When it comes to loyalty and/or affinity programs, many businesses and brands are still missing the mark. Too many go for short-term thinking, and offer discount after discount to get customers into their stores, and this can hurt them in the long term.
With new programs from Canadian coffee chain Tim Hortons, updated programs from Starbucks and new lifestyle programs from Barneys in the U.S. all offering different takes, should businesses be concentrating on affinity or loyalty?
In this week’s episode of Marketing on Tap, we look at the different approaches various brands are taking, and share what your business should be looking to do when it comes to understanding your customer base, and what type of program you should offer, loyalty or affinity.
Settle back and enjoy this week’s topic, brought to you in the usual unscripted manner that you’ve come to expect when Sam and Danny take the mic.
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This week’s beer is Skinny Dippin’ Stout from Sawdust City Brewing Co.
Intro: Join marketers, authors, and craft beer enthusiasts Sam Fiorella and Danny Brown for a hoppy discussion on all things digital over a cheeky pint or two. Topics on the menu include influence marketing, social media, brand advocacy, and a taste-testing of real-world, digital marketing campaigns. Some are smooth, others don’t sit so well. Don’t forget to stick around for last call, where the boys will serve you up one final marketing takeaway that you can go out and apply in the real world. It’s a great primer before the weekend.
Sam Fiorella: Welcome back, everybody, to another episode of Marketing On Tap. As always, my name is Sam Fiorella. This is my mate, Danny Brown-
Danny Brown: Hello. You almost forgot.
Sam Fiorella: I almost forgot your name. We can’t be that good of friends I guess. Either that or I’ve already been dipping into the beer.
Sam Fiorella: Today, Danny, I want to talk about loyalty programs. It seems a bit pedestrian almost, marketing podcasts talking about loyalty programs. How long have we been talking about this? But loyalty programs are actually getting a renewed exposure, or a renewed interest, and you can take a look at McDonald’s that I want to talk about today that’s just invested in that’s going to have a company that has a loyalty program built into it. Starbucks has just launched an update to its program, yet again. Barney’s, of all places, high end fashion retailer has created a loyalty program that they’re offering.
Sam Fiorella: So, I want to talk about why. Should companies really be considering loyalty programs. All the airline loyalty programs seem to have died off, or, not died off, changed so much that they’re not nearly what they used to be.
Danny Brown: Right.
Sam Fiorella: You know, and those generic ones like air miles and the rest of them don’t seem to have a lot of value for a lot of people. Grocery stores do it now.
Sam Fiorella: So, anyway, we want to talk that, and is there real value, and if there is, and people listening out there want to do something what might it be. So, that’s our topic today. Loyalty programs. Does it make sense? Is it money wasted? How do you go about doing it if you want to do it? What are the key factors?
Danny Brown: Okay.
Sam Fiorella: So that’s today and I’m liking what I’m seeing.
Danny Brown: A nice dark beer there.
Sam Fiorella: Yep.
Danny Brown: This is the Skinny Dipping Stout from Sawdust City up in the [crosstalk 00:02:19] country, Muskoka.
Sam Fiorella: What was the last one? We had another equally cheeky beer from-
Danny Brown: The Long Dark Voyage to Uranus?
Sam Fiorella: The Long Dark Voyage to Uranus. That was one of the first ones we tried.
Danny Brown: I think it was, actually, last winter. Yeah. So yeah, it’s a nice [inaudible 00:02:33] cheeky beers. But this is one of their core stouts, it’s year round and it’s made with Canadian 2-row barley. It’s got a bit of victory chocolate and there, dark chocolate and roasted barley.
Sam Fiorella: I like.
Danny Brown: So, easy drinking. 5.5% ABV and it’s only got a 35 IBU. So, it’s a good core around winter beers, thin beer, whatever beer in July.
Sam Fiorella: We should be … It’s getting to be spring. We should be looking at lighter pale ales or something. But I’m just a fan of this stout.
Danny Brown: Yeah, exactly.
