IMV4 : Loyalty Programs

The following is a transcript for IMV4 : Loyalty Programs. The original podcast is located here.

Announcer:

Welcome to the Internet Marketing Voodoo podcast brought to you by MindComet. And now, here’s your host, Ted Murphy.

Ted Murphy:

Welcome to Internet Marketing Voodoo Episode Four. I’m your host, Ted Murphy, and with us today is Michael Friedman. Michael is Director of Interactive Marketing Services for Darden Restaurants. Mike joined the Darden team in 2001 as an Internet strategy developer and brand manager for Red Lobster. Welcome to the show today, Mike!

Michael Friedman:

Hey! Thanks for having me Ted. I appreciate it.

Ted Murphy:

Mike, today we’re here to talk about loyalty programs, and I know that Red Lobster has a pretty extensive loyalty program. And Darden restaurants, in general, use programs in a variety of different capacities. I’m happy that you’re here to talk on the show today because I think you’ve got a lot of experience with loyalty programs, and I wanted to ask you, how do you determine if your company should establish a loyalty program?

Michael Friedman:

Well, there are lots of different factors, Ted, that really go into driving the creation of a program, the exploration of a program. Primarily, there are factors that are driven by the consumer end of the equation, as well as factors that are driven by your company itself. On the consumer side, first and foremost, is there a genuine interest? And how do you know there’s an interest? Can they get the same or better services somewhere else? Is there potentially a void in the marketplace? And do your customers ask? Do they walk up to the counter and say, “Hey, wouldn’t it be great if you did this?” Or, “I’d come more often if this.”

And you’d be surprised at how many consumers will volunteer that information, and once you have that piece in hand, you can kind of couple that from your own company side, which is taking a look at the space itself. And say, “Hey, is there a 500 pound gorilla in the space doing it well, consistently?” ‘Cause if so, I may not want to go up against them. I might not want to bite off more than I can chew, but at the same time, is there a potential for some kind of competitive advantage if I do it right? And with that, my interest in creating the program, are they driven by my interest in retaining customers, growing the customer base, simply, increasing sales of current customers or customers in aggregate? Or is it simply a research initiative? And that’s something that people discount pretty regularly, which is loyalty programs are generally thought of as ways to drive some type of sale equation, but they can quite extensively and effectively simply for research, which is used in other areas. So, there are all kinds of things to consider.

Ted Murphy:

Absolutely. When you were looking at putting this program together for Red Lobster and for other Darden Restaurants, were you seeing that most of the people and the feedback you were getting was actually at the restaurant? How can someone who maybe doesn’t have a physical location gauge that? Would you suggest doing things like online surveys or doing customer surveys over the telephone? Or what types of additional things can they do there?

Michael Friedman:

First and foremost, obviously you can use surveying, polling, everything from, you know, email surveying and polling to online Q&A, quick and dirty questions in various content areas. You can use traditional methods like phone polls and direct mail response polls. You’ve got frontline employees potentially, people in your call center who may be answering guest questions or guest feedback, any way you’ve got a consistent touch point with the consumer. Generally, you don’t want to tap into a resource that is far and few between. So, if you’ve got, you know, somebody who has a dialogue with a consumer once every three months, six months, that can be a pretty biased sample. But if you’re talking to somebody who is, you know, hearing it from guests every day or a man on the street who’s visiting retail locations every day or even a secret shopper of sorts, who might in one of your locations just observing, those could all be pretty good sources of understanding consumer dialogue and consumer interest.

So lots of different ways. They don’t have to be terribly automated. They can be pretty cut and dirty, and if you’re a sole proprietor, you know, owning a business, just the ability to have interaction or dialogue with the consumer once in a while can tell you a lot.

Ted Murphy:

What about hesitations that a company may have? I mean obviously you’re talking about going out there and gauging the market and making sure that your solution might be viable. But what are some of the things that you’re gonna run up against? What are the roadblocks?

Michael Friedman:

Start-up costs are always an issue with any kind of new marketing program, you know, those infrastructure costs, whether you do a technologically involved and integrated program that may tie to your point of sale system or tie to your email or data warehouse or whether you do really a cut and dried punch-card type activity where you’re printing off some pieces and badges and giving people stamps when they walk in and out. Regardless, there are gonna be start-up costs associated with that. There’s gonna be costs for the infrastructure. There’s gonna be costs for advertising that you’ve got a program, and most likely, depending on the size of your organization, there’s gonna be some costs associated with training and making sure the people that are coming in contact with your customers know how to speak to the program, can answer questions about it, and can communicate it as if to encourage people to join.

