Consumers approve of rewards programs … sort of

By Mark Dolliver, Adweek

Getting new customers is expensive, which is why sensible marketers toil to keep the ones they’ve already got — and to get them buying as often as possible. As such, loyalty programs have become a conspicuous part of the marketing landscape. But how do consumers feel about such programs? A recently released survey by the Chief Marketing Officer (CMO) Council takes a close look.

The polling finds consumers exhibiting a kind of “yes, but” attitude toward loyalty and rewards programs. Sixty-nine percent of respondents said most of their own experience with such programs has been “pretty good,” and 10 percent said they’ve been “very satisfied.” Half said a program membership either “strongly motivates my repeat business or visits” (21 percent) or is “usually a big factor in my decision making” (30 percent). But, the report has less favorable news as well: “In fact, 32 percent of respondents felt that program participation held little to no value while 37 percent felt individual rewards had even less to offer by way of value.”

Do these negative sentiments reflect a lapse in communication on the part of loyalty marketers, or is the problem that many of the programs really aren’t valuable? “It’s both,” says Liz Miller, who was involved with the study in her role as vp of programs and operations for the CMO Council. “Listen, there are a lot of programs out there that only exist because of some brands viewing loyalty programs through what I call a ‘Field of Dreams’ lens — the ‘if you build it, they will come’ mentality. So, they build this program, investing millions in it, and then they pepper the consumer with junk. Or, they don’t pepper them with anything and just let consumers pile on points into a fantasy account that does nothing. What is worse is the lure of savings only to realize you can’t get to them because you can only do it on the second Tuesday of the sixth week of the month.” On this last point, 38 percent of respondents included “too many conditions or restrictions” among their top complaints about loyalty programs.

MEMBERSHIP HAS BEEN GROWING
Whatever misgivings consumers have about loyalty programs, though, this doesn’t seem to stop them from signing up. “Our research shows 67.7 percent of consumers belonged to loyalty programs in 2009, a 19 percent increase over 2007, when 57 percent of consumers belonged to one,” says Kelly Hlavinka, a partner in Colloquy, a firm that provides research and other services to the loyalty-marketing field. “Activity in some key demographic segments is up even more,” Hlavinka adds. “Just to name two, participation by young adults has soared 32 percent, and women age 25-49 are up 29 percent.”

Another statistic, from Colloquy’s “census” of loyalty-program participants, points to the ambivalence many consumers bring to these relationships. “Colloquy’s census does indicate a critical gap — that the average U.S. household  has enrolled in 14 programs, yet only participated in 6.2 of them,” says Hlavinka. “So clearly, most loyalty-program operators need to be thinking about how to enhance their value proposition for their most profitable customers. In addition, much more can and should be done to enhance the relevance of program communications and the recognition benefits for a company’s most profitable customers.”

It’s important, after all, to remember that consumers’ true loyalty is to themselves, and they tend to judge a loyalty program on the dollar-and-cents benefits it provides. That’s reflected in one of the CMO Council report’s observations about how consumers react to such programs: “Unfortunately, they’ve been programmed to expect the fundamental discounts and free products, and marketers will be hard-pressed to wean them off such a deep dependence on them and respond to more experiential rewards.”

Read the complete article here.

Now that we have talked about how to calculate your budget lets talk about some ways to invest it.

The first step is determining our goals for the buy. We need to set a baseline from which we can measure our buy’s success and the success of the overall campaign. We should start with looking at sales for the desired month of the campaign from the previous year. (If you are a new business, take a look at the industry standards or similar budgets to get an idea of where you should be.) We can also look at the last month’s number and average the two to get a more accurate baseline.

Now that we have a baseline, let’s focus on a message. Determine what you want to say and to whom you want to say it. The reason any campaign is successful is because of its message and placement for a specific target. (If you are focused on a branding campaign, focus less on a specific message and more on the perceived value you want to place in the brand.)

With a message in place, let’s focus on placement and implementation of the message. For example, let’s say that we are a cell phone company looking to increase sales of cell phones to young adults ages 18-25. There are specific places you want to make sure your message is heard such as bars, gyms, movies, music sites, concert venues, and social media outlets. More specifically, know your audience. Know things like what music stations they listen to and what TV programs they are watching. For smaller companies with less buying power, get involved with popular organizations in your city where this demographic hangs out. Partnerships with organizations are one of the best ways to reach people on a personal level.

Now, here comes the real challenge. How do you measure a buy or campaign’s success? First, take a look at our baseline. Did you move the needle at all in sales? If yes, let’s figure out what worked and where. These are called tracking devices and the best way to use these is through print and internet advertising. Using traceable bar codes on print offers and monitoring click through rates, not only on banner ads, but, your own website can be great indicators as to how effective your media was placed and if your message was clear. Measuring radio and TV ads can prove to be much more difficult, as there is no way to trace the direct effect on sales other than asking in store where they heard the offer from. The best way to trace any broadcast media is to have a call to action that takes all traffic back to the website to redeem the offer in printable form for presentation in store.

Lastly, at the end of each campaign or buy a performance evaluation should be done compiling data such as total dollars spent on the campaign vs. increased number of tickets (receipts) per day in store, sales per store, and count of most popular item(s) being sold. This will allow you to understand if the overall direction of the campaign was a success and what avenues to revisit in future buy’s.