Saturday, January 31, 2009

How much is your loyalty worth?

Customer loyalty is quickly becoming one of those recession business buzz-words, as big companies realize that consumers are spending less and less, and that to remain profitable, they need to attract more and more of this dwindling pie. It's not surprising that we're seeing more and more companies pushing their brand rather than their product in their current commercial and ad offerings. There's also been a re-kindled interest (likely from streamlined marketing budgets) in customer loyalty programs. Here's a (albeit old) Air Miles commercial:

And another (this one a cheap laugh), albeit more recent, just before the credit crunch
and recession:

This next one isn't a real commercial, but accurately demonstrates the U.S. recession, as:

> The Aliens are creditors
> The Space Man is the average American
> And as usual, the U.S. will need to settle with the alien and tax the space man later, even
though he escaped in his pod.

Closer to home is the new Shoppers Drug Mart commercial that absolutely rocked:

They have their own in-house rewards program called "Shoppers Optimum". It's a program much better suited to the frequent shoppers customer; someone who can afford to go to there for all their daily staples. I guess it's working quite well, despite the economic slowdown, as it's posting higher than predicted sales numbers in the looming recession.

I just stumbled across a new brand loyalty program that is incredibly strong in the United States that I'd never heard of before. It's called Upromise; "where your everyday spending can pay you back with money for college".They have hundreds of online stores, thousands of restaurants and tens of thousands of grocery and food stores along for the ride. Participating companies include Apple, Expedia, Walmart, Dell, etc.These companies are leveraging Americans' emotional and economic mindset in order to get more brand loyalty (isn't marketing great?). 10 million users over an 8 year period can't be wrong.

The rewards program works so that whenever the American participant buys from one of the participating retailers using your special card (not unlike airmiles, but integrated into your credit card), a certain percentage (varies by participating entity) of your purchase is put into a savings account. It's like cash back, but reserved for higher education. This format is ingenious for two reasons (apart from playing on Americans' economic disparity):

2. The program gets payouts from retailers immediately, to be distributed at another time

THe first point is almost like defaulting on a mortgage. If a family has been using the program anad amasses a wealthy sum only for the student NOT to go to college or university; that money is pure profit (and there's a 50/50 chance they won't).

The fine print: "...It's too bad she'll grow up to work in that same supermarket."

The second point regards the time value of money. The Upromise company gets to earn interest on that money while it's waiting to perhaps be collected. That's potentially huge sums over a potential 19 years (birth -> usual college admission age) that a family could be saving money.

So, why is the program so popular (and bound to only get more attention)?

Now that there's so much turmoil in the economy, people's MPS (marginal propensity to save) is rising. Programs that play off this consumer attidue, while offering a no effort approach for consumers to act on their predispositions is an ideal choice for a rewards program. This isn't unlike the Canadian banking version. I think it was Scotiabank that had a similar program, where they would round up to an even dollar on debit purchases, and deposit that amount (<1$)>

So, how much is your brand loyalty worth? Maybe your tuition covered for shopping at WalMart rather than your mom-and-pop shop down the street?

No comments: