Brand engagement in post pandemic inflation based times

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Synopsis

As a society we have all lived through 18 months of disruption caused by the COVID pandemic, and now as things start to get back to the ‘new’ normal, there is an emerging economic threat on the horizon – rising costs and inflation. For hard working families, that means making choices and decisions about what subscriptions to keep and what to pause or cancel.

Any brand that relies on an annual renewal cycle for their products and services needs a strategy to both keep their customers engaged and also make it easier for them to afford to retain their custom.

This thinking runs alongside the ever-present reality that the cost of acquisition – replacing lost customers – is far higher than the cost of retention.

Money saving capabilities
In the world of eCommerce, two money saving capabilities already exist:

1. Cashback and discount coupons – used to reduce the basket cost when a consumer makes a purchase online

2. Prepay gift cards used as a payment method when you check out online or in store – offering cashback to the consumer for their loyalty

Both are big business.

For example Quidco – which is the second largest cashback website in the UK – has just been acquired my MoneySupermarket for £100M. It was co-founded by Paul and Jennifer Nikkel whilst studying at university as a way of saving students money as they shopped online. Since then, it has grown to over one million transacting users by offering savings at over 4,500 merchants including retail, travel and switching services.

Secondly the gift card market has been a surprising beneficiary of the changing times. Over past 12 months, pandemic customer behaviour has seen an 8% to 25% uplift YoY in gift card spend across different categories – with the biggest growth numbers in retail as a response from loyal customers to stores being closed e.g. Hobbycraft up 50%. And there is an important myth to dispel – as 70% of this spend is enabled through B2B offers (employee benefits, incentive schemes and now the government sector through Crown Commercial), with only 30% being direct sales to consumers i.e. for birthday presents.

Put these two capabilities together and you have a strong consumer proposition – with more than 60% of gift card redemptions in ‘bricks and mortar’ stores which makes them attractive as outreach from just offering eCommerce online discounts.

What can brands offer their consumers?
The challenge for enterprises with an annual renewal cycle is making sure that brand engagement becomes a habit. That’s easiest to achieve if your product or service is used regularly – like going to the gym or streaming a movie – but less so if your service is only used when a need arises, like when your car breaks down or making an insurance claim. The response of many brands has been to offer incentives by engaging with an app, for example I can now get a free coffee from my mobile phone provider.

But it strikes me that this is all a bit random if the offer is for an unrelated purchase, particularly where the fulfilment of that offer is not tracked or visible to the brand. Yes the app stats may show frequency of customer visits to browse or take-up the incentive, but you need to make that real at the moment of truth when the renewal cycle becomes due.

So what do brands require? This breaks down into three factors:

1. Access to relevant offers
For effective engagement, brands need to offer a range of saving opportunities – across everyday purchases likes the weekly supermarket shop, for occasional purchases like a family meal out, as well as those discretionary one-off higher value purchases like a new tech gadget. Taken together, the value of these savings become a material benefit that the brand has enabled, and because there is a frequency of purchase then these transactions could potentially become habit forming.

2. The ability to track user behaviour
Brands already recognise that consumer traits vary across different customer segments. That means that behavioural responses are different when presented with a promotional offer. Not all savvy shoppers have a calculator at hand to sum up the totality of their savings, which is where having a savings goal in mind can make a real difference.

We can learn a lot from loyalty schemes like airline frequent flyer programmes when a consumer knows when they need just one more transaction in order to reach the next tier level or have sufficient points to book that reward flight that they want to make.

This means that brands offering various type of cashbacks and discounts need to keep a track of consumer behaviour – in order to tailor the right offers – as well as making this information visible to the user to drive future activity.

3. Making the value of savings and discount real at the point of renewal
As a consultant, I have sat with many retentions teams in contact centres talking to a consumer at the point of renewal. The conversation always starts along the lines of “I have found a cheaper price for your service” (which as consumers we can thank price comparison websites for) and then the agent tries to turn the conversation around to the value of the service. “We offer you a range of discounts and rewards that could typically save you X pounds per year”. And if that tactic doesn’t work, then the conversation moves into price negotiation to achieve renewal. But surely the brand has lost the commercial argument when you get to that final stage of the conversation, as margin erodes away in achieving a customer ‘save’.

