Yes, retailers can also reward non-transactional behaviors
Keith Lu, Senior Business Analyst, Global Solutions, LoyaltyOne
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.
Most loyalty programs boil down to incentivizing customer transactions with rewards — make a purchase and receive a point, free item or coupon. But beyond the traditional system, a big opportunity lies in rewarding shippers for non-transactional behaviors to enhance their overall shopper journey.
The first step in moving beyond transaction-based incentives is quantifying value. Quantifying the value of a transaction is straightforward — the value is guaranteed. But understanding the value of incentivizing non-transactional behavior in the pre-transaction and post-transaction phase is more difficult because the result of those efforts is expected value, not tangible.
As an example of expected value in practice, a store selling widgets for $10 attracts 100 potential customers and sells 10 units in a single week, implying that each customer has an expected value of one dollar. To remain profitable, an incentive value from zero to $1 per customer can be used to increase foot traffic (and, accordingly, sales). It may seem illogical to reward a customer for walking into a store or watching a commercial, but non-transactional behaviors can indirectly impact sales.
The next step is uncovering which non-transactional behaviors drive sales by analyzing your customer data:
- Does your customer data suggest that a group of customers are more likely to make purchases after sampling? If so, tying loyalty rewards for trialing products could accelerate customers in the pre-transaction phase and increase their probability of a purchase.
- Does customer feedback indicate returns are driven by a lack of product knowledge and a failure to realize value? Offering rewards that incentivize their use several times post-purchase could reduce returns by reinforcing the purchase and preventing buyer’s remorse.
- Are Millennials indicating they trust online content produced within their own networks over traditional advertisements? Rewarding customers who generate and share trustworthy online content on social media could be a more effective way to attract new customers and potential sales.
At the end of the day, what you do before and after the point of purchase is fundamental to ensuring that transactions both occur and reoccur.
- Using Loyalty To Incentivize Non-Transactional Behaviors – COLLOQUY
DISCUSSION QUESTIONS: What advice would you have for retailers trying to drive loyalty through non-transactional behaviors? Can you add any other effective ways of rewarding non-transactional behavior? Is the outreach opportunity larger pre-transaction or post-transaction?
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14 Comments on "Yes, retailers can also reward non-transactional behaviors"
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Cofounder and President, StorePower
In addition to thinking about how any consumer action enables me to reward that specific consumer, I would also push retailers to think about how the given action of one consumer may create value for other consumers. I would be happy to reward a consumer whose actions deliver no incremental value on him/her but enable me as a retailer to learn something that could be replicated and applied to other consumers.
Podcast Host, Retail Influencer, Fractional CMO
Interesting. I would suggest to retailers that they revise their terms and expectations.
“Loyalty” isn’t really a thing anymore. Points systems only work for some folks. I think that the interesting spin on this is to get retailers to look at referral programs and affiliate links and think about how they take those to their advantage.
Where multi-channel gets very interesting is taking the experiential and pairing it with influencers for compelling referral/affiliate programs. Now a retailer is finding influencers who are committed to getting the best products to their readers focused on their business.
EVP Thought Leadership, Marketing, WD Partners
Rapha, one of the best brands out there (cycling), invites folks to “just ride with us.” They call their stores “clubs” and serve coffee, organize rides and provide a great place to hang out, chat and check out the latest products. They also produce world class videos of people riding in exotic places and conditions that NOT ONCE ask you to check out product or buy something. This is the future of branding: join us, be with us, be in our “club” — let the purchase come later. Because if you feel like you belong in their club, you will definitely buy something — it goes without saying. Brilliant.
President, Integrated Marketing Solutions
The best advice is: Loyalty is earned, not “driven.”
Director, Solutions Marketing with Alteryx
There’s a lot of evidence to suggest that loyalty is a function of customer experience, not a reward system. Rewards can play a role in overall marketing to high value customers and to spur infrequent customers to spend more. Rewards themselves can be some combination of monetary value (discounts) and more qualitative benefits. The outreach opportunity varies by customer — the key is to use analytics to identify key moments of truth to engage your customer.
