J&J Unit Scores by Planning
How to Evaluate Programs
By John Karolefski
Evaluating the results of any loyalty marketing program is only as good as planning how to conduct a successful evaluation, according to Mark Tamke, Business Analytics with Ortho McNeil Janssen Pharmaceuticals, a Johnson & Johnson Company.
“Testing your assumptions and what you expect to gain out of the program is important,” he said. “Increasing sales is always what everyone wants to do, but there are other soft metrics that you may want to motivate people and staying competitive within your marketplace.”
Planning the evaluation also gives executives the tools and confidence to go to upper management to outline the program’s objective and metrics so everybody in the company is aligned, says Michael Schiff, managing partner of Partners In Loyalty Marketing (PILM), a Chicago-based consultancy that specializes in program strategy, optimization, and evaluation for Rx, OTC, and CPG companies
The executives outlined how to plan for successful program evaluation in a recent presentation at a conference, Optimizing Promotional Spend, hosted by the Pharmaceutical Management Science Association in Philadelphia.
Evaluation is only as good as the planning that goes into it, the speakers stressed. Programs evaluated “after the fact” usually have sub-par analytics for several reasons:
- Processes were not put in place to capture metrics
- Team members have moved on, taking a lot details with them
- Vendors are less likely to share data or make it a low priority
- Much more assumption-driven analysis.
On the other hand, they said, planning makes evaluation faster and easier, gains alignment on what success will look like, and reduces the potential for error.
Their evaluation process has two parts: Planning (build a model and gather inputs) and Executing (evaluate program and disseminate learnings).
The programs that the companies have jointly conducted over the years include trial (trying a drug), persistency (getting someone to stay on drug longer) and compliance (getting people to follow the instructions).
One example of a typical program, Tamke explained, prompts a consumer to register on a website to get a voucher. The measurement identifies how many people registered and how many vouchers were sent out and redeemed. “The net result you want to see is obviously increased sales driven by the redeeming vouchers as well as increased persistency,” he said.
The presentation focused on the gathering of inputs necessary for a strong evaluation. The executives outlined four steps in the process:
Create Program Inventory
The program inventory is the single source list of all programs planned or in the field. The common elements across brands / categories include: Point of Interest, Target Market, Objective, Materials and Content, Incentive and Primary Action, and Available Metrics.
“The inventory, simply put, is a simplistic summary of the program,” said Schiff. “It does three things: One, what are we doing?, because you’ll be surprised [that] people don’t necessarily know all the programs that are going on; two, what is the objective?, and three, what do we have in place to measure it?”
Construct the Logic of the Plan
The logic shows the flow of end users through the program and what tactics touch what groups in the brand adoption cycle. It enables executives to determine which programs operate independently versus those that intersect.
The logic exposes key requirements for the ROI Model. It highlights a program’s impact on patients and sales to determine profitability.
“The logic is a visual representation,” said Schiff. “It’s meant to show how programs are or are not interacting with each other. That’s important because if you evaluate one program and it’s dependent or it’s feeding into subsequent programs, you can look at them in isolation. But you also need to consider everything else that they’re feeding into or are feeding into them.”
Strengthen the Logic
According to the executives, programs need to be tied to brand objectives: retention, more-sell, up-sell, cross-sell, and efficient acquisition. Retention is important because not all customers are created equally. What’s more, 20% of customers often account for 75% of sales.
“Tie everything to your objectives,” advised Shiff. If the program is about trial, that’s an investment. So the measures we need to make sure that we have an understanding of are downstream or lifetime value. The other two would be is it about persistency and compliance. Depending on what your objective is, your measurements would be different and you should set up accordingly. Very few programs can meet all objectives successfully at the same time.”
Optimize Plan & Set Benchmarks
It takes time to achieve best-in-class benchmarks, according to the executives. First, establish the level set, and then understand the driving factors of success. Finally, improve program design and continue to evaluate rigorously
Know what success looks like, they said, adding that their best practices define success as $1 bottom-line ROI for retention/ more-sell programs, and 40% or less cost-to-acquire ratio for acquisition programs.
