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Post #8854

by Stephen Davis, VP of Pricing and Revenue Services, Integrated Insight

Published November 2020

Loyalty programs have become pretty commonplace for retailers in today’s market. It’s estimated roughly 7-in-10 adults are a member of at least one loyalty program.1 From simple punch cards to elaborate point structures, you can find them in just about every industry.

Loyalty reward programs are powerful tools for businesses. Offering perks for loyal customers improves retentionand encourages new customers to engage.

Let’s first answer some common questions about loyalty reward programs. Then we’ll jump into tactical components and strategies to help make sure you’re getting the most out of it, regardless of the type of program.

What Is the Goal of a Customer Loyalty Program?

Determining the correct program to implement can make a difference in the value of the loyalty program for consumers and your business. There are three key goals loyalty programs aim to meet:

One of the key targets of a successful program is the ability to retain customers. According to a study by Marketing Metrics, the probability of selling to an existing customer is at least three times higher than selling to a prospective customer.So maximizing retention means an easier sell.

A successful program should be structured to incent more purchases among loyalty members in a way that doesn’t “give away the farm.” More than 60% of loyalty program members report modifying their spending to maximize loyalty benefits.3  Achieving this goal is attainable with the right structure in place.

Loyalty programs provide more than one “win-win” for businesses and consumers. In addition to providing more value for customers and more revenue for businesses, loyalty programs also provide critical insights on customer behavior.  Convincing customers to participate in a program provides a way to learn more about them, including what they like and how they shop. Gaining clear insight on loyal consumers provides opportunity for meaningful engagement, which results in a better customer service experience.

It has become an expectation, not a differentiator, that companies put the wealth of data consumers share with them to work on their behalf.  In a business environment that has become less personalized towards the consumer due to technology, tracking consumer habits presents an opportunity to engage customers on a personal level once again.

In recent years, companies have taken this a step further by tracking purchases of customers and creating customized offers for those who use services. For instance, the CVS ExtraCare rewards program tracks purchases and prints coupons on receipts based on transaction history. Data from Bond Brand Loyalty shows that 87% of participants in loyalty programs are interested in having purchasing behavior and activity monitored in order to receive personalized rewards.

What Type of Loyalty Program Should I Use?

Let’s break down a few of the most popular loyalty programs that businesses use to increase customer base and encourage incremental purchases. There are benefits and limitations to each, so certain types of programs may work better for your business depending on products sold and available technology.

Punch cards are a tried and true loyalty program tactic. But the days of carrying around scraps of paper with unique punch holes are behind us. Today, nearly all consumers would much rather interact through modern technology.In recent years, punch cards have gone digital as businesses have published apps. Even those companies that have not published their own apps have been able to use third-party apps for their rewards programs.

Going digital with punch cards offers a few advantages. In addition to eliminating the need for keeping track of paper punch cards, a digital approach can reduce fraud by eliminating the ability for a customer to punch their own card and take advantage of the business. Additionally, it can lower cost to businesses in the long run and allows business to collect data to profile customers – one of the key goals of a loyalty program. Digital programs provide real-time data with each use, whereas punch cards only provide insights once customers complete earn all punches and have earned a reward.

The goal of the punch card style program is to incent incremental purchases with the offer of a free or greatly reduced purchase in the future. However, setting a fence around those reward items can help make a punch card even more efficient. For example, rather than allowing a customer to get a broad discount on their 11th purchase – create a structure so that the award after 10 purchases is an array of potential items, or discounts, fenced to specific products. A loyal customer is likely to use an indiscriminate discount on a product they’d already purchase. However, offering products that need a boost or are not frequently bought by customers can help incentivize trial purchases of other products you sell and avoid dilution.

Points systems are one of the simplest loyalty reward structures. Customers spend X number of dollars to receive Y number of points, which can then be used as a currency at your business. The points system is great for capturing many types of customers because it is based on the dollar amount that is spent. This means that all customers receive the same incentive relative to the dollar amount spent. 

The key to a successful points program is setting a structure that transparently communicates how customers earn points, what their value is, and what they can redeem. Being transparent about the entire structure upfront builds trust and helps customers see why the program is a benefit for them.

Paid subscriptions and memberships create a system in which only people who participate (pay money) for a service or privilege can access products or deals offered by a company. Companies like Sam’s and Costco use these memberships and offer huge discounts for products by selling in bulk. Online retailers, such as Amazon, also use this system in which members have access to special benefits and services, such as free shipping. These memberships are often profitable because they have low cost for customer acquisition while giving substantial benefits to customers. This allows these companies to attract consumers to buy subscriptions or memberships at a high volume.

It’s easy to see how a paid membership could pay off for a retailer. Receiving money up front regardless of usage is attractive, but that’s not the end goal. Retailers with paid loyalty program memberships have to leverage the relationship to pull members into higher levels of spending, but when faced with strong savings, there is little benefit for customers to shop elsewhere.