Research proposes that purchase decisions, even for current customers, happen in the consideration phase where a customer can evaluate many options very easily. The one they choose is probably not going to be grounded in a transactional-based loyalty program given the intense price competitiveness in many retail segments. Whoever wins with this customer will offer the optimal blend of price and experience.
Principal, Anne Howe Associates
The biggest impact on business results can be realized through peer to peer sharing and content development that provides value to other potential customers. People tend to trust each other more than brands and retailers that “talk at them.”
That said, I believe more than just Millennials see value in content produced within their own networks. The younger Gen Z group is even more focused on sharing value. Thus, retailers need to get in early on using platforms that enable and reward sharing value and information across both their current and future customers.
Strategy & Operations Transformation Leader
Loyalty in today’s consumer-dominated market should extend well beyond pure sales transactions. Experiences matter and consumers are seeking a level of appreciation you are unable to achieve online.
Pure transaction-based loyalty programs are effective, yet this doesn’t solve the challenge of actually knowing who your consumers are. Predictive analytics and consumer insights are the solutions necessary to really know who your customers are. This will help you better understand what drives and motivates them to come to the store, what intangible experiences they are seeking beyond the loyalty program points, discounts, etc.
Perhaps it’s just a recognition of who they are as an individual … even something as simple as offering a cup of coffee, smiling and being appreciative that they took the time to come to your store. Non-transactional relationships will ultimately lead to those treasured transactions.
Principal, PII - Retail
This is about a clear as pea soup. I’m not getting the rationale behind some of the math in the examples given (each customer has an expected value of $1, so spending between 1 cent and $1 on incentive keeps the sale profitable?). It would seem obvious that incentivizing pre- and post-sale activities could impact purchasing behavior. But how do you do it without heavy resourcing in people or dollars that would then surely drive down profitability? If I were to delve into this I’d say that post-transaction is where I’d invest. Keeping something sold is always a better investment than trying to sell it in the first place.
A process for interacting with shoppers on several different levels is more important than ever given the changing dynamic of retail and continued consolidation of the retail marketplace into larger and larger retail chains. Retailing can be impersonal and associates are not always driven to help customers above and beyond the minimum required. In at least some way, a process for getting closer to the shopper in non-transactional ways is like the strength that an independent or local retailer traditionally has had over a chain store operation — the independent can interact with the shoppers in a myriad of ways and lock them into the store.
EVP of Business Development
Loyalty is a journey, not a destination! Brands need to understand that customers want to interact and engage with brands in the manner they prefer and place tremendous value to brands that recognize and engage in a manner the customers prefer. This requires both a holistic and granular approach to include non-transactional behaviors. Reminding customers and rewarding them for interacting with the brand in their preferred manner reinforces the customer behavior that they have made the right choice by choosing the brand. That reminder or reward demonstrates the loyalty of the brand to that individual customer and the customer is loyal to the brand.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Managing Director, Retail and Consumer, PK
We are working with several retailers right now that are revamping their traditional points or coupon based loyalty programs and moving to a model based on engagement like the one described in the article.
Several reasons this is a trend. First, building engagement into the program creates a much richer customer data set to help the retailer truly understand their members and their browsing, buying and social behavior. Second, a well executed engagement based program drives emotional loyalty which has a greater impact on lifetime value and retention than behavioral loyalty alone. Third, increasing engagement has been shown to drive revenue and retention.
Some brands that are introducing a loyalty offering for the first time are eschewing the points based model altogether in favor of membership programs that are completely centered on engagement along with access to products and experiences. Nike’s announcement today of Nike Plus Unlocks is the latest prominent example of this approach.
Strategic Market Communications, Upstream Commerce
My advice would be to pay close attention to the last part of this summary: uncovering which non-transactional behaviors drive sales by analyzing your customer data. That was by far the most interesting and rewarding procedure a retailer could pursue!
Director of Product Management, Voyager Labs