#523: Speed of Success by Way of Velocity of Earn

This week’s episode of the “Wiser Loyalty” podcast series explores an advisory-led course from the Loyalty Academy™ curriculum, Key Success Factors in Loyalty Marketing (course #112). Our hosts today are ⁠⁠Bill Hanifin⁠ and Aaron Dauphinee from the Loyalty Academy faculty.

In this episode, Bill and Aaron discuss a key component to creating successful customer loyalty from your rewards program – the speed at which members accumulate enough points to be able to redeem for rewards is the earn velocity.  It is a critical factor that brands want to forecast, monitor, and then manage as an easy metric of program health.

In the Wiser Loyalty series, Bill and Aaron draw a theme each month based on the courses required to earn the Certified Loyalty Marketing Professional™ (CLMP™) designation and this is now the third month of this global loyalty education series.

Show Notes:

1) ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Aaron Dauphinee⁠⁠⁠⁠

2) ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Bill Hanifin⁠⁠⁠⁠

3)  ⁠⁠⁠⁠⁠⁠⁠The Wise Marketer 

Audio Transcript

Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the Founder and CEO of Let’s Talk Loyalty and also Loyalty TV. If you work in loyalty marketing, you can watch our video interviews every Thursday on www.loyalty.tv. And of course you can listen to our podcasts every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts around the world. 

Today’s episode is part of The Wiser Loyalty Series, which is hosted by our partners, The Wise Marketer Group. The Wise Marketer Group is a media, education and advisory services company providing resources for loyalty marketers through The Wise Marketer Digital Publication, and the Loyalty Academy Program that offers the certified loyalty marketing professional or CLMP designation. I hope you enjoy this weekly podcast, The Wiser Loyalty Series, brought to you by Let’s Talk Loyalty and The Wise Marketer Group. 

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Bill: Hello everyone. I’m Bill Hanifin, the CEO of The Wise Marketer Group and one of the two hosts of The Wiser Loyalty Series, as I have my partner and our CMO, Aaron Dauphinée here with me, Aaron. 

Aaron: Hi, Bill. How are you today? 

Bill: All right, good. Great. Good to see you again.

Aaron: Thanks.

Bill: So thanks everyone for joining us in this episode. And for those of you that are tuning in for the first time or maybe just as a reminder, if you’ve been here before, the series introduces constructs from our Loyalty Academy course curriculum on various topics that we think are interesting and will help you learn how to be wiser in loyalty, help you in your personal career, in your business. We hope you can really take away some practical tips here and go out and better the world with it in customer loyalty. 

So each month we’ve chosen a different topic. This one, this month is Key Success Factors for Loyalty Programs. And this is inspired by our course number 112, which is  Key Success Factors, so we’re not going to cover every bit of what’s in the course. We’re going to hit some highlights. 

I’m going to throw it to Aaron right off the bat and let him tell us what key what earning velocity is all about. What key success factors we should be thinking about? Just get us started, Aaron. 

Aaron: Yeah, thank you so much, Bill. I think it’s a really one of the key things and it’s a bit cheeky in our title about the speed to success is laden through the earn velocity.

But this is one of those topics that really is a linchpin, I would say, in terms of how successful your loyalty program can be. And success in your program is very much correlated to the speed in which you know, your members are able to accumulate and earn enough It’s not just about how much points or miles or whatever the metric may be that you have in the measuring your program in order to be eligible for a reward or receive in some cases, certain benefits or status, because it’s not just about mileage or points for earning. It can also be about a threshold to a tier. 

So all that is to say is that it requires very thoughtful planning and forecasting and particularly in the program design phase. Like at the onset, before you even launch the program, you want to think this through because it gets to your, the loyalty value proposition that you’re putting into market, but then it doesn’t stop just there. 

Like, you want to make sure that you’re on an ongoing basis you’re leaning into what you’re forecasting and planning is around your members in terms of their earned velocity, your monitoring and measuring it and taking stock that the goals that you thought were attainable actually truly are, and then you’re, and then you’re managing it.

And there’s a number of different levers that exist to be able to adjust it. So you can adjust your earn rate, you know, the points per dollar spent that the individual has, or you can adjust your redemption amounts for certain factors or certain loads that they would have in terms of the particular item or, you know, whether it’s a travel reward or a merchandise reward or gift card or an experiential or whatever that may be. But in most cases, what we’re talking about is really being able to adjust that time to get to a point where you’re eligible to redeem for that reward or the alternative is, if you’ve got a tiered threshold in place that you’ve got certain points accumulation or a certain amount of time based. We talked about that in our last episode of the series to be able to unlock the status of benefits that go along with those particular tiers. So there’s kind of a one two punch there. 

