ORLANDO, Fla. -- Lessons on optimizing retail loyalty programs can be found in unusual places. Take Disney World, for example.
Walt Disney World Resort in Orlando, Fla., has changed drastically over the past 20 years. But the park’s most noticeable changes are not the new rides or attractions—it’s the technology.
Dan Gloede, CEO of Chicago-based Hatch Loyalty, formerly known as Belly, recalls visiting Disney World as a child. He remembers wandering through the park as his family pored over their paper map, waiting in long lines for rides and wasting time looking for something to do.
Compare that to his recent experience at the park. A couple of months before the trip, Gloede signed his family up for Disney World’s FastPass+. This online tool—also available via app—allowed Gloede to reserve seats on rides, admission into shows and even interactions with well-known Disney characters.
But the tool is only half of Disney’s loyalty offering. MagicBand, an NFC (near-field communication) payment wristband park guests use for payment and admission, delivers both convenience to customers and valuable visitor behavioral data to the company.
Disney’s reservation and check-in system may not seem like a loyalty program at first glance, but Gloede challenges that assumption. “Just because it’s not called ‘the loyalty band’ doesn’t mean it’s not a loyalty program,” he says.
Deals and Discounts
For Gloede and the team at Hatch Loyalty, the concept of loyalty isn’t necessarily about influencing customer behavior through deals and discounts. It’s about studying customers’ behavior, finding out what drives them to return, and using that data to deliver a customized experience.
“Just getting one free coffee after buying nine isn’t cutting it anymore,” says Natasha Janic, Hatch Loyalty’s platform marketing manager. “You don’t necessarily just need a loyalty program.”
In other words, retailers using a loyalty program to directly influence customer behavior can also use it to learn more about customer behavior. They can analyze the data to see what products and services customers gravitate toward and why. This way, instead of trying to force customers into a purchase or specific buying behavior, retailers can suggest products customers are likely already gravitating toward. Think of it as a soft sell instead of a hard sell.
“Just getting one free coffee after buying nine isn’t cutting it anymore.”
The same mindset concerning loyalty can be found in the restaurant industry. James Park is CEO of Centennial, Colo.-based Garbanzo, a Mediterranean-style restaurant that uses a loyalty program from Paytronix.
“We use it to mine information,” says Park, who before leading Garbanzo spent time at 7-Eleven in consumer insights and fresh foods and also was vice president of the Which Wich sandwich chain. “We look at patterns of what consumers are buying. We also look at the customer and who’s buying what and when, and try to understand why they’re buying. We also look at what’s moving from a menu standpoint. So it’s not just that we look at one element using this database. We use it to mine a whole array of insights about our business and especially our customers.”
The program still influences customer behavior, but it does so using data about the customer collected throughout their purchase history. For example, say there is a customer who regularly orders a chicken pita but has been visiting less often after growing tired of their order. “If I start to see that attrition, I may say, ‘Hey, have you tried our falafel using similar ingredients?’ ” Park says. “I’m not trying to switch you to a different protein at this juncture, but I’m just trying to get you to try something different.”
Customizing the Experience
Tracking customer behavior is key in keeping attrition at bay—and also in delivering a customized experience.
For Starbucks, the most important detail about every customer is not who they are, but what they do in the café and how often they visit.
According to Gloede, Starbucks does not track demographics such as race, age or gender. “Starbucks just looks at the way you interact with the brand,” he says. “They use those outcomes to drive the next journey.”
For example, a Starbucks customer who regularly orders breakfast sandwiches on his way to work may one day wake up to a reward for a free sandwich.
Park also tracks consumer behavior at his restaurant, but customers are categorized in different buckets depending on their behavior. “We observe their buying and spending habits, when they’re going and the level of frequency,” he says.
From there, Park and his team distill the customers into a particular segmentation—or a “universe,” as he calls it—and create campaigns targeting customers with specific behaviors.
“For example, my wife’s a vegetarian,” says Park. “The last thing a vegetarian wants is to constantly get blasted with a steak offer.”
Loyalty programs that fail to factor in individual preferences like this are susceptible to what Park calls “opt-outs”—customers who say they no longer wish to receive any further communications from the brand about deals, discounts or news. The key to keeping customers in touch with a brand is offering them items they are likely to want based on their past behavior.
However, retailers should also be wary of asking too much of their customers. “Consumers are becoming a lot smarter about who they give their data to,” Janic of Hatch Loyalty says. “If they’re not getting something worthwhile, they’re just not going to.”
At Garbanzo, newly registered loyalty- program members receive a $5 credit in exchange for their relevant information, which typically includes phone number, birthdate, full name, gender and address.
“We collect a very healthy set of information specific to the customer,” Park says. Garbanzo customers can sign onto the program through a number of avenues.
They can receive a loyalty card after their first transaction and apply the $5 discount retroactively to their first order, or they can register through the restaurant’s mobile app or online. But no matter how the customers register, they have access to the $5 reward.
“You can’t just establish loyalty; it’s an outcome, not a program.”
Garbanzo also offers an employee-focused loyalty program. Each marketing campaign has specific opportunities in which employees can engage and be rewarded for their participation. Through the program, high-performing employees can redeem tickets to sporting events or movies, or free T-shirts or jackets. Sometimes the rewards are based on employee input—for example, pizza parties are a popular prize.
While employee loyalty programs have the potential to improve overall workforce performance, it begs the question: How can operators reward their employees without affecting their bottom line?
“It’s an investment, not an expense,” says Park. “Everything costs money, but if you view it solely as an expense, you’ll never invest your way to success.”
Loyalty Vs. Marketing
Although Garbanzo’s employee loyalty program is employee-facing, human resources does not manage it. The program is managed the same way as the customer-facing program: through the marketing department.
As far as Park is concerned, it’s all a part of marketing.
“Essentially, any person who is selling the future growth of the business is a marketer,” including everyone from front-line employees to the chief marketing officer, says Park.
Janic of Hatch Loyalty agrees. “Many retailers claim they need a ‘loyalty program’ and address it as a separate entity from their overall marketing strategy,” she says. “You can’t just establish loyalty; it’s an outcome, not a program. It shouldn’t run in parallel to the overall marketing strategy; the two should be intertwined.”
Customers are not stagnant, Janic says. Their interests and needs shift over time, and the only way to keep up with these changes is to consistently collect customer data and adjust consumer-facing programs accordingly.
“As we move into machine learning, we’re going to see brands and retailers with highly evolved algorithms that can account for all of the new data collected that allow for more effective marketing,” she says.
Until retailers have access to that kind of technology, the key to managing an effective loyalty program is making the most of the data available. “Once you get people on your list, you’ve got to work that list hard,” says Park. “Make that engine smoke and it will pay you back. It’s the only way that you can market—to really know who your customers truly are.”
The very idea of conventional media marketing makes Park uncomfortable. “When you talk about eyeballs and impressions, and media this, media that—stop it. … They’re right there in your database. Get more people in your database,” says Park.
He also cautions operators not to leave their current loyalty program before ensuring they are making the most of their data.
“Everybody believes that if they just switch, the world is going to magically change,” he says. But switching comes with its own headaches. Namely, everyone on the existing loyalty program needs to switch to the new program, and no migration will catch everyone.
At the end of the day, the results won’t change until the strategy changes. “I always say the biggest room is the room for improvement,” Park says.
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