Sam Fiorella: All right. Let me get the Robert cam going before we cheers and get this thing [crosstalk 00:03:10]. Yeah, last time I … I’m still trying to figure out how to use the camera on a phone. I’m clearly not the … Especially now that they’ve come up with a new update. All right, here we go. Robert. Cheers everybody.
Danny Brown: Cheers.
Sam Fiorella: Oh.
Danny Brown: Yep. That is very good.
Sam Fiorella: What do you think Robert?
Robert: Not what I expected.
Sam Fiorella: No? So is that a yes or a no? We can’t tell.
Robert: I need to drink some more.
Sam Fiorella: All right. You drink. We’ll get back to you.
Danny Brown: Scientific here.
Sam Fiorella: With any beer the more you drink the better it tastes, the way that I find it.
Danny Brown: That is true. Yeah, geeking off, I like this, sawdustcitybrewing.com. Check them out. Really good.
Sam Fiorella: We have to have a whole podcast on why 90% of craft beers are bloody IPAs. When I bought this one today I was looking, like, what are we going to try and everything was IPs and I hate IPAs. We got to figure out why craft brewers can’t come up with more stouts.
Sam Fiorella: All right. So back to the loyalty programs. So let’s start with one of my favorite companies to hate on, Tim Horton’s. All right, I think we’ve them before. Tim Horton’s is icon Canadian … Well, they’re not Canadian anymore, but formerly Canadian company and they’ve got Dunkin’ Donuts of Canada essentially. So they’ve introduced a loyalty program that people have been bitching about for a long time. “Why don’t you do the buy 10 get one,” or whatever.
Sam Fiorella: So they have a card, like most coffee companies have a card, where you can pre-load X number of dollars and then which tap and it automatically takes off whatever based on what you’re buying. But what they’re introducing now is a program that allows you to buy on the card, but if you use the card as opposed to a credit card or cash, it knows who you are and it will give you rewards based on the frequency of visits. So what they’re trying, from what I understand, their new program encourages you to buy more frequently, not necessarily to buy a bigger dollar amount in one sitting. Although I’m sure that, that’s calculated in there as well. But it really does seem to be focused on come in the morning, come for your mid-day break, come after lunch, or have your lunch. Come middle of the afternoon for your pick me up espresso or coffee or whatever you’re having. That sort of thing. Then they develop rewards based on frequency which is an interesting approach.
Sam Fiorella: Is that a better way to approach a loyalty program as opposed to dollars spent?
Danny Brown: Well, I mean the more you have people come into your outlet, or whatever, the hope is the more they get. Even subconsciously they’ll think, “Okay, this is very critical always for my coffee. They know that I’m going to go into Tim Horton’s and they know that I like the donuts with the jam in the middle. That could be one of my perks that I get, or X amount.” So, it makes sense from a frequency point of view, the more often you visit somewhere. It’s certainly a longer term strategy, or better long-term strategy than just pure old discounts that aren’t real sustainable. No, I’d go with it, yeah.
Sam Fiorella: The publicity that Tim Horton’s is getting over this is pretty good. They need some good publicity because its been nothing but bad publicity for them based on their issues over the quality of their food, the way they treat their staff, the way they treated their franchises. There’s so much going wrong with that company right now. So it’s good to see that there’s something positive here.
Sam Fiorella: But you actually said something kind of interesting. If they know you like a jelly filled donut that, that could be one of the rewards. One of the things that I’ve not seen, and quite frankly it’s not something we’d do with the loyalty programs we build, is not have a standard set of offers or benefits that everybody gets whatever your metrics. It’s personalized. You take a look at a coffee company, or any other retailer that has product on the shelf that could be used as a reward. It’d be kind of cool to just instead of you getting $5 off your next purchase, or 50 cents off your next purchase, we know you like jelly donuts. So, hey, you can get a jelly donut for the next three purchases. That level who’ve personalization would certainly make me want to participate.
Danny Brown: Yeah, exactly. It’s not as if we don’t have tools within the data exactly.
Sam Fiorella: Well, I want to circle back to this point about personalization of a loyalty program and the value beyond just keeping people coming back. But it’s about data, you’re 100% right. If you take a look at what McDonald’s is doing. McDonald’s has their standard buy 10 get one cup of coffee-
Danny Brown: Yeah, [crosstalk 00:07:55], yeah.
