Category: Loyalty Programs & Data Collection

Loyalty as a Data Play | The MarTech Matrix with Jai Rawat and Sean Simon

On a recent episode of The MarTech Matrix, Loyalty as a Data Play, Zinrelo’s CEO Jai Rawat shared a more nuanced approach to customer engagement and loyalty programs that could very well be the secret sauce retailers have been searching for.

Loyalty Programs Should Drive Relationships and Data 🛍️

The discussion highlights how most brands are getting loyalty wrong by putting too much focus on generating the next transaction. Loyalty should be about building relationships with your customers so they think of you when they need your product. By engaging with customers, brands can acquire a goldmine of data without seeming too eager.

Takeaways

Zinrelo offers a unique approach to loyalty programs by focusing on holistic loyalty and personalization in loyalty programs.
They track and reward customers for various types of engagements, not just transactions.
Zinrelo helps companies launch successful loyalty programs by first identifying their business needs and providing a flexible loyalty technology platform.
Data acquisition and the use of zero and first-party customer data are key components of effective loyalty programs.
Zinrelo has helped brands increase customer retention, average order value, and repeat customer revenues.
The company values customer-centricity, excellence, innovation, respect, and open communication.

Chapters

00:00: Introduction with Zinrelo
04:15: Insights on Building a Successful Loyalty Program
09:00: Strategies for Enhancing Customer Engagement and Data Collection
17:36: Insights on Brand Strategy in Retail Environments
18:29: Discussing Customer Data and Loyalty Program Strategies
26:27: Strategies for Effective Loyalty Program Management
31:44: Strategies for Direct Customer Engagement and Loyalty Programs
32:38: Key Considerations for Effective Loyalty Programs
33:35: Overview of Product Bundle Benefits
33:48: Long-Term Considerations for Choosing Loyalty Platforms
35:07: Discussing Loyalty Program Success with a Household Name Brand
35:47: Enhancing Customer Engagement and Retention Through Loyalty Programs
39:16: Evolving Loyalty Programs and the Impact of AI

Once upon a time, in the bustling world of retail, there was a common misconception that bombarding customers with daily emails was the golden ticket to securing their loyalty and boosting sales. However, nestled within the insights shared by Jai Rawat, founder and CEO of Zinrelo, on a recent episode of The MarTech Matrix, lies a tale that challenges this narrative, revealing a more nuanced approach to customer engagement and loyalty programs that could very well be the secret sauce retailers have been searching for.

📧 The Email Dilemma: Less is More

In an age where our inboxes are perpetually flooded with promotions, the discussion brought to light by Rawat offers a refreshing perspective. The key takeaway? Retailers might be doing more harm than good by sending out daily emails. This relentless digital onslaught can lead to email fatigue, causing customers to disengage, or worse, unsubscribe. Rawat suggests a more strategic approach, advocating for meaningful engagement over sheer volume. Imagine receiving tips on how to care for the t-shirt you just bought instead of yet another promotional email. It’s this kind of valuable content that keeps customers coming back, not the daily reminders that you exist.

🔄 Engagement Over Sales: Building a Connection

The conversation then shifts towards the art of keeping customers engaged between purchases. Rawat emphasizes the importance of building a relationship with customers that transcends the transactional. Whether through surveys, quizzes, or interactive content, the goal is to stay top of mind in a way that feels genuine and engaging. This approach not only fosters loyalty but also paves the way for a more organic lead-up to the next purchase.

🛍️ Redefining Loyalty: Beyond Points and Perks

Perhaps the most enlightening part of the discussion revolves around the evolution of loyalty programs. Rawat outlines a holistic view of loyalty that extends beyond the traditional points and perks system. He introduces a multi-dimensional approach that includes transactional, social, behavioral, and emotional elements. From rewarding customers for social shares to recognizing their purchasing behaviors and connecting on an emotional level through causes they care about, this comprehensive loyalty strategy aims to create a more meaningful and lasting bond with customers.

🌟 The Future of Retail: A Harmonious Blend of Technology and Emotion

As we look toward the future, it’s clear that the intersection of technology and emotional intelligence will play a pivotal role in shaping the retail landscape. The insights shared by Rawat underscore the importance of leveraging data and digital tools to understand and anticipate customer needs, while also emphasizing the human element that truly drives loyalty and engagement.

In a world where consumers are bombarded with choices, the brands that succeed will be those that manage to carve out a special place in their customers’ hearts and minds. It’s not about the number of emails you send or the discounts you offer; it’s about how well you understand your customers and how effectively you can engage with them on a level that transcends the purely transactional. As we close this chapter, let’s remember that in the end, the most powerful currency in retail may just be genuine human connection.

