In a recent strategy enhancement preparation meeting with a client who has an existing loyalty program, I was preaching one of my favorite mantras: “test, evaluate, recalibrate, test, evaluate, recalibrate.” Tellingly, my mantra was met with shifting seats, averted eyes and audible throat clearings. I stopped right there.
“Is there a problem?” I asked. “Do you disagree with the importance of testing?”
“Well … ” they responded, “we really don’t use that word around here. It makes people nervous. It can be so complicated and it requires so many resources.”
In the loyalty space, we hear a lot of this talk. Blanket offers go out with no testing, based on the peculiar passions of the CMO, to the entire membership with little or no consideration of its previous behavior or expressed preferences. Even more alarming, offers go out with no plan in place to measure return on investment.
A promotional offer program doesn’t have to be intimidating. There’s a simple, systematic approach to getting started that will bring a robust cache of intelligence about how to make any loyalty program more profitable.
Here’s a quick example: Let’s say my client is in hospitality. One program objective is to boost customer loyalty and value by increasing cross-amenity purchases. In other words, I want to change behavior so members who stay at my properties, but don’t eat at my restaurants, begin to do so.
We’ve identified a segment of the membership – Segment A – that exhibits the behavior we hope to change. We also know there are other members – Segment B – who already exhibit cross-amenity behavior. We could recognize them for exhibiting profitable behavior.
So which segment receives the following offer? The next time you visit our property, dine in our restaurant and you’ll receive double points and a complimentary non-alcoholic beverage.
And which segment gets this one? We appreciate your patronage to our restaurant. The next time you stay with us, please enjoy a complimentary beverage with your meal.
Of course, you said Segment A, and then Segment B. This isn’t brain surgery. But how do you make this concept a reality? Involve your IT group and your analysts. Lay out a simple 12-month plan in which you test – one offer each quarter for one or two high-level segments. Devise a high-level plan to capture response and measure profitability. Test, measure and recalibrate.
But don’t stop there. When you pull the mail file for an offer, include in the mailing a simple code indicating in which segment the member falls. And don’t forget to select a control group for the event. When the promotion period ends, pass all of that information to your analysts and ask them to answer two simple questions:
· Of the members from each group who visited us during the promotional period, how many also dined at our restaurant?
· How much did they spend?
Compare that data to your control group. Did the initiative make any money? The answer will tell you whether to try a similar approach again.
To achieve program objectives, you’ll need to shift member behavior. Why not use the program benefits you already have to accelerate that shift by offering targeted members more benefits, or access to benefits sooner?
A simple testing and recalibration plan can help keep you on target, and it doesn’t require a lot of pain and suffering.