2. table ofcontents03 Introduction04 #1 | think strategically about the program07 #2 | identify & enable brand advocates10 #3 | THINK BEYOND THE TRANSACTION13 #4 | DESIGN, EVALUATE, & OPTIMIZE FOR ROI16 conclusion
3. IntroductionThese are challenging times for retail. The key according to Kristine Jacobs, ViceAlthough ecommerce is growing rapidly President of Customer Success at 500friends,and offers a vibrant opportunity to reach is for retailers to “optimize a long-termnew customers, the gains have not been relationship with consumers and maximize “Retailers need to optimize aequally distributed. In fact, Amazon the value created by each and every way long-term relationship withaccounts for 30% of all product searches customers interact with their businesses.” their customers and maximizeand continues to grow at twice the rate the value created by each andof ecommerce as a whole. At the same One of the ways retailers can accomplish every way customers interacttime, the cost of acquiring customers is this is through a well-designed and executed with their businesses.”increasing year-over-year while margins social loyalty program. A social loyalty program Kristine Jacobscontinue to get squeezed. Given these gives retailers a powerful tool for building VP Customer Success, 500friendsrealities, retailers have to find new and durable relationships with their customerscreative ways to maximize the lifetime while leveraging their social connections andvalue of their customers. actions to effectively reach new audiences. More loyal customers mean greater lifetime value per customer and more profitable customer relationships, which give a retailer more opportunity to invest in growth. © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 3
4. best practice #1thinkstrategicallyabout programdesign
5. #1 | think strategically about program designimagine a Program thatMeets Your ObjectivesBefore discussing what makes a social loyaltyprogram successful, it’s important to understandwhat a successful loyalty program is not. Too Strong Programoften, a company’s loyalty program will consistof a microsite and a few simple promotions that Objectives Include...offer all of its customers the same discount.Although such a program may be easier INCREASEto implement than a robust, multi-channelincentive program, it is also unlikely to create 1 OVERALL LTV & SHARE OF WALLETthe sort of sustained, long-term relationshipswith customers that retailers need to thrive intoday’s competitive marketplace. 2 GROW ACTIVE CUSTOMER LISTIn order to design and implement a successfulsocial loyalty program that creates and sustains GAIN INSIGHTlong-term relationships with customers, retailers 3 INTO CUSTOMERmust think more strategically. A social loyalty SEGMENTSprogram is not an isolated feature; it has to bean integral part of a brand’s overall marketingand growth strategy. © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 5
6. #1 | think strategically about program designdesign foryour audienceThe first step in defining a winning strategyfor a loyalty program is to think about whomit is for and what will appeal to them. In other Match Customer Populationswords, design the social loyalty program forspecific populations. A first-time customer with the Right Rewardshas different needs and expectations thana lifelong customer. Rather than blanket all INVITATIONof a site’s customers with a one-size-fits-all INACTIVE TO AN EARLYprogram, a well-designed program will target MEMBERS ACCESS SALEkey customer segments with compelling andrelevant rewards. For example, a first-time REWARDcustomer might receive a special discount 1ST TIME EMAIL AFTER BUYERSon their next purchase to encourage them to PURCHASEreturn to the retailer while a well-establishedcustomer might be offered an exclusive gift MEMBERSHIP 3RD TIMEto reward them for their continued loyalty. BUYERS UPGRADE TO VIP SERVICEBefore choosing rewards, think carefullyabout who is receiving the reward and thebehavior it will drive. © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 6
7. best practice #2IDENTIFY &ENABLE BRANDADVOCATES
8. #2 | identify & enable brand advocatesrecommendations as amarketing engineWord-of-mouth marketing is as old as At a time when customers are constantlybusiness and it is more important today inundated by offers and discounts, whetherthan ever before. This is as true for the in the form of banners, emails, or targeted “More and more money will go into making a greatsmallest boutiques as it is for the largest Google or Facebook ads, word of mouth customer experience, and lessretailers in the world. Jeff Bezos, CEO represents a powerful means for retailers to will go into shouting aboutof Amazon, predicts that “more and reach customers directly. A successful social the service. Word of mouth ismore money will go into making a great loyalty program must find ways to amplify becoming more powerful...”customer experience, and less will go into the impact of a personal recommendation jeff bezosshouting about the service. Word of mouth online. This requires retailers to appeal to CEO, Amazon.comis becoming more powerful. If you offer a brand advocates and make word-of-mouthgreat service, people find out.” marketing in all of its forms one of a loyalty program’s central goals. © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 8
