What Loyalty Program Penetration Rate Increases the Likelihood of Sustained Success?

That question was one of several answered during Tuesday’s Loyalty360 webinar titled, “The Loyalty IQ Challenge: Five Lessons for Loyalty Pros,” which was presented by Paytronix.

Kimberly Otocki, Content Marketing Specialist, Paytronix; and Stephen Stone, Content Marketing Specialist, Paytronix, were the featured webinar speakers.

Otocki and Stone recommend that brands should target low frequency customers: If your loyalty penetration (the number of transactions that you receive from your loyalty program compared to non-loyalty transactions) is 10 percent, you’re only targeting your best customers.

“We usually recommend hitting a loyalty penetration rate of at least 15 percent,” Otocki told attendees. “And, of course, ideally, it would be much higher than that.”

Why should brands strive to hit 15 percent?

“Because once you hit that 15 percent, you are at a critical mass and good things start to happen for your brand,” Otocki said. “All your cashiers and workers start to promote the program more and more. They are more likely to encounter at least one loyalty member per shift, so each team member needs to quickly learn about the program and its benefits and will start to promote it to non-members more frequently since they are educated and aware of all the program has to offer.”

Word-of-mouth starts to take root as well, Otocki noted.

“Customers overhear others talking about and using the program, which causes other customers to seek out more information on your loyalty program and how to join and register,” she explained. “And, of course, the financial results start to matter once you hit 15 percent loyalty penetration rate. The program will boast a higher check average for members and your targeted promotions will move the sales needle.”

Otocki discussed three customer types:

Fanatic Frank: Who will always be with your brand

Loyal Lisa: Extremely loyal and likes to be recognized. Wants to know she’s working toward something. A great customer to have.

Promiscuous Pete: Kind of a drifter. He definitely likes many other brands and isn’t comfortable with a commitment to one brand.

Who has the most growth potential? Promiscuous Pete.

The least? Least? Fanatic Frank. “Not a ton of room to change his behavior,” Otocki said.

Stone said that the best and most loyal customers are already loyal to the brand and do not need any extra incentives to participate in its loyalty program.

“There is not a lot of room to generate extra visits and revenue from a brand’s best customers since they are already at or close to their spending potential,” he explained. “The real money-makers for loyalty programs are customers who show equal loyalty to several different brands within the same competitive space. These are the customers who have the potential to become more loyal, which, in turn, helps brands win visits from their competitors.”

Stone said that the number of visits over a six-month period it takes for a customer to become truly loyal is four.

“And after the fourth visit, there is a higher propensity to maintain that loyalty,” he explained.

What’s more, when a customer reaches the second visit, he or she is likely to visit 4.9 more times.

“That’s a huge thing and a huge step toward earning that loyalty,” Stone said.

American’s spend 2.8 hours a day on mobile devices, Stone said, which is about 51 percent of total time spent on digital media per day.

Keeping guests engaged must involve mobile, he said.

Through what channels do you want to engage with guests via mobile?

“We found that, even with all of these new communication channels, email is by far the most effective means,” Stone explained. “Email represents a massive slice of that pie in terms of where the guests are receiving these offers and turning around and redeeming those offers.”

Having a variety of message channels in your toolset means that your brand can appeal to multiple millennial segments, Stone said.

“The trick is to determine which channel each of your guests prefers,” he said.

Stone said that 5.75 represents the number of emails a brand should send per subscriber, per month.
An email value framework is how you determine the value of your email campaigns.

There are four main components: The volume of emails sent, the open rate, the visits per open, and the lost future visits from opt-outs.

“If people opt-out because you’re getting too many emails, they won’t be able to respond to future email campaigns,” Stone said. “The more emails you send, the more subscribers you lose. The more people who unsubscribe, the more money you lose because you lose all future visits that would have resulted from future campaigns. If you send more than eight emails per subscriber, per month, you could see more than 1 percent of recipients unsubscribe. That’s a huge number. We have clients with one million-plus email subscribers. Imagine losing 10,000 email subscribers because you sent more than eight emails. Imagine the lost revenue from that. I’m sure that every marketer on the line is shaking their head in agreement with me.”

What’s more, Stone cited the figure of $97,000 as the amount of money Paytronix has seen brands lose by sending everyone the same offers.

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