“Testing your assumptions and what you expect to gain out of the program is important here,” said Tamke. “A lot of times, when you get to this final step, you realize that maybe what your initial goal was might not necessarily be the case anymore. It may have changed.”
Schiff suggests doing an analysis before executing a program for two reasons: “One is to set expectations about what we want to get out of it. Two, from an ROI perspective, is to determine if the payoff is even possible. If not, is there another reason we might be doing this program?” he said.
Market Watch
New Coupon-To-Card Application
Provides New Capabilities
By Lynne Cooke
A new coupon-to-card application from NCR Corp. for its multichannel offer management provides retailers with a single solution to manage and deliver loyalty programs and promotional offers. It enables shoppers to select online coupons and have them delivered directly to their loyalty cards, removing the need to print and carry paper coupons to the store.
Marsh Supermarkets, operating 99 grocery stores in Indiana and Ohio, will implement the application as part of its Fresh I-D-E-A loyalty program later this year.
With this new functionality, shoppers can visit the online coupon website of their choice, select the coupons they desire, and then identify the store in which they will redeem the coupon. The NCR Advanced Marketing solution then receives this data and automatically activates the offer without manual intervention from the retailer.
When the shopper visits the store and presents their loyalty card, the solution confirms that the appropriate items have been selected by the shopper, applies the proper promotion at the point-of-sale, and then sends the redemption information back to the source for clearing.
The coupon-to-card functionality integrates with many online coupon vendors, providing retailers with the flexibility to exercise their choice in digital coupon solutions. A wide variety of coupon configurations are supported, including percentage discounts, cash discounts, buy one get one free, buy A get B free and more.
“We look forward to extending the benefits of the NCR Coupon-to-Card solution to our customers and utilizing this technology as part of our Fresh I-D-E-A loyalty program later this year,” said Mark Heckman, vice president of marketing for Marsh Supermarkets. “Our customers will appreciate the added convenience of not having to print out coupons and faster checkout times, and Marsh will gain new operational efficiencies, such as reducing the costs of processing paper coupons.”
The solution is a comprehensive, flexible and consumer-specific multichannel offer management solution. Retailers can craft incentive offers based on many factors, including basket size, item mix, loss leaders or other parameters. The promotional message can then be delivered across multiple channels, including email, the Web and the point-of-sale. The solution allows retailers to coordinate and manage offers, loyalty programs or incentives and then view real-time results.
“Consumers continue to demand faster, easier and more convenient ways to shop and do business with establishments that they feel deliver greater value,” said NCR Advanced Marketing Solution General Manager Adam Blake. “The solution can help retailers deliver this enhanced value and unify their marketing resources to engage shoppers through many channels – online, in the store or even through mobile devices - with personalized, multichannel offers. This ability can improve the overall customer experience and enhance the effectiveness of loyalty programs.”
‘Price Lock’ at BI-LO
Price Lock, a new consumer savings program at BI-LO, locks in savings on thousands of products store-wide at a set price for an eight-week period with the use of the My BI-LO BONUSCARD. The program gives consumers the flexibility to shop when it’s most convenient for them.
Michael Byars, President & CEO, says BI-LO is working to deliver real savings and real
fresh goods along with a dedication to its customers that extends beyond the expected promotional pricing.
Gas Programs Rolling
Loyalty programs that link grocery purchases with discounts at the gas pump are on the move. After a local test with Rainbow Foods in Minnesota, BP is rolling out its program nationwide. Shell and Kroger are launching their own version.
Under a program called Fuelperks, Minnesota Rainbow Foods stores offer a 10-cent-a-gallon discount for every $50 spent at Rainbow and give consumers a plastic discount card containing a computerized ID number. Shell Oil’s program with Kroger has debuted in five markets in
three states.
Brookshire Leverages Data
To enhance its ability to leverage shopper card data, Brookshire grocery chain has partnered with Spire, which will provide analytic and technical resources. The alignment is designed to enable the chain to significantly improve the insights generated from shopper card data, both inside the company as well as with trading partners.
