How sub-programs are maximizing customer loyalty

Discussion
Jun 08, 2015

Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty marketing publishing, education and research since 1990.

An increasing number of companies, particularly retailers, are launching sub-programs that target specific sectors of their loyalty base.

When well executed, these initiatives, such as Kmart’s recently launched Shop Your Way Pharmacy Rewards, Best Western’s Ride Rewards with Harley-Davidson or GameStop’s PowerUp Pro, can increase memberships, goose up shopper frequency and encourage positive word-of-mouth when well executed.

The question of execution has been the challenge, however, and often a roadblock for many loyalty marketers. In an increasingly crowded field, organizations tend to catch "me-too" fever and roll out new concepts before completing due diligence, experts say.

"A lot of people rush into creating a lot of sub-programs," said Rachel MacQueen, vice president of marketing at LoyaltyOne, operator of Canada’s Air Miles coalition loyalty program. "You need to have careful consideration before you do that. It adds complexity to your program; it adds complexity to your messaging."

GameStop Powerup Pro

Source: gamestop.com/PowerUpRewards

Avoiding major slipups requires making two key steps: first, determining if a viable sub-loyalty market exists; and second, charting out a brand-tailored implementation strategy.

A key attraction of sub-programs is that they help to distinguish broader loyalty programs from rivals while encouraging members to concentrate their spending on one brand, said Oleg Urminsky, associate professor of marketing at the University of Chicago Booth School of Business.

"A sub-program makes sense when it allows you to better target a segment for whom the current program is not working so well," he said.

A sub-program can also play up the benefits to more dedicated members, while also meeting the needs of the organization, said Suzanne Tameler, director of loyalty at GameStop.

GameStop’s PowerUp Rewards Pro, for instance, is a fee-based ($14.99 a year) offering of its larger PowerUp initiative designed for more dedicated gamers. Among the added benefits are bonus points, special discounts and a subscription to Game Informer magazine.

"Loyalty does not exist in a vacuum; a loyalty program must be part of the overall shopping experience, it does not fix a bad product or poor customer service," Ms. Tameler said in an e-mail.

She adds that it is important to understand the financial components, revenue implications and the associated expenses of the initiative. Once a need is determined, the organization can establish whether the difference in the group’s behavior would deliver the volume a program requires, Ms. Urminsky said.

What do you see as the pros and cons of sub-programs in improving customer loyalty? What are some steps for stores to avoid conflicts and complexities with existing loyalty programs?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Simply adding coalition or reward partners and offering their content to the entire membership hoping the something sticks is a dangerous strategy."
"Twice, I’ve been persuaded to upgrade to sub-programs with promises of better service and greater relevance only to be disappointed with the results—very disappointed. One did not deliver on the promise, and the other actually managed to turn me away from the brand."

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11 Comments on "How sub-programs are maximizing customer loyalty"


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Max Goldberg
Guest
6 years 11 months ago

As loyalty programs become more costly and complex, consumers have more reasons to turn away from them. At this point it seems that every retailer has some sort of loyalty program. How many of them really drive loyalty, increased consumer spending and greater profits?

Ryan Mathews
Guest
6 years 11 months ago

The “pros” obviously center around the ability to grow share on a selective basis without having to offer discounts to existing customers or wasting money on “shotgun” promotions aimed at no real group of customers.

The “cons” are misidentification of the markets, unintended consequences (imagine how Best Western would feel if it began attracting outlaw bike clubs) and of course, successfully attracting customers but then under-delivering on product, services and/or experiences.

The real problem is captured in the second question. Making sure a sub-program doesn’t, in fact, compete with existing offerings requires very sophisticated analysis and program design — perhaps a bit too sophisticated for many retailers.

Mark Heckman
Guest
6 years 11 months ago

One of the biggest mistakes early loyalty programs made was not using the resulting customer data in such a way as to increasingly customize offers and messages. Simply adding coalition or reward partners and offering their content to the entire membership hoping the something sticks is a dangerous strategy.

