The budget battle is in full force for most consumers as gas prices remain high – costing families nearly $2k more this year. The impact is unavoidable, since commuters can’t change their daily mileage even when prices spike in the short term. But will optional travel like road trips and outings quickly be impacted as consumers weigh the financial tradeoffs, looking to save their budgets more than their social life? The answer is yes, which puts a lot more at risk.
If gas prices sustain, consumers will seek more fuel-efficient cars and possible diet changes as the price of pasture-raised organic eggs jump from $5 to $8 a carton, for example. We will also see unnecessary spending decrease. That black leather jacket that you’ve been eyeing all year will now sit on the store rack collecting dust until a holiday weekend filled with deep discounts rolls around.
So, what does that mean for consumers and their loyalty rewards? Here’s what some brands are thinking about and what others should take note of:
Many brands feel the need to focus on program rules or feel stuck using segments that were created during a time when different cost structures were necessary. When volatile times happen, brands don’t need to rethink their entire program, but rather could shift their outcomes in a positive direction with calculated, but minor changes in strategy. For example, instead of segmenting customers by observed behaviors, swing the pendulum around and segment by predictive behavior – and while you’re at it, identify the triggers that change those leading behaviors.
The best brands are looking for changes in what was expected and what drove those outcomes. This allows brands to focus on what they can affect vs trying to solve too many things at once. Control the controllables.
Use promotions that create leverage
When prices change this much, consumers will pay more attention and Kobie research has shown many are intentionally saving their rewards with something specific in mind. This rationing of rewards by consumers means brands need to do more to incentivize them and create urgency, like providing limited time promotions for these reward rationers to earn and redeem points right away. This strategy allows brands the ability to provide financial relief without changing expectations for the customer and without sustaining long term financial burdens. Do this effectively and both your customers and CFO will be happy.
We often see brands implementing a similar strategy for win-back communications and point expiry, where there’s a short timeframe to action, creating an urgency for the consumer. Chipotle is an example of this where they ran a BOGO campaign to incentivize members to visit again and “have lunch with a friend, on us”. The CTA directed members to redeem the offer in their rewards account, a 14 day expiry created a sense of urgency, and the messaging touched on the friendship angle. During periods of volatility, brands can stretch their loyalty strategies to encourage emotional benefits and experiences to create engagement and drive visits.
Bring in funding partners
If you must discount, take it a step further and connect with banking and product partners to fund promotions. Investing in partnerships can be tricky, and Kobie has a partnership team that can help assess the right fit for your brand and brand values. Creating leverage in your program by investing the time and analytics to make these partnerships and promotions successful allows you to use that success to build case studies that in turn can be used to bring in new partners.
One of the unique ways BJ’s (a wholesale warehouse club) saves customers money at the pump is by partnering with brands and manufacturers like P&G (Procter & Gamble), for their Fuel Saver Program. For each P&G item purchased, customers save ten cents ($0.10) per gallon of gas. With a rotating list of eligible products, customers will try P&G consumable goods, and build brand loyalty to P&G while enjoying the savings through BJ’s.
Plainly put, partners create leverage for your brand…however, optimizing their success is what will create the richest offers over time. Don’t be afraid to bring in new partners if it enhances the customer experience and value proposition. Kobie can help you identify test and learn tactics to find the right strategy and investment mix by maintaining the center of the customer relationship while evaluating customer impact.
Leveraging promotions effectively and investing in meaningful partnerships can mean loyal customers continue to interact with your brand positively during times of market volatility and at times where you have less control over the costs that you bear.