Is your geosocial loyalty strategy naive?
June 8th, 2010 by Robert Davis
It’s clear that location-based mobile app providers see loyalty programs as a business model that can help drive their expansion – for example, Loopt’s introduction of LooptStar creates a much more powerful platform for managing geosocial elements of brand loyalty programs. Brand marketers need to be careful not to get caught in the geosocial industry’s ramp-up on loyalty basics, however. Pepsi Loot’s program is a good example of a retro-loyalty concept: rewarding store visits. While it’s important for Pepsi to be seen by distributors and retailers as driving innovation, it’s the kind of program likely to have little demonstrable effect on any kind of measurable business results. Why? Because it’s focused on the wrong metrics – check-ins – and ignores metrics which successful loyalty marketers have been working with for quite a while.
The metrics loyalty marketers typically favor are those that measure increases in customer lifetime value, or LTV. By their very definition, LTV metrics include a monetary component, which is sorely lacking from foot traffic calculations based solely on frequency. Of course, increasing frequency can increase value, but in most cases involving day-to-day behaviors, visit-based rewards programs do not stimulate enough extra visits to pay back the cost of the rewards structure. Instead, they simply reward existing behavior, and in doing so give away margin.
Marketers might be better off focusing on program strategies designed to increase customer value, such as
- Incenting referrals. For example, LooptStar allows marketers to reward a group if they check in together. If you’ve got five people checking in as a group at your restaurant, it’s likely at least one of them is a net-new customer, and hence a revenue boost. Empowering program members checking in to share a first-time reward with friends via their social graph is another way to go.
- Stimulating trial. ShopKick’s CauseWorld platform can reward visitors for scanning a bar code on a product on a store shelf. Consumers could also be asked to answer a question based on copy on the product packaging. In return, consumers could get points, or offers for a new product, such as that new, heavily bacon-driven item of the moment on a QSR’s menu.
- Tying spend levels to geosocial behavior. Starbucks already lets consumers replace their physical stored-value card with a smartphone app. Linking purchasing to the location-based program would provide marketers with much more powerful tools for understanding the role of location based programs in driving customer value – and enable targeting of rewards and offers based on the sophisticated predictive models that can make loyalty investments pay off.
These are obviously early days in the rollout of geosocial apps. It’s easy to forget that we’re still addressing a minority of “geosocial nerds.” (A group in which I count myself. Maybe “enthusiasts” is a better word…) But as smartphones proliferate, and marketers are pressured to “do something – anything” with location-based programs to drive loyalty, just as they have been with the web, with viral, with crowd-sourcing and with Facebook, it’s not too early to get in front of the movement, and think about strategies that link location with measures that truly matter to the business.
Marketer’s action plan for location-based loyalty
- Relax – you haven’t missed anything meaningful yet. Take the time to get the customer loyalty team involved, rather than letting the social media team run with a location based program.
- Start with a clear view of how customer actions impact lifetime value, including direct actions (such as recency, frequency and monetary as predictors of future value) as well as indirect actions, such as referral or net promotion.
- Develop generic strategies for affecting these key measures based on location-based context. Taking this step helps avoid the trap of being influenced too early by the specific capabilities of each of the location-based platform options.
- If you’re relying on a location-based platform provider, make sure the tactics they recommend align with your key strategies and measures. If they don’t support more than one or two of them, consider a small pilot focused on proving out a limited business case. If they don’t support any, take a pass.
- Conduct a survey to profile your customers that currently use smartphones and those that use location-based apps. Do they look more like leading-edge influencers than your average customer? If so, consider WOM or referral strategies as a starting point.