The podcast and the article were originally published on The Martech Matrix and Cogent Collective

Financial Planning Strategies for a Successful Loyalty Program

In today’s competitive business landscape, loyalty programs have become a crucial tool for retaining customers and driving repeat business. Whether you’re a small startup or a large corporation, implementing an effective loyalty program can significantly impact your bottom line. However, to ensure its success, you need solid financial planning strategies.

10 Key Financial Planning Steps to Create a Loyalty Program

1. Set Clear Objectives

Before diving into the nitty-gritty details, define your program’s objectives. Objectives can vary depending on the nature of the business, your industry vertical, and your target audience. The loyalty programs could be of different types: B2C, Channel, Employee Rewards, Brand Loyalty, and many more.

Type of Loyalty Program	Sample Objectives
Business to Consumer (B2C)	Improve customer retention Increase repeat purchase rate Boost average transaction value Encourage referrals
Channel Loyalty	Incentivize your dealers to meet quotas Be top of mind for your dealers Gamify the selling experience for your dealers
Brand Loyalty	Enroll offline customers Collect zero-party and first-party data
Employee Rewards	Engage employees in regular activities Maximize employee motivation Increase employee productivity

You must clearly understand how meeting these objectives will result in a quantifiable financial benefit for your business.

2. Understand Your Customer Base

Analyze your existing customer data. Download the past 3 years of transaction data and figure out answers to the following questions:

Who are your most loyal customers?
What demographics do they belong to?
What are their preferences, spending habits, and pain points?
How can you tailor your loyalty program to their needs?

This analysis will help you create a program design that will achieve the audience behavior you want and meet your financial goals.

3. Financial Modeling and Budget Allocation

Allocate a budget for your loyalty program. Consider costs such as rewards, marketing, technology, and program management. Remember that a successful loyalty program requires ongoing investment, so plan for the long term.

While you may incentivize your audience for various activities, the simplest way to budget is by computing the following parameters for your business.

a. Monthly Dollar Volume:

Figure out your monthly transaction dollar volume. This volume represents the transactions you want to incentivize e.g. purchase dollars, sales dollars.

b. Enrollment Percentage:

This represents a section of transactors who sign up for the loyalty program. If you are using automatic enrollment, then this number is 100%. If your enrollment is an explicit opt-in, your percentage is likely to be lower. Assume 50% as a mid-range number.

c. Payback Percentage:

Finalize your payback percentage e.g. 2%, 5%, 10%. This is based on your available margins.

d. Rewards Payout Eligibility Percentage:

Percentage of loyalty value (points, dollars, etc.) that is who will be eligible for a rewards payout. This tends to be about 25-30% of the total number of loyalty value issued to members. Assume 30% as a conservative number.

e. Breakage:

Breakage is the expiry of loyalty value (points, dollars, etc.) across your member base that either does not have a redeemable balance or does not use their redeemable balance. The unexpired loyalty value is still a liability on the books and should be excluded from breakage. This number could range between 10-30%. Assume 20% breakage as a mid-range number

f. Redemption Rate

A related metric Redemption Rate is simply computed as follows:

Redemption Rate = (1- Breakage)

If the breakage is 20%, the Redemption Rate will be 80%.

g. Effective Payback Percentage

Using the numbers above, you must first compute your Effective Payback Percentage.

Effective Payback Percentage = Enrollment Percentage X Payback Percentage X Rewards Payout Eligibility Percentage X Redemption Rate

For example, Effective Payback Percentage = 50% X 2% X 30% X 80% = 0.24%

Once you have computed the Effective Payback Percentage, you can now estimate your monthly budget.

h. Monthly Budget Formula

Monthly Budget = Monthly Dollar Volume X Effective Payback Percentage.

If your Monthly Dollar Volume is $1 million, your estimated budget will be $2,400 per month to pay as rewards to your loyalty members. This cost is in addition to the cost of subscribing to your loyalty platform provider.

Note that the numbers indicated above are purely for representation purposes. You should analyze and compute these numbers carefully for your business. Create financial models to estimate the program’s impact. Calculate the return on investment (ROI) to justify your expenses.

4. Choose the Right Rewards

Select rewards that resonate with your audience. These could include discounts, free products, exclusive access, or personalized experiences. The rewards are highly dependent on the nature of your business. Ensure the perceived value of the rewards exceeds the effort required to earn them. Typically, rewards that have high perceived value and low-cost work the best.