9. #2 | identify & enable brand advocatesunderstand thecustomer’s journeySocial loyalty programs should be designedaround the customer’s journey. Retailersmust be able to place themselves in the The Customer Journeyminds of their customers in order to create acompelling customer experience. A key partof creating that experience is removing all ADD TO CART STANDARDfriction to sharing. Writing a review, referring VISIT SITE PURCHASE SHIPMENT NOTIFCATIONa friend, or sharing a purchase to Facebook VIEW PRODUCT INFOshould be an integrated, natural part of the CREATE ACCOUNT PURCHASE CONFIRMATIONcustomer experience, rather than an irritationor impediment. At the same time, retailersmust have the right tools to measure their POINTS FOR PRODUCT REVIEWcustomers’ engagement in order to identify OPPORTUNITY MONTHLY PROGRAM EMAIL ENROLL IN PROGRAMpotential brand advocates. CONNECT SOCIAL ACCOUNTS SURPRISE BADGE IN EMAIL SHARE PRODUCT PURCHASE 1ST TIME BUYER REWARD EMAIL © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 9
10. best practice #3think beyondthe transactionToo many retailers think their work ends once a customer has clicked “Buy.” Rather, theyshould be finding ways to connect with customers in new and dynamic ways that will increasecustomer lifetime value. One of the goals of any social loyalty program must be to deepen theretailer’s relationship with its customers by engaging them beyond the purchase.
11. #3 | think beyond the transactionengagethrough actionsA well-designed loyalty program reward Every brand has its own strengths andstrategy should be built around more than resonates with customers in different ways. LIST OF ACTIONS:just buying more to accumulate more A social loyalty program is an opportunitypoints. Social media gives retailers many for retailers to extend and reinforce their Purchaseopportunities to engage their customers in brand by appealing to their customers in Enrollmentnew and creative ways, such as rewarding innovative ways that match business goals. Connect Facebook Accountcustomers for social actions like writing The key is that the content offered by a Connect Twitter Accountreviews and sharing purchases to help brand’s social loyalty program should fit Sign Up for Emailspread the brand’s message. Bestowing into the brand’s identity and appeal to its Open an Emailbranded badges and special recognition unique relationship with customers. For Refer a Friend to Purchaseon repeat customers deepens their example, Spaweek (www.spaweek.com) Refer a Friend to Sign for Emailconnection to the brand and makes them awards points for sweepstakes entries, spa Follow on Twitterfeel recognized. reviews, and spa check-ins on Foursquare, Email a Friend in addition to dollars spent. Tweet a Product Write a Review © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 11
12. #3 | think beyond the transactionengagethrough rewardsProgram reward structure connects point-earning engagement to redemption, acore driver of value and cost for a loyalty Reward EXTRINSIC REWARDS (Direct Cost)program. Rewards should be differentiated Design Tipsby customer segment in order to reward Gift Couponsa brand’s most loyal customers and keep Exclusive Products MINE CUSTOMER INSIGHTSothers excited and engaged. Early access, 1 TO INFORM APPROACH Sweepstake Entriesfree shipping, and other VIP perks are Charitable Donationspowerful incentives to keep customerscoming back. Retailer Kate Somerville’s CONSIDER USING TIERS(www.katesomerville.com) social 2 AS INTRINSIC MOTIVATORSloyalty program is a prime example of acompelling reward mix: top-tier members EXTRINSIC REWARDS INTRINSIC REWARDSget an exclusive weekend skincare clinic. 3 ALONE WILL NOT DRIVE LONG-TERM ENGAGEMENT (No Direct Cost) VIP Customer Service Recognition SURPRISE & DELIGHT TO 4 REINFORCE KEY BEHAVIORS Badges © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 12
13. best practice #4design, evaluate,& optimize for roiAn effective social loyalty program is a significant investment of time and resources.A program must have clear objectives and target specific customer segments. Mostimportantly, a program must be designed for maximum ROI, and it must be measuredat the right moments. Ongoing program optimization lays the groundwork forcontinued growth and success.
