Acquiring new members to your loyalty program is a great sign of growth, but costs can be high – varying from US$20 to US$275.
After acquisition, it’s critical that marketers onboard new members properly to keep them engaged. Loyalty programs without onboarding initiatives see an average of 33% of members purchase just once in their first 12 months after joining. A further 12% make only one additional purchase, and therefore almost half of your new members (45%) are not engaged, loyal or even semi-frequent purchasers.For low purchase frequency industries or non-product necessity industries, we see just 16% of new members making two or more transactions during their first 12 months. This differs greatly in high frequency industries, for example, banking or CPG, where we see an average of 70% making more than two transactions during their first year with the brand. This still means that we see wastage of 30%.
Using the extreme example mentioned earlier of an acquisition cost of US$275 and assuming you bring in 1,000 members per month, that would be a total cost of US$275,000. With 30% of members not progressing past two purchases, US$82,500 of your expenditure would effectively be wasted dollars. Even with a cost of just US$20 per acquisition we would still see a wastage of US$6,000 per month or US$72,000 per year.
Table 1: Purchases by new members in the first 12 months after joining
Creating a Personalised Experience
In today’s world, loyalty data gives marketers the basis to build personalised experiences. Even in the start of a program when transactional data is limited, marketers can use engagement data to start guiding the customer along ideal milestones.
What a customer purchases during their first visit to your store is a great indicator of future behaviour and value. Even with just one transaction, the value of that receipt is highly correlated with future spend. You can build anything from statistical lookalike models and next-best-offer models to simplified data-driven business rules based on historical behaviour of prior new members.
Regardless of the sophistication of your approach, you will be able to take action to give early rewards or recognition to members showing great signs of long-term high value and take corrective action with those customers who look indicate low value/frequency.
Engagement doesn’t mean bombarding members with information and offers. Too much communication can be worse than none at all. There will be time to deploy more advanced analytics methodologies to create upsell and cross-sell campaigns later, provided you hook them in during the onboarding phase. A larger, more engaged base of members is much more likely to give you greater returns on any upsell or cross-sell campaigns.
Onboarding Success Stories
We have seen clients have improved activation and retention during the onboarding stage when they utilise Aimia’s SmartJourney™ methodology. Here are just two examples:
A global retailer introduced a new member data-driven cultivation campaign across its Asian markets. The campaign included up to three touchpoints aimed at educating the member of the loyalty program benefits, encouraging them to purchase and finally incentivising them to hit a spend threshold to climb to a higher tier which would result in program benefits.
As the frequency of purchase and demographical data captured was “limited”, a decision tree business rules methodology was applied to ensure smart and timely targeting. The retailer saw immediate success with monthly campaign ROIs consistently reaching high triple figures, as well as seeing longer term incremental activity and spend versus the control.
A health and beauty retailer attained similar success. Analysis of customer product purchasing behaviour identified hero products which had higher retention and repurchase rates. Coupled with Market Basket Analysis, members received offers around hero products related to what they bought during their first transaction with the brand. This personalised new member campaign increased early retention rates of members during their first three months by 40% when compared to the control group.
SmartJourneyTM is Aimia’s methodology for an end-to-end loyalty solution for brands.
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By James Riley - Director & Head of Analytics & Insights, Asia and Middle East Aimia Inc.