

Do: Be aware that it’s not for everyone, and it may not be right for you.

With a subscriber base that has surpassed 85 million and shows no signs of slowing, the allure of Groupon is hard to resist. The basic premise seems fail-proof: create a discount offer that’s broadcast to thousands of potential new customers, sit back and watch the dollars roll in.

However, every business model is unique, and there are many variables that determine how well your company can respond to a sudden, short-term influx of traffic or a temporary drop in profit margin.

Running a promotion is particularly risky for companies in Groupon’s bread-and-butter categories like salons, spas and restaurants, where the frequency of offers dilutes their perceived value.

If your business falls into one of these categories, you must carefully weigh the chances of being able to convert first-timers into regular customers versus the likelihood that they’ll simply wait for the next Groupon to come along. If the odds don’t stack up in your favor, you may find that the sacrifices you must make to execute the promotion won’t ultimately deliver a long-term pay-off in the strength and size of your customer pool.

Don’t: Expect Groupon to boost your bottom line.

At least not right away. While there’s no upfront cost to run a promotion, Groupon requires you to discount your products or services by at least 50 percent, and they then typically take a cut of 50 percent of the final selling price, leaving you with only 25 percent of your normal revenue. While you’ll undoubtedly see a major bump in traffic, your margins on that traffic will be slim, if they exist at all.

Playing the Groupon game is less about building profit and more about gaining mass exposure.

Do: Crunch the numbers.

When deciding whether or not Groupon a good fit, you must weigh the ROI of your promotion according to the same metrics as you would any other marketing tactic.

Examine every scenario to determine what your promotion will ultimately cost. What if 100 people jump on your deal? What if it’s more like 1,000 or 10,000? Can the potential benefits justify that level of investment? Or would your money be better spent elsewhere, such as a pay-per-click advertising campaign?

Do: Be strategic in your offer.

If you do decide that Groupon is a good fit for your business, make sure to structure your promotion so that it’s a win for you and your new customers.

Be creative and find a way to build an offer that minimizes the losses you must absorb and maximizes your ability to fulfill a short-term spike in demand. Focus on the products or services where your overhead is lowest and your profit margin is highest.

For example, let’s say you’re a personal trainer. If you offer a Groupon discount on your consultation services, you’re limiting the number of hours you have available to clients who are willing to pay your regular rate. However, let’s say you’re a personal trainer who also sells subscriptions to an online video coaching series. You can absorb an almost unlimited amount of cut-rate subscriptions without compromising your primary revenue stream.

Or, let’s say you run a beachside bed and breakfast. Executing your promotion in the off-season is a great way to reel in new visitors. If your doors are open, your operating expenses are fixed. In terms of defraying those costs, it’s better to be filled to capacity at 25 percent of your standard rate than to have only one or two guests at full price.

Don’t: Be afraid to negotiate.

A lesser-known secret of playing the Groupon game is that you can negotiate. When it comes to shaping your promotion, nothing is written in stone.

You can score a more favorable split on the take than 50/50. You can also cap how many discounts are available, which is a good way to safeguard your bottom line and make sure you don’t end up with more business than you can reasonably handle.

Groupon’s entire business model revolves around presenting great deals that people want to buy, so if you’ve got a good one, make them play ball. If they won’t agree to terms that work for you, either try another daily deals site, or pursue a different marketing strategy entirely. No amount of exposure is worth an arrangement that could potentially sink your business.

Do: Pay attention to the fine print.

Terms and restrictions can make or break your deal. Use the fine print to make sure your offer is one that your business can sustain.

Set an expiration date. Cite whether the offer includes tax and gratuity. Specify whether customers need to make an appointment or reservation in advance to use their Groupon. Determine which products or locations the Groupon applies to. Define whether the Groupon can be used in conjunction with other offers or specials. Limit how many offers can be used per customer and per visit.

Just be careful not to make the terms so restrictive that the promotion loses all value to your potential customers, or your Groupon will be a flop.

