Episode Title: Do Loyalty Programs Work?
Host(s): Dean Millson, Sam McEwin
Sam McEwin – 0:0:27
Yes. Welcome back to another episode of Brandwidth Podcast. My name’s Sam McEwinand joining me againas alwaysDean Nelson. How are you today? Dean
Dean Millson – 0:0:36
Thank youSammy. Good to see you again.
Sam McEwin – 0:0:39
Good to see you too. And could you hear that you’re
Dean Millson – 0:0:41
Splendid? Yes. Thank you very much. How are you?
Sam McEwin – 0:0:43
<laugh>? Doing very well. Doing very well. So, uh, yeah, as we, as we do, this is a, a podcast where each of us or one of us comes to the, uh, the recording with a topic, topic without notice and, uh, see where it takes us. And today it’s my turn to
Dean Millson – 0:1:4
Where will we go today?
Sam McEwin – 0:1:7
<laugh>? Mm. The suspense. So, uh, I wanted to start today with a quote. I, I recently or somewhat recently, uh, completed a book called Invent and Wander, which was a collection of shareholder letters mostly, um, but other writings by, uh, Jeff Bezos of Amazon Fame, obviously, I assume, obviously I think everybody knows that. Yep. <laugh>. Um, and it contained this quote about customers, which I, I liked. Uh, I’ve paraphrased it slightly, but the quote is,
Dean Millson – 0:1:41
Goes like this,
Sam McEwin – 0:1:42
Like this, <laugh> our customers have made our business what it is, and we consider them to be loyal to us right up until the second that someone else offers them a better service. Which I think is pretty much spot on. Spot on. If we’re talking about brand loyalty, which we are, because the topic I wanted to talk about today is brand loyalty. Ooh. And more specifically loyalty programs.
Dean Millson – 0:2:14
Oh, good. Cuz I’ve got some thoughts on these
Sam McEwin – 0:2:16
<laugh>. I thought you might. Yeah. Um, and this would be one of, uh, or although this is a topic without notice, I think this might be one area that, uh, both of us have, have done a little bit of
Dean Millson – 0:2:26
Reading research. I may reveal to too much about myself in this conversation, though. <laugh>, I may overshare here. But anyway,
Sam McEwin – 0:2:34
<laugh>, I’m, look, I’m looking forward to that. Uh, I, I love, I’d love nothing more. So, <laugh>, uh, look, I, I thought the Jeff Bassis quotes a, an interesting one. And my, uh, consumer example of, of that is, uh, I’ve long been very, very brand loyal to a particular brand of, of yogurt that I refer to as <unk>. But it could be
Dean Millson – 0:2:56
<unk> Ah, yeah, I know Yk, I think,
Sam McEwin – 0:3:0
I think Yana feels
Dean Millson – 0:3:1
Go with that. Feels right. Feels yoy
Sam McEwin – 0:3:3
Yoy. Um, they’re, they’re vanilla yogurt forever in a day. That’s been my staple choice, uh, until such time as Tamar Valley yogurt showed up. And I haven’t thought about Yma until now, ever since,
Dean Millson – 0:3:17
And been seeing other people. I have been very happy.
Sam McEwin – 0:3:20
Have you seen that same video I watched yesterday?
Dean Millson – 0:3:22
No. <laugh> <laugh>.
Sam McEwin – 0:3:24
There’s a, there’s a bit of a satirical, uh, video going, doing the rounds at the moment. Uh, this will be one for the show notes of, uh, a marketing. Yeah. Uh, what is it? A, a brand and a consumer, uh, receiving counseling, marriage counseling.
Dean Millson – 0:3:40
<laugh>. Did written share that I’ve I saw it. I haven’t watched it. I think I’ve said it.
Sam McEwin – 0:3:44
It’s, it’s, uh, it’s, um, interesting. Anyway. Okay. What, what was it? Uh, I thought that might’ve been a reference.
Dean Millson – 0:3:49
No, no. It wasn
Sam McEwin – 0:3:50
<laugh>. Um, so yeah. Anyway, I thought, I thought as, you know, that was, that was, uh, I, I instantly sort of thought of that, yo, and I thought it’s, it’s true. That is loyalty. I was, you know, couldn’t be more brand loyal until I find a better service and, you know. Yep. Right. We’ll switch instantly. And Yes, there was no heartbreak. No, I didn’t feel any guilt. Uh, I don’t,
Dean Millson – 0:4:7
There was no program there,
Sam McEwin – 0:4:8
<laugh>. Ja. And maybe they needed a loyalty program.
Dean Millson – 0:4:10
Yeah, they did.
Sam McEwin – 0:4:11
So, yeah. So that’s, um, you know, leads us to the que question, do loyalty programs work? And, um, I answer that, but I’m gonna throw some questions at you, so,
Dean Millson – 0:4:22
Yep. Okay. I think, do want me, do you want me to answer?
Sam McEwin – 0:4:25
Not, not yet. I’ll tell you when. I’ll, I’ll, I’ll give you a knot, actually. Yep. You know what, this is the time. Let’s have a quiz, Dean.
Dean Millson – 0:4:30
Okay. In your opinion, it’s a music. Yeah. <laugh>,
Sam McEwin – 0:4:33
Welcome to another episode of
Dean Millson – 0:4:36
Brand Loyalty Quiz.
Sam McEwin – 0:4:37
Loyalty Prices. Right? Um, hmm. I might edit that out later. Uh, so in your opinion, in your well-researched Oh, <laugh> and, uh, experienced opinion Yep. Through loyalty programs, improve loyalty.
Dean Millson – 0:4:55
Well, I can only go off my, no, see, I haven’t done research on that, but I’ve got myself. Yep. For me. Yes, yes, yes. And I have a interesting, but I, I have one example, but it’s a really strong example. Okay. But it’s totally worked on me. Okay. But, um, we’ll keep going through the please. I, I, unless you want me to, I’m
Sam McEwin – 0:5:12
Gonna an, I’m gonna an, an well, the research, according to
Dean Millson – 0:5:16
Berg, that <laugh>, I know that research
Sam McEwin – 0:5:19
Dean Millson – 0:5:21
Yes. Do they
Sam McEwin – 0:5:23
Only a little bit though, and Okay. It’s not much, but yes. And this is one of the, the most misunderstood Oh yeah.
