When launching loyalty initiatives it’s easy to start imagining how your new efforts will improve your marketing results, and ultimately, the bottom line. But for the desired results to happen, your retail loyalty program will need to continuously improve as well. And that’s why, on the fifth day of loyalty marketing nirvana, we address the need to build consensus on improvement.
It’s vital that everyone in your company – and especially the stakeholders we discussed on day one – fully supports the loyalty investment. Before running plays, athletes huddle. Before elections, citizens rally. What is your business doing to ensure everyone is using the same playbook to both prepare for and implement your future retail loyalty marketing investment?
Before we get ahead of ourselves, let’s take a step back and discuss ownership of building consensus on improvement. Failing to address ownership can cause delays and roadblocks that make it difficult to get your retail loyalty program off the ground. You can certainly use the experience and historical performance data from your loyalty vendor to help you ideate, plan and project, but ultimately your company needs to commit to the data, process and metrics you will use. Getting your project approved will be an uphill battle if you are only using historical data from your vendor to justify your business case.
Okay, now that we’ve got that caveat out of the way, let’s talk about how we can build consensus on improvement. Eilene Zimmerman shared a cool story about Butter Lane Cupcakes, which opened in 2008 at the dawn of the economic crisis. With business slow, co-founders Pam, Maria and Linda knew they needed to take a different approach to getting customers in the store, so they agreed on the idea of offering cupcake-making classes. For $20, attendees could learn how to make batter and frosting. The classes only attracted four attendees at first, but gradually increased to about 10 people a night as word-of-mouth spread.
Seeing the class model was catching on, the owners decided to expand to the space next door and also tried a Groupon promotion, offering half-price classes. They hoped to sell a few hundred coupons. They sold 9,000.
Discount included, the company still made money. “That first seat is expensive,” said Pam, “because you are paying for the instructor, the room, the oven and utilities, but every seat after that, the marginal costs are lower, so you’re highly motivated to fill the room.”
Butter Lane’s revenue has since increased significantly and they also added another location. Approximately 40% of Butter Lane’s revenue will come from classes this year.
Tying it back to building consensus on improvement, Butter Lane’s endeavor wouldn’t have worked if the company didn’t:
Believe in the value of growing customer loyalty
Teaching classes was a risky move, as they were giving away baking secrets to customers, but it ended up driving retail loyalty with all the goodwill it generated.
Get consensus on improvement
For this to work, everyone needed to agree that teaching customers how to bake their own cupcakes was a great move. The team at Butter Lane ultimately agreed on the promotion details and the profit margin metrics that would be used to determine success. They also agreed on a plan for expanding the initiative once it proved successful.
Chances are your organization is much larger than Butter Lane. You will have larger sets of data to work with, there will be more factors to consider and you will have more stakeholders involved – which is why it is absolutely necessary to establish an agreed-upon plan upfront for continuously evaluating and improving your retail loyalty initiatives.
Do you have questions regarding building a consensus on improvement? We’re happy to help. Tweet us @TIBCO, hashtag #LoyaltyLab.