Jupiter Research claims that 75% of consumers are card-carrying members of one loyalty program or another.

by Jon Winsell,
ID Society Strategy Director
Appearing in Convenience Store Decisions
July 2006

It seems like you can’t buy anything now without bumping into an offer to join some type of consumer loyalty club. Retailers have long adopted loyalty programs as a method of getting more sales out of their customers. Whether they "live" offline or online, loyalty programs can and do work when properly executed. Simply issuing a card, offering some incentive and sitting back to wait for the sales to ring up is not going to deliver good results. You need to design your program with defined success in mind.

For example, loyalty programs come in many flavors, from the frequent-flyer/buyer/diner/shopper to deep luxury product programs. Jupiter Research claims that 75% of consumers are card-carrying members of one program or another. And not all programs are created equally. The key to success is not in simply "having" a program, but structuring that program to collect usable data. Success is in the execution of slicing the data collected, and using it to build repeat sales. It’s not the data itself, but the trends and actionable insight that will spell success.

Loyalty programs also vary in purpose. Most loyalty programs are structured for retention through rewards or other forms of consumer appreciation. Retention programs have a direct ROI, especially those focused on decreasing defection rates. Clearly, it’s easier and more cost effective to keep existing customers than to recruit new ones; however, a recent Harvard Business Review study claims that reducing the defection rate by only 5% can double your profits.

Why a Loyalty Program?
Do it for the data. Loyalty programs are designed to retain customers and draw them closer to the brand so that they will buy more, more frequently. Although such programs can certainly work and be successful offline, the real cost savings and expandability comes from a strong digital strategy. Your POS system can collect data that can be used to create direct mail campaigns, but by adding an online component, you have instantly accessible data that can be easily segmented as the foundation for a strong relationship marketing strategy.

A digital strategy can allow you to define who your most loyal customers are and create a campaign with messaging and incentives designed specifically for the high value customers. If 20% of your customers are giving you 80% of your sales, find a special way to communicate and reward those customers. Use them as your true ambassadors to spread the word to their friends. Now your online retention strategy also assists in customer acquisition, and sales will spiral upward.

By starting small and adopting a religious fervor for testing, your loyalty program can demonstrate strong ROI while providing high value consumers with the emotional quotient of feeling special - something that all consumers want.

Jon Winsell is director of the strategy team at ID Society, an interactive marketing and design agency whose clients include Diageo, L’Oreal and ABC Family Network. It specializes in developing strategic online marketing programs that build loyalty and relationships while extending brands to new audiences. Winsell has more than 20 years of experience leading companies to increased brand awareness, deeper customer loyalty and higher profitability.

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Mekeisha Madden Toby
Detroit News
Friday, June 30, 2006

In high school, it was always weird to see two girls who had hated each other suddenly become friends.

Well, pull out the zit cream, because NBC and independent Internet video portal YouTube (youtube.com) are those catty girls from your teens, and now they love each other to a sickening degree.

Back in the winter, NBC was all up in YouTube’s face, taking the-little-Web-site-that-could to task for offering downloads of the "Saturday Night Live" short, "Lazy Sunday" for free. The peacock people even went as far as issuing cease-and-desist threats.

So imagine everyone’s surprise when NBC announced this week that it will be partnering with YouTube, a site known for showing hilariously remixed movie trailers, strange clips and homemade flicks.

NBC is getting its own channel on YouTube, but for now, is using it to preview promos for its 2006-07 TV season. In July, NBC is creating episodes of its hit comedy "The Office" for NBC.com . An added bonus feature will allow Web crawlers to create their own "Office" episodes, with a YouTube tie-in.

"The audience NBC is trying to attract is not interested in promotional videos. They’re already putting the wrong things up there," says David Cherry, Director of Production & Multimedia for ID Society, a leading interactive marketing agency out of New York City.