Dean Millson – 0:5:32
Cause I would’ve said No, there
Sam McEwin – 0:5:33
You go. From, uh, from how brands grow and, and the research, there’s actually two areas. Oh, that makes
Dean Millson – 0:5:39
Me feel so much better. So you’re correct, because my, my, um, well, only cuz I, yeah, cuz I, I think about this often, um, when it comes to this certain lly program and I was just like, maybe I think there’s a reason for it, which when I reveal what it is, it’s, um, I, I think you understand why, but I’ve always thought, wow, it absolutely works on me. Like <laugh>, am I the only one?
Sam McEwin – 0:6:0
Well, no, no. So the, the, the conclusion, and this is fairly, well, maybe not clearly stated cause everyone misunderstands it, but it, it is stated within, within, you know, how brands grow and, and in the research that Yes, loyalty programs do increase loyalty just a little
Dean Millson – 0:6:15
Bit. Yeah. Okay. So the point really was they increase loyalty. They’re good, but don’t rely on them to, to, to, to on your, on your brand.
Sam McEwin – 0:6:24
We’ll return to the
Dean Millson – 0:6:25
Sam McEwin – 0:6:26
We’ll go back to this. Okay. So question number two. Yes. Do loyalty programs increase growth, market share?
Dean Millson – 0:6:35
Sam McEwin – 0:6:37
No. Absolutely. I was gonna say, uh, well the, actually the answer is not really. Maybe a little bit sometimes, but no. Um, and the third question, number three. And last final question. Do loyalty programs increase the profitability of those organizations that employ them?
Dean Millson – 0:7:1
In my experience, I’d say no.
Sam McEwin – 0:7:4
No. And that is an absolute fundamental, I mean, obviously this is general research, right? There’s, I’m sure there’s an outlier or two, but No, no, they don’t. And that is the reason why loyalty programs should be rightly considered very much on the nose. Because yes, they do improve loyalty a little bit. Um, no, they don’t really increase growth at all. And actually they don’t increase profitability. What they do is decrease profitability of your most already existing, most loyal, uh, buyers.
Dean Millson – 0:7:39
The fascinating Catch 22. Because with the example, should I just share it or?
Sam McEwin – 0:7:44
Dean Millson – 0:7:45
So it’s vintage sellers. Yeah. Okay. And so they have a loyalty club, which you, you earn points for dollars you spend on wine. And the deal is actually pretty shit. <laugh> <laugh>. Um, so the end, like, and, and it’s, so there’s, you know, so much kind of interesting stuff from behavioral sides going on here. You spend $500, 500 points and you get 25 bucks back. So it’s, it’s not that good. But they do things like, they have triple points, weekends and stuff like this. And, and so what generally happens with me is I’ll make larger purchases that might have, you know, um, for they’re gonna last me a while when they throw up that, that that deal. So, but it, it got me to, that’s where I shop now for, for wine. Now it’s a bit different though because I had to start budgeting, you know, um, a bit tighter.
Dean Millson – 0:8:32
Like I had 12, 18 months ago. And so beca became a, like a, a a price thing. Like I wasn’t just gonna knock jump down to the, the local, you know, um, wine merchant with, with fair enough than the nicer wine. Yeah. I was looking for, so I had price, price going on here a little bit that I, you know, I had to be conscious of, but, so that, that really suited my kind of preferences. So it’s not for, for everyone, but I will, you know, I’ll shop there and I’ll, you know, my, my wife laughs and it was Triple Points weekend last weekend. I, I did like a, you know, a two month shop for, for wine, cuz I got my, you know, 50 bucks off. And, but, so, but yeah. Profitable, like, I, I, they’re not, it’s not being more profitable for me, but I probably wouldn’t shop there as much if it wasn’t there. I would, yeah. I would just go to other bottle shops or try other things. So a part of me, I’m kind of locked in there. Yeah. Their cycle a little bit. So,
Sam McEwin – 0:9:30
So follow up question though. Yeah. How, how did you, do you remember the time you signed up to that
Dean Millson – 0:9:35
Loyalty program? I signed up for that 20 years ago whenever, like, but I, it set dormant FRAs really? So I really only started using it kind of two years ago again, because they were, they were there and I’d become budget conscious and, you know, wanted to get the most, most bang for buck. There’s
Sam McEwin – 0:9:50
Some serious 5 95 rule going on there. No.
Dean Millson – 0:9:53
Yeah, no, they’re, they’re, they’re, they’re, well, yeah, there, there are. And I know, but the other side, there’s one close to my house. So there’s the other thing, you know, you can’t Physical availability. Physical availability, that’s right. Yeah. So, but, but it’s interesting. I, I would say so it totally doesn’t, um, for me, and this is sample of one, so it’s not, it’s, it’s, it’s not really, um, not, you know, don’t hold too much weight with it. But, um, I, you know, if you said there was other people out there like me, um, it doesn’t increase profitability in a sense that I’m only, I’m buying there in order to get, you know, get some free money or, you know, extra wine, really. Um, but I wouldn’t shop there as much if the, if I wasn’t into the program. So I don’t know what, how you work that out.