Complexity, conflicts and confusion are three really bad elements of a loyalty program. Consequently, adding partners and their content runs the risk of over complicating the message to the member and the entire value proposition of the program. Content and reward partners should be thoroughly vetted for compatibility. Their content should be DIRECTED to the members who have the profile or the stated interest in receiving such, not blasted to the entire membership.

This counsel sounds intuitive, but years later programs continue to make the mistake of not permitting the data to drive the content.

Gordon Arnold
Guest
6 years 11 months ago

There is nothing people like to do more than play games and surf the net for news and deals with their favorite IT connection device. Much of what they search for is a good deal for something desired but not necessarily needed. The attraction to a new site wears off quickly as the passion to search continues. This may explain the surge in different looking “me-too” sub-programming offers. As for the future of these offers, let us remind ourselves that old age and significant changes in tech offerings within the IT market are measured in months, not years or decades.

Grace Kim
Guest
Grace Kim
6 years 11 months ago

Unless sub-programs provide a clear and definitive VALUE to the customer, it would be a misstep for a retailer to add to the overwhelming versions of loyalty programs existing today. Retailers who focus more on delivering a great, consistent customer experience and customer service will naturally drive more loyalty without such “loyalty programs.”

Tony Orlando
Guest
6 years 11 months ago
As a small business owner it is overwhelming to me just keeping up with all the new loyalty programs being created each day. Add in the trillion new apps available and you can spend all your waking hours trying to decide how to run your business. As a panelist, my response is trying to keep it simple, as in my opinion offering great deals to the general public works well. A sub-loyalty program for me can be offering credit to local churches and charities by offering a line of credit to them, along with discounts on products they can use to raise funds, without any cash up front. Facebook can target different consumers based on unique offerings we post every day, and the customer can choose to purchase a variety of limited-time offers, which create traffic. Loyalty or sub-loyalty programs all require time and effort along with investment, so a program needs to reach the right target to get a return on investment. Choose wisely and stay on top of it, or it will not… Read more »
W. Frank Dell II, CMC
Guest
6 years 11 months ago

Sub-programs are not new. Tesco years ago divided their members into 5 groups and built a program for each group. The key is understanding and defining the sub-consumer group, then building a meaningful program for each group, and continuing to keep making fresh each program. A problem arises when there is an overlap. This must be managed well, so as not to upset any consumers.

Shep Hyken
Guest
6 years 11 months ago

Not all customers are the same. I like sub-programs, or whatever you want to call them, if they make customers feel special, unique and appreciated.

Carlos Arámbula
Guest
6 years 11 months ago

Twice, I’ve been persuaded to upgrade to sub-programs with promises of better service and greater relevance only to be disappointed with the results—very disappointed. One did not deliver on the promise, and the other actually managed to turn me away from the brand.

So long as the program delivers on the promise, the pros are many. But fail to deliver, especially if it means an additional fee to loyal consumers, the cons can be devastating.

Camille P. Schuster, Ph.D.
Guest
6 years 11 months ago

The biggest challenge will be keeping track of which consumers are in which program and have received and/or responded to which offer. Consumers are multidimensional and consider themselves part of many groups. Targeting specific groups makes sense. Finding software to keep track of these activities will be critical for success.

Fred Johnson
Guest
Fred Johnson
6 years 11 months ago

We use a CRM program that’s versatile, easy to use and surprisingly, not expensive. We agree that the whole shopping experience is our target and find that we don’t need sub programs with their extra costs as our whole program drives new customers to us. Perhaps we are trading in a less sophisticated market than yours, here in South Africa? We have a system of “hubs” with like minded members, and all benefit. A different business model?

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Braintrust
"Simply adding coalition or reward partners and offering their content to the entire membership hoping the something sticks is a dangerous strategy."
"Twice, I’ve been persuaded to upgrade to sub-programs with promises of better service and greater relevance only to be disappointed with the results—very disappointed. One did not deliver on the promise, and the other actually managed to turn me away from the brand."

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