Many larger businesses pair with credit card companies to create cards which have added incentives for spending at a brand’s location. While a typical credit card may offer 1-3% cashback at retailers and restaurants, these cards often offer upwards of 5% cashback. This brings in customers as they are fundamentally receiving a discount from purchases at the brand, though they can spend the money received through cashback perks anywhere.

The real value of brand credit cards for a business though are the referral payments for getting a customer to sign up for the card. Though this can be very attractive, it typically only pencils out for major retailers with a national brand.

Conclusion

Picking a loyalty program method will depend on the nature of a business and technology capabilities. But in nearly all instances, a loyalty program can be designed with the right value proposition to drive desirable behaviors.

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Indianapolis Colts At Jacksonville Jaguars – Were Conditions Safe for Spectators?

Indianapolis Colts At Jacksonville Jaguars – Were Conditions Safe for Spectators?

by Ben Dubiel and Alexis Fiore, Industrial Engineers at Integrated Insight

Published September 14, 2020

It’s early September, the weather is starting to cool, and our team couldn’t shake the desire to go out and watch a football game.  While we are in the middle of an active pandemic, many attractions and other activities have shown they can safely open with good planning and limited capacity.  This was put to the test with the Jacksonville Jaguars being one of two teams in the NFL that allowed fans in the stadium this weekend.

Tickets on the secondary market were a good value, with lower bowl seats going for $65 and upper deck available for $23. Our count of occupied seats identified an attendance of approximately 15-18% of capacity with large sections of available seats completely empty. The upper deck was sparsely populated, with some sections having less than 4% of seats filled.

This game was not an outlier for low attendance. The Kansas City Chiefs did not sell out their limited capacity for their season opener despite last year’s Super Bowl win. This could be a sign that fans aren’t yet ready to return to large scale events as some have speculated.

Given the general absence of sports content over the past 6 months, we figured we would replicate a common trope in sports journalism – the grading column.

Arrival: A-

The entry experience was very pleasant, even while we arrived at what was expected to be the peak, 20 minutes prior to game time.  Parking was straight forward and the walk to the stadium was encouraging.  Everyone was keeping their distance and there was a steady and spaced flow of fans.  There was no crowding at the entrance, with an over-abundance of “S.A.F.E.” team members holding signs reminding guests to wear masks.  The evenly distributed arrival pattern matched our observations from other attractions where guests seem to leave extra time for parking and arrival.

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Seating: C+

Finding seats for our group of two was more difficult than expected due to mandated grouping “pods.”  These pods were enforced by zip-tying all seats that weren’t sold. Three pods per row were sold, and every other row was left completely empty.  This resulted in the middle pod group having to step over one of the end-of-row pods to access their seats.  Stepping over another group could have been avoided if the middle-seated pod was placed in the empty row instead.

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Cleanliness: A

The safety protocols in place were exceptional.  Masks were provided at the entrances and branded cloth masks were given out at every seat.  Sanitizer stations were freshly installed every 100 feet, and five out of six bathrooms had a cleaning attendant in them when visited.

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Fan Experience: B+

Even with the extremely low attendance, the experience was amazing.  The stadium at 15% full sounded 50% full.  Fans were having a great time and the game was close; allowing fans on both sides to get engaged.  Social distancing and masks clearly weren’t some fans top priority, but the “S.A.F.E.” team was strictly enforcing all safety policies.

Food and Beverage: D-

The food and beverage operation seemed well planned but poorly executed.  A mobile ordering platform was developed and easy to use.  The mobile platform said we would receive a text as soon as our order was ready in “less than 5 minutes.”  After 30 minutes and no text, we walked to the location where the staff told us they did not have the ability to text fans when orders were ready.  Eliminating the text feature and giving fans an estimated time to pick up their order would have created a better experience.

Socially distanced queues for in-person ordering were also available, but with only 73% of locations open, in-person ordering became a problem at halftime.  As we’ve observed at theme parks, grocery stores, and restaurants, without ground markings, monitoring, and reinforcement by staff, crowds will not social distance themselves.  Queues that extended beyond the ground markers stacked up and groups were back-to-back 30 people deep.

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Spacing between ground markings is an opportunity for future games.  The six-foot mandate is good guidance for groups of one. But a group of four creates a different dynamic and will require almost double the space of a single guest. The bottom line: well-meaning plans can quickly break down if variability is not considered.

Departure: B+

Game conditions were a perfect storm for crowding on departure.  The Jaguars were up 7 points with 2:30 left, so everyone stayed until the end.  Once the game finished, fans started pouring out, but the limited number provided a fairly positive experience.  The only crowding observed was for the escalator and elevators coming from the upper deck of the stadium and outside the stadium at the first major intersection.  These bottlenecks weren’t helped by attendants who separated groups on escalators by 40 feet.  Read our article, Solving Elevator Transportation During Covid-19, for more information on optimizing accessibility.

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Stadium-Movie

It was fantastic to get to see live football again, and when Johnathan Taylor broke that 35-yard screen pass the world seemed normal for a few moments. Seeing people enjoying shared experiences again was the most inspiring moment of the day. Great motivation to help others get the chance to cheer on their favorite team.

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alternatives to program cuts for college athletics coronavirus

Alternatives to Program Cuts for College Athletics

by Rich Pepin, COO, Integrated Insight

Published July 31, 2020

College athletics is facing an existential crisis. Another unexpected 2020 headline, but here we are. And if you’re one of the many Americans who eagerly await tuning in to a nationally televised football game on a fall Saturday afternoon, that headline is probably a punch to the gut. This fall there won’t be millions of screaming fans packed into stadiums, which spells potential disaster for college sports.

The coronavirus pandemic has significantly reduced revenue potential for football and basketball, which has been compounded by the reduced tuition income from lower enrollment at schools in the short term. As a result, schools have resorted to cutting non-revenue sports such as tennis, track and field, swimming and diving, and golf. As of now, 19 Division I schools have cut a combined 57 programs.  Division II & III and junior colleges have eliminated dozens more.

The results of a recent Gallup survey indicate college athletes are more likely to be thriving than their non-athlete counterparts when it comes to health, relationships, community engagement and job satisfaction. Taking away opportunities to be part of team sports at the college level will have negative impacts to student athletes that miss out in the short and long term. As a former Division 1 college golfer, I can attest to the overwhelmingly positive influence my four years of college athletics had on my personal development.

Not to mention, eliminating non-revenue college sports will have a major impact on the Olympic model. The U.S. Olympic model leans on these college programs that serve as launchpads for athletic careers and an ideal space for high schoolers hoping to develop into elite competitors. Nearly 80 percent of the 558-member U.S. Olympic team in 2016 competed at the college level, representing close to 150 schools.

For purposes of this discussion of the business of college athletics, let’s focus on the 130 institutions that are in the NCAA Division 1 Football Bowl Subdivision.  Half of these schools fall in the Power Five Conferences and are commonly referred to as the Autonomy schools, the other half are Non-Autonomy.  There is a stark divide in terms of overall revenue and the respective revenue sources between these groups.

Autonomous schools account for 75% of the $10.6B in NCAA Division 1 revenues and only 7% of their funding comes from institution, government support and student fees. Conversely, Non-Autonomous schools require institution, government support and student fees to cover more than half of athletic funding. At a time when state and municipality budgets are being squeezed and universities and colleges will be under financial stress due to lower enrollment, the stress on Non-Autonomous schools will be exacerbated.

Most college athletic programs are lucky to break even. But even before the pandemic, many schools (especially in the Non-Autonomous group) were struggling to make ends meet. For the Autonomous schools, coaching and administration compensation are a huge burden, representing nearly 40% of annual expenses overall.  Student scholarships and aid, gameday operations, and travel are relatively small proportions of the cost.

With costs rising much faster than inflation and schools facing a shortfall in media and bowl revenues, the only choice some schools felt they had was to eliminate entire programs. Administrators were forced to make decisions that they haven’t ever had to consider with a rushed timeline that gave them little chance to look at things holistically.  But sometimes, what appears as a catastrophe, could spell opportunity.

Opportunities for College Athletics

 

Think differently about conferences.

It is exciting and educational for the athlete to travel all over the country, but a regional or even local schedule beats no sport at all.  Many schools could develop a set of games, tournaments or meets within their own state or neighboring states and significantly reduce travel costs.  And there is a chance to develop some new in-state or nearby rivalries that have never had a chance to foster because schools were in different conferences.

Make non-revenue sports available to networks or streaming services.

There is a significant opportunity to match the demand of live college sports content with the shortfall of new programming available for TV and streaming platforms.

Production sets are on pause due to coronavirus safety concerns, putting a halt to new films and shows.  Additionally, professional sports have been on hiatus and will have the start of their seasons shifted. This gap can be filled with amateur sports. Work with the NCAA to create its own subscription-based streaming service or go to ESPN+ or others.

Leverage the hunger for live sports with a new model. If these avenues don’t provide opportunity, colleges can live stream the sporting events on YouTube with sponsors. Production costs can be reduced by utilizing the school’s in-house film and marketing students. Use well-known alums to serve as play-by-play or color commentators to draw people in while keeping costs to a minimum.

Create compelling content out of personal stories.