Sam McEwin – 0:10:40
Well, there you go. And that’s, and that where I, I think they say, well, it does increase loyalty. You are, you are more loyal and there’s those times, you know, maybe you’d shop there anyway because it’s local. Um, but there’s times when you, you would, you know, maybe for convenience you’re near another, uh, competitor that you, you know, now you are, you know, the loyalty program is this, oh no, I won’t do that. I’ll, I’ll,
Dean Millson – 0:11:1
I’ll wait, wait until do that there,
Sam McEwin – 0:11:2
Which makes sense. There’s the little bit,
Dean Millson – 0:11:5
There’s the, there’s a
Sam McEwin – 0:11:6
Little bit, the reason where it breaks down this is, this is, um, so what’s contained in, in how brands grow and what’s, um, certainly sort of featured in, in the Berg bass studies and those ba those studies. So what, what I wanted, I didn’t want this to be just, uh, you know, Sam ru recites a chapter from How Brands Grow,
Dean Millson – 0:11:24
Because that’s tough. Our podcast
Sam McEwin – 0:11:26
<laugh>. Yeah, I know. And there’s plenty of podcasts out there that, that sort of do that. So I, I will sort of go, I, there’s a, a few questions that, that I don’t think have been answered. I haven’t seen that in any of the research. Okay. Any the other studies that have come that I think maybe we can tackle. Yep. Um, but yeah, certainly Erin Berg Bus did a lot of studies and, and their study was on flybys the main one. Right? Ah, uh, and so it was a, you know, in, in some ways it’s, it’s not your typical loyalty program, you know, which, which raises the questions. But then that particular study was replicated numerous times. It was done in, oh, I wanna say France, maybe around some grocery store chains and different things and, and a number of other studies. And they all come to the exact same conclusions. Uh, and the reason why, uh, that Yeah,
Dean Millson – 0:12:8
Just on that, I wonder, this is a side note. Um, I, I wonder partly with that, like maybe you’re gonna cover this, um, it’s not connected to the brand. Like it’s, you know, you, so what flybys here is, is Coles and then a bunch of related businesses, and Woolworth has got worse. I think their one is, I don’t know, but it’s not the video tellers one for me, it’s like connected to the brand. Yeah. I see. A direct connection. Whereas, because when they have their own brand, it’s like, it’s once more removed. It doesn’t feel as strong.
Sam McEwin – 0:12:38
Yeah. Well, uh, there, there may be some reasons why actually not being part of the brand might be a actually, uh, oh yeah. A good thing. Um, but certain, look, I, I think it would apply to vintage sellers as much as it applied to, to flybys. And the reason that it doesn’t work is, um, and, and this is to quote this time from how brands grow. Cause I think, uh, how brands grow actually do do a really good job of explaining it, which is, um, what they say is from a marketing strategy perspective, there is something unusual about loyalty programs. And that is that they skew more than other marketing interventions towards heavier, more loyal buyers of the brand. And there’s
Dean Millson – 0:13:16
Two, I’m putting my hand up right now because that’s why I sound gonna overshare buyer, every
Sam McEwin – 0:13:21
Dean Millson – 0:13:22
Heavy, get buyer of wine. Very
Sam McEwin – 0:13:24
Good. And that, and that’s what it is. So firstly, right, if you are someone, and this might not be exactly, uh, you know, to, to your Casper, as you said, uh, simple of one, um, if you are already a heavy category buyer and you’re already brand loyal to that particular brand that’s running the loyalty program, then you are much more likely to actually be aware of the loyalty program. And because most loyalty programs you sign up in the store or maybe on the website. Yeah. Uh, so, you know, just, just statistically speaking, you’re more likely to sort of be aware of it and sign up because you’re always in there and you’re already loyal. Yep. Uh, and then the second part, of course, is economic, well, heavy category buyers who are already loyal to that particular brand are going to benefit from the discounts more Yep. Than, you know, light non-lawyer buyers or heavy, uh, category purchases that are, that are non-lawyer. Yep. And, and therefore they’re gonna see the benefit. And that right there is why they’re not profitable, and it doesn’t increase growth very much. Yeah. Because all you are really doing is just shaving off your margins to your already loyal. And, uh,
Dean Millson – 0:14:27
But I definitely wouldn’t be loyal in that regard. Yeah. I’m loyal because of this. I, without a doubt. And that’s, but it’s,
Sam McEwin – 0:14:33
And that is what the studies, all the studies do sort of mention Yeah. As the, there will be some level of increased purchase. Like there will be some effect across the sort of four main types of buyers, which I mentioned in, in a moment. Yeah. So that they’re all, but it skews really, really heavily to already loyal, high, you know, heavy
Dean Millson – 0:14:53
Purchases. And we know that, you know, you need to be looking for light buyers and more of them Right. To
Sam McEwin – 0:14:58
To Exactly. And that’s certainly the conclusions, uh, that, that, uh, the good professor Byron Sharper Yeah. Uh, goes to. So yeah. But it’s, it is really interesting. So in, in the book, um, you know, they have this beautiful sort of quadrant where they show, you know, uh, the four types of buyers which are, uh, heavy, highly loyal, uh, buyers, which they say are really the most undesirable for a sort of program like this, because they’ve, you know, you’ve already got them, they’re already heavy purchases and they’re already really loyal. Yep. Um, then heavy, but heavy buyers, but low loyalty. And that’s ultimately the ones that you want to program like this to attract. You know, they’re, they’re heavy purchases in the category, but they’re not loyal to your brand. Mm-hmm. <affirmative>. So if you have a loyalty program, attract them across, but of course, they’re not loyal to your brand, so they don’t come across the, the, uh, program very often <laugh>, uh, and, uh, you know, and so, so you’re just not gonna have a huge amount of impact with, with those types of buyers. Uh, and then you’ve got your, you know, light, but loyal buyers, which are also undesirable and the, the, um, you know, light but low loyalty buyers, which I guess would be somewhat desirable as, as far as becoming part of your, your loyalty scheme. But, you know, they really buy much. They’re not gonna make
Sam McEwin – 0:16:5
Yep. Not be very profitable. So that’s, I mean, that’s the, uh, that’s the Ehrenburg, bass <laugh> Institute, uh, portion of today’s podcast. Okay. But, um, it, it did, look, there’s a few questions that, that, um, that came out. I’ve got four questions, so we’ll throw them out and, and, and see where they go. So first question, why, you know, this, this, these studies are so like well known, you know, they’re, they’re out there. If we sort of, you know, as a, as a marketing industry, uh, we know this stuff, why do brands keep persisting with loyalty programs?
Dean Millson – 0:16:42
I think it feels, it, it feels comfortable, feels easy. They’re there. Keep them there because it, you know, feels, it just, I think it just feels easier. Um, there’s a few less, there’s less unknowns. We can see these people. We know they’re there. Yeah. You know, other than, I dunno where those people are. I have to find them. We kind of know a bit about them. So, um, that’s probably it. And then maybe people have similar experiences to me where, where they, I, I’m picking part of my head now, like Yeah. Some of the reasons why, I think in some categories it can work a little bit more, which is maybe a question for one of your other questions later on. But Yeah, look, I think it just, just feels, feels, feels easy. Um, yeah.