Type of Loyalty Program	Suitable Loyalty Rewards
Business to Consumer (B2C)	Discounts Cashback Recognition via badges, website Status Benefits (e.g. Lounge access) Emotional Rewards (letter from CEO)
Channel Loyalty	Cashback Experiences (e.g. trip to Hawaii) Recognition
Brand Loyalty	Cashback Discounts for future purchases Recognition
Employee Rewards	Experiences (e.g. trip to Hawaii) Recognition Emotional Rewards (letter from CEO)

5. Segmentation Strategies

Segment your customer base based on behavior, demographics, or purchase history. Different segments may require different reward structures. For example:

High-Value Customers: Offer exclusive perks or personalized services.
Infrequent Shoppers: Encourage them to visit more often with bonus points or offers.
New Customers: Welcome them with a special discount or offer.

6. Loyalty Program Monetization Strategies

Rather than treating the loyalty program as a cost center, you should think about how to monetize the loyalty program in interesting ways. Loyalty programs amass valuable first-party customer data that can be monetized in interesting ways.

a. Harnessing Loyalty Data

You could charge fees for crafting joint offers or distributing promotional messages on behalf of your partners or external market research agencies. Of course, it is best to avoid selling your database to other parties.

b. Suppliers

You could promote certain suppliers in your loyalty program and charge the suppliers for such promotions.

c. Trading Loyalty Points

For operators of multi-partner loyalty programs, trading loyalty points can generate revenue. Partners pay for the loyalty points earned by customers, and the program operator profits from these transactions.

d. Retail Media Network

You could monetize your online space and utilize first-party data to provide highly targeted advertising for brands.

7. Communication Plan

Effective communication is vital. Inform customers about the program through various channels: email, social media, in-store signage, and your website. Regularly update them on their progress and available rewards.

Setting up a loyalty program is only the first piece of the puzzle. Making it work is 90% of the battle. Therefore, maximizing participation and engagement in the program is vitally important. The communication plan ensures that your audience is aware of the program and would be interested in participating in it.

8. Data Analytics

Track program performance using data analytics. Monitor loyalty program metrics like engagement rates, redemption frequency, and customer lifetime value. Adjust your strategies based on these insights. Also, track your spending and compare it with your original budget to ensure that your financial models are in line with your assumptions.

9. Test and Optimize

Pilot your loyalty program with a smaller group before rolling it out to everyone. Gather feedback and fine-tune your approach. Continuously optimize the program based on real-world results. Optimize your loyalty program to run campaigns and provide rewards that minimize your costs and maximize your objectives.

10. Legal and Financial Compliance

Ensure compliance with legal and financial regulations.
Consult legal experts to draft terms and conditions, privacy policies, and tax implications related to rewards. Some states have restrictions on loyalty rewards. You should be aware of them.

Accrue the value issued by your loyalty program as a payable liability on your books. This is required as per GAAP accounting standards. To understand details, visit our blog: Financial Accounting for Liability from Rewards Program.

Remember, a successful loyalty program isn’t just about discounts; it’s about building lasting relationships with your customers. By implementing these financial planning strategies, you’ll create a program that not only retains customers but also drives significant revenue growth.

Key Takeaways and Action Items

Establish Specific Goals: Define clear objectives for your loyalty program based on the program type (e.g., B2C, Channel, Brand Loyalty, Employee Rewards) to guide its development and measure success.
Analyze Customer Data: Utilize transaction history, demographics, preferences, and behaviors to tailor your loyalty program to your target audience, ensuring it aligns with their needs and your financial goals.
Allocate Budget Wisely: Plan your budget by considering all costs associated with your loyalty program and use financial models to calculate ROI, incorporating metrics like enrollment and payback percentages.
Choose Appropriate Rewards: Select rewards that resonate with your audience and are cost-effective for your business, aiming for high perceived value to maximize engagement and participation.
Optimize Continuously: Monitor program performance, adjust based on analytics, and ensure compliance with legal and financial standards. Leverage segmentation and monetization strategies to enhance the program’s effectiveness and financial viability.

Understanding Zero and First-Party Data

Zero and first-party data are two critical types of information that businesses should consider leveraging due to their accuracy and consensual nature.

According to Forrester (via VentureBeat), zero-party data is information that “a customer intentionally and proactively shares with a brand,” such as “preference center data, purchase intentions … and how the individuals want the brand to recognize [them].”

First-party data, on the other hand, is data collected directly from customer interactions with a company’s products, services or websites, such as transaction history, website visits, and engagement with marketing content. A 2022 survey by Acquia (via VentureBeat) found that 88% of marketers surveyed viewed first-party data as more important to organizations than it was two years prior.