Beyond the competitions themselves, everyone loves a heart-warming story of personal triumph over long odds.  These stories exist in every sport on every campus.  Develop a business model to sell this content to streaming platforms that can help distribute the story while filling their own content gaps.  And it is also another opportunity to leverage in-house storytelling from film and theatre students and professors.

Re-think the way programs are supported by alumni and the community.

Develop structured programs that give people status to football or basketball tickets if they contribute to non-revenue sports.  Many alumni play tennis and golf recreationally - two sports that are on the chopping block - and they may have considered helping out.

Make sure alumni understand the impact they can make with their support.  Match alumni to specific athletes for sponsorship. Provide them with regular updates on the team and recognize their contribution with something of substance.  Twenty-eight years after graduating I still wear new UConn Golf gear every chance I get.

Maximize use of resources in the Sports Management program if there is one.

Use students and assistant professors to play a role in scheduling, fundraising, game-day management, and other duties to reduce administrative costs and provide them with real-world experience.

Re-assess the way coaches are compensated.

For high profile sports, coaching compensation has become an arms race with spending reaching new heights every year.  Most states list their highest paid state employee as a football or basketball coach at a large university.  And most contracts are guaranteed so when a school parts way with a highly paid coach, the salary is often paid out for one or more years.  The desire to compete in these highly visible sports may make it too difficult to break the mold on that compensation, but for other sports, make sure coaching compensation is in line with full professor salaries.

Maybe all of these ideas, and more, were considered before schools decided to cut non-revenue sports.  But at a time when entire programs are being eliminated, we owe it to the college athletes to explore long-standing models to see if programs can thrive in a different way.  There is so much upside in maximizing the opportunities for student athletes.

 

Generational Perspectives on the New Economy

Generational Perspectives on the New Economy

by Andrew Poirier, Consultant, Integrated Insight

Published May 8, 2020

Much of the world is looking towards young adults to stimulate the economy when the regulations around social distancing are lifted. While young adults have fewer personal health concerns in regards to the coronavirus, financial concerns tell us a different story. Conversely, our older generation is the least financially affected by the crisis, yet are the most at risk from the virus itself. This illustrates the difficulty with reopening the economy. How do we get people to engage in economic activity?

Surveys studying economic attitudes of the Coronavirus Crisis have consistently reported that Millennials and Gen Zers have the most uncertainty about their financial stability during the pandemic. An example is a survey from mid-March by the Pew Research Center which reported that Americans in their 20s and 30s are the least sure about keeping their jobs and being able to pay their expenses.

This trend is likely to continue as the economy remains closed. KFF Tracking Polls showed a 44 percentage point increase in respondents reporting that they have been affected by the outbreak from mid-March (40%) to early April (84%).

As a young professional (23 years old), my personal plans to spend money in the near future have changed in the past few months. I have paused to reconsider what I can afford due to the medium to long term uncertainty of my own financial stability. This ranges from not ordering take-out, to deciding against planning a vacation sometime this year.

Prior to the economy suddenly coming to a halt, I didn’t think twice about going out on weekends and spending more freely. However, now I hesitate to spend money that I otherwise may need later. Until there is more certainty in the market, I have to continue adjusting my spending habits. I will still go out, but just not spend as much. I may even look for more deals or offers that stretch my spending further.

I point this out to address the idea that young people will be able to bring back the economy. The notion that young adults will be able to stimulate the economy back to normal just isn’t likely. Decreased consumer demand is an economic problem that will take time to rebound.

If I only had to worry about my own personal health, my behavior would be much less affected. Unfortunately, I have concerns around paying my bills, the health of friends and family, and the restrictions imposed by the social distancing guidelines.

My grandmother, who has not been affected financially from the virus, is experiencing the opposite problem. She hasn’t adjusted her behavior due to financial uncertainty. Instead, she has changed her behavior due to fear of illness.

Unfortunately, health officials say that it is unlikely that we will have a safe vaccine by the end of the year. Aside from abiding by social distancing regulations, businesses have a vested interest in making sure that they are safe for consumers. People are looking towards different levels of government to guide the U.S. through the Coronavirus crisis, but they will feel more comfortable to be in public as new business techniques are developed and hopefully help to restore a sense of normalcy. Innovation in business practices will establish much of what “the new normal” looks like. Developing safe ways to open the economy will help to bring back demand on the macro-level. This can only happen by reducing perceived risk in public environments.

Consumer preference varies by generation. Understanding the expectations of target markets can optimize business strategies. Appealing to younger consumers alone is likely not enough. Enhancing hygiene practices and innovation in the customer experience are just a few ways that businesses can appeal to at-risk demographic groups. Placing an emphasis on protecting the most vulnerable in a population will allow more people to participate in the economy in a post-quarantine world.

For more information on business strategy and how we partner with brands across the globe, please contact us at info@integratedinsight.com

 

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