Sam McEwin – 0:17:32
Look, I think some of it is, is in, you know, that confusion on the question. That’s why fraden it that way. You know, do loyalty programs work? Well, the definition of work is, is is the interesting thing, because as, as your experience sort of shows, well, yes, it increases loyalty. So if, if you run the program, there will be more loyalty. And if you, depending on how you measure that loyalty, you’ll, you can easily come to the conclusion that the campaign’s been successful. But if you’re not measuring it by profitability,
Dean Millson – 0:17:59
So loyalty’s the wrong thing to measure, that’s probably why they’re being done. It’s easy to measure.
Sam McEwin – 0:18:2
Yeah. Yeah. Whereas if you’re measuring it by market share or growth, then suddenly it doesn’t stack up and, and should be abandoned, but not all. I mean, depending on the organization. Right. Not all marketers and ne necessarily even have that information. Right. You know, and this, this shows to the sort of siloed na nature of some bigger businesses is you’ve got, you know, marketing as the color and in department <laugh>, um, yeah. You know, sort of running their, running their campaigns and, and potentially measuring it by increased loyalty showing. And then it’s great successful setting up in front of the, the, uh, you know, easy to measure all hand me meeting and saying, what a great job we’re doing. And, and everyone claps, maybe <laugh>. Yep. It’s been a while since I’ve worked client side, so apologies if I’ve, but, uh, but yeah, so I mean that, that’s it.
Sam McEwin – 0:18:42
But, and the other things I put down is, is a bit of me tooism, alright, well if your competitors got it, okay, let’s, let’s roll that out. And there’s, there’s no shortage of loyalty platforms and, you know, and, and different features and, uh, and these kind of things that are out there that are very easy to set up. And, you know, sometimes, you know, we, we might not do the research that we, that we should into whether something’s effective or not, but we just say, oh, wow, there’s a platform here. We are not doing it. We’re just gonna do doing it. This is new and, and effective. Um, probably when I, when I looked into it a little bit deeper though, I think the other one is that there’s some poorly designed analysis, which I guess I sort of touched on there. Is, is, is, you know, well, if you’re measuring it by loyalty, it, it’s, it works.
Sam McEwin – 0:19:23
But the, the other side of that is if you took, if you run a loyalty program right? And run for a period of time, and then you say, okay, let’s test if it’s, if it’s, uh, improved profitability, or let’s test if it’s improved our customer lifetime value or our bar basket size. And depending on how you set that analysis up, you know, what some people might do incorrectly is say, okay, let’s take all the members of our loyalty program and let’s compare that against people who purchase, who aren’t loyalty members. And let’s compare those two things. And are they more loyal? Uh, do they buy, do they cons purchase, you know, larger in larger amounts, do you know, and all these kind of things. And I think,
Dean Millson – 0:20:5
And you’d say the answer would be yes,
Sam McEwin – 0:20:7
It’s gonna be yes every time. Right? And, and that’s maybe because we don’t understand that loyalty programs skew towards your already loyal Yeah. Already heavy buyers. So suddenly you’re gonna get all this data that says, oh, well our, um, our loyalty members are heavier buyers. They, you know,
Dean Millson – 0:20:21
The more loyalty members, more loyalty
Sam McEwin – 0:20:22
Can get. Yeah. Okay. And, and so you’re gonna get the sort of false positives there in, in your analysis, so. Yep. You know, um, yeah. So I, I can
Dean Millson – 0:20:30
Sam McEwin – 0:20:30
They’re, they’re my two. Yeah. Anyway, so next question. Yeah. Are there any loyalty programs that could potentially break the mold and, and drive growth?
Dean Millson – 0:20:43
Oh, no, you, you’ve thought of something I hope
Sam McEwin – 0:20:47
<laugh> Well, the, the, yeah. Well, I thought, what’s really interesting is, well
Dean Millson – 0:20:52
Keep talking. Let me think while you’re
Sam McEwin – 0:20:54
Talking. Yeah. Okay. So for, for me, if what we’ve sort of said is, is we’ve taken, the environment is such that most loyalty programs, you sign up in store or online, therefore they skewed two heavy buyers Yep. And already loyal buyers. But if you could change that paradigm somewhat, so the loyalty programs are somehow more visible to heavy category buyers who aren’t loyal and aren’t in the shop, then maybe, you know, there’s no reason why it can’t work. Right. I haven’t seen any studies on this or whatever. Yeah. But the one that immediately, immediately comes to mind is Amazon Prime. And the reason I think is because why? I don’t know why would a lot of people anyway, a a fair majority, I would suggest, and I don’t have, unfortunately, I don’t have the data, there’s no statistics I was able to find about Prime. But why would you sign up to Prime? I think a number of people sign up because, well, they wanna watch Man in a High Castle or, you know, one of the, the, the many shows on Amazon Prime as a streaming TV service. Therefore it’s got broad appeal, mass market appeal. And if you wanna watch the shows that are on Amazon Prime, you’ll sign up to Prime for $6. But hey, as a bonus, you now get free shipping on any orders from amazon.com.
Dean Millson – 0:22:9
I went the other way.
Sam McEwin – 0:22:10
Really? Yeah. So you were already in Amazon.
Dean Millson – 0:22:13
I was buying something on Amazon and I realized that I, the shipping was about the same amount as the Prime. Yep. Um, price. So
Sam McEwin – 0:22:21
I want to get some free TV shows works both ways for, for mine. So for me, you know, we we’re potentially the, and almost making a big assumption that it’s effective and that it’s increased profitability and, and market share. But I would, I don’t know, I don’t think I’m going out on a limb to suggest that it has,
Dean Millson – 0:22:38
Maybe the difference there though, is the payment then. So there’s a bit of skin in the game Yeah. To be part of it. Cuz another one I can think of now is, um, there, I, I’ve, I signed up to like a membership at National Pharmacies. So the national, the pharmacy. I was always a, um, a recent until recently a chemist warehouse guy, cuz it’s the, the cheapest. But I’ve gotta drive a little bit of the way to get there. And as I’m getting older, I’m there to take more medication. And so I overshared in the <laugh> I’ve over shared too much again already. But, um, damnit,
Sam McEwin – 0:23:14
I appreciate your over.
