#136: Return on Loyalty (Short Summary Show)

How do you know your loyalty investment is worthwhile?

If you’re interested in measuring your “return on loyalty”, listen to learn from industry experts Ellipsis how they they isolate, measure and define the levers within any loyalty program to understand what’s working, what’s not and why!

A MUST-listen episode to answer the most-asked question in the loyalty industry IMHO 🙂

Show Notes:

1) Ellipsis Australia 

2) Adam Schaffer – Co-Founder & Managing Partner at Ellipsis & Company

3) Tim Tyler – Managing Partner at Ellipsis & Company

Audio Transcript

Speaker 0 (0s): Welcome to “Let’s Talk Loyalty”, an industry podcast for loyalty marketing professionals.

I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas from loyalty specialists around the world.

This show is sponsored by Comarch, a global provider of innovative software products and business services.

Comarch’s platform is used by leading brands across all industries to drive their customer loyalty powered by AI and machine learning.

Comarch technologies allow you to build, run and manage personalized loyalty programs and product offers with ease. For more information, please visit comarch.com.

Perhaps the greatest challenge for us as loyalty marketing professionals is the ability to prove the value of the investment we make in our loyalty programs.

After all the customers who are most engaged with your brand are the ones most likely to join the program in origin, to earn awards for the business they are already giving you.

So the inevitable correlation between your loyalty program members be more valuable to your business than non-members does not mean they are more valuable because of the program. Correlation is not the same as causation. This idea is called the self-selection bias and it’s the cause of so many of the challenges we face in order to prove the value of the investment to our business and finance leaders. One specialist consulting firm that has taken this challenge as their entire reason for being is a company called ellipsis in Australia, founded by some of my fellow members of the customer strategy network. The word ellipsis is the name of those three dots that can be used at the end of an unfinished thought or sentence. So for loyalty programs, the analogy is the unfinished understanding of the power and impact of your loyalty program. And even to understand whether it’s working or notch in episode 37, I was joined for this fascinating discussion by Tim Tyler and Adams gaffer, two of the co-founders of ellipsis in order to respond to important questions from clients who are not necessarily wanting to start a loyalty program, but instead they wanted answers to some fundamental questions such as where was the value in their customer base? Did they even need a loyalty program? Or of course, if they had one is their loyalty program actually working Speaker 2 (3m 6s): With so Speaker 1 (3m 6s): Many questions, the challenge became to identify what the ellipsis team call the return on loyalty to get beyond the self-selection bias and prove what value is being driven by the loyalty investment specifically. And their expertise has proven invaluable. Having already worked with over 90 programs around the world across all sectors, including brands like Estee Lauder and Mac cosmetics, Priceline, visa, eBay, and so many others. I learned immediately from all of this analysis. One of the assumptions that many of us make is that the greatest potential to drive profitable behavior change might be in the mid tier of the customer value, but counter-intuitively the most value is actually available in the top tier where you may think you’re already getting as much spend as you possibly can expect. In fact, those customers are still the ones with the most potential was an incredible insight. Tim and Adam shared that loyalty programs depending on the sector. And of course how well they are run can drive extremely good returns for companies relative to other assets. Tim made the simple but brilliant comment that customers are actually the only source of income for a company. And I’ve used this super succinct summary. So many times since then, we then talked about other KPIs like NPS scores and the importance of understanding the key drivers of these metrics like return on loyalty. There was actually no point in measuring your performance with customers to simply compare against your industry. So these metrics are never as simple as one question brands also have to isolate the key drivers of them in order to influence them to go up both NPS and return on loyalty should be used as magnifying glasses to understand underlying challenges to consumer behaviors, and then turn these insights into a strategic roadmap that will maximize the lifetime value of your customer base. The advice from ellipsis was clear. It’s critical to understand and be laser focused on a single objective for the loyalty program in order to understand the right questions to ask and align it to the strategic direction of the loyalty team and the wider business. For example, there is no point focusing on increasing basket size, if in fact, it’s the customer’s frequency of spend, that is the most profitable behavior pattern. And many of us I think are guilty of either assuming the wrong objective or trying to achieve multiple objectives. Of course your loyalty objectives can and should change in the same way that customers change. And of course, the market is constantly changing too. Another fascinating discussion we had was around the performance of the program at different stages in its life cycle. And the importance of realizing that over time, your marketing effectiveness will in fact decay. So we need to know when and why in order to take the appropriate action. There are always those who are members of your loyalty program yet are not engaged. And it seems that this cohort can in fact be a great control group to compare the uplift from those who do engage against those who don’t finally for this brief summary, we talked about the emergence of subscription-based loyalty programs, which Adam explained simply use different psychological leavers to drive loyalty based on the concept of sunk cost as distinct from more traditional models, which focus on the idea of loss aversion in closing Adam summarized that loyalty works best when it’s not put in the loyalty corner to the exclusion of the rest of the customer strategy, loyalty initiatives must be part of your overall customer relationship. And as we’ve seen so often with successful airlines and perhaps grocery programs, these are often operated in those sectors as a fundamental part of the business. So that’s it for this short summary, there are so many brilliant insights and ideas that were shared by the guys from ellipsis. So the next time you have 45 minutes to spare, I can promise you, this is an incredible way to learn all about this idea of return on loyalty. So once again, it’s episode 37 of let’s talk loyalty, that’s it for today on Thursday, I’ll be celebrating the second birthday of the show, chatting with my friends in the loyalty Speaker 0 (8m 31s): Academy and the wise market here. So join us for a great informal conversation about Speaker 3 (8m 38s): Then and now. Thanks for listening guys. Speaker 0 (8m 46s): This show is sponsored by the wise market here. The world’s most popular source of loyalty, marketing news insights and research. The marketeer also offers loyalty marketing training through its loyalty academy, which has already certified over 170 executives in 20 countries as certified loyalty and marketing professionals. For more information, check out the wise market tier.com and loyalty academy. Thanks so much for listening to this episode of let’s talk loyalty. If you’d like me to send you the latest show each week, simply sign up for the show newsletter on let’s talk loyalty.com and I’ll send you the latest episode to your inbox every Thursday, or just head to your favorite podcast platform. Find let’s talk loyalty and subscribe. Of course I’d love your feedback and reviews. And thanks again for support the show.