Do: Put your best foot forward.

When your Groupon lands in the inboxes of subscribers in your area, you’ll inevitably have an influx of potential new customers checking out your website, your Facebook page and your Twitter feed to find out more about you.

Make sure that your website is up to date and that it showcases the products or services being featured in your promotion in such a way that makes the decision to buy an easy one.

Make sure as well that your Facebook and Twitter streams are primed with interesting content and lively dialogue to boost your chances of scoring a like or a follow from these new visitors.

If you don’t have these critical elements in place before your Groupon hits, you won’t be making the most of the opportunity you have to be in front of hundreds or thousands of people who are in the market for what you have to offer.

Do: Understand that these are Groupon’s customers, not yours.

Due to privacy laws, Groupon cannot share the email addresses or personal information of those who have bought into your deal. So while you’ve gotten great exposure to these potential new customers, you have no built-in way to make a repeat appearance in their inbox.

Make sure that when these shoppers visit your website or come into your store, they have the opportunity (and incentive) to join your mailing list. If you don’t already have a list, now is the time to start building one.

Do: Bring your A-game.

The true value of a Groupon promotion isn’t getting a tidal wave of people through your doors. It’s the opportunity to convert those one-time deal-seekers into loyal customers and fans.

In order to do that, you must wow them. They may come in looking for a bargain, but if what they find is exceptional quality, value and customer service that go above and beyond their expectations, they’ll not only be more likely to come back and pay full price but also to spread the word about you as well.

Do: Make sure everyone’s on the same page.

One sure-fire way to guarantee that your Groupon customer will never come back is to make the process of redeeming their offer a hassle.

Hold special meetings or training sessions if necessary to make sure that everyone who’s on the front lines of your business understands the terms of the offer and how to handle any questions or complaints.

This is also a good opportunity to review your customer service standards and reinforce your expectations to ensure that everyone is prepared to do whatever’s necessary to convert, convert, convert.

Don’t: Alienate your loyal customers.

You know the old saying about new friends and old friends – one is silver and the other is gold. The same applies to customers.

In your efforts to bring new customers in the door, be mindful not to alienate those who’ve been happily paying full price all along.

If you’re going to Groupon, it’s an opportune time to simultaneously execute a customer appreciation promotion to reward these customers for their loyalty and show them that their business is always valued.

Don’t: Mistake Groupon for a marketing plan.

Let’s say you run your first Groupon promotion.Groupon is no substitute for a sustainable, long-term business growth plan. You get a huge response, so you stock up and staff up to meet the demand. The wave comes; the wave goes. Suddenly you’ve got a bunch of employees standing around staring at each other and more inventory than you know what to do with.

While running another promotion seems like the obvious solution to this problem, it’s no substitute for a sustainable, long-term, diversified growth and marketing plan.

You must realize that creating one Groupon offer after another will train old and new customers alike to expect never to pay full price and will ultimately devalue your products and services. You’ll end up caught in a cycle of dependency on discount shoppers and razor-thin margins that will make it next to impossible to ever actually grow your business. And isn’t that the point of running a Groupon to begin with?

Is Your Promotion Ready for Prime Time? Seven Make-or-Break Lessons in Staging a Successful Retail Sales Event from Amazon

