• by Phil Leggiere , December 3, 2008

Marketers have long understood that part of their job of motivating customers (in a down economy, a very big part) includes the creation of timely and relevant incentives. Yet most gift card and other loyalty club promotions remain unimaginatively generic in execution. Below Stefan DeCota, senior vice-president of MyPoints, explains why the key to unlocking added value in loyalty programs is deploying behavioral data to personalize and customize incentive offers.

 

Behavioral Insider: How is the recessionary economy changing the way e-marketers are looking at targeting in a strategic and tactical sense moving into the holidays this year?

Stefan DeCota: In a recessionary economy, ROI becomes every marketer's core challenge. Marketers don't want to take chances. What's even more disconcerting is, at the very same time that they want to stick with the tried and true, they may begin to find that the proven sites they've relied on don't perform as well. Customers are looking for deep discounts and they are looking for added values. They've trimmed expenses but they will still buy.

In a down market especially, targeting the right prospect with the right message -- which is where most behavioral targeting begins and ends -- is not enough. You need not only the right product at the right price, but ever increasingly, the right offer as well. Loyalty-based marketing is a way of really leveraging that third, often missed, component.

BI: Many upscale advertisers and their agencies have tended to be quite cautious about the whole area of loyalty marketing. What sorts of misperceptions do you think they have?

DeCota: ...Part of the problem with the negative perception of loyalty programs is that many marketers have been overexposed to poor examples of the practice. What too many people still consider the norm in loyalty marketing is just pretty randomly throwing out free gift cards without any real consideration of what constitutes real value for consumers.

That's not the essence of what loyalty marketing is. What advanced loyalty marketing companies offer is enhanced targeting. Not only can you zero in, for example, on a particular demographic, say 25- to 34-year-olds making $50K to 75K a year, or on a particular geo-target, but beyond that, you can ascertain what kinds of value-added offers inspire incrementally higher sales per conversion and frequency of sales.

BI: Can you cite some examples of how targeted loyalty programs work?

DeCota: We worked with one very big retailer who said they needed to ensure y/y growth. Their goal was to increase total sales while holding down cost per sale. We said, we can't guarantee a reduction of cost per order, but that with a marginal increase in cost per sale we could double total revenues. By using behavioral data to optimize offers we actually more than doubled revenues with only a modest increase in cost per sale.

Another example of how targeted loyalty marketing can drive performance even in a challenging environment can be seen in a lead-generation effort we did for an automaker. What they specifically wanted to do was drive their loyalty members to a site where they could custom-design their own auto and request brochures. Beyond driving this particular promotion, however, what the client found was that the campaign additionally influenced over 300 new vehicle orders over the next six months.

BI: what do you see as the biggest challenges for marketers attempting to add behaviorally targeted loyalty offers to their mix?

DeCota: The key to leveraging behavioral data in a loyalty membership content is making sure the creative keeps changing and, as a related matter, treating program members with respect. You need to keep testing, not only specific offers but how they're presented. You also need to test when offering more really translates into more, both in terms of value to customers and incremental revenue boost, and when more is actually the same or even less.

Looking ahead in general for the industry, I think mobile platform expansion will be crucial. Although the U.S. remains behind Europe in this area, consumer adoption here of smart phones, SMS text is accelerating rapidly. Over the next few years that means commerce over phones, where consumers are not tied to their computer screens, should increase dramatically. That's a perfect opportunity for providing timely, even location-specific offers at the right time in the right place.