Spire’s Loyalty Panel combines the shopper data from retail partners to provide significant insights into consumer behavior. The company says its manufacturer partners have leveraged the panel to identify key consumer trends and evaluate consumer impact of various marketing levers such as FSIs, CRM programs and digital marketing.
FEBRUARY 2010
Loyalty Programs Reward Consumers,
But Fail to Connect Fully with Them: Study
By Rose Anthony
Are marketers getting all they can from loyalty and rewards programs?
Sure, they spark business growth, and customers like the discounts and deals that come from participating in these frequency programs. But a new report from the Chief Marketing Officer (CMO) Council indicates that marketers are under-valuing these often costly programs. Customers and marketers agree that deeper engagement and personalized contact drives loyalty, not mass blast communications and gimmicks.
The Leaders in Loyalty: Feeling the Love from the Loyalty Club is the latest research from
the CMO Council, tapping into the insights of over 600 marketers, and gaining first-hand perspective from the recipients of these programs in an audit of over 700 consumers.
Sponsored by InfoPrint Solutions Company, a joint venture between Ricoh and IBM, the study shows that loyal consumers expect marketers to understand them better and deliver more relevant and valued offers. Unfortunately, marketers are not giving themselves high marks in meeting the needs of their business, and question their ability to meet the needs of the customer. In fact, the study raises questions about the value and return on investment (ROI) in this area of customer relationship and insight building.
Marketer’s View
Six of ten marketers (61%) believe that participants in loyalty program are the best and most profitable customers. So it is not surprising that an almost equal number of respondents (65%) view customer loyalty program investments as a very essential, or a quite valuable part of the marketing mix.
Unfortunately, only 13% of respondents believe they have been highly effective in leveraging loyalty and brand preference among club members, and nearly 20% don’t even have a strategy for this. Another 25% admit they have not mobilized brand loyalists to become active advocacy agents, either.
The study also found that marketers are mostly inducing loyalty with discounts or free products and premiums rather than quicker, better service or improved customer handling. Four of ten (39%) of respondents view discounts and savings as the key member benefit, a third (34%) view free products and premiums as essential incentives, while a third (33%) are committed to offering points for merchandise redemption as a further motivator.
When asked to outline typical customer complaints about loyalty programs, nearly three of ten marketers (30%) report that some customers see little or no added value to becoming a loyalty member; a quarter of them (24%) indicate rewards lack substance; a similar percentage feel they don’t get enough personalized attention; and 21% have problems with receiving too much spam email and junk mail. Customer complaints also touch on a lack of individualized communication (23%) and issues with redeeming points and miles (18%).
Despite these challenges, investments in loyalty programs will continue as nearly eight of ten (80%) of marketers are committed to maintaining or further funding loyalty programs as customer retention and relationship building vehicles. Over a third of then (34%) report they are significantly increasing their commitments, and nearly half (45.9%) maintaining their current commitments. Just 4% expect to discontinue their programs.
Online channels dominate expected investments as nearly six of ten (60%) of respondents said they planned to make better use of the Web and new community and networking tools to grow and develop loyalty programs. Other key actions for generating a greater ROI from club members include:
- Personalizing interactions and target messages (51%)
- Increasing frequency and relevance of communications (39%)
- Gathering more insights and intelligence for better customer handling (38%)
- Adding new benefits, incentives and inducements (36%)
- Studying industry best practices and making adjustments accordingly (19%)
Marketers appear to be failing to extract greater value from customer loyalists. When it comes to in-depth profiling of customers, the vast majority of marketers still only aggregate and analyze limited customer data sets. Three of four (73%) collect basic demographics and nearly seven of ten (68%) track the location of members. However, critical insights – such as advocacy rates (14%), brand loyalty and attachment (27%), personal preferences (31%), satisfaction levels (33%), and product preferences (38%) – are not being leveraged.
“Relevant profiling data continues to be a limiting factor in customer engagement,” said Donovan Neale-May, executive director of the CMO Council, “Without a deeper customer insight, marketers will be limited in their ability to do meaningful predictive modeling, market segmentation and revenue forecasting. Better understanding of customer behaviors, predispositions, intentions and preferences enables more effective and relevant messaging.
