5 Criteria for Assessing Your Loyalty Program Value

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To encourage customers to actively participate in your loyalty program, they need to see value in doing so. From a program management perspective, it is important that you regularly audit the value provided by your program in order to create sustained engagement with your current and potential program members. This is especially critical if you have recently made changes to your program or are about to implement changes. A classic loyalty program article in the Harvard Business Review suggests a really useful framework that lays out five criteria for assessing loyalty program value. I would like to explain these five criteria here and offer an illustration of how several well-known loyalty programs fare on these criteria.

Criterion #1: Cash Value

This first criterion should be a no brainer. It refers to the financial value consumers receive from participating in your program. You can determine your program’s cash value by calculating its reward ratio. That is, how much does a member receive in terms of free rewards for every dollar spent? Take Starbucks Rewards as an example, consumers earn 2 stars for every dollar spent (without promotion). A free reward is issued every 125 stars accumulated, or $62.5 spent. Assuming consumers redeem the free reward for the more expensive items on the menu (say, with an average price of $5), they would receive a cash value of $5 for every $62.5 spent, or 8 cents per dollar spent. That is the reward ratio for the program. To calculate your program’s reward ratio, use this more general formula: reward ratio = (average reward value/average point threshold) x number of points earned per dollar. In the case of Starbucks above, reward value ratio = ($5/125)*2 = $0.08 per dollar (or 8%). This is actually really high compared with typical credit card reward ratios of 1-2%. If you already know the average value per point, you can also directly calculate your reward ratio as average $ value per point*number of points earned per $1. Continue reading “5 Criteria for Assessing Your Loyalty Program Value”

Social Media in China

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This sign was the last thing I expected to see when I stepped into a quiet back alley restaurant off a street several hundred years old in China. Printed on the worn green wooden plate were Chinese characters that roughly translated into “Feel free to take pictures and show off on WeChat and QQ.” (WeChat and QQ are major social network platforms/apps in China.) Situated at the entrance to a traditional looking courtyard, the sign felt like it was left by someone who once traveled here from the future.

But as my month-long trip to China continued, I came to realize that the presence of such a social media token is perhaps not so surprising after all. It appears social media have become more or less a way of life here. Everywhere I looked, I saw the presence of social media. In this post, I would like to take you on a vicarious tour of the social media landscape in China.

Social Media is Everywhere

According to Statistica, there were 596 million social network users in China in 2017, the highest in the world. This translates into approximately 42% of the country’s population. But the penetration rate is much higher among those under 50 years old, at nearly two-thirds and as high as 77.3% for those 20-29 years old. What is unique about Chinese social media users is the dominant use of mobile devices for social media access. eMarketer estimates that 480.4 million Chinese users will be accessing social media through their mobile phones in 2019.

My own observations in China conveyed the same impression as the numbers. Buses and subways were full of people hunched over their smartphones scrolling through social media postings and friends’ messages. Even the traveling retirees (all 60-70 years old) that I encountered during my trip were frequent social media consumers, spending a large chunk of their free time reading, liking, and to a lesser extent posting on social media. Adoption by businesses is also high. On advertisements and product packages, company social network information was frequently printed alongside phone numbers and website addresses for consumers to reach them. Continue reading “Social Media in China”

The Future of Influencer Marketing

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Influencer marketing has been a buzz word for the last few years. It is a highly attractive marketing tactic, leveraging the social influence of high-visibility opinion leaders to spread words about products and persuade consumers. This is similar to the long tradition of celebrity endorsement, but with the added intimacy of social interactions and the approachability of “I could be her too”. Major brands such as Motorola and American Express have successfully engaged in influencer marketing. In this article, I would like to discuss recent shifts in the influencer marketing landscape and where I see influencer marketing to be heading.

Recent News about Influencer Marketing

Two pieces of news broke recently that may have long-term impact on influencer marketing. In one, several brands’ CMOs spoke against influencers at Cannes this year. The criticisms raised included inflated follower numbers and lack of brand authenticity in some cases.

Separately, Girl Up, a United Nations Foundation organization, surveyed Gen Z women aged 14 to 19 in seven countries. The survey found that Gen Z women are less affected by influencers. They are aware of the financial incentives offered to influencers and as a result some of them may not trust these influencers. Instead, Gen Z women are more driven by brands’ stance on socially important issues and by brand authenticity.

Do these developments indicate the end of an influencer marketing golden era? Will influencer marketing become passé? In my opinion, influencer marketing will continue to be part of the marketing toolbox. However, I believe there will be several significant changes in the influencer marketing landscape.

Prediction #1: The Rising Power of the Average Joe/Jane

As newer generations of consumers become wary of mass influencers, brands will need to rely more on the average Joes and Janes among their customers. These customers have actually experienced the brand and will bring more authenticity to their word-of-mouth. Supporting this idea, both Samsung and eBay CMOs mentioned at Cannes the desire to shift their focus to the business’s actual customers.

One concern with relying on average customers is whether they can generate the same reach as mass influencers. Fortunately, even without superpowers, average Janes and Joes can still get the message pretty far and wide. Although the message from these customers may only get to a smaller number of people at first, the amplification effect through social networks can still lead to a large mass. If one person tells ten people, and each of those ten people tell ten new people, the total reach after 10 rounds will be an astounding 1 billion. Of course the number in reality is generally much lower because you and I may share some common people between our respective networks. My own research shows that a moderately diverse group of people are best for maximum message reach.

The implication from the rising power of average customers is that brands need to see each consumer as more than a single consumer. It is no longer simply a brand-customer dyad. Instead, brands need to be conscientious of the consumer’s network of social connections. To use an analogy, when you marry someone, you are also marrying his or her entire family. I suspect this ability to deal with circles of customers will be crucial to competitive advantage once the current efforts at improving individual customer experience maxes out in its potential. The best brand loyalty will be brand loyalty shared with friends. Continue reading “The Future of Influencer Marketing”