Sam Fiorella: Was brilliant because it’s built right into the coffee cup, which I think is a great way to do it. The card is built into there. Still, makes more sense to me to just have it on a card. But then people just don’t want another card in their pocket. Although, the card is built into the cup. You got to take that out and still put it into your … So, I don’t know. I think make it mobile based. Keep it on your phone, something everybody already has and you don’t have to worry about it.
Sam Fiorella: But, one of the things that for them … So, McDonald’s has done two interesting things, in my mind, is to expand that. The first thing is they invested in a New Zealand, or an Australian based app company that they’ve got an exclusivity with, at least in North America from what I understand, which allows … It basically creates user engagement, user experiences within the app. So, it not only allows you to tap and maybe buy, or track a loyalty program but it offers games, and contests, and content. So it’s really more about engaging with your audience beyond buy and you get something, buy and you get something. There’s some value added entertainment, some value added information to strengthen the touch points that you have with your customer beyond the actually transaction.
Danny Brown: Right, yep.
Sam Fiorella: Which I think is kind of an interesting approach. Let’s build a long-term relationship as opposed to just encouraging more purchases. Because the more purchase will happen if we can build a long-term relationship, right?
Danny Brown: Yeah.
Sam Fiorella: That’s maybe the difference in affinity program versus loyalty program.
Danny Brown: Okay, yeah.
Sam Fiorella: We’re not rewarding you for the dollars you spend, but we want to build a relationship with you and make our brand stickier. I mean, I think there’s some real value to that and then the big data that can be data mined.
Danny Brown: Yeah. Well, especially, I mean, McDonald’s no matter which one you go to they’ve got kids play pens, they got these little family areas, et cetera. So they can really kind of use it to [inaudible 00:09:56] say, “Okay, we’ll have when you come in five days a week with your kids. Why not one of these days we’ll have a loyal helper that will watch after your kids in the ball pit while you can sit down, relax and put your feet up for 15-20 minutes while your kids are-”
Sam Fiorella: Well, this is where the personalization with AI driven analytics or AI driven programs can really help. I know one of the things in one of the analysis that I’ve read about what McDonald’s is trying to do is they want to use the AI driven portion of their program to identify, well, if you’re coming in at, let’s say, 5:00 in the afternoon and you’re buying kids meals, or chicken nuggets, or something like that you’re likely a woman with kids or-
Danny Brown: That’s my wife. That’s what she-
Sam Fiorella: Yeah. Or a man with kids because you’re rushing to take them to soccer practice.
Danny Brown: Yep, exactly.
Sam Fiorella: Or, you work late and you don’t have time to cook dinner so you need something quick. So, predicting when you’re going to be coming in and if you are buying for that, is there something, like, what add ons can we suggest to you. Or what reminders can we send to you at certain times of the day that might encourage you to come back.
Danny Brown: Right, yep.
Sam Fiorella: So that’s really fascinating, I guess, this whole idea of driving AI insights, or AI powered insights into this workflow. Especially when you marry it with third party data, or other transactional data that you already have.
Danny Brown: What would be really cool, I just want to add to that, actually. Because, my wife does, like my son goes to soccer practice, my daughter goes to gymnastics. So my wife’s taking them to that in the evening, or late afternoon early evening. She’ll often stop at McDonald’s grab a kids meal and then drove off with it wherever they’re going. They were using the data with this new app that you mentioned that’s going to create a profile saying I’ve got two kids, this is their likes, dislikes. Because McDonald’s don’t only just give toys out, they’ll give books out.
Sam Fiorella: Right. Oh, yeah.
Danny Brown: My son likes, for example, soccer and my daughter likes unicorns. Maybe if my wife touches on the app any time my daughter gets a unicorn cup. Or my son gets a football sticker book. Something like that, that again, builds that full experience. Makes the kids happy, to the mom that’s driving them.
