Local businesses are investing more in retention marketing in 2017, but loyalty programs can be expensive to roll out — especially without a clear mechanism for understanding return on investment. Panelists at Street Fight Summit West recently discussed how this was pushing loyalty companies into offering a wider suite of analytics tools to better understand customers and establish ROI.
Street Fight recently spoke to Zach Goldstein, the CEO of Thanx, about how the loyalty sector is evolving, and what retention marketing vendors can do to make their products more seamless for customers.
Digital loyalty programs initially had their heyday about five years ago. How do you think loyalty platforms have progressed since then?
Thanx came from a reaction to that wave of daily deals because those go against every principle I know about building a business — identify and build relationships with your top customers. In most brick-and-mortar companies, two-thirds of revenue comes from the top 25% of customers — and you want to build relationships with these customers.
You need to integrate the loyalty program with the point of sale. POS businesses are archaic, and extracting data is difficult and prevents most businesses from launching a sophisticated program.
What is customer engagement like?
About 60% of consumers who register with a loyalty program go inactive within the first six months. Customers don’t want to jump through hoops every time they go to a business, and the challenge of plastic loyalty cards is with the high friction actions that we are asking customers to take — there’s no wonder so many churn out.
Do traditional loyalty programs do a better job with data?
Even though traditional loyalty programs collect data, businesses need help figuring out how to use that data and what to do with it. A lot of businesses discontinued their loyalty programs because they were swimming in data that they weren’t using or didn’t know how to use.
What does this mean to the bottom line?
You don’t want to spend money to collect data if it doesn’t change your revenue, and you want your revenue to deliver value. A negative ROI on your marketing would say, “I should stop doing that,” and a positive ROI should say, “I should do more of that.” Operators with an uncertain ROI may not be able to figure this out — most marketing departments are under resourced — but an uncertain ROI is as bad as a negative ROI.
This is why you’ve seen interesting changes in the market. Companies are starting to change their loyalty programs to be based on spend as opposed to visit frequency with the goal of better identifying top customers and identifying ROI. We’re seeing businesses that are catching up on the value of data, and we’re seeing a lot more about loyalty programs.
How does Thanx work?
It doesn’t require any hardware of point of sale information or that consumers do anything differently. We get our data through partnerships with the credit card networks. When a consumer makes a purchase, they automatically get rewarded for that purchase without doing anything extra. We’ve eliminated the pain points that make loyalty programs a burden for merchants and customers.
The key there is making it simple for consumers to increase participation rates. Loyalty is not just about giving out rewards or discounts, but about building deeper relationships between you and your best customers. The core to a successful loyalty program is having data about customers so that you can actually improve their experience — that’s real goal of loyalty.
Is Thanx designed more for small businesses or for national chain retailers? Do you focus on a specific retail vertical?
We work with small businesses to national chains in all sorts of verticals. The desire to know more about your customers and to build deeper relationships with them is across industries. We find that every business has a need to identify their best customers and to engage with them.
What are some of the main pain points that merchants have in retention marketing?
We have looked at the data and seen definitely that 70% of customers who visit you today will not be back in the next six months. Some of those people are your most loyal value customers, but if you’re not capturing data, you have no way of knowing that that person has stopped coming in and you can’t do anything about it.
A lot of local companies are working on mobile targeting and online/offline attribution. Do you see these types of things impacting loyalty programs, or interacting with them?
I think there’s interesting opportunity to be found in geo-location, whether through beacons, geofencing or otherwise. That said, targeted geo-located promotions have historically struggled to get consumer engagement.
Where we’ll see that changing is combining that geo-location with useful data. You want to know how much your customers spend so you treat them accordingly and where they spend that money.
Andrea Murad is a Street Fight contributor. This interview has been edited for length and clarity.
Related content: 7 Ways Local Merchants Can Foster Customer Loyalty