Explosion of Big Data Leading Brands to “Place Big Bets” on Loyalty Programs
Nike introduced a limited-edition Tiger Woods polo shirt for Nike Plus members on Tuesday morning that sold-out within an hour. It was the footwear and apparel company’s latest effort to engage (and reward) their highest value customers; Nike Plus members spend 3x more than the remainder of Nike buyers. The Beaverton based company isn't the only brand (or team) finding success with loyalty programs. NPD Group retail analyst Matt Powell told the New York Post that those types programs are “on fire right now [as] brands and retailers [are] discovering their best customers are high-leverage.”
Howie Long-Short: Peter Honig (svp, CSM LeadDog) says that it’s no surprise brands are finding success with loyalty programs because “when you’re talking about discovery, purchase intent or advocacy, the research indicates that rewards and discounts are significant drivers within the consumer’s decision-making process. Nearly 90% of consumers are incentivized by loyalty programs and more than 50% see rewards or discounting as a reason to recommend a product or service to others." Simply put, if a consumer has a good experience with a brand "they’re going to return and they’re going to evangelize for that brand to their friends and family.” They’re no longer just a brand's most valuable consumers, they’re also a mobile sales force.
The concept of a loyalty program is not new, but the explosion of big data within the last decade has driven brands (like Nike) to “place big bets” on their renewed efficacy. Honig explained that “for many years sweepstakes and contests were used to attract consumers when a company was running out of creative ideas, so the returns were limited. But with access to real-time consumer insights (editor note: Nike bought Zodiac, an analytics firm in '18),brands can now re-target the consumer with communications suited to that specific individual. It’s a level of detail and customization that didn’t exist just a few years ago."
Brands also didn’t have the ability to deliver custom ads and experiences through engagement on television up until recently, as cord cutting and OTT distribution are relatively new advancements. Honig thinks that as digital ad distribution gets more sophisticated brands will see “the real incremental rise in revenues because there is nothing like feeling as if a brand knows who you are and what appeals to you.”
Fan Marino: As Nike “ramps up” it’s loyalty program, Fitbit recently rolled out a beta version of its own Rewards program (users earn points for doing exercise, Adidas, Blue Apron & Deezer are partners) and announced plans to introduce a premium paid version later this year. While the idea of paying for a loyalty program sounds a lot like paying to work (a surefire tell of a pyramid scheme), Honig insists that there’s logic behind it; “people love the idea of exclusivity and can be incentivized with a higher barrier for entry. The basic premise is that membership has its privileges. It’s the AMEX approach.”
Of course, setting a high barrier is exclusive by nature, so Peter isn't sold that premium paid tiers “are going to be the next trend in loyalty programs." If you add the element of exclusivity to your program, “how do you get the remainder of your target audience to engage? They know that there is additional content or experiences available for an additional investment.”
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