How to use data to build relationships with customers

Homing in on your ad target through technology is only half a marketer’s job: The other half is maintaining that customer relationship. Seductive rewards programs give consumers easy access to brands they already buy and give companies lots of data to mine—and the better the program, the higher the adoption rate, enticing customers to spend more.

A Harvard Business Review report in 2014 says that acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one. According to marketing technology and CRM specialist Punchh, an anonymous customer’s lifetime value to a brand is about $12 per year, while a brand loyalist is worth $173.

Loyalty programs pay off “because they allow you to protect those customers that you’ve acquired,” says Guy Cierzan, managing partner at marketing engagement and analytics company ICF Next, which works with brands such as Hyatt on loyalty strategy and execution.
According to a report from YouGov, 68 percent of women and 59 percent of men say they are members of loyalty programs. And 70 percent of those who have not yet subscribed to one say they’re not likely to within the next year. Still, that leaves 30 percent of non-users, or 17.6 million Americans, open to signing up.
Some major marketers are tweaking their programs to increase participation. Papa John’s now offers points at a rate five times faster than its prior version, the company says. Marriott rebranded its rewards program as Bonvoy across all of its chains. Starbucks overhauled its program, which already has north of 16 million active users, it says. And Domino’s got really creative, giving away points to members who submitted photos of any pizza, even from competing chains, to boost awareness of its program.

Below, some tips on how to get your program right.

Converting ‘invisibles’ to loyalists
The initial brand-customer interaction, much like a first date, is more of a casual connection. For the most part, these are anonymous users who aren’t sharing data, says Shyam Rao, CEO of Punchh. Then, if things go well, there’s a deeper commitment.

Next come the “digital invisibles,” whose data is somewhat known to a brand. They might share an email address to access free WiFi while shopping or dining, say, and then a retailer or restaurant might follow up with a coupon. These consumers also might download an app to redeem an offer, but aren’t diving in completely. Lastly come the loyalists, who participate and spend much more than others.

At restaurants, 15 percent to 25 percent of customers can account for 45 percent to 60 percent of revenue, says Rao, whose company works with more than 160 brands including Pizza Hut and Denny’s. So if a program entices them to come in even just a couple more times per year, “that’s a fairly big impact to the top line,” he says.

Speed matters
Make the signup process quick, simple and rewarding, and consumers will be back for more, say experts. Starbucks in April revamped its program to give consumers more choice and the ability to use points more quickly. Buyers used to accumulate 125 stars, or points, to get a handcrafted drink. Now they can redeem as few as 25 stars for add-ins—such as an extra shot of espresso—or can save up 400 points for items such as tumblers.

Track and personalize
Rao advises that brands collect enough information from consumers to enable regular communication. That means more than simply asking for a phone number at checkout. Because these are opt-in programs, customers are typically willing to share some personal data in order to get something they perceive as valuable (and they’re going to expect their information will be safeguarded and used responsibly, adds Cierzan).
Tracking behavior helps brands notice what their customers are interested in, and then they can further personalize their messages. While push notifications can work, physical interactions need to be on-message, too. On-site staff should talk up programs—for instance a hotel concierge can explain benefits—and signs are helpful because they can catch the eye.

Avoid disruption
Loyalty programs can also help brands protect against disruptive forces, such as Amazon diving into a category or delivery services eating away at restaurant revenue. Hotel operators fending off the likes of Airbnb make sure loyalty members get free bottled water when they check in, along with a code for free WiFi. At some hotels, those who stay frequently get their favorite pillow already on the bed in a room that’s in their preferred section of the building.

And while there may be no such thing as a free lunch, freebies do work. Chipotle offers chips and guacamole when someone signs up and makes a purchase in the rewards program it started this year. And consumers get more points for trying items they don’t usually buy.

Brands that often rely on retailers to promote their items are also using loyalty programs as they build their direct-to-consumer offerings. The new Reebok Unlocked program, for instance, gives out points not just for buying Reebok products, but also for completing a user profile and reviewing products.

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