Dean Millson – 0:23:15
So, and, and then I, I, I, I walked past I was, I I was in there, you know, browsing or something cause I had to get something quick, and then I kind of looked into the loyalty program, the membership, and I think I paid $40 for the year. So it’s not, not cheap, but I would, I, I could tell that on the subscription, the prescriptions I get, I’d be making that back easy for the rest of the year. And then, then, you know, I get 15% off everything else in the store. So it’s changed my behavior from the point of view of now I’ve, I’ve paid for it, I’ve gotta use it. Yeah. And, and, and, and you can do a family as well, which we didn’t do because it didn’t kind of seem to make sense. But then I can go buy the family things.
Dean Millson – 0:23:54
Like last night I bought, you know, my son’s got some mosquito bullets and things. And, and so I, I, like, once again, I, I wouldn’t go there as much as I do. It’s taken me from Chemist Warehouse, I’ve paid for it. My wife still thinks I, it probably doesn’t work out <laugh> a better deal, uh, from the, from the mental accounting that, that, that I’ve done. It does. But that probably goes to show you it doesn’t. Um, but that’s definitely shifting. But I think the difference, I’ve paid for it. And, and, and that’s Prime as well. You gotta pay your monthly thing Yeah. To keep it going. I’ve just canceled by Prime, but I’m sure I’ll take it up again when the, you know, the, the shipping is kind of the same and it becomes a, a value add and then I’ll keep it for a few months. So.
Sam McEwin – 0:24:38
Yeah. Yeah. I think that works. And, and I think that’s for me, like, you know, if, if you’re thinking about this Yeah. If, if you go into crafting a loyalty program with you, and I hope Professor Byron Sharp doesn’t listen, he might, I might get a, I might get a, uh, very harsh tweet from him. Twitter or something. <laugh>. Yeah. Um, but um, you know, but I, I think if you were to, to, to go into looking at a loyalty program, well thinking, you know, and, and with your eyes open knowing, okay, well it’s, it’s going, if we just do the, the standard, you know, run of the mill loyalty program, it’s definitely gonna skew towards our already loyal heavy purchases. So how can we change that paradigm a little bit? How can we change that environment? I re I think absolutely charging for it works because now, okay, maybe this is a, a mechanism that allows us to take a light buyer, you know, a loyal light buyer to a, to turn them into a, a loyal heavy buyer.
Sam McEwin – 0:25:30
Yeah. You know, so it’s still gonna skew towards already loyal buyers potentially, but now suddenly they, they’re worth more and that profitability and, and of course if they don’t, well you’ve got $4 anyway. You know, so, so it sort of offsets it a little bit. So I think that works. I think the genius of, of Amazon goes beyond that in the sense that it applies now to a, a market. Like, you know, if you have, like, if there’s the mar, if the audience is Avid TV viewers, you know, that sign up to all the subscription services because they just wanna watch all the tv, you know, then suddenly when they’re purchasing from the everything store Right. You know, there’s, there’s, you know, so they’ve got two broader pure products here that can clash together and say, okay, well, you know, now you get free shipping, you know, and, and you’re gonna pay. Yeah.
Dean Millson – 0:26:10
Fascinat say that. Cause I, I always saw primers. I’ve only ever seen it at the, it was cuz it was first just through a shipping. Yeah. Wasn’t it? And then they streaming service.
Sam McEwin – 0:26:20
So I, I should know this cause it was all in the, uh, shareholder letters of Jeff Faso. Yeah. I think it did start off as a, as a free shipping type thing.
Dean Millson – 0:26:29
It was you. Yeah. And I think maybe even in memory, I remember seeing, like, I’ve, I’ve watched one too many, like feel good videos on, on Facebook. Like something good happening or like a, a one of the troops coming home and surprising their children Now I just get constantly bombarded with these kind of, you know, stories. But one of them I’ve, I saw again last week, and I reckon I saw it years ago, was like this guy that was buying things for homeless people Yep. And having them delivered, you know, in an hour to, to the corner that they’re begging on in, in, in New York. I feel like that was almost the start of Prime. It was like you could supercharge your, your delivery. Anyway, we, we digress.
Sam McEwin – 0:27:7
Well, and and that’s the thing. I mean, it’s been through a, it’s been through a journey and we sometimes, you know, we look at these, the finished product and we, and we, uh, we come back from there. But is is
Dean Millson – 0:27:14
It a loyalty? Like, so I guess this is the other kind of part to it all. Like what is a loyalty program? I guess it’s a loyalty program. The paradigm though, you know, is is a, is or I guess originally was, you know, you buy more from us and you’ll get something else. Yeah. Fly buys, you know, buy this, you’ll get points. You’ll better turn those points into this, you know, vintage sellers buy this adds up to points. You’ll get a voucher to, to, to for some free stuff. You know, even down to the coffee card, you know, by, um, by, you know, here’s your, you’ll get your 10th coffee fr coffee free. I, I want to add into that just a side note. Um, a great little bit of behavioral science. I came across that, um, I wish I could remember the name of the bias, but the, the, if you give someone a coffee card, uh, with um, yes. With 12, 12 spots on it and you give them the first two free, um, and you give someone a coffee cup with 10 spots on it, but you give them, you know, no stamps, the people with the, the, the, the one with the couple of free stamps where you’ve already helped them along their way will perform way better than the other one. Because I think it’s to do with getting, moving you closer to a goal or something like that. So
Sam McEwin – 0:28:21
Once we, it’s, it’s, it’s um, what’s the, the old word, uh, Oprah Winfrey. It’s, uh, um, closure.
Dean Millson – 0:28:29
Sam McEwin – 0:28:29
Yeah. So yeah. Human brain demands closure. So if you start something, you know, despite what, uh, some of my unfinished projects line around in various places might suggest most humans want to finish things and we have a strong desire to finish things and we can’t. That’s thus the, the cliff hanger. Yeah. You know, we have to keep watching to, to resolve that. You know, that’s why, why we can’t, we, we need that resolution. Yeah.
