Do Loyalty Programs Really Work?

Written By Ted Grigg

I believe that well conceived loyalty programs provide both immediate and long-term benefits to the organization. But how should the direct marketer go about proving the effectiveness of Customer Relationship Marketing activities?

As the sophistication of loyalty programs increase, so does the evaluation process.

The increases in customer loyalty budgets should translate into share-of-customer growth and additionally, more cost effective acquisition efforts. These need to withstand the scrutiny of the CFO with quantified results.

But here’s the rub. What would have happened in the absence of any loyalty program?

How does the marketer create a control group that totally isolates customers from the overarching influence of powerful loyalty programs? I have yet to see results that do not create more questions than they answer.

In today's multi-channel environments, it is almost impossible to isolate customers totally from their peers and other indirect influences.

It appears that the changes in the marketing space have placed new demands on direct marketers. We must now confront the same analytical problems that our branding brothers face. It works, but what yield am I getting from my marketing budgets?

We are well beyond the simple cost-per-sale and cost-per-customer indicators with new, more advanced evaluation criteria. We must now begin to apply hard numbers to soft data. Judgment replaces certitude when assigning credit to various media expenditures and complex, interdependent strategies.

In a sense, the promise of strategic integration has outpaced our ability to evaluate it.

There is a crying need to train analytical staff to take on more strategic and broader roles in today’s organizations. We need people who not only know analytics, but individuals who know how to create actionable recommendations from an oversupply of information.

Do you think that loyalty programs generally work? Or are there now too many such programs for consumers to care about anymore?

Ted Grigg

Ted Grigg is a direct response strategist who helps growth-focused companies reduce risk by identifying weak assumptions before they become costly mistakes.

Over the course of his career, Ted has evaluated several hundred million dollars in direct response testing across direct mail, digital, print, television, telephone, and other channels. His work combines direct response strategy, acquisition economics, customer analysis, creative evaluation, offer development, and disciplined testing.

Ted has worked on both the client and agency sides of the business. That experience gives him a practical understanding of the pressures facing executives, marketing teams, agencies, and service providers—and of the problems that arise when activity, media volume, or creative preference replaces a clear economic objective.

His consulting work helps organizations examine such questions as:

  • Are acquisition goals economically realistic?

  • Is the allowable Cost Per Sale supported by customer value?

  • Are targeting, offers, creative, media, and response paths working together?

  • Are tests structured to produce reliable business decisions?

  • Are unproven assumptions being treated as facts?

  • Is the organization measuring sales outcomes rather than convenient proxies?

Ted’s experience includes the development of direct mail and multichannel acquisition programs for insurance, healthcare, financial services, technology, nonprofit, manufacturing, retail, transportation, communications, government, and business-to-business organizations.

For a national direct-to-consumer insurance company, he developed a direct mail format that defeated established controls and helped expand the productive use of compiled prospect lists from less than 10 percent to more than 30 percent of total direct mail circulation within one year. He also planned Medicare lead-generation programs for more than 60 regional and national HMO and PPO organizations, with some programs exceeding sales projections by as much as 60 percent.

Ted founded Wyse Direct, a direct marketing division of Wyse Advertising in Cleveland, where he developed acquisition programs and helped launch a new technology product for Seiko Instruments by generating a predictable flow of qualified sales leads for its national sales organization. As vice president of new business development for the Grizzard Agency, he helped broaden the agency’s strategic capabilities and pursue new commercial and fundraising opportunities.

He is the author of The HMO/PPO Marketing Plan—A Step-by-Step Guide, published by Executive Enterprises, and has written numerous articles and conducted webinars on direct response strategy, testing, creative development, and marketing economics.

Ted earned a Bachelor of Arts degree from Abilene Christian University and completed two years of graduate study at Texas Tech University. He is the founder of DMCG, LLC.

http://www.dmcgresults.com
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