Building Consumer Loyalty With Email Rewards Programs

When done well, email rewards programs can turn a new customer into a repeat customer, and a repeat customer into a loyal customer, but how effectively can this technique be used to nurture customer loyalty?

The strategy seems straightforward enough – engineer an email around customer behavior and then provide tangible benefits, say industry participants.

“It’s a marvelous medium for building and cementing loyalty,” says Christopher Penn, vice president of marketing technology for Shift Communications.

But it’s also a terrible medium for acquiring new customers, he adds. “You cannot cold call – that’s spamming. You can encourage people to forward to a friend or share with their social networks, but those actions typically see very low actions, 1 percent or less in any given email,” says Penn.

The key to any email rewards program, he says, is to provide tangible benefits that can offer instant gratification. Orchard Supply Hardware, for example, gives every new member a $5 discount in its welcome email.

At the point of purchase, the consumer can sign up for the loyalty program and gets an immediate benefit.

“You don’t have to come back another day or buy something extra. You feel the love immediately. That’s the key to any kind of referral or loyalty program,” Penn says.

Dela Quist, chief executive (CEO) of email marketing agency Alchemy Worx, says the most effective rewards programs give information based on the number of points collected, or how many more points might be needed to obtain a particular item. The least effective would be something that gives no points-rewards information at all like, “Here’s the little tip for next time you travel to Europe.”

“Rewards programs go to the best customers who are already getting more emails than anybody else. Recipients who get those type of emails are already experienced travelers, so they are unlikely to engage with that content,” says Quist.

But how to find the best subscribers in an email rewards program, and send out tangible benefits accordingly? Here’s where data comes to play.

“We pull data that has browse behavior, purchase behavior, interactions with previous emails, demographic data, and persona data. We put all the data sets together to define the best consumer and make a reward email dynamically constructed,” Quist says.

“We encourage our clients to do personalization instead of segmentation. Segmentation means five segments or maybe 10 segments twice-a-year, but personalization means that everybody gets a message that is unique to them.”

This top-of-funnel thinking focuses on how to make less valuable consumers more valuable, and requires depth in subscriber data, Quist adds.

If a business has a smaller data pool to play with, the best practice for nurturing loyalty would be recency, frequency and monetary (RFM) analysis.

“Most companies will do some data analysis to understand their RFM (recency, frequency, monetary value) clusters and then assign sales personae to those clusters,” says Penn.

At ClickZ for example, there could be Wanda the Website visitor and Cathy the conference attendee, etcetera, and then building programs for each cluster and tiers within each cluster.

“You’d want to elevate the casual website visitor to a newsletter subscriber, a newsletter subscriber to a buyer, and a buyer to a repeat buyer. You’d want to also incentivize frequent surveys to get a sense of why people move from cluster to cluster, especially if they are down-leveling,” notes Penn.

Many big data tools are becoming more affordable and can offer such levels of analysis, adds Penn.

IBM Watson Analytics, as an example, now starts at $30 per month, with a free edition also available, giving businesses the ability to conduct email marketing data analysis themselves.

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