But all of the say is that the time to rewards, you know, can be impacted by a number of different things. So certainly first off there’s the base programmer, like you set the threshold in terms of what that expectation would be. There’s bonusing programs and those can be enabled by the brand themselves that is offering bonuses on their products and services or partner based. If you’ve got a network that is feeding in for and if it’s a common currency, you know, call it quasi coalition is where the you can earn across a number of different brands, the same currency that can also increase their velocity or if it’s vendor enabled where you’ve got you know, consumer packaged goods companies are fast moving CPG said, FMCGs pardon me coming into play that also up the ante on the bonus thing. And it’s a little bit different than when the brand does it. You know, those are means in which you can increase that time to reward by that earn accumulation. 

And then I think the last one that kind of plays into that is if, you know, there’s a co-branded credit card that’s available, whether that’s a fee or a no fee based product. But the point is that there’s category accelerators often in place, you know, whether it’s 3 times earn on a grocery or retail fuel or other categories. But the point is, all of these things combined to come together to create an accumulation speed of velocity. If you will, that gets an individual quickly to that value proposition, which is I’m getting something for participating, providing my loyalty back to the particular brand.

So. I think the only thing that I’d add here, and then I’ll turn it over to you, Bill, but for some examples is really like, all customers aren’t created equal and we talked about that a lot of times. So, your earn velocities could be different by segment or status tier in particular. So, you know, those accelerators are on earn or unlocked or the access to exclusive rewards or a lower threshold for premium awards kicks in at a different point. 

Way to also comment that there needs to be diversity in the rewards offering. So you’ve got this range from something that’s readily attainable, small amount of points earned to an aspirational and you certainly don’t want things to be unattainable. You know, like when we talked about the the PepsiCo fighter jet many years ago came into play, like it seemed unattainable, but then someone found a way. So, you know, it’s one of those things where you can have these higher order ideals in place and think, oh, they’ll, no, no one ever redeem for it. But you know, consumers are tricky. They’ll, they sometimes just find a way. 

But all of which is to say, you know, in an ideal world, I think the last thing I would comment on from my perspective, which is my point of view, and I think, bill, you may share it, but you may not. We’ll see where you follow ’cause I know your background is finance a little bit, taking a shot there at finance answers, is that in an ideal world, all points you know, really should be utilized for reward back to customers, but we know that sometimes the finance teams gets ahold of things in some companies.

And so I guess I would leave you with the idea that, you know, don’t view break breakages being bad. In fact, you know, from a member centric perspective, you should really be aspiring to have a no long tail in your program. So these are individuals who are participating or tried it. And have oftentimes not become active or don’t remain active because they’re just not getting any value. They’re not able to accumulate in a manner that gets them to something of tangible benefit. That is meaningful for them to say, hey, I want to continue to spend money in this particular or participate in this program. So, and we know that in places is a fact. And then this goes back to my lineage of with bond brand loyalty, producing the loads report.

What we saw there is, you know, oftentimes 50 percent or less of programs that were individually enrolled in at 50 percent or less, they were actually active in, and it was a loose definition of active, like one trends that transaction I’ve earned or one redemption in a 12 month period. So really we can do a lot better in terms of providing value to our customers across a multitude of programs. And some are doing it much better than others. And maybe they’ll turn it over to you, Bill, to offer your perspective on who’s kind of winning the game on earn velocity. 

Bill: Yeah, absolutely. I, and of course, you know, that some of the research we’ve been reading lately seems to indicate that people want to get value quicker in programs. So I think it’s put a little bit more pressure on earning velocity because brands have to deliver more quickly. The offset to that maybe is that there, if you can deliver something, a reward more quickly in a shorter period of time, you’re allowed to do something in a smaller denomination too.

So, a cup of coffee you know, a small discount at the point of sale, something like that might appear bigger than it actually is because you got it so quickly. It’s so satisfying. So there are a few things that all of these, guess what? Tie back to our Psychology Loyalty Series that we talked about a couple months ago. They’re direct correlations to why people respond to some of these things and how people work. 

But the one thing I just wanted to mention to you, just to kind of add onto what you were talking about is, and I know we’ve talked about this. It’s when you develop the value proposition, it’s really important to step back and put yourself in the exact shoes of your customer and say, would this be appealing to me, would I hang in there? Long enough in this program to, to enjoy this reward and say, I like this program. I’m going to continue to shop with the brand. If you and I can’t say that, then there’s a really good chance that our customers are not going to say that. So something to think about, right? 

Aaron: Yeah, no, I like that. I putting yourself in the shoes of your own customers but not taking your own experience as a, you know, an example of one like reaching beyond, because you know, like I said, segmentation matters.

Bill: Yeah.

Aaron: And that’s where you can start to say, Hey, I want more bills in our program versus errands as an example. 

Bill: That’s right.

Aaron: Because and be intentional be purposeful about how you structure the earn velocity for some different types of customer groups. 

Bill: Right. Something to think about it. So I love just two examples for you. So the idea of accelerators that you were talking about is really good. 

Here’s an interesting one in the typical convenience and fuel program. I’ve seen a lot of companies offering 2 cents off purchases inside the store and to say, 2 points and the points for a penny, let’s call it 2 points inside the store. 2 points per gallon. And so that equates to around 2 percent overall. If you do the math, it can get complicated, but call it a 2 percent kind of program. If you take CPG offers and put them in the program, and suddenly, because you pumped 20, 40, 50 gallons, wherever they set the threshold, you get a free energy drink.