Cherry says NBC wised up and realized that YouTube could give them the Gen X male viewers it desired. That includes the 5 million YouTube users who downloaded "Lazy Sunday."

"Sure there are some funny shorts and films on YouTube, but the best material is from the movies real people make, like that short that one kid did about his MySpace page," he says. "If NBC does this ‘Office’ thing right, it will attract a lot of young people, especially young guys, who want to make movies to share with their friends."

Rob Owen
Pittsburgh Post-Gazette
Friday, June 30, 2006

Nobody’s watching the sitcom "Nobody’s Watching" on TV, but a portion of the failed pilot has been seen more than 289,000 times since it was posted online two weeks ago at YouTube.com, one of the Internet’s most popular free clip sites.

Created by "Scrubs" executive producers Bill Lawrence, Neil Goldman and Garrett Donovan, "Nobody’s Watching" was under consideration for The WB’s prime-time schedule in May 2005. The network passed, and the project seemed dead until someone posted the pilot online (Lawrence said he suspects he knows but doesn’t want to ask).

Now NBC Entertainment president Kevin Reilly wants to meet with Lawrence when he gets back from vacation to discuss the possibility of reviving the series. NBC Studios produced "Nobody’s Watching" for The WB, and in the past they would have ordered YouTube to remove the posting, but in this case they have not, possibly because the network announced a deal with YouTube this week to make promos of its fall series available on the site.

"Nobody’s Watching" follows two twentysomething guys from Ohio, who, sick of lame sitcoms on TV (they name check "Yes Dear" and "According to Jim"), get invited by The WB to make their own sitcom. An untrustworthy network executive is more interested in the reality show about them trying to make a sitcom than he is in the sitcom itself.

Lawrence was pleased "Nobody’s Watching" got a chance to find an online audience, and he’s bullish on its prospects for a future life on TV. He was surprised when The WB didn’t pick the sitcom up last year (especially after the network flew him to New York to announce the show at the May upfronts), because it was a favorite of young WB executives.

"I’ve made other pilots in recent years that were no one’s favorite shows," Lawrence admitted. "Those were horrible, and I’m crossing my fingers no one ever puts those on YouTube."

Lest you think TV shows online are a flash in the pan, this is just the latest example of television migrating to the Internet. Lawrence thinks allowing a show to be seen online will provide networks with more useful feedback than the classic pilot-testing process that involves focus groups.

"It’s such an archaic form of testing to put 20 people in a room in the Valley and ask leading questions [that allow network executives] to justify their hunches," Lawrence said, noting that the comments from YouTube viewers were far more insightful. Network execs worried viewers wouldn’t understand the show’s concept and asked the focus group, "Do you think this could be confusing?" to which they responded, "I suppose it could." Lawrence said no one at YouTube had such concerns.

"What’s fascinating to me is what a better form of testing it is to release something on the Internet if you’re doing a young [skewing] show," Lawrence said. "There was stuff I’d never noticed that, as I read these reviews, there was a through-line of things that bothered people that no one mentioned in testing. If we do get to make this again, we’ll change things [based on that feedback]."

David Cherry, Director of Production and Multimedia at New York interactive marketing agency ID Society, noted that YouTube is a completely unmoderated forum; with focus groups, members are pre-selected.

"When you have people sitting in a room, they’re unlikely to give you completely honest feedback, whereas on the Internet, anything goes," Cherry said.

There are downsides to online screenings (people on the Internet can claim to be whatever age and gender they want), but Cherry said NBC’s deal with YouTube gives the network a foothold with a popular online site, much the way ABC was the first to stake out iTunes.

Cherry said NBC executives saw the success of the "Saturday Night Live’s" "Lazy Sunday" download, and after a ton of online grumbling for forcing YouTube to remove the video clip, the network has decided to embrace the potential young audience the site can deliver.

"The demo for YouTube is sub-24-year-olds," Cherry said, "and that’s the demo that’s disappearing from television broadcast channels."