When a crisis occurs that impacts customer traffic, companies tend to use price promotion as a way to grab customer’s attention, keep them engaged, and get them to return to their previous shopping patterns. While it sounds like an impulse move, there are sometimes logical reasons to offer price promotion like protecting market share, keeping the supply chain flowing and responding to competition. While these tactics are quick and sometimes effective in the short-term, they can also create lasting negative effects. These types of discounts can lead to changing the customer’s reference price; reducing their willingness to purchase at full price when the crisis is over. What is worse is that customers can even begin to lose trust in the brand.
Bigger problems and broader thinking
Companies are making these decisions at a time where they are solving bigger problems. They might need to re-establish their relationship with the customer due to the nature of the impact, the company economics may be in disarray, and/or customers may simply have other things on their mind. All of this makes it hard to land any message. While these factors can make achieving results difficult, it’s tough to keep each of these problems separate in the operational silos that exist in most organizations.
Kobie’s Observation: Companies that work quickly to solve for the customer first, in a tone of partnership and empathy, will have more success in solving business problems.
Before we go into ways to drive short-term results without creating long-term commitments, it is important to point out that tone really matters. We are seeing that customers are aligning with brands that understand their situation, make an effort to show empathy and create a sense of social responsibility. It is the best way for brands to stay relevant to customers without cheapening the message.
While visual depictions are easy for consumers to digest, altering your tone in regular messaging can go a long way. Of all the communication channels available to brands, loyalty communications have the unique benefit of segmentation of behaviors beyond spend.
Loyalty program communications provide flexibility
Kobie’s Observation: Loyalty programs can help solve for both the sales and marketing challenges, while providing a flexible vehicle for tone and connection.
Sales and marketing costs can be reduced and time limited: Loyalty programs can be used to provide a stronger value proposition to customers through points-earning promotions and special redemption options. Through these tactics, brands can effectively accomplish the same thing a discount can, without changing the stated price.
Here is why:
1. Loyalty program currency allow brands to arbitrate the cost effect of a promotion. Even programs that are based on experience, convenience, or being a connected consumer have events and experiences that can be curated to lessen the financial impact.
2. Loyalty promotions and communications are already established as temporary events based on recent experiences… as opposed to brand communications that are more established.
3. Loyalty promotions can leverage third parties to determine cost further by teaming up to serve the same customer base.
One example of where companies are doing this is through the extension of expirations. In an email from Panera offering free delivery and reward extensions they state, “Together we’ll make it through.”
An example where companies teamed up with a partner to offer a reward at a mitigated rate is Popeyes: giving a Netflix username and password to 1,000 customers who tweet a picture of their at-home fried chicken order with the hashtag #ThatPasswordFromPopeyes. This is both engagement and relationships building.
Tone can be targeted and flexed to fit the moment: Leveraging a loyalty event or currency has the added benefit of driving promotions to a targeted group. The tradeoff is that delivering the promotion to targeted customers is typically done via the increasingly crowded email channel. There are additional options as technologies are providing more options to deliver targeted messages throughout the experience. Recently, we have seen great examples of tone shifting within an engagement program to targeted users.
One example of this is a Dunkin’ email promoting order/touchless pay through the app – “Even as your daily routine changes, you can still rely on Dunkin’ to keep you runnin’ with order ahead.” Another email offered 100 bonus points for ordering ahead via the DD app. This messaging can expose loyalty program benefits to nonmembers, with the potential for membership growth at a difficult time.
In an email to Nike Club members – it leads with 25% off discount, messaging, “Right now it’s more important than ever to make sure athletes like you are healthy and positive – there’s no better way to do that than by staying active.”
A Starbucks® Rewards email providing general COVID-19 information stated: “For our Starbucks Rewards members we recognize that the current environment may limit your ability to redeem your Stars. Therefore, we will delay the expiration of all Stars scheduled to expire between now and June 1, 2020.”
Loyalty economics can help predict the outcomes of broader decisions: While loyalty members are usually a subset of all customers, it is the one place that companywide data comes together to be optimized. Transactions, supply, marketing and promotions, digital, in-store experience, and call center data are all leveraged to forecast liability and program costs. This provides a critical opportunity for program managers to assist the company to come together to understand the impacts of changing customer actions. It also provides a unique opportunity to help predict the impact of customers facing decisions far beyond the program itself.
Kobie’s observation: Companies that regularly update their program financials can use their financial model to provide guidance to the broader organization.
Top 8 Actions to take
1. Rally the organization around empathy for the customer – but keep your eye on the long term costs of your actions
2. When developing promotions, consider leveraging points or experiences in place of discounts
3. To avoid changing customer expectations, tailor messaging of the benefits to their current situation
4. Leverage the economic tools in place to understand how short term decisions will impact the entire organization
5. Tone matters – defer to the primary message that you are ‘in it together’ but be wary not to appear insincere by over promoting in the same message
6. Overlook internal silos to come together in a common message or you can appear tone deaf with mixed messaging
7. Leverage existing partnerships to pare back the cost of unplanned promotions in a united message to the customer
8. Promote goodwill and brand broadly, but target promotion expense where it will reduce elongated purchase cycles.
Prioritize customer connection
A final note – because of the emotional nature of a crisis, customers will turn to the emotional connections of community, safety, and security. Brands that successfully connect on these emotions will experience leniency from the customer when it comes to getting the rest of the value proposition right. Taking small risks in favor of supporting the customer may be well worth it at this time.