Sam Fiorella: Yeah, and I think this is where loyalty programs really fail in lack of personalization. Especially if you go take a look at airlines. I mean, the airline loyalty-
Danny Brown: Your favorite.
Sam Fiorella: Oh, yeah. Don’t get me going on airlines. But, I promise not to bitch about airlines. But in terms of the loyalty programs I know that I remember when I was with … I used to fly frequently with Delta. I was a frequent flyer with them, I had some pretty good status and, quite frankly, some really good perks. I remember it was based on segments. It didn’t matter how much you spent on a ticket, for them it was about frequency at the time. So, I would take … If, for example, I was going from here to Los Angeles and I had to stop in Detroit, well that was two segments. So I would get credit for two flights even through it was one flight, but because it was a layover I would get the two flights. It didn’t matter if it was a 30 minute flight, or a three hour flight that was considered a segment.
Sam Fiorella: So, you could build your loyalty based on the number of segments that you travel in a year, or the number of miles that you travel. Assuming that the further the place you go the more money you’re going to spend. Well they got rid of that. So, now it is all about the money that you spend. I know with West Jet, who I’m currently a loyalty member of, here in Canada West Jet is really all about the dollars spent. It doesn’t matter, if you get the most expensive seat on a half an hour flight it’s equivalent loyalty to the cheapest seat on a long distance flight if the dollars are the same. So, I mean, again, I’m finding that it’s becoming more and more difficult to earn status.
Sam Fiorella: Then the other thing on an airline, for example with West Jet, is that you’re perks die after a certain period of time. So, I remember I used to be able to say, “Well, if I have loyalty I’ll have loyalty for a year which means I get upgrades to first class, or business class if available when I check in.” Now, with West Jet, for example, and I love West Jet as an airline. But I really dislike their loyalty program. They gave me, when I hit a certain status they give me basically coupons that say, “You have access to our airport lounges.” But, you could only use them within a particular, like, six week window, or an eight week window then they expire and then you can’t use them. So if you haven’t used them … So what they’re saying to me is basically, “Listen, we’ve taken your money and you didn’t use it in this time frame so too bad.”
Sam Fiorella: What if I didn’t have any business travel? Well, I have a ridiculous amount of business travel after that.
Danny Brown: Right, exactly.
Sam Fiorella: You know what I mean? So I get really annoyed with that sort of stuff. Because, again, there’s a lack of personalization that is there.
Sam Fiorella: So speaking of personalization what do you think of this: I was having this conversation with my gym. When I walk into-
Danny Brown: Is this your friend Jim?
Sam Fiorella: Not my friend Jim. The gym, the athletic club where I am trying to lose some weight and get all buff. Can you tell? That is bursting, right?
Sam Fiorella: One of the things that I’m looking for there is personalization, right. So I pay a little bit extra on that Lifetime Fitness. It’s a big chain, it is also one of the most expensive clubs. But I did it for a couple of reasons. I won’t get into that now, but one of the things I really like is when I walk in I usually go at the same time every morning. I’m in by 5:30, 6:00 in the morning. Jane there at the front desk knows me, “Hey, Sam.” As soon as I open the door. She doesn’t have to look at my card or anything. She knows who I am. I like that personalization. But when I walk into the café, they don’t know me. They don’t know me for Adam. I always say, “Hey, Mike.” Because the guys name is Michael, who’s always there in the morning. He’s yet to learn my name after six months of me buying a coffee five times a week, or dinners, or whatever I’m buying in the café.
Sam Fiorella: So, I mean, because they don’t require any kind … They have a loyalty program on coffee. You get stamps. You know, buy 10 coffees get one free. Buy 10 entrees get one free. But they don’t actually have any level of personalization. So, what advice would we give a company like them? How do they get that personalization in the café?
Danny Brown: I mean, there’s a couple ways. A- train their staff maybe.
Sam Fiorella: Yeah. Train staff-
Danny Brown: It depends how many guys like yourself go to the gym, and how many people names they can remember, et cetera. So, I can see that. But then you’ve got two simple options. Have a little card, a loyalty card, that you hand over. It’s a gym card and that’s got your name on it, Sam, you know. Then what’s that go to the point of sale. Then at the point of sale knows that Sam likes this coffee in the morning, or this workout juice, or whatever. But Sam’s in the afternoon he wants something more relaxing because he’s had his workout and now with downtime, et cetera.
