Expressing Gratitude to Loyal Customers

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My favorite holiday, Thanksgiving, is just around the corner. This is a great time of the year for companies to send out words or gifts of appreciation to their loyal customers. The insurance company AMICA sends out artistic Thanksgiving cards to their customers every year; many real estate agents send out fresh calendars for the next year to their clients; and I once even received a BIG can of popcorns as a customer appreciation gift during this time of the year. Are such gestures beneficial for companies? How should such thank-you’s be conveyed? In this week’s post, I pull academic research on gratitude to shed some light on these questions.

Feelings of Gratitude

According to philosophy and social psychology research, gratitude is an important emotional foundation for sustained reciprocity in human relationships. When an individual feels gratitude, he or she is motivated to repay the favor by conducting an act of kindness in return. Many of us probably still remember the paying it forward story at a Starbucks in Florida a few years ago. It started with a woman offering to pay coffee for the customer behind her, who then passed on the kindness by paying for the next customer. This chain continued unbroken for a total of 378 customers. That is the power of gratitude. In a bilateral relationship between a customer and a company or brand, feelings of gratitude can provide the drive to sustain a trusted and committed relationship and increase customer loyalty.

Gratitude Needs to be Expressed

The feeling of gratitude has a unique social component that prompts it to be expressed. In an eloquent essay written by Dr. James W. Ceasar, he describes gratitude as having developed into an objective standard of behavior. In his words, “Gratitude has a social aspect and is incomplete if it does not include the act of acknowledgment”. Or in more plain words, not saying “thank you” when someone has done something nice for you is just rude. Although much of Dr. Ceasar’s arguments relate to political and social domains, they are just as relevant to customer relationships. It is not quite enough for a company to claim its commitment to its customers when it does not properly express its gratitude to customers. Continue reading “Expressing Gratitude to Loyal Customers”

Loyalty Program Review: Chipotle Rewards

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Chipotle, the fast-casual restaurant chain specializing in Mexican food, has launched a new loyalty program called Chipotle Rewards. The company is currently beta testing the program in three markets: Phoenix, AZ; Kansas City, MO/KS; and Columbus, OH, and plans to roll out nationwide in 2019. For this week’s blog, I thought it would be fun to do a professional review of the new program using the five criteria for assessing loyalty program value I wrote about previously.

First, a few details about Chipotle Rewards. The program is free to join. Members earn 10 points per $1 spent at its restaurants or through catering orders, and 15 points per $1 for orders placed via its website or mobile app. There will be bonus actions consumers can complete to earn additional points. Once a member accumulates 1250 points, those points can be redeemed for a free regular-priced entrée item. Rewards expire after 60 days. Till Nov. 21, 2018, the program is offering a joining incentive of a free order of Chips & Guac after the new member makes the first purchase under the program. Let’s take a look at how this design stacks up against the five value criteria.

Criterion #1: Cash Value

In my geographic area, a typical entrée on the Chipotle menu costs about $7~$8. Together with the point earning ratio of 10 points per $1 and a reward threshold of 1250 points, we can calculate the reward ratio to be ($7~$8/1250)*10 = $0.056~$0.064 per dollar spent (or 5.6%~6.4%). This reward ratio is pretty high compared with a typical credit card reward program, but how does it compare with other restaurant loyalty programs? Chipotle’s direct competitor, QDOBA, also runs a loyalty program called QDOBA Rewards. The program requires 3000 points for a free entrée priced at the $8 range, with lower thresholds for cheaper items. The earning ratio for QDOBA Rewards is the same 10 points per $1 at the two lower tiers (Recruit and Apprentice), and goes up to 15 points per $1 for the Pro tier and 20 points per $1 for the highest Champ tier. Putting these numbers together, it appears QDOBA Rewards has a base reward ratio of about 2.67% for the two lower tiers, and 4% and 5.33% for the two higher tiers. Comparatively speaking, Chipotle Rewards offers a higher cash value. However, considering the bonus points per visit offered to higher-tier members of QDOBA Rewards, the two programs are more comparable in cash value at the higher tiers. Continue reading “Loyalty Program Review: Chipotle Rewards”

Measuring Loyalty Program Performance and ROI Part 3

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I hope you have enjoyed reading Part 1 and Part 2 of the loyalty program performance measurement series. In this last portion, let’s look at what your metrics should be for the last two types of program goals: to attract new customers, and to gain customer insight.

Metrics When New Customer Acquisition is the Goal

The obvious metric for measuring new customer acquisition is the number of new customers acquired as a result of the loyalty program. Although it seems rather straightforward, it is necessary to note a few things about this. One, depending on the nature of your business, determining who are new customers may not be so easy. An online retail business typically has customers’ name and contact information. So identifying and determining the number of new customers is pretty straightforward. Without such information, a new loyalty program member may simply be an existing customer who decided to sign up for the program. Therefore, it is generally not a good idea to count sign-ups for the loyalty program as a metric for customer acquisition.

Instead, you may want to leverage POS data to identify new credit cards that have not previously been used at your business. This is not 100% accurate either obviously, as existing customers may simply be using a different credit card. But it is likely to be closer to the true number of new customers. Measurement of foot traffic or sales and then excluding frequency+spending growth by existing members can be another crude measure of new business. Finally, it is also possible to draw a random sample of your visiting customers and ask the simple question of whether it is the first time that they are buying from your store. Whichever approach you use, it’ll be best to have some baseline customer acquisition numbers before the program was established to compare the new numbers to. Continue reading “Measuring Loyalty Program Performance and ROI Part 3”