With the holiday season just around the corner, talk of “Black Friday” and “Cyber Monday” sales have already become practically unavoidable. These two retail sale juggernauts have become so deeply entrenched in our cultural lexicon that they actually shape consumer behavior, as eager shoppers anticipate and plan around their arrival for weeks or even months ahead of time. But what if you want to go your own way? Can you conceive of your own unique promotion that will excite consumers and jump-start spending behavior on par with Black Friday? This was the very challenge Amazon attempted to tackle this past summer with their “Prime Day” promotion. Coinciding with the company’s 20th anniversary, Prime Day was a one-day sale that was promised to include “more deals than Black Friday.” Amazon flooded the marketplace with advertising in advance of Prime Day and whipped up great excitement and speculation among customers about what types of deals might be offered. However, when Prime Day arrived and the sales rolled out, the reaction was decidedly less enthusiastic, with many underwhelmed shoppers turning to social media to express their apathy, disappointment and even downright disgust. In the end, Prime Day was not the colossal failure that the Twitterverse would have you believe. In fact, just a few hours into the day, Amazon sent out a press release claiming that “peak order rates have already surpassed 2014 Black Friday.” Moreover, “Prime members have already bought tens of thousands of Fire TV Sticks, 35,000 Lord of the Rings Blu-Ray sets, 28,000 Rubbermaid sets, and 4,000 Echo devices in 15 minutes. The Kate Spade purse was gone in less than a minute. We also sold 1,200 of the $999 TVs in less than 10 minutes. And there are thousands more deals coming.” While Prime Day may not be the next great retail phenomenon, Amazon’s venture into inventing a new sales holiday offers several valuable lessons in the do’s and don’ts of crafting a successful promotional event:

1. Build buzz around your promotion.

One thing that Amazon did right was building up excitement in advance of the event. They ran advertising for weeks leading up to Prime Day, yet they kept the specifics about the deals that would be offered under wraps, leading to great speculation among Amazon enthusiasts about the kind of fantastic steals they might be able to score. Many of these shoppers even logged on early to try to capitalize on the sale. Any successful promotion starts with hype. You must have a plan in place to build excitement and get people talking so that once it begins, you have a eager customers ready and waiting to jump on board. Of course, hype is just that. It should be the drum roll leading up to the big finish. Otherwise, it’s just an empty promise that will result in disappointed (and distrustful) customers.

2. Deliver on the expectations you’ve created.

By far, the biggest point of failure for Prime Day promotion is that many customers expected much more than Amazon ultimately delivered. The majority of the complaints about Prime Day centered around the lack of perceived value or desirability of the discounted items. Typically, during Black Friday and Cyber Monday, retailers tease deep discounts on highly desirable items (such as TVs, gaming consoles and premium brand products) to get shoppers in the door, counting on them to scoop up other items that they want to unload in the process. But on Prime Day, the best deals centered around Amazon’s own tech gadgets, like their Fire TV stick, Kindle and Echo, while many of the other products that were included, such as dishwasher detergent, socks and even a 55-gallon barrel of lube, were much less attractive and left many customers feeling underwhelmed. Furthermore, Amazon front-loaded the hottest deals at midnight PST, so by the time most customers jumped online in the morning, everything had long been sold out. While Amazon has the numbers to prove they sold tons of item during Prime Day, there’s no denying that, for many customers, they did not meet the expectations that they established in the pre-sale campaigns, leaving the retailer with a major black eye in the court of public opinion. When planning a promotion, be sure that you live up to the hype you create. If your focus is on marketing the promotion instead of on the promotion itself, then you are setting yourself up for disappointed customers.

3. Remember: bigger does not always mean better.

Looking back at Amazon’s pre-sale campaign messaging, you will notice that they refer to Prime Day as being bigger than Black Friday and having “more deals.” Nowhere could I find any mention that Prime Day would be “better” than Black Friday, just that there would be more deals offered, which is a perfect example of the old adage that “bigger does not always equal better.” Item for item, Prime Day may have indeed had more to offer than Amazon did on Black Friday, but that didn’t matter to most customers. People don’t necessarily want tons of options, they just want the right ones. When planning your own promotions, think big, but also ensure that you do not sacrifice quality for quantity. Instead of focusing on offering a wide array of deals, go the opposite direction and think about personalizing your promotion. These days, with the abundance of traffic analytics and customer account data available, it’s easy to know what your customers shop for and purchase most often. Use this information to your advantage and craft customized offers that reward your loyal shoppers with discounts on the things they really want and need. And for goodness sake, notify them ahead of time that their favorite items will be on sale! This is definitely one area where Amazon really missed the boat. After all, who has more customer data and marketing intelligence than one of the Web’s biggest retail giants?