Danny Brown: So you could have a beer so when, Mike is it?
Sam Fiorella: Mike.
Danny Brown: Yeah.
Sam Fiorella: Hey, Mike.
Danny Brown: Hey, Mike. So when Mike goes to the register and Sam pops up and it tells him, “It’s morning time. Let’s get him this coffee.” So there’s a lot of ways you can do it that’s not super technical.
Sam Fiorella: I think part of it comes just down to having a card that I would tap. Like my membership card on my phone, just tap that when you make a purchase even if you’re not using it to make a … Like the take money off of a pre-uploaded amount of money. That’s one great way. But I think definitely giving them the opportunity for that level of personalization. Because somebody like me, and I know there’s a lot of people out there, it isn’t about the dollar savings. I don’t care if I get that 10th coffee free because when I’m already spending that kind of money to be part of this club I’m not necessarily looking for a discount. What I’m looking for is extra service, right? So they know that I pay for a trainer. I mean, I pay a fair amount of money to a trainer to develop this incredible body of mine. So, they should-
Danny Brown: Well, you feel like [inaudible 00:17:46] for sunset, or-
Sam Fiorella: And for my ass here. Because that’s getting bigger, and bigger with all of this weight training.
Danny Brown: All the muscles.
Sam Fiorella: The squats, yeah.
Danny Brown: Buff.
Sam Fiorella: I am.
Danny Brown: Buff butt.
Sam Fiorella: Never mind. I can actually twerk now.
Danny Brown: No, you look good to me.
Sam Fiorella: We’re going to do this one day. We’re going to have a twerking contest. I showed it to my daughter and she was-
Danny Brown: What, your butt?
Sam Fiorella: She was … No, that my glutes are getting so strong right now that I could actually … You know how some guys with their chest popping up, I can do that with my butt. So I showed it to my daughter and I thought she was going to vomit all over the kitchen floor. But, I think everybody needs to know that I can actually do that with my butt.
Sam Fiorella: But the idea there is, what I’m really interested in is that service. That level of service. That level of personalization. So they know that I’m working out with a trainer. So, when I’m in there, “Hey, how was your workout with Andrew?” You know what I mean. Or, “How was this … ” knowing that they’re listening to me, that they recognize me, that they acknowledge me as a valued member because I pay more than the standard fee to get this. That in and of itself would be a big deal. It goes to affinity, right.
Sam Fiorella: So, what’s more important? Is it more important to give a discount, or is it more important to build brand affinity?
Danny Brown: No, I think anybody can give a discount and we’ve seen a lot of businesses fail because that’s a business model.
Sam Fiorella: Yeah.
Danny Brown: Sale lower [inaudible 00:19:03] even through you’re not making profit. You’re making lots of revenue, but 90% of that revenue is gone with the discount. So, no. It has to be affinity. It has to be something that makes sense to you, and your use of the product or service that will enhance that to you even more.
Sam Fiorella: I think, maybe a little bit of a shameless plug, we develop affinity programs for our clients. We just relaunched [vondi.co 00:19:30]. I know just looking from personal experience, for those that don’t know what we do, and I’m looking at Barney’s. Barney’s just launched a loyalty program, and when you take a look at what the programs are, and I’ll get back to how I started this conversation. But, they’re programs, from what I read quickly, were based on lifestyle. So you know if you shop at Barney’s not only are you typically of a certain income level, socioeconomic class but that there’s certain types of lifestyle events that you like. Whether it’s a spa thing, or [inaudible 00:20:08] tea, or whatever.
Sam Fiorella: so, they’ve actually purposely looked at not just for cash discounts but they’re looking to create a more of a community for these people. So come shopping, but then you’ve got your tea that you can take advantage of afterwards whether it’s for free or for also an additional discount or whatever, with participating brands that are in the New York market. But with us, with some of the ones that we do I know that, again I’m thinking of our our financial services client here, a wealth management company. It’s about creating events, and experiences that this type of an audience wants. It’s just about the offers we’re developing content, but we’re also showing them how to be legacy. How to give their money away, how to donate to various charities which is something they wanted.