14. #4 | design, evaluate, & optimize for roiBalance RewardCosts to Ensure ROIFrom the early stages of program design, Of course, the design and goals of aROI is the right context for key decisions. retailer’s social loyalty program should The retailer CoffeeTableSome retailers make the mistake of making also reflect their unique challenges engaged a member segmenttheir points too valuable or awarding too and circumstances. A retailer that finds with a sweepstakes entrymany points over time; the rewards can itself constrained by low revenue per that qualified them for theend up being more valuable than the customer, for example, might build its highest program reward.purchases required to earn them. A retailer program around rewards that emphasizethat gives a customer a $15 reward for recognition and exclusivity—such as early The offer drove engagement while$12 worth of purchases might have very access to new products or VIP offers. reducing the reward cost among their lowest program tier. The team atloyal customers, but it won’t be in business CoffeeTable arrived at this innovativelong. Marketers have to model the financial and effectiveimpact of a social loyalty program and offer by criticallymake adjustments to point values and examining the goalsrewards before and after they launch a of their program andloyalty program. designing a solution that made financial sense for them. © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 14
15. #4 | design, evaluate, & optimize for roiSuccess With OngoingOptimizationA social loyalty program should be first engagement metrics become critical for to program impact beyond the programdesigned for ROI and then optimized for decision-making. And finally, ultimate launch—not only in later months butROI. Even programs with a large emphasis program impact is what every marketer in perpetuity. Successful optimizationon social components—such as sharing will want to report on, but it’s a mistake to efforts require this long-term view inpurchases to social networks or writing look for that proof from day one. Moreover, order to drive maximum impact on keypublic reviews—should be evaluated enrollment and engagement remain central performance indicators.and optimized based on a measurableROI. Optimization in the long-term is thekey component of ROI success, and itis also the most commonly neglected or Ongoing Optimization for ROIpoorly understood element of program 1-3 MONTHS 3-6 MONTHS 6 MONTHS & BEYONDmanagement. It helps to think about thelifecycle of the program and its measurable ENROLLMENTelements, and then match a timeline of ENGAGEMENT IMPACTmeasurement and adjustment initiativesto that lifecycle. For example, in theearly months of a program rollout, thecritical metric for program performanceis enrollment, but as the program ages © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 15
16. conclusionIt is no longer sufficient for retailers A loyalty program gives retailers a powerfulto focus on conversion rates and new tool to identify and engage these incrediblyacquisition. Instead, marketers must renew valuable customers. At the same time, thetheir focus on customer relationships and ubiquity of social media has made it moremaximizing lifetime value, the only activity important than ever for retailers to findthat will drive the profitability needed creative ways to reach new customers.for growth. The data is clear about the By building social components into theiroutsize value of repeat customers: they are loyalty programs, retailers can leverage theresponsible for 40% of revenue and they proven effectiveness of loyalty marketingdrive 3-7 times the revenue per visit as with the burgeoning potential of socialone-time buyers. networks to solidify existing customer relationships and reach new customers. © 2013 500FRIENDS, INC. ALL RIGHTS RESERVED. 4 best practices for social loyalty 16
17. about us500friends is a team of eCommerce expertscommitted to maximizing the profitability ofcustomer relationships for the world’s retailers.phone Visit our website(800) 818-8356 500friends.comaddress visit our blog100 FIRST STreet 500friends.com/blogSUITE 2250SAN FRANCISCO, CA 94105 email email@example.com