Dean Millson – 0:28:51
So I love that one cuz at the end it’s still the 10 spots. But
Sam McEwin – 0:28:54
Yeah, it’s it’s a brilliant one. I mean, the other, um, but you know, the, the coffee loyalty card is a perfect one actually, because, um, they’re exactly the ones, no, there’s no loyalty there. Like, I just used to get a free coffee every now and again from the coffee shop I went to every single day. Yeah. Because
Dean Millson – 0:29:7
It was the most, and I would’ve gone, gone there
Sam McEwin – 0:29:8
Anyway. The best. Yeah. And I would’ve gone there anyway. Yeah.
Dean Millson – 0:29:10
It’s funny, I, and, and, uh, the the coffee <laugh>, uh, the coffee shop just below our studios just shut because of Covid, unfortunately. Yeah. Um, but I, I remember, you know, them coming up and going, here’s your loyalty cards. And I felt like going, I’m gonna buy coffee here anyway, but Okay.
Sam McEwin – 0:29:25
If you wanna, it’s, it’s the, it’s the perfect, pure, pure example. You know, like the only people that get it are people that buy coffees every day. Yeah. And the only people that are gonna use it are the ones that, that do buy the coffee every day. I’m
Dean Millson – 0:29:35
Glad I’ve contributed.
Sam McEwin – 0:29:36
There you go. Um, but the inter other interesting thing about that which reflects, which you’ve just made me think of is, is there’s a great book called Drive. And I’ve heard this research in a few things as well. Yes. That’s the one Yep. Um, that talks about what motivates people. And, um, we love randomness. Yes. So the, the problem with loyalty cards, it’s not random, is it’s not random. And we, we expect it, and this, it might be, um, thrilling at the start, but then we soon just sort of do the mental maths and factor that into our decision making. And we just expect that,
Dean Millson – 0:30:5
Which goes back to, I think we’ve talked about it before, just, you know, we are riffing now on examples of this <laugh>, but do you remember we, we spoke about lo um, uh, word of mouth. Yes. Um, strategic word of mouth. There was that restaurant in That’s right. The US that, um, uh, you could pick a, um, pick a card out of the deck of cards and if you got the Joker, you’ve got your meal for free. So there’s a randomness happening there. Um, because, so a, it was a talk trigger. So people talked and shared, shared that, you know, go down there, you never know. You, you, you get a chance. The randomness is there because, you know, am I gonna win my meal? Am I not? Yeah. Um, and then there’s also the, the loyalty aspect of it. It’s kind of a program in a sense that it’s a, it’s an offer for for to come here and, um, to, it’s probably not a loyally program, isn’t it? But it’s a, it’s kind of similar. And that’s the randomness.
Sam McEwin – 0:30:54
And they’ve done heaps of studies on this too. Like they did one, I think there was a human study where you could get 50% off the price of something, a particular percentage of the price of, of something or spin the wheel That’s right. And potentially get a hundred percent. But the chances of getting, getting it was so much worse that like, you, you’d be better.
Dean Millson – 0:31:11
Sam McEwin – 0:31:12
But everyone was spins the wheel. And there was another one with pigeons where they gave them
Dean Millson – 0:31:16
Love, a good pigeons where
Sam McEwin – 0:31:18
They gave, um, you know, like two sort of buttons that they could pick to get feed would drop out. One gave feed a hundred percent of the time, and the others was random. And they all ended up into the random one. Apparently. It’s a, it’s a very common sort of, uh, a lot of animals and, and humans included. Yeah. Um, it’s just part of the, we just, we just respond to randomness much more than we do. Yeah.
Dean Millson – 0:31:40
Yeah. So, no, that’s, it’s a really interesting idea. Yeah. So the coffee cup coffee card fails.
Sam McEwin – 0:31:44
Yeah. Just go, just to sort of, to finalize that, that point of are there any that break the world? So I think, I think Amazon’s a good one, which then sort of makes me think, and I haven’t seen many of these that, well, loyalty programs could therefore work. If your maybe one of these sort of, um, umbrella brands and you have a number of products within, you know, a number of brands under your, under your umbrella that potentially share an audience that having like some sort of combined loyalty program that, that, you know, yes, you are already loyal buyers of one brand might come into contact with, but then that might encourage loyalty of the rest of the group Yeah. Could potentially be, be effective or some sort of sort of co-op style, um, collaboration potentially with an alternative brand. Yeah. That is not a competing brand that shares the same audience, therefore may be something
Dean Millson – 0:32:35
That help each other out.
Sam McEwin – 0:32:36
But I, again, I haven’t heard of this. I expect maybe a swift wrap over the knuckles from Professor Byron Sharp if he, uh, do share this with hi with the good professor. If he’s not a, a shy, I’d love to love to hear from you professor. Uh, <laugh>
Dean Millson – 0:32:50
Sam McEwin – 0:32:50
In trouble now. But anyway, just thinking out loud. I feel like they could be two areas worth exploring. I’d certainly love to see some research into, into this if, if anyone’s done it. So that’s my second question. Um, third one, you know, is, is there, if we, if we know, um, maybe I should’ve put this first. You know, if, if we know that loyalty programs aren’t going to drive growth, is there a reason to have one beyond growth? You know, is is there a reason why it can be effective? And I might, uh, put you out of your misery quickly on this one Dean and say, for mine, the, the, the reason is data and Yeah. Okay. Uh, in, in particular data that links online and offline purchase behavior. So, um, the, the example I love was the, uh, group general manager of
Dean Millson – 0:33:39
Haines. And and that’s really like flybys isn’t a loyalty program. Flybys is a data mining operation. Operation.
