October 18, 2022

Loyalty Programs

There are moments, folks.

I sat in the SVPs office as the CEO walked in and handed a yellow sticky pad note to the SVP. The CEO performs the classic "back slap" or "shoulder slap" two or three times, then walks out.

The SVP looks at the note, makes a face that simulates the face one would make when smelling sulfur, then crumples the note and throws it away.

I asked.  "What did the note say?"

He responded.  "It said, 'push our customers to pay with proprietary credit to boost our loyalty program.'  Kevin, that's not gonna happen."

There are other moments. The President of a Brand is sitting at the table with me. I'm going over some of the customer reporting I generate for this business. Repurchase rates are (predictably) in the low 30% range, as they are (or are lower) for most of the e-commerce businesses I analyze.

This guy is stubborn. Really, really stubborn. He directed marketing to invest much less in customer acquisition. He directed marketing to boost rebuy rates among the most loyal buyers. Guess what? The business plummeted as it was starved from new customers ... but ... but ... rebuy rates among loyal buyers increased from about 55% to about 60%. The net of the two outcomes? A very, very unhealthy business.

The guy would just smile at me ... "Give it time, Kevin, everybody knows it costs 8 times as much to acquire a customer as it costs to keep a customer. My strategy will work as we give our loyal customers a chance to pay us back."

His strategy did not work.

One final moment. About 12 years ago an Executive asks me the following question.

  • "Can you help craft a new loyalty program that makes it look like the customer is earning amazing benefits like double/triple points but the program doesn't really give anything away? We went the benefit of a loyalty program without the cost. Thanks."

Yeah, I'll be the Executive wanted the benefit of a loyalty program without the cost. Who wouldn't?

If folks want to talk to you about loyalty initiatives, don't walk away, run away.

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