Aaron: Suddenly.

Bill: Look at the retail price of the energy drink. It’s 4 dollars, US. So now if you say, look what I spent on fuel, I got a 4 rebate. Suddenly it can almost look as though you got 5 percent, 10 percent at different times. And so by taking CPG offers that have high retail value creates high actual, not even perceived, but the customer is going to look at that and say, wow, this is a great deal. This is not your usual loyalty program of one or 2%. Suddenly I get a lot more. So there’s a good example in that sector I think of how you can really increase your own velocity, increase the perceived value of the program.

The other one, and then I’ll let you chime in, which is kind of a different set of circumstances. And I have been thinking about this lately in financial services and in co-brand reward cards. Traditionally, what has it been? 1 percent back 2 percent back and yes, they have category accelerators. So you might get 5 percent of restaurants this month or, you know, somewhere. So the urn is somewhere between 1 and 5 percent typically. And I just looked at a program for an online retailer. The very classic co-brand card set up with something like that, between 1 and 5, depending on category.

You know, the trouble is now. If you look at, say the reward in restaurants, this particular card I looked at, which happened to be LL Bean, just say that because it’s out there and it’s public knowledge. It was 2 percent in restaurants. I believe it’s getting to be more and more common that restaurants are adding a 3 percent or 4 percent surcharge for using a credit card. And the point of sale providers, I guess they’re collaborating in this because they’re enabling it to be printed right on the receipt. And if you do pay with cash, they will remove the surcharge. 

But think about that math for a minute. I’m putting down my beloved co-brand credit card from, you know, whoever that provider is, the retailer. I’m going to earn 2%, but suddenly 4 percent because I used a credit card. It’s to me that’s bad math. It’s a bad look for co-branded rewards cards. I think it’s a worse look, honestly, for retailers who are starting to jump on this trend of, I’ll just charge more for, I’ll put a credit card church surcharge in my business. And I, anecdotally, I know consumers that are walking away from restaurants that are doing that, but it just shows you how external factors can come in and even dampen a really well thought out value proposition.

Aaron: So that one hits home for me in terms of example, just offer a comment. I won’t go into my examples because you hit on a few that I was going to lean into as well, too. But for me, with my small business expertise here in Canada, you’re able to as small business owners start to be able to pass on the charge to consumers as a result, like that’s come into play. And so this is what we’re talking about here. 

But if you’ve got a co-branding card that now it’s been enabled in the US as well, too, that is you can pass that charge on the consumer. I think that is a, you know, for a large retail brand you know, that’s a little bit different cause you, you want to give the flexibility and the choice of tender, tender choice to the consumer and then have that so they can, you know, quote unquote, eat that cost a little easier, even though it is at a cost to the business still you know, but it’s always been there.

It’s just a matter of not passing it onto the consumer for a small business owner. Their first thought is always, you know, this is dollars out of my pocket. And it’s the way that they’re just hardwired, so to speak. But that being said, I think it’s myopic for some folks, if small retail chains, retail you mentioned restaurants to say, Hey, we’re going to pass this on to consumers and point the finger at the transaction providers or the banks or the issuers or whatnot, because that’s, that’s not the way to handle that. Then, you know, there’s a different way to cause force and you can create value in your program through other bonusing and back potential offerings to offset that. If you’re using a credit card, maybe we can find a way to give you value in other ways because there’s other levers that you can come into play.

So, you know, such as creating partnerships with others to create a velocity that overcomes that cost structure. So I think it’s just worth some better thinking as opposed to just being kneejerk reaction of, oh, I have the means and ability to pass this on to the consumer doesn’t necessarily mean that you should, because it might be at the at your end demise to some degree.

Bill: Right. So you know what, we debate, we have different opinions and we even disagree on some things. But we a hundred percent agree on that one, don’t we? 

Aaron: No. For sure.

Bill: Yeah. Absolutely. Listen, everyone, thank you so much for being part of The Wiser Loyalty Series. We are covering key success factors in loyalty programs this month. We’re going to continue with one more episode on this topic in a week. So just thanks for being part of this. We hope it’s helpful. 

Please drop us some comments, whether it’s here through Let’s Talk Loyalty on our Wiser Marketers site or in our LinkedIn feeds, and we’ll see you back here soon. Thanks. 

Aaron: Have a great day everyone. Be well. 

Paula: This show is sponsored by Wise Marketer Group, publisher of The Wise Marketer, the premier digital customer loyalty marketing resource for industry relevant news, insights, and research. Wise Marketer Group also offers loyalty education and training globally through its Loyalty Academy, which has certified nearly 900 marketers and executives in 49 countries as certified loyalty marketing professionals.

For global coverage of customer engagement and loyalty, check out thewisemarketer. com and become a wiser marketer or subscriber. Learn more about global loyalty education for individuals or corporate training programs at loyaltyacademy.org.

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