Never Underestimate the ROI from Mid-Tier Customers
To quote Sir Richard Branson, “If you find yourself stuck in the middle there is only one way to go, forward.” Same applies to those mid-tier loyalty members. Even if the top 20% of a program’s members account for 80% of the brand’s spending, that middle 30% still presents much upside opportunity.
They just need the incentive to move forward.
Let’s explore this opportunity simply from the perspective of tier memberships. Three out of five loyalty program members said they would spend more with a brand if given the incentive to access an enhanced tier, according to The 2021 Bond Loyalty Report. Further, program members are three times more likely to believe the brand is loyal to them if they are part of an enhanced tier.
When customers believe a brand is loyal to them, they will likely spend more with it. So how do we get there? Here are three tactical steps in which program operators can elevate those mid-tier and lagging members into higher-spending, better engaged and more loyal customers.
Step 1: Run an Analytics Analysis
Data is the fuel that nourishes a reward programs, yet its role often is taken for granted. If the source and purpose of the data are not regularly reviewed, it can become irrelevant in a hot minute. These housekeeping steps will help ensure the data is being used to spot potential-upside members.
- Don’t discount the effectiveness of a good old-fashioned decile analysis! Decile analysis is perfect for identifying potential value because it categorizes sets of data from the highest to lowest values, based on predicted probabilities. Not everyone can be a one- or two-rated loyalty member, but a proper decile analysis can provide the insights to turn some fours into threes, and some threes into twos.
- Get ready for your close up. Once member value is established and categorized, segment the mid-tier/lagging members into one group. Then subsegment this group by key characteristics such as demographics, psychographics, geographies, cohorts and behaviors. Zero in on the characteristics that historically have indicated a potential for higher engagement and spending.
- Is the data a match? Determine what data is needed to better understand this high-potential segment. You may be collecting some of the necessary insights, but you also may be collecting data you don’t need, and that clouds the focus. Stop collecting irrelevant data – it’s a burden. Think about your most indicative data – maybe 10 to 12 fields – and invest more in collecting the data that delivers higher ROI. Two suggestions.
- Complement the decile analysis with predictive machine learning to get ahead of needs and preferences and wow these slower-going members. (Don’t be daunted by machine learning; it’s basically a souped-up algorithm and the technology is very accessible.)
- Collaborate with vendors or partners to share data for a more comprehensive understanding of mid-tier member needs.
Step 2: Look for Fails in Communication
Rather than focus on how well the brand’s communication works, consider where it is not working and the missed spending opportunities that can result. This three-pronged exercise can cure marketing FOMO.
- Perform a full audit. Determine open rates, click-throughs and promotional responses among mid-tier members and compare the results with top-spending members to identify the general language that resonates. A/B testing can be done very rapidly these days, so this exercise shouldn’t slow anyone down.
- Be honest – is your brand a nuisance? Look at the cadence of your message delivery. Are you hitting these members too often, or at the wrong times? What about the channels? Do mid-tier members respond more favorably to different channels than high-tier members?
- Be honest – are you copying your rivals? Look at the competition who target the same mid-tier customers. How are your communications and offers different? If you look the same, you don’t look better.
Step 3: Consider a Creative Makeover
Looks matter. A reward program’s design communicates style, which is personal and deeply relevant. Design generates emotion that can encourage brand interaction. Two rules to follow.
- Stick with the message at least a dozen times. Research has shown that toddlers need to try a new food at least 12 times before liking it. I have a similar theory that applies to consumers absorbing marketing messages: That it takes at least 11 times. But by the 11th attempt, the creative team is often sick of the message and makes changes. If the message shows potential, though, then stick it out.
- Is your program design in style? Based on the results of the analytics and communications, a brand may find its program’s design is out of step with the targeted mid-tier market. Consider these basics:
- Is there a demographic disconnect in design? Member preferences change – they age, move, have kids, switch jobs. And as they do, what resonates visually will change. When I was leading marketing for the retailer Tuesday Morning, we had to change all of the creative layouts after realizing our 50+ older target market could better read pages with high contrast. So no more light text on light backgrounds.
- It’s not hard to switch out photos to better connect with demographic subsegments. Do the members live in the suburbs or the city? Are they retirement age or Millennials? Another tip from my past life: While running United Airlines’ Silver Wings Plus program for those 55 and older, we learned people want to see idealized images of how they perceive themselves. So even though the average member was 72, we used only “salt and pepper” images of people, because that’s how members imagined themselves…in Hawaii enjoying the luau.
Lastly, a program operator should remind himself every day that each member is investing her time and attention, as well as money, in the program. And those members expect a return on their investments. This is why the key difference between reward members who spend a lot and those who spend less is their relationship with that brand.
The brands, and programs, that effectively resolve more needs, as needed, will be rewarded.
This article originally appeared in The Wise Marketer.