Sam Fiorella: I know the feedback that we’re getting is that it’s sticky because it’s valuable and it’s interesting. That you’re not just asking me to spend money, because to be part of that program you don’t have to keep spending. You know what I mean? If you are a client, some of our programs all you got to do is be a client. Doesn’t matter how much money you spend. The affinity program is just giving you something to engage our brand with beyond the transaction. Which I think is a really valuable tool.
Sam Fiorella: But I’m getting the signal, which means … Thanks for our bell, Steven. It’s that last call. So, what is the … thinking about loyalty programs, points based, affinity based, distance based, whatever. Should a brand be looking to do an affinity program and if so what’s the one thing you want them to know?
Danny Brown: Yeah. I think just think long-term. Anybody can give discounts and get people in stores and say, “Hey, whatever you two you buy we’ll give you the third free,” et cetera. Or, “We’ll give you 50% off your next purchase.” That’s cool, that’s easy. Easy to do. But long-term, understanding who your customers are. Why they’re with you versus your competitor, and keeping them with you because of that knowledge. That’s where the real power in affinity programs comes in and makes your brand valuable to your customer.
Sam Fiorella: Some type of differentiation might be wise. Yeah, I agree with you. Everybody and their mother now apparently has a loyalty program.
Danny Brown: I do.
Sam Fiorella: You have a loyalty program?
Danny Brown: Yep.
Sam Fiorella: You know what, I feel like I’m walking into something so I’m not even going to ask. I don’t want to know.
Danny Brown: I’ll give you the details later.
Sam Fiorella: Okay. Oh, Jesus.
Sam Fiorella: Okay. So, my thought there is that if everybody, you included, having a loyalty, a frequency, a loyalty program what can you do that’s going to set you apart? I really think that with the crowded space, while everybody loves a discount doesn’t matter how much money you have everybody likes to get something for free. I really think in this overcrowded space we need to create loyalty programs that make your brand sticky. That gives something back to them, to the audience that improves their lives beyond that transaction barrier like I mentioned earlier. I think if you can do that longer term, to get to your point, I think that’s going to keep customers coming back more.
Sam Fiorella: Consider the data analytics that they’re getting out of it. Don’t just stop at giving a discount and hoping that, A, that’ll get more customers to come in the door, or get customers to buy more. Look at the data. Understand what trends are being developed. What can you learn that will help you either find influencers within the space, who’s driving the most engagement outside of the loyalty program. But are also part of your loyalty program. As an example, what times of the day, who do they come with? Figure out that data to understand how you can then further the relationship beyond just discounts. I think it has to be more than just discounts to be successful long-term.
Sam Fiorella: So, that’s my take, my final thought. Hopefully you guy have learned something, or have been inspired by something.
Danny Brown: [inaudible 00:24:03].
Sam Fiorella: Yeah. Well, if nothing else you all know that I can twerk now. Thank you for taking the time and for not throwing up when I said that. I will talk to you guys, we will talk to you guys in a week. Join us again, we’re here lunching every … Once a week lunch.
Danny Brown: Well, and forecast with them Wednesdays-
Sam Fiorella: Wednesdays.
Danny Brown: [inaudible 00:24:21] Fridays.
Sam Fiorella: Yeah. That’s it. So follow up on either one of those channels.
Danny Brown: Yeah. Get on YouTube, remember, little notification at the top so you get the new video when it comes out. Subscribe down here. But the subscribe button definitely is, and if you listen on a podcast by all means recommend it to your friends if you like and leave us a review.
Sam Fiorella: Right. Cheers everybody, thank you.
Outro: You’ve been listening to Marketing on Tap with Sam Fiorella and Danny Brown. If you enjoyed this episode make sure to subscribe so you don’t miss the next one. Please, feel free to leave a show review. That’s always worth a cheers.