The Loyalty Equation

 

An equation, by mathematical definition, declares that two expressions are equal. And loyalty is one equation that marketers have yet to solve.

The root of the problem is that marketers and consumers can’t seem to agree on what loyalty actually means. Many marketers consider loyalty behavioral, based on metrics such as repeat purchase. For most consumers, however, loyalty is attitudinal, based on emotionally driven brand devotion and how purchases represent them personally, explains Eric Pakurar, chief strategy officer of North America for activation agency Geometry Global.

“As brands, we need to take in both sides of the equation…what my brand can do for the consumer and how the consumer makes the vision,” he says. “Bridging the two is the tough bit.”

Thankfully, there is one common denominator: data. Here’s how marketers at Dunkin’ Donuts and USA Track & Field are using data from their respective customer loyalty programs to balance satisfying their brand’s financial needs with meeting their consumers’ experiential desires; that is, to build loyalty profitably.

Brewing up loyalty

Just as how balancing an equation requires taking something from one side and applying it to the other, marketers must be willing to subtract their hard-sell mind-sets and add in consumer value to produce the emotional connection with consumers that leads to repeat sales. Coffee and baked goods chain Dunkin’ Donuts is one brand that knows how to leverage data and targeting to do exactly that.

Dunkin’ Donuts customers are consistently on the move. In fact, popping into one of its quick-service-restaurants (QSRs) before work or school is part of many guests’ daily routines, says Scott Hudler, VP of global consumer engagement for Dunkin’ Brands. So, the QSR has to deliver timely, relevant, and convenient experiences to fit into customers’ busy lifestyles and generate purchases.

One way it delivers these experiences is through its DD Perks Rewards program and Dunkin’ Mobile App. Dunkin’ Donuts relaunched DD Perks Rewards nationally in January 2014, updating its 2011-born program, and fully integrated it into the app in early February 2014 to enable mobile payments. Instead of earning Dunkin’ Dollar reward coupons like customers did in its previous iteration, members now earn five points for every dollar spent when they pay with a plastic or mobile Dunkin’ Donuts Card, which is a reloadable prepaid card. Once members reach 200 points, they receive a coupon for a free medium beverage of choice.

“Dunkin’ Donuts knows that its guests are always on-the-go and constantly connected through their mobile devices,” Hudler says. “So for us, it was extremely important to resonate with our customers by offering a loyalty rewards program that provides our guests with new levels of speed and convenience, so that people can ‘run on Dunkin” more quickly than ever before. Both the app and DD Perks program are ways to enhance a guest’s experience, which is essential to retaining loyalty.”

When designing DD Perks Rewards, Dunkin’ Donuts’ marketers used insights from consumer research to figure out how the QSR could make the program as convenient as possible for its guests, Hudler says. These efficiency nuances help Dunkin’ Donuts differentiate its program from its competitors, he adds. For instance, unlike other reward programs, guests can access points immediately after purchase—rather than having to wait for the transaction to clear—Hudler says. In addition, members can share rewards with family and friends.

But Dunkin’ Donuts wanted to find even more ways to drive incremental spend and visits through convenience. So, when it launched DD Perks Rewards, it also started targeting members with localized, one-to-one offers.

By looking at members’ transactional and behavioral data, marketers for Dunkin’ Donuts segment its audiences and send relevant offers via its app to prompt desired changes in behavior. For instance, if the analysis detects that a rewards member buys an iced coffee and muffin twice a week, it may send that member an offer for a new limited-time muffin, Hudler explained during Dunkin’ Brands’ Q4 2014 earnings call this past February. Or if analysis shows that a member of DD Perks Rewards visits only during the morning, the brand may send that member an offer to return later in the day, he added.

In just a little over a year, more than 2.5 million customers have enrolled in DD Perks Rewards, and the app has received more than 11 million downloads. And when looking at the results from Q4 2014, Dunkin’ Donuts determined that DD Perks Rewards members had a more than 40% increase in average weekly spend and a more than 30% increase in average weekly visits compared to the previous year, Hudler stated during the call. In addition, DD Perks Rewards accounted for 3% of overall transactions for the full year and 4% of total transactions in Q4.

It looks like Dunkin’ Donuts is roasting the competition without leaving a bitter taste in customers’ mouths.

Calculating a fair exchange

As with Dunkin’ Donuts, brands that use customer data to drive revenue need to provide a value exchange to customers as part of the equation. USA Track & Field (USATF) embodies this concept by rewarding fans for the data they provide and, in turn, benefiting from that information by learning more about its fans, helping them form deeper connections with the sport, and increasing its membership.

As the national governing body for running in North America, USATF strives to help people form lifelong connections to the sport and become dues-paying members of the organization. And with more than 30 million self-proclaimed runners in the United States, USATF has a lot of opportunities to do so.