However if brands have followed these steps above and can track actual customer behaviour in value terms – how many times they have used the service plus the total savings made through rewards – then the renewal decision making process becomes much more informed in the consumer’s mind. They are more likely to accept the renewal price point – with ‘full’ margin – because the service has a perceived level of discount built in through the value of the rewards already claimed.

Look out for the new entrants
The good news is that brands don’t have to do all the heavy lifting themselves in terms of creating a bespoke range of affiliate cashback and prepay saving offers. There are start-up businesses that have created all the infrastructure – across multiple network sources – that brands can configure and white label. You bring the traffic by promoting to your customer base and they do the fulfilment and cashback tracking, providing you with information to serve up to customers at the point of renewal.
Two examples illustrate this:

1. RevGlue
RevGlue is a UK based affiliate marketing SaaS monetisation platform that has spent the last three years building out a range of affiliate and publisher tools. The business is well positioned to take advantage of consumers deal seeking behaviour to save money – particularly in period of economic uncertainty.

Enterprise brands can have their own white label, managed and bespoke retail reward platform that offers customer cashback discounts at the point of purchase. It works like this:

● Affiliate marketing is an aggregated marketplace, and RevGlue provides the cashback and discount deals sourced from all the affiliate networks and their stores. It’s a managed service where all the resulting commission earned from consumer transactions is tracked and collected by RevGlue from the affiliate networks and advertisers.

● Revenue share payments are made to the stakeholders – the brand and their consumers – in the proportion required, less a retained percentage for managing the cashback platform, sourcing the deals with the advertisers, daily data management and managing user enquiries.

For the consumer, the ability to claim their reward could either be a cashout option – direct to their bank account when the savings exceed a threshold level – or retained by the brand as a payment credit that can be applied at the point of policy renewal. This gives your customer the ability to use their “cashback” money they have already accumulated through the reward platform to pay for their existing subscription, or alternatively to purchase additional cross-sell products without having to pay up-front.

2. JamDoughnut
JamDoughnut is a UK app that understands consumer spending habits and helps them to save money on everyday essentials – the daily coffee, the weekly supermarket shop – plus those occasional night outs and discretionary purchases. Consumers pay using JamDoughnut at the till, where all purchases earns points that can be redeemed for cash rewards.

Consumers can use the app to pay at their favourite supermarkets, where it works alongside the store loyalty card. They can buy the latest fashions and accessories, with money back on purchases both in store and online. It can be used to pay for that special occasion eating out, used along with any discounts or special offers at the venue. And if the consumer can’t be bothered to cook, it can provide money back on all the leading takeaway food apps.

The potential for an enterprise brand to white label the JamDoughnut app is worth exploring, as the level of rewards soon adds up and for a typical family could easily total £800 worth of savings per year. Imagine that – it’s like giving your customers a pay rise without having to ask permission from their boss!

Where to start?
For brands to explore these money saving concepts further, you first need to create a hypothesis to test with internal stakeholders, particularly in the scenario where the consumer purchase decision happens relatively infrequently. You might also want to research if the mindset of your customers is open to the idea of engaging with your brand, and then making unrelated purchases?

Once you have buy-in then there are different commercial models you could pursue, in terms of it either being a defensive strategy i.e. maximising the cash back savings for the consumer with the business justification being higher margin renewals, or as an offensive strategy where a proportion of the cash back savings are retained as a new revenue stream.

And in terms of timing when to explore these cashback saving scenarios, then also remember the impact of external factors on your customers. Across global markets prices are now rising fast, higher interest rates are driving up the cost of mortgage borrowing, and supply chains are becoming congested – which is the perfect storm for a prolonged period of inflation.

Don’t leave it too late to take action.

Paul Weald
Having worked for some 30 years in the contact centre industry, I have built up a vast array of experience across all aspects of people, process, technology, operations and Customer Experience. The latest innovations - such as customer service crowdsourcing and digital money saving apps - are now making it so much easier to provide new methods of customer engagement using digital communities.

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