Sam McEwin – 0:33:45
That’s that’s exactly right. Yeah. And then it’s
Dean Millson – 0:33:46
Not a loyalty program. Yeah. I guess that’s why I feel
Sam McEwin – 0:33:48
Yeah. <laugh> that. Yeah. Well that’s why I had, that’s the problem I had with the Berg Bass one. Like that was my first frame of reference to this. Right. Yeah. And I’ve since gone away and read some of the other studies or given to them, um, <laugh> and, uh, you know, but tried to do a little bit of research into it and, and click cause because, you know, the, the first thing it all made sense and I said, this is great, but this is one study on fly buyers, which doesn’t seem your typical loyalty. And yeah, as I said, it’s not really loyalty. So, or you know, it’s not just loyalty. I mean, that is a data mining pro. And that’s, you know, and that, that’s this and, and, um, you know, connecting that data and connecting offline and online purchases is a really big challenge for retailers, you know, that, that have a bricks and mortar store and an online retail store.
Sam McEwin – 0:34:33
And the way that you do that is through loyalty programs. And the, the wonderful example is, um, yeah, the Haes group, uh, is the general manager of online, I, I’ve forgotten his name, Ryan, someone or other now, um, he, I I, I went to a, uh, a talk conference that he was speaking at and he spoke about bonds and how they use their sort of loyalty program to, to link online and offline data. And that then enabled them to really target advertising that was really meaningful to their users because they know that journey from um, pregnancy Ah, yeah, of course. Right, right. Through that life cycle. Um, and they, they can, if you know one purchase, you can map that cycle out. Say, okay, great, we start at maternity brass, we move on to Yeah. You know, wonder suits or whatever, you know, post pregnancy leggings if they sell that kind of thing. But yeah. You know, they, they, they, they can map that right through and so suddenly your advertising becomes more meaningful, more targeted, um, and also they’re able to stop advertising for things that people have purchased offline, um, because they now know this No. That you’ve got, which is, is more effective use of your advertising. Yeah. So, you know, I think, I mean, you’ve got probably gotta be a pretty big brand and Yeah. You know, to, to benefit from that. But I guess maybe on,
Dean Millson – 0:35:49
Yeah, I think that makes sense. There’s another, yeah. I think that makes sense.
Sam McEwin – 0:35:52
And that’s why the me Tooism I mentioned before could be dangerous for little brands, right? Because you look at someone like bonds, you know, or you look at Kmart or, or something like that, having a loyalty program, you go, oh, well, you know, Kmart are doing it. That must be fairly well researched. That must be working, you know, maybe my little online store should, should go down that loyalty path as well.
Dean Millson – 0:36:10
Yep. Maybe you think of another one. Talk about, um, kids stuff. Like there’s a, there’s a loyalty program. There’s a kids shoe store in Melbourne Yep. Bought socks and shoes or something really clever. Um, but they’ve got a lordy programs. You buy six or seven pairs. I think it’s six pairs near the seventh. Three now. Just made me think of like, I guess with a, it, it kind of makes sense with a, with a, with a, with a child, they’re gonna probably grow out of shoes maybe every six to eight months, maybe a year. But it’s still a long way. Like we’ve ju our son’s five and a bit and he’s just got his first pair of free shoes. But funnily going onto that kind of closure idea, <laugh>, he’s like, you know, it’s, we’ve, we’ve, you know, we haven’t bought shoes from anywhere else because, um, uh, it’s probably not the whole reason, but maybe it’s me who thinks about these things we’ve over sharing.
Dean Millson – 0:37:3
Yeah. Um, but they, but, but yeah, it, so whereas I was going with that, that it’s, it’s, it’s a, it’s a lordy that takes a little bit of an effort to get to. Yep. It’s not a, not a, yeah. It’s, it’s, and I guess vintage sellers, you could say $500 of wine’s, a bit of an effort to get to as well. It doesn’t seem like for some people the same as, well it’s probably the same amount in shoes now I think about it. Um, but uh, but something that gives you, you know, you’ve got a bit of an effort to get there so that you’re not giving away something kind of straight away. Actually, I don’t know. You don’t
Sam McEwin – 0:37:34
Have ITT make sense? And, and what it does, I think is sort of, well it’s not really, these aren’t, Lord, the successful ones are not loyalty programs. It’s not about loyalty. It’s about
Dean Millson – 0:37:41
Sam McEwin – 0:37:42
Yeah. Increasing purchase value or something.
Dean Millson – 0:37:45
Yeah. Yeah. That’s a good, maybe that’s a different way to reframe
Sam McEwin – 0:37:47
It. Yeah. So which is, which sort of does does take me to the, the next point, which is what are the alternatives? Um, you know, and I think that’s, you know, potentially one of them is, is you know, pr rather than rolling out a loyalty program, work on upsell opportunities and basket size optimization and you know, providing Yeah. Opportunities to sort of in increase that basket size. Yep. You know, and then maybe, uh, use that, that randomness to surprise your really already loyal customers with, you know, um, a VIP event or a money I can’t buy offer or Yeah. You know, if it’s the coffee shop, just give them a occasional coffee for free
Dean Millson – 0:38:25
<laugh>. Yeah. I’m trying to think of an example. I can’t, but Yeah, it makes, it, it, it makes sense. It makes sense.
Sam McEwin – 0:38:34
So I mean, mean, you know, and, and I guess to, to extend that, uh, I’m curious if, you know, what you would potentially advise clients to, to do instead of, of launching a, a loyalty. But, you know, the obvious one that, that, um, you know, the Ehrenberg BAS Institute would say is just focus on attracting new customers.
Dean Millson – 0:38:51
Yeah. I like, I, um, I don’t have any clients that are big enough to do a loyalty, loyalty, um, program. If I’m, if I’m, if I’m honest, um, yet <laugh>, uh, but, um, I would be always focusing on the, you know, the, the, the, the new light buyers. But I, I, I don’t have an answer, um, for you, but it’s, I’ve often wondered whether, um, like you even using the soap, um, um, company, the, the, the carwash soap company I used in the last podcast, an example, like in a B2B context, um, what, what, what could you do? But, but it’s the same thing. You are just gonna be given away something that they probably would’ve purchased anyway. But it’s, it’s whether or not maybe if there’s a level of relationship in it somewhere, like it’s, so it becomes a little bit less mass. It’s, you know, it’s more, you, you’re giving something away.