“For us, loyalty means getting someone interested in the sport at the earliest age possible, whether it’s through a healthy active lifestyle or [a] competitive [one], and retaining them as a fan or a participant all the way through as long as they can compete,” says Max Siegel, CEO of USATF.

But while USATF was attracting younger runners, winning over adult athletes proved to be its Achilles heel. Consider the following: The running organization has about 130,000 dues-paying members—60% of whom are youth athletes, notes Caleb Bailey, USATF strategic programs manager. These runners are 18 years old and younger, and often join the organization to compete in high school meets. However, when it comes to attracting older athletes, the number drops “significantly,” he says.

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And these aren’t the only challenges that USATF faced. Although people are familiar with track and field as a sport, not many are familiar with USATF, Siegel acknowledges.

So, to educate people about the organization, help fans and athletes form lifelong devotion to the sport, and increase the number of dues-paying members (particularly among adult athletes), USATF launched USATF Rewards.

The premise of USATF Rewards, which launched at the end of January 2014, is to create emotional connections between USATF and its fans through engagement. Here’s how it works: Fans can enroll in the program for free via its designated website. Once enrolled, fans can earn points—i.e. wings—for interacting with the brand on- or offline, such as by reading an article online, attending an event, engaging with the brand via social media, or watching a webcast of a sporting event, Bailey explains. After they earn enough wings, members can cash them in for rewards. The rewards range from posters and athletic gear to autographed memorabilia and experiences (e.g., holding the finish line tape at an event).

But the fans aren’t the only winners in this program. USATF also benefits—by learning about its fans through the data it collects. To enroll in the program, members must provide USATF with their email address or connect through Facebook or Twitter, in which case USATF gains access to their social profile information and followers. Members then fill out a profile where they provide their name, birthday, and location. But the data collection doesn’t end there. Members also have the opportunity to provide additional data in exchange for points. For instance, members can earn 100 wings for providing their gender or phone number and 500 wings for connecting via their other social channels, like Instagram or Foursquare. USATF collects and stores all of this first-party data within a tool from multichannel loyalty program provider CrowdTwist.

Another source of data USATF uses is members’ interactions. USATF can look at fans’ behavioral data—such as what articles they click on, which videos they watch, and what kind of messages they tweet—to better understand how each fan prefers to engage with the brand.

“This program is a fun and innovative way to have even casual fans start to interact with USATF, our brand, [and] our program, and [to] start a conversation with them, while at the same time collecting important data about the folks who we reach out and touch, whether it’s their interest, their buying habits, their wants, [or] information they’re seeking,” Siegel says. “This helps us do both of those things: provide them with a unique experience and at the same time educate us about our fans.”

USATF can then use the loyalty program data to further engage members. For instance, the organization can segment its members by location and then email that segment when a local rewards opportunity arises—like the chance to give an athlete a medal at a nearby meet. What’s more, USATF can track which of its members are the most and least engaged and send them a surprise-and-delight reward, such as a handwritten postcard from track and field Olympian Sanya Richards-Ross, to either thank them for their engagement or encourage them to interact with the organization more.

“As soon as they get a postcard that they didn’t expect in the mail from their favorite athlete saying, ‘Thank you for supporting me,’ they immediately post it on every social platform that they have…. They freak out, to be honest,” Bailey says.

USATF also uses the data to cross-promote other initiatives within its organization. For instance, it promotes its online TV channel by encouraging fans to watch its videos or mini-series to earn points. Last year fans watched 29,512 videos via this channel; since then, this number has escalated to 37,000. The organization also received an additional 417,000 visits to its main website, where it hosts other forms of content, like news articles, that members can consume for points.

To promote the program and drive engagement, USATF relies on TV broadcasts, social media, email newsletters, in-stadium announcement, digital broadcasts, and advertising. In the program’s first year fans earned almost 188 million points and cashed in about 17 million. These figures have since increased to more than 223 million points earned and almost 28 million redeemed. What’s more, 69% of the loyalty program members joined the organization’s email list and more than 4,200 fans used the program’s hashtag #USATFrewards when they commented on social sites. But perhaps one of the biggest wins is the number of new and renewal memberships USATF received since launching the loyalty program: 1,822 newly purchased memberships and 4,477 renewals.

And it looks like USATF has been able to reach the older athlete it was aiming for. Of the more than 13,000 rewards members USATF Rewards had as of March 2014, 58% were male, and 27% of this population consisted of men 18 to 24 years old, which had made up the smallest membership segment on the men’s side. In addition, men 36 to 50 years old made up the most active demographic for the male population. As for the 42% of females who made up the rewards program membership population, 29% fell between the 36-to-50 age range, which was the lowest membership demographic on the women’s side; this was also the most active segment.

Although USATF’s loyalty efforts have been more of a marathon than a sprint, the strides the organization has made are significant.

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