Tuesday, September 18, 2007

Marketing Database Facilitates Customer Loyalty

There's been quite a bit of controversy lately about how to measure customer loyalty. Many large companies seem to be buying in on the premise of the Net Promoter Score (NPS), although the analytical types I listen to don't seem to have a lot of confidence in NPS. Specifically these blog posts from Marketing ROI and Profitable Marketing have some great points to make about the NPS and some alternative ideas on ways to evaluate the worth, or loyalty of a customer.

I guess, overall, I'm pretty old-fashioned and believe in letting hard numbers paint the picture of success, or failure. In short, we've got to be able to quantify (whether it's increased profits from up-sell/cross-sell programs, or a longer customer relationship or referrals) the value we get from each customer. And, then we need to weigh that against the cost it took to acquire and nurture that relationship. Sounds simple, eh? Unfortunately, it's not simple at all...

That's why I love reading about companies who seem to have gotten the equation RIGHT! Take a look at this "AdWeek" article about how the Harrah's database and loyalty program investment is paying off, in a big way.

'Total Rewards' Pays Off for Harrah's

The article cites some reasons why it's working for Harrahs:

  1. The program is easy to use and offers a variety of ways to redeem rewards. The article talks about how too many rules and too many restrictions on redemption equate to a program that people won't participate in.
  2. It offers "upward mobility". Tiers of membership are built-in, with better and better perks as people move up the chain. This lets members aspire to the next level, hence they spend more with you.
  3. Harrah's program maximizes customer communications. "Rewards members look forward to highly targeted promotions. The casino uses information from the card usage to create frequent direct-response promotions that customers would be likely to use. The response rate for such offers averages about 10 percent." As a direct marketer, this touches my heart! I'm thrilled not only with a 10% response rate, but even more so by the fact that these programs are so targeted that customers actually look forward to receiving an offer.

The article concludes with helpful tips on how to design a loyalty program that works.

Bottom-line, Harrah's has proven through hard numbers that their marketing investment (database infrastructure and loyalty program) has paid off. And, that's the kind of measurement I can believe in.


Ron Shevlin said...

I was at the Colloquy Loyalty conference a few weeks ago, where David Norton, who runs the loyalty program at Harrah's, was speaking.

He said something I thought was great. In response to a question about how they approach the personalization of rewards, he said:

"Because we have a lot of data about our customers, we're able to personalize our rewards and communications. But one thing we think a lot about is how much can we do without being creepy. We're always trying to learn where the edge of creepiness is."

Loved that quote.

Ted Grigg said...

As the sophistication of a loyalty program increases, so does the evaluation process.

The increase in customer loyalty translates into share-of-customer growth and additionally, supports acquisition efforts. But what would have happened in the absence of any loyalty program?

All that is left is the option to isolate customers from these activities and set up control groups. But I have yet to see results that do not create more questions than they answer.

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

So the results are not always as conclusive as one would like.

Suzanne Obermire said...

Ron--love the concept of the 'creepiness' factor. It's true, we need to really safeguard consumer information and how it's used.

And, Ted, yes I agree--the more you start understanding your metrics, the more questions arise. It is also virtually impossible to isolate cause and effect in a multi-channel environment, even with the best set-up test plan and control process/groups. But, it's best to keep trying, right?

Amy Madsen said...

Thanks for an interesting post. As per Net Promoter Score, as an fyi, "analytical types" created the Net Promoter Score, which includes Dr. Laura Brooks of Satmetrix.

In her recent blog - "Building Value One Customer at a Time" - she addresses "some critics from various corners of the market research world who are doing a poor job explaining what Net Promoter is about."

Here is the link to that blog:

We'd also like to highlight real-live companies having success with Net Promoter. Here is a link to a number of success stories (companies include HSBC, Philips, GE, LEGO, T-Mobile, Schwab, and more):


We will have more companies sharing their successes at the next Net Promoter Conferences. Details can be found on the overview page:


Suzanne Obermire said...

Thanks, Amy for the links. I will definitely spend some more time on the netpromoter site and look forward to learning more.

Anonymous said...

The process that the organization uses to ensure repeat business/usage of its products/services on an ongoing basis