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Acquiring a New Member
Acquiring a new member to your loyalty program is a great sign of growth; it’s a sign your member base is getting larger and therefore your revenue and margins are growing. That’s the usual perception and the reason why many marketers spend a disproportionate amount of their budgets on various forms of above-the-line communication to attract new members.
Yet in most cases, this is the wrong approach.
We know that attracting a new member to engage and ultimately purchase with your brand is the most expensive element of customer lifecycle management. In a short study across a number of loyalty programs throughout the globe we see that this figure varies from $20 per member to $275. While recent tactics, such as lookalike targeting, makes marketing spend for new customers attractive, the fact remains acquiring high potential new members doesn’t necessarily yield the anticipated amount of revenue. Without educating members on the benefits and value of the program, brands continue their cycle of spend to attract new members while failing to retain and engage newly acquired members.
The Need for Onboarding Programs
Loyalty programs without orchestrated onboarding see an average of 33% (refer figure 1) of members purchase just once in their first 12 months after joining. A further 12% make only one additional purchase, and therefore almost half of your new members (45%) are not engaged, loyal or even semi-frequent purchasers. This equates to a missed opportunity to cultivate and educate them about your brand, meaning you have failed to capitalize on present and future revenue opportunities.
For low purchase frequency industries or non-product necessity industries such as health and beauty, we see just 16% of new members making two or more transactions during their first 12 months. This differs greatly in high frequency industries (refer to table 1), for example, banking or CPG, where we see an average of 70% making more than two transactions during their first year with the brand. This still means that we see wastage of 30%.
Assuming you bring in 1,000 members per month at the acquisition cost of $275, you’re looking at a total cost of $275,000. With 30% of members not progressing past two purchases, $82,500 of your efforts would effectively be wasted dollars. Even with a cost of just $20 per acquisition we would still see a wastage of $6,000 per month or $72,000 per year.
Some industries have a natural bias with regards to continued activation from members after joining. On average the banking sector sees 89% of new members making five or more transactions in their first 12 months with two thirds of members making more than 20 purchases; this too, without onboarding campaigns. Despite the natural success there is still opportunity to cultivate these members to drive increased spend as in most Asian markets, especially in Southeast Asia, customers on average hold six or seven credit cards and aren’t, therefore, maximizing their share of wallet with you.
Creating a Personalized Experience from the Start
Knowing and understanding your customer is becoming easier and easier. If we think back to loyalty’s roots when you could walk to your local grocer, be greeted by name and asked if you wanted your usual items. Today, data and the use of analytics allows us to recreate a similar personalized experience in the modern world in much larger scale outlets.
The key to doing this successfully is to proactively use your data and create personalized experiences for your customers from day one, even when the transactional data is limited.
A customer’s first purchase from your store is a great indicator of future behavior and value. Even with just one transaction, the value of that receipt is highly correlated with future spend.
Depending on the industry and the demographical and lifestyle data collected at member signup, you can build anything from statistical lookalike models and next-best-offer models to simplified data-driven business rules based on historical behavior of prior new members.
Regardless of the sophistication of your approach you will be able to take action to give early rewards or recognition to those showing great signs of long-term high value and take corrective action with those customers who look like becoming “one-hit wonders” or low value/frequency.
After acquisition, too much communication can be worse than no communication at all. So don’t bombard your new members with campaigns, offers, and information, regardless of how personalized it is. Your customer will see too-frequent emails as junk mail and is unlikely to open your comms, or they may opt out entirely.
Instead, you need to find the right balance of timely and personalized onboarding campaigns that take the customer through a journey of your program at the right pace. There will be time to deploy more advanced analytics methodologies to create upsell and cross-sell campaigns later, as long as you hook them in during the onboarding phase (refer to figure 2). A larger, more engaged base of members is much more likely to give you greater returns on any upsell or cross-sell campaigns.
We have seen many examples of clients improving activation and retention during the onboarding stage when using Aimia’s SmartJourney™ methodology. Over many years of refinement, we have applied our knowledge
and experience from analytical reviews and campaign performances to help our clients on their loyalty journey.
Here are two examples:
A global retailer introduced a new member data driven cultivation campaign across its Asian markets. The campaign included up to three touchpoints (dependent on response) meant to educate the member of the program benefits, encourage them to purchase and finally incentivizing them to hit a spend threshold to climb to a higher tier which would result in program benefits.
As the frequency of purchase and demographical data captured was “limited,” a decision tree business rules methodology (refer to figure 2) was applied to ensure smart and timely targeting. The retailer saw immediate success with monthly campaign ROIs consistently reaching high triple figures, as well as seeing longer term incremental activity and spend versus the control.
A health and beauty retailer attained similar success. Analysis of customer product purchasing behavior identified hero products which had higher retention and repurchase rates. Coupled with Market Basket Analysis, members were sent offers around hero products related to what they bought during their first transaction with the brand. This personalized new member campaign increased early retention rates of members during their first three months by 40% when compared to the control group.
Spending time and budget on brand awareness and customer acquisition is a given; new members will join and engage with your program as a result. However, don’t waste your hard work and success by not engaging with them in a personalized way, beginning with their first interaction with your brand.
Take them through a journey relevant to them and give them a great customer experience to show that you care. Do this well and your new customer will reward you with the one thing every brand strives for, loyalty and continued spend!
SmartJourneyTM is Aimia’s methodology for an end-to-end loyalty solution for brands. The customer journey-centric process provides clients with a distinct and proven track to building a brand as a habit, leading to supercharged growth.
ABOUT THE AUTHOR
James heads up the Analytics & Insights function for Aimia across Asia and the Middle East and is responsible for clients in multiple industries including retail, CPG, health and beauty, banking, airlines, oil and gas and hospitality. He has Analytics, Consulting and Project Management experience working with brands across Europe, APAC and the Middle East and currently sits in Aimia’s Singapore office.
Director & Head
Analytics & Insights