Both data types are invaluable for creating personalized experiences, as they are collected directly from the customer, ensuring accuracy, relevance, and compliance with various privacy regulations.

As Clive Humby aptly put it, “Data is the new oil.”

The Role Of Loyalty Programs In Data Collection

Loyalty programs present a unique opportunity for businesses to collect zero- and first-party data in a manner that is both consensual and beneficial to the customer. Rewards create an attractive “value exchange” that encourages the voluntary sharing of zero-party data through preferences, surveys, and interactive engagements.

At the same time, the transactional nature of loyalty programs allows for the seamless collection of first-party data, capturing purchase history, redemption behaviors, and engagement rates.

Here are some examples of how businesses are creatively leveraging their loyalty programs to capture zero and first-party data:

Shop Premium Outlets: The online arm of Simon Outlet Malls, uses its loyalty program to capture style preferences. You can earn 100 points for taking a style quiz about your preferences. This information is then used to personalize the user experience. The data is also highly accurate since it is provided directly by the customers. Users can earn 100 points for taking the style quiz or 25 points for taking a survey.
Life Nutrition: The vitamin quiz gathers customers’ insights on their health and wellness to offer product recommendations.
Black Box Loyalty Program: Black Box Wines (a Zinrelo customer) mostly sells through third-party stores and therefore has little information about its customers. The company uses a creative loyalty program to collect zero-party data from its customers. It rewards customers for uploading a copy of their receipt showing a Black Box Wine purchase. Program enrollment, combined with a product receipt, allows Black Box Wines to collect zero- and first-party data such as customer name, email address, product purchases, amount spent, and retailer name.

In my opinion, zero-party data is not merely just a trend; it is becoming a need of the hour. A 2018 Accenture report found that 83% of consumers are willing to share their data for a personalized experience; this highlights data’s role in enhancing loyalty and retention.

Leveraging Data For Enhanced Customer Experiences

The combination of zero- and first-party data collected through loyalty programs can be a goldmine for businesses. This data enables companies to tailor their marketing strategies, product offerings and customer experiences with unprecedented precision. By understanding customer preferences and behaviors, businesses can create highly personalized and relevant experiences. This can help them enhance customer satisfaction and loyalty, as well as optimize their marketing spend by targeting customers with the right message at the right time. Here are some specific strategies for integrating and leveraging this data:

1. Creating Unified Customer Profiles

Leverage loyalty programs to collect and combine zero-party and first-party data across all channels to create unified customer profiles. This unified view can provide you with a more precise understanding of customers.

2. Contextualizing Engagement

Use zero-party data to understand the “why” behind customer choices and first-party data to track the “what” and “how.” This can help you craft contextually relevant messages and offers. First-party data is derived from actual customer behavior. It may reveal that a customer is searching for sustainable products and looking for availability in a local store. Zero-party data collected via a survey or style quiz may reveal the “why” behind these actions; for example, the customer may reveal that they are environmentally conscious.

3. Leveraging Predictive Personalization

Leverage both data types to predict future customer behavior and preferences and create anticipatory engagement strategies, like personalized product launches or preemptive service adjustments.

4. Creating Dynamic Reward Systems

Tailor rewards and incentives based on the holistic data you gather to ensure they are relevant and desirable for each customer.

5. Using Advanced Segmentation

Use purchase history and customer preference data to categorize customers and develop segment-specific offers or rewards.

6. Personalizing Your Website

Tailor online experiences based on user behavior and preference data. From customized product recommendations to content curation, this strategy can help to boost user satisfaction and engagement.

Future Trends And The Path Forward

As we look to the future, I believe the importance of zero- and first-party data will only continue to grow, especially if regulations around third-party data become stricter. The evolution of loyalty programs will likely focus on creating more engaging and interactive experiences that incentivize the sharing of zero-party data, such as gamified surveys, preference centers and personalized rewards. Moreover, advancements in data analytics and artificial intelligence could enhance the ability of businesses to analyze and act on this data in real-time.

Loyalty programs have emerged as a powerful tool for businesses navigating the challenges of data collection in a privacy-first world. By fostering an environment of trust and mutual benefit, companies can encourage the sharing of zero- and first-party data to unlock deeper customer insights and more personalized experiences. As we move forward, the businesses that succeed will likely be those that recognize the value of this data and invest in strategies that respect customer privacy while delivering undeniable value.

This article is originally published on Forbes.com by Zinrelo’s co-founder and Forbes Business Council Member, Jai Rawat.