Why Loyalty Works

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Why Loyalty Works

  1. 1. Why Loyalty WorksLive discussion with Chris LuoApril 25, 2013Prepared by: Chris Luo, VP of Marketing at FiveStarsFormer Head of Small Business Marketing at Facebookchris@fivestars.com
  2. 2. How can I grow my business?Print AdvertisingCouponsDirect Mail MarketingWord-Of-MouthPunch Cards
  3. 3. Marketing options are exploding
  4. 4. •  Larger companies can afford to pursue tactics like direct mail,print, and TV because they have the advantage of scale•  Larger companies have full-time marketing managers who canspend months optimizing online marketing spendYou have some disadvantages
  5. 5. What should your focus be?•  Highest return for your limited time•  Highest return for your limited marketingbudget•  Marketing that is fun & easy to execute
  6. 6. Red Robin partially attributesits turnaround to the successof its loyalty program.Red Robin: Red RoyaltyThrough revamped advertising efforts,cost cutting and BEEFING UP OURLOYALTY PROGRAM, the company hasaccomplished a full year of profitability.”In the third quarter, Red Robin swung toa profit of $2.1 million, as revenue andmargin rose from improving same-storesales, guest traffic and average check.Shares rose 9.2%,representingnearly 35%growth last year.An article published on November 4, 2011 in the Wall Street Journal stated:“”
  7. 7. In its 2012 10-K report, Paneras CEO shared thattheir MyPanera program had grown to morethan 13.8 million registered members. Panera Bread: MyPaneraStockholder letter, April 16, 2012“”In 2011, we benefited from ourinvestments in a few key areas:quality of our food, our increasedmarketing expenditures, andTHE ROLLOUT OF OURMYPANERA LOYALTY PROGRAM.
  8. 8. Retailers withloyalty programs,on average, are88% moreprofitable thancompetitors whodo not.It is 6 to 7 timesmore costly toacquire a newcustomer than toretain an existingone.Opinions on Loyalty MarketingExperts agree that loyalty is the mosteffective and highest return marketing“”“”“”Customer loyaltyis the single mostimportant driverof growth andprofitability.
  9. 9. Lifetime Value of a Customer“”Increasing Lifetime Value of Customers:the key to running a successful, long-term businessThe development and retention of profitable customer relationshipsis VITAL TO THE HEALTH OF EVERY BUSINESS... Companies needto be concerned with the future revenue & profit streams associatedwith the ongoing satisfaction & retention of their core, profitablecustomer bases. The companies that FAIL TO RECOGNIZE THISTRUTH overspend in marketing to acquire & retain less profitable, oreven unprofitable customers and DO NOT SPEND ENOUGH ONKEEPING PROFITABLE ONES.
  10. 10. Loyalty for Small BusinessesLoyalty marketing is more relevant today forsmall businesses than it has ever been•  Your biggest asset isyour existingcustomer base andfoot traffic•  Data shows thatloyalty programs canincrease customervisits by 20 percentor more•  With social media, each ofyour customers can nowshare your brand withhundreds of others•  Technology can nowautomate most of yourloyalty marketing needs.It’s marketing that’s funand makes sense!
  11. 11. Driving ROI from LoyaltyLoyalty marketing ROI is traditionally driven byincreasing visits, spend, and response to promotions
  12. 12. Increasing VisitsOnce a customer becomes engaged with your loyaltyprogram, you will begin to see them come back morefrequently
  13. 13. Increasing Visits: Coffee & TeaFrequency Compression for Coffee & Tea
  14. 14. Increasing Visits: TpumpsCase Study: Tpumps After FiveStars:Customer VisitsBefore FiveStars:Customer VisitsADDITIONAL VISITSFROM FIVESTARSGross ProfitADDITIONAL PROFITPER MEMBERNumber of VIPsADDITIONAL PROFITWITH FIVESTARS2.5 visits/month1.85 visits/month0.65 visit/month$4 per visit$2.60X4,000$10,400X
  15. 15. Increasing Spend Per VisitRevenue perCustomerVisit(Illustrative)Only possible if you have rewards based on spend
  16. 16. LOYALTY PROGRAM MECHANICS:Instead of giving one point per visit, give one pointfor every $5 to encourage more spend per visit.Increasing Spend Per VisitIdeas to encourage customersto spend more per visitCROSS-SELL:Starbucks gets customers to spend more by promotingtheir baked goods and other food items at the point ofpurchase.BUNDLING:Create compelling bundles - buy entrée, dessert, and drinkfor $12. Or create compelling packages for groups - buy alarge pizza and get an additional medium pizza for halfprice.
  17. 17. Use TextMessaging toDrive Loyalty•  Brings your best customers inthe door immediately•  Customers prefer gettingtimely messages from placesthey already go to, especiallyplaces they frequent•  Text message promotions canreach customers throughoutthe day, they don’t need tobe in front of a TV orcomputer•  Good text messagecampaigns can complementyour other marketing efforts.Driving Promotions91% of peoplekeep theirphones within3 feet ofthemselves24/7People look attheir cell phones150xper day
  18. 18. Driving PromotionsPROMOTIONS SUCCESS STORYSoulman’s BBQ had a 4 percentresponse rate from texting a timely,relevant promotion to its customersOne of our Client Success Managers convinced Jim, a FiveStarsbusiness owner in Texas, to send out a Valentine’s Day textmessage to their customer base using our Merchant Toolkit.Jim had never used our texting services before,and wasn’t convinced it was going to bring people in the door.“Got 3 already.One within 5 minutes!”ACTUAL COMMENTS RECEIVEDFROM OWNER AROUND NOON THESAME DAY: “Well, you have convinced Don and oneof my staff. I actually did get $107.40 insales. I will have to try it againsometime”LATER THAT DAY:Text Sent: 11:15amFeb. 14, 2013
  19. 19. Driving Promotions: Soulman’s BBQCampaign Profit Total Revenue GeneratedCost of Goods SoldCost of Text CampaignProfit from Text Campaign——XTotal Loyalty MembersPrice Per TextCost of Text CampaignSoulman’s BBQ achieved Revenue/Cost Multiple of18x from its promotion to loyalty program members$107.40$32.22$6$69.18400 1.5 ¢ $6.00
  20. 20. But we still have a disconnect
  21. 21. Loyalty Automation PlatformWE TAKE CARE OF EVERYTHING•  Customer information righton the POS•  Never slow down your line•  Built in fraud controlPoint-of-Sale Relationship Manager FiveStars Card Merchant Toolkit•  Simple technologyeveryone can use•  Impossible to lose•  Hundreds ofthousands of cardmembers•  Simple customersegmentation•  Text message &email campaigns•  Social mediaintegration
  22. 22. Thank You To learn more about how FiveStars automates loyalty,visit http://bit.ly/fivestarsloyaltyTo get more free resources on small business marketing,visit http://blog.fivestars.comChris Luochris@fivestars.com
  23. 23. Q & A

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