Dean Millson – 0:39:44
Um, when there’s more, it’s, there’s a relationship going on their mail maybe with the, so they, you know, with the Carish guys, you know, they have a relationship, you know, they have salespeople, they have a relationship with their customers and they’re, they’re, they kind of try to embed themselves in their businesses and become, you know, mentors to not only sell them, you know, car wash soap, but to, to also to to help them, you know, help them run their businesses better. Cuz they’ve got an amazing amount of expertise in the industry. So maybe it’s a diff you know,
Sam McEwin – 0:40:15
I still, I guess I’d still, I mean, I think it about, I’d still say it’s probably wasted. Like if I was gonna go that path, I’d, I’d, I’d go, okay, it’s b2b. Let’s, let’s focus on stickiness, general stickiness. Yeah. You know, and, and improve the service so that it’s, it’s harder to leave and no one would in their right mind would leave and Yeah. You know, and, and those kind of things, you know, and that might be, you know, creating some sort of software that, you know, your, your customers use. Yeah. You completely unrelated to your core product, but by, you know, in using it, it’s, it’s, you know, or something like that. Like, like thinking out, out outside that box and sort of expanding
Dean Millson – 0:40:51
You. Oh, I know these guys have like an education, I they call it soap school or something. We might be changing that, but, um, but, but it, but it was helping them, you know, up upskill and a lot of these people are, you know, they’re, you know, they’re, they’re often without stereotyping like, you know, um, retirees that have bought a franchise or, or something like that. And, you know, they need help through. So in a way it’s kind of, it’s a loyalty, once again, it’s a loyalty program that’s not a loyalty program. Yeah. It’s got another, I guess in the end it’s loyalty, but you’re not, you’re not, you’re reframing it a different way. It’s, it’s, it’s more about stickiness, but you don’t wanna call it a stickiness program, cuz that sounds pretty,
Sam McEwin – 0:41:32
Uh, you wouldn’t, you wouldn’t mention mention that out loud in a podcast.
Dean Millson – 0:41:34
No, you probably wouldn’t. You’d, you’d edit that out
Sam McEwin – 0:41:37
<laugh>, but No, but yeah, it is something, you know, what is it? Uh, uh, yeah. Anyway, it’s, yep. I, I think that, I mean that’s probably, you know, talking this through, I think that’s the conclusion is you come to, is that, you know, you, you probably needs to be more bespoke, needs to be more customized. It needs to be more thoughtful and rolling out, uh, you know, get your fifth purchase free, but loyalty program is, is unlikely to do much for your bottom line. Yeah. And, um, yeah, so I mean, you know, I had a couple of other alternatives here, but, you know, um, so I think is
Dean Millson – 0:42:9
There reciprocity going on maybe as well, like the reciprocity bias? You know, we will do, we will, we, we, we will do things for other people that have done something for ourselves. Um, that,
Sam McEwin – 0:42:20
That’s where I think random, like, that’s where I think the randomness comes back to, because I just think there’s no reciprocity there. If the expectation is every time you, you buy your 10th coffee, you get one free where Correct. Whereas, whereas if you had like, you know, if you gave your, your a budget or something Right. Like, you know, and, and said, okay, you, you’re allowed to give out a free coffee every now and then, you know, or you can give out one free coffee a day or something. Yep. Um, you know, and, and you might do it random to, it’s, it’s gonna be more impactful and then, then you would have the rest of, of reciprocity. Gotcha. So, um, yeah, I think when you, when you make a system, and this is I think to the B2B example, you know, like there’s, there’s so many great ways to, to build loyalty as a B2B organization and as a service organization, uh, you know, that, that like as if you rolled out some sort of, you know, cookie cutter type program, it’s gonna look really fake. And I, I don’t think it’s gonna land spin
Dean Millson – 0:43:12
The wheel for
Sam McEwin – 0:43:13
This fees free. So
Dean Millson – 0:43:16
Is it, although that could be kind of cool, but, but once again, you’re not gonna attract customers by doing that. You wouldn’t
Sam McEwin – 0:43:22
No, no. I think, I think in, in b2b you should be able to be more thoughtful about it and there should be a deeper relationship there, and you should be able to do some, some extra things even for b2c. I think if you, if you focus on experience, you know, like forget the loyalty program. I mean, why throw away all that discount and lets just make the the shopping experience incredible. Um, yeah. You know, and, and uh, and um, you know, make sure that those frequent buyers that are in there do just get an amazing conversation. And maybe there’s some talk triggers there, Dean? Uh,
Dean Millson – 0:43:50
Still there are, I’m sure there. So
Sam McEwin – 0:43:52
Anyway, look, I think there’s, I, I hope I wanted to do this because I hope it progresses the conversation a little bit. You know, like it’s, I think a lot of what we cover here is, is fairly obvious once you hear it, but maybe not so obvious, you know, on the surface. And, and we can sometimes just blindly go down the path of, of, you know, looking at a loyalty program. But hopefully it, it’s, uh, progresses a conversation a little bit and, and, uh, yeah. Some food for thought and we can make better decisions and more profitable ones and, and ultimately serve our customers better as well. Right.
Dean Millson – 0:44:24
Sam McEwin – 0:44:25
Yes. So that’s it. We’ll wrap it up, um, as is going to become the norm. Just a quick reminder that the, the best way to support the podcast is to be loyal to the podcast <laugh> and be loyal to the podcast, uh, is to, is to sh is to share it, tell people about it, talk about it, uh, but ultimately also leave reviews. The review engine is what drives the, uh, podcast appearance in the various, uh, searches. And, uh, will give us a nice little dopamine hit that will encourage us to continue to record these and, uh, that’s right and all that. So please do that. Um, you know, and do get in touch. We want to hear from people we don’t, haven’t heard from anyone yet. I don’t think they heard. We have heard. No. We have heard from a few people. We’ve had, we have heard from a few people, uh, hundreds of people <laugh> every single episode. Uh, but we’d love to hear from more social proof that’s called Sam. Ah, yes, yes. Um, we need some of it. <laugh>, maybe the next podcast. <laugh> do some research. Yeah. Okay. Done. But, uh, let’s do that. And, um, you know, and if you can’t be bothered doing either of those, then just tune into the next podcast and, uh, will you shall see you there. You there? Yeah. We’ll see you then.