Those are big things in terms of understanding the costs. Will there be commitment to it beyond day one? The question is, is this something that we’re committed to because, you know, growth doesn’t happen overnight in these programs. You don’t see, necessarily, all the factors you desire to see, you know, in the first 30 days. So do you have the commitment both from a management standpoint, perhaps from a funding standpoint or you know, a frontline employee interest standpoint to keep it going?

Ted Murphy:

How long are you typically gonna look at a program like this before you’re gonna actually see a return and see some tangible benefits back to the organization?

Michael Friedman:

Well, I think it depends quite a bit on your individual sales cycle. You know, I would say if you’re somebody in a high volume, high frequency, transaction business, such as a convenience store or a gas station, you can probably see patterns of behavior change pretty rapidly, maybe 60 to 90 days. But you know, if you’re an automotive dealership, where your average car buying cycles three-plus years, you’re definitely not gonna notice changes that quickly. You may notice them on the maintenance side or the service side of the equation, but it’s definitely gonna depend a lot on your individual sales cycle.

I’m a firm believer that you need a good period of baseline data. So if your average consumer is coming in once a month, I would want at least three months, a good quarter of behavior under my belt to help me understand any kind of basic trends that my consumers follow from a purchasing behavior standpoint or a frequency in visit standpoint before I would start to say, “Hey, this is starting to make a difference over time.” The challenge you run into if you don’t have a good baseline of data is you be easily swayed by things in seasonality that could hurt or help you. You know, there’s lots of different little pieces, cultural events, gas prices. You have to have those throw your program off or give your program and artificial boost because it’s just not gonna do you any good for the long-term.

Ted Murphy:

Absolutely. You mentioned earlier that email marketing can be a component of a loyalty program, and I know that you guys use that pretty extensively in the loyalty programs that you implement. Tell me what ways you’re implementing email marketing, and what types of results are you seeing as a result of that?

Michael Friedman:

One of the things that email is incredibly powerful for is to really just kind of bridge that gap between the times a consumer traditionally touches your brand. So you know, if you’re in a department store setting and your consumer’s coming in to buy school clothes during one season and Christmas gifts during another season, you potentially have two months or more between touches for that consumer. Email is a great way to kind of bridge that gap, keep a consistent dialogue, in between times. And you can use email very softly to personalize, not overtly commercializing the experience, but recognizing people by name, automating the little touches.

Just think about how important it is or how impressed you are when you walk into a meeting or run into long lost friends of friends of friends who remember your name and you know, remember some odd fact about you from whenever last time you met. You always usually impressed by these people who can kind of rattle off names or rattle off, “Hey, yeah. We ran into each other in Reno,” or whatever it may be. The same thing goes to be said about how email can kind of bridge some of those gaps. It keeps your brand fresh in their mind. It’s the ability to say things, sometimes a little bit overtly, but at the same time, you don’t have to be as hard of sell because in essence, it’s you one on one with the consumer there. So you know, recognizing people by name, saying thank you after they’ve come in to visit or bought something, perhaps, and then asking their opinion. I mean use it to solicit feedback in small batches, whether it’s through a question or, “Tell me more. Give me your thoughts.” Or, “What do you think of this?” Just those kind of probing things can really kind of help keep someone interested to the point where they start looking out for how they may have affected the brand.

Ted Murphy:

And along the personalization lines, I believe that you guys actually do things in your Red Lobster restaurants where you’ll actually put people’s names up on the plasma screens in the restaurants?

Michael Friedman:

The ability to integrate technology can be a real good thing. There are definitely plenty of articles about there about when it becomes “big brother,” and you do want to be careful, you do want to be sensitive to that. Consumers don’t want you to talk about sensitive information around income, around sex, education. A lot of those things are kind of taboo, but you know, recognizing somebody when it’s their birthday and putting their name in lights or giving them a special benefit for being a part of something, yeah, I mean that’s something that can go a long ways. So if you’ve got the ability to integrate your email program or your online program into something a little bit more traditional, such as you know when somebody checks out at the department store and swipes their credit card or swipes their loyalty card, recognizing, “Hey,” you know, “how did that gift work out last time for your nephew?” Or, “Are you excited that Johnny’s going off to college?”

Those are things that can be personal experiences that are usually somewhat joy-inducing and show that you just kind of care as part of the sales cycle. So again, I wouldn’t advocate saying, “How was that bottle of wine you bought for your mistress last time you were out on the town?” Just understanding that you’re looking out for me, you’re there and you’re watching to make sure that I have a good experience. I mean, I think that’s the key takeaway.

Ted Murphy:

And you kind of mentioned the ability to get key information like sex and income. What types of things have you guys been able to gather, in terms of information, from your customers using your loyalty program?