It is also an essential part of customer revenue optimization and lifetime value building,”
Neale-May said.
The study found that loyalty program operations are increasingly challenged. Acquiring and retaining motivated and engaged participants is the number one problem facing half (46%) of marketers. Other obstacles and issues include:
- Measuring marketing value and effectiveness (42%)
- Collecting, integrating and maintaining customer data (41%)
- Deriving valuable insight and intelligence (38%)
- Delivering more personalized offers and inducements (34%
- Creating more customized communications (33%).
Digital marketing channels are definitely taking precedence in ways marketers promote their loyalty and rewards programs, according to study respondents. Nearly six of ten (60%) rely on web sites, nearly 60% on email, 47% on word-of-mouth, 46% on point-of-sale information, 42% on direct mail, and 39% on a sales or service representative. Most member communication is monthly (30%), while 20% interact with members on a daily, weekly or bi-weekly basis. Cost-efficient email is the preferred mechanism for member communication among 84%of marketers, followed by printed mailings and statements (51%), corporate web sites (45%), dedicated club sites (32%), SMS text messaging (24%), and social networks (16%).
“Targeting has taken on a very different meaning in today’s marketing mix,” said Sandra Zoratti, vice president of Global Solutions Marketing for InfoPrint Solutions Company. “Before, targeted messages relied on basic data to engage in rudimentary segmentation and single channel communication delivery. Today’s loyalty leaders are better leveraging customer insights to deliver highly personalized, multi-channel communications that are more relevant to the individual customer and provide for ongoing interaction and attachment.”
Consumer’s View
Respondents report they see value in loyalty program membership. Eight of ten (79%) say they are very, or pretty, satisfied with their loyalty and rewards program experiences. But
seven of ten (70%) want to see more discounts and savings, and half (52%) want more compelling personal deals and offers as rewards for steering their business to loyalty program operators. In a definitive call for personalization, nearly six of ten respondents (58%) say they want more compelling personal benefits and services, as well as more relevant offers or individualized deals.
While social media tops the list of investments for marketers, consumers report that point-of-sale (POS) information, service representative interactions, company web sites and word-of-mouth are the primary sources for learning about loyalty clubs. Nearly 65% found out about the programs in stores, compared to only 4% in social media networks, 3% in blogs and 11% in online advertising..
Too much spam and junk email topped the list of negatives associated with loyalty and rewards program membership (44%), followed by too many conditions and restrictions (38%), and rewards that lacked real value (37%). Other prevalent beefs included members having a hard time redeeming points or rewards, program membership lacking value, as well as communications and service not being personalized or targeted specifically for members.
More than 700 respondents took part in the online research conducted in the third and fourth quarters of 2009. Over half (50%) had household incomes of over $100,000 and were fairly evenly split across gender and age groups. Nearly three of four (75%) reported enrollment in supermarket loyalty programs, 69% in airline frequent flier clubs, and 58% in credit card incentive programs. Drug stores, warehouse price clubs, specialty retailers, hotels and motels, rental cars and restaurants are other providers of loyalty programs.
Surprisingly, the poor economy is not necessarily inducing consumers to sign up for loyalty and rewards programs. Only 22% said the economic climate had raised their interest in these programs compared to 41% who indicated it had no impact at all.
“It is notable that the economy is not a big driver of program participation, indicating that as marketers look to recovery, fully leveraging these programs must be a strategic priority,” said Neale-May. “Figuring out ways to deliver added value to those willing to repeatedly purchase your products and services, advocate your brand on a viral level, or more actively respond to offers and incentives, is critical to marketing effectiveness.”
For marketers, a key question is how much loyalty club membership influences purchasing decisions and customer affinity and attachment to brands. Club membership strongly motivates, or is a big factor, in influencing buying decisions, for half (52%) of survey respondents. When it comes to word-of-mouth, nearly 20% of club members say they are big brand boosters and almost half (50%) say they sometimes talk up the product or service they support. On the other hand, 54% said they would give up their loyalty or rewards club membership if they had a poor product or service experience with a brand.