4. Don’t try to please everyone.

The fact that we are talking about all the complaints that people had about Prime Day is interesting in and of itself. After all, this is a sale we’re talking about! People are actually upset that the deals offered weren’t good enough! That’s the very definition of a First World problem and it shows that, no matter how hard you try, you will never please everyone. When planning a promotion, consider your customers and what they want, but don’t get too hung up on trying to include something for everyone. Doing this can force you to go to market with a campaign that is unwieldy and unfocused, and no matter how hard you try, there will always be someone who complains that they did not get what they wanted. Do your best to set and meet expectations, but also be prepared to hear complaints, and accept that this is part of doing business.

5. Motivation is key, and timing is everything.

One of the key reasons Prime Day was not a bigger success is that the motivation behind the event was driven by Amazon, not it’s customers. Amazon decided that they wanted to stage a huge promotion in the middle of the summer to celebrate their 20th anniversary. But what does that have to do with me, the consumer? Nothing at all, really. As Ed Stevens, CEO of Shopatron explains, Amazon’s chief failure was that they neglected to tap into any real time- or emotion-based motivation for their customers: “Prime Day will in no way replace Black Friday. The primary reasons for this include the amount of consumer discretionary dollars in July will not change. Consumers are most motivated to spend their money when it’s associated with an event, and most holiday sales are centered around a sentimental or emotional gift giving component…Prime Day is an unsentimental, ordinary sales gimmick akin to a car dealership having a Labor Day blowout sale.” Everyone knows that the key to making a sale of any sort is to instill a sense of urgency in the buyer. July is far removed from any major gift-giving holiday, so as a shopper, the idea of Prime Day as an early Black Friday is null and void. Unless there’s something I want for myself and happen to find an unbeatable deal on, I’m not likely to part ways with my money on this particular day just because a company tells me I should. When you’re planning your next big promotion, make sure the timing is right, and that you’re tapping into motivations that are relevant to your customer base. If you own a stationery shop, you can run a promotion timed to coincide with brides who are planning for the summer wedding season. If you run a sporting goods store, it doesn’t make sense for you to run a Valentine’s Day sale, but it does make sense for you to plan promotions tied to the beginning of each new sports season for adults and kids needing to gear up for spring baseball or fall football and so on.

6. Make it easy for your customers to participate.

Another one of the chief complaints about Amazon’s Prime Day was the way in which offers were presented: an infinite scroll of items presented five at a time in no particular order which continued on for hundreds of pages. Who wants to wade through that for the chance at finding something they might want at a price they might want to pay for it? If you’re going to run a promotion, don’t make your customers work hard to make you money. People love a good deal, but only to the extent to which it doesn’t cause them an excess of inconvenience. Don’t forget: there’s always a competitor lurking in the wings to give your customers what you fail to deliver.

7. Accept that you will have a target on your back.

With Prime Day well underway and customer reactions starting to roll in, Walmart jumped into the conversation by offering a number of their own “Rollback” deals. They were able to sit back and see what Amazon was doing and then respond in a way that would allow them to try to trump Amazon’s big sale – and for many customers, this move worked as they found (in their opinion at least) better deals on Walmart.com. What does this show us? That the first one to do something is the one with the target on their back! After all, it is always easier to follow rather than to lead. By waiting to see what Amazon had up their sleeve, Walmart was able to evaluate the situation and respond, instead of taking the leap and being first into the fray. This is a reality for any company that forges into uncharted territory, since it allows your competition to learn from any mistakes you make and build upon the path that you establish. Does this mean you should be reactive rather than proactive in your promotional strategy? Not at all. Many companies that were “first in” benefited from that position. eBay was the first company to do online auctions, and sites that tried to follow in their footsteps slowly failed and closed up shop while eBay remains a powerhouse. Sometimes, the first one in wins the day, but other times, they end up being the target that everyone else comes gunning for. Ultimately, though, it’s good planning and solid execution that are the differentiators between a promotion that soars and one that sinks.