Michael Friedman:

Well, I mean, one of the things that we try to do is really build the data profile over time in very, very small doses. While we will have the occasional all-out ten, 15, 20 question survey, which is very cut and dried and to the point and has a lot of those demographic and psychographic questions. You’ve also got things like, you ask a poll question which is, “What do you like to do when you’re at the beach?” And four easy choices: one might be build a sand castle, one might be read a book, one might be play Frisbee, and one might be have a Corona. And on the surface, do you get a lot of information by asking that question with those four answers? Possibly not, but in conjunction with other information, it can be very leading and telling stuff.

So if you build a sand castle, you might realize that, you know what? This person is family-oriented. They’ve taken vacations associated with family, and they actually don’t mind getting dirty in the sand and playing. They’re reading a book. Are they introverted? What other types of hobbies and activities go along with people who book read? And you can start to build that data profile by asking very unassuming questions and learning more about your consumers that when you piece them all together tell a much more holistic story.

Ted Murphy:

Yeah, and I think that that’s a key thing you just mentioned there, is getting that information in very small pieces. So it really is an investment from the marketer’s standpoint in that it’s gonna take some time before this program is really gonna deliver the results that you’re looking for because you’ve got to get that information in small pieces.

Michael Friedman:

It is. I mean, I’ve always been amazed though, at the same token, how many people will sit through a 20 minute telephone survey. And you know, some people sit through it and then get off the phone completely frustrated, “I can’t believe I just wasted 20 minutes.” Other people don’t have an issue with that, and I think it has a lot to do with the approach and the honesty of the person who’s actually administering the survey. If someone came on the phone to you and told you, “I’m gonna ask you some questions about your habits in buying an automobile and your preferences. It’s going to take 15 minutes, but the information we use is gonna be for this purpose, and as a result of taking it, I am going to give you X or your information will be used to further product development,” whatever it may be. If you’re very honest and open on the front-end, I think there are still plenty of consumers who will answer some of those tough questions. They will sit down in a batch and take the survey, and I think you can do it, as long as your approach is very honest and genuine. Don’t trick people into answering 25 questions.

Ted Murphy:

So what are the top three most important things to know before developing a loyalty program?

Michael Friedman:

First and foremost, I would say you definitely want to know your audience. Not every audience is unique and not every audience is similar to those who are necessarily running the brand or running the organization. So just be conscious of what your audience is looking for, and that goes to everything from, do they want “big bang” type opportunities? Do they want small little pieces? What really motivates them?

Because the second piece, I would say, is behavior follows rewards. People will do amazing things when the reward or the “carrot” is in touch with their lifestyle, and no everybody is motivated by the same things. So you’ve got the basic principle where people get discouraged sometimes which is, “You know, I really gotta have a loyalty program with nothing but rewards related to my brand.” Or, “I’ve gotta have a loyalty program filled with rewards that are so pie-in-the-sky, send a man to the moon, kind of events,” that you really put something out there that you can’t achieve. You’ve got people out there who are collectors and will keep points for years and years and years to take that trip around the world, and you’ve got people who are spenders, who will cash in points tomorrow for one month of People magazine.

So understanding what people’s needs are and that they vary is incredibly important because people are motivated by all kinds of things. Some are motivated by faith, and some are motivated by family. And some by money, and some by fame, and some simply by somebody recognizing who they are. So that behavior follows rewards piece is incredibly important.

And the last piece, I think, is more just a general principle, not just for loyalty, but for any kind of communication you do, online especially, which is just respect your audience. If they’re given you five minutes of their time, respect that they gave you five minutes of their time. Don’t take six; don’t take ten. And if they told you they wanted to communicate twice a month, don’t take liberties and make it three because you think you’ve got something really important to say. And at the same time, if you don’t have something to say twice, say it once. So to that idea, just understand what kind of commitment they’ve made and what kind of commitment you’ve made to them and really try to stay true to that.

Ted Murphy:

Mike, it has been incredibly informative, and I appreciate the time that you spent with us today. Hopefully we can have you back on another show in the future to maybe talk a little bit more about your email program.

Michael Friedman:

No problem. I appreciate it, Ted. Thank you very much!

Ted Murphy:

And to our listeners out there, you can download a PDF of the top ten things to know about loyalty programs from our website. That’s internetmarketingvoodoo.com, and we look forward to seeing you again next week!

Announcer:

For more information on this week’s topic, visit internetmarketingvoodoo.com. This podcast has been brought to you by MindComet, the Relationship Agency.

[End of Audio]

Marketing Resources
Download Top 10 Things to Consider Before Starting a Loyalty Program (PDF - 684KB)

Listen to the Loyalty Programs podcast.

Contact MindComet about creating a loyalty program for your organization.

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loyalty programs, customer loyalty, loyalty marketing, consumer rewards