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Episode 30: The value of brand loyalty programs (and how to build them)

Sippin' & Shippin'
Sippin' & Shippin'
Episode 30: The value of brand loyalty programs (and how to build them)
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Tanya Phipps|January 6th, 2023

This new year is all about retaining customers, and one way to do that is by showing your most loyal customers some extra love through a loyalty program. In this episode, the crew chats with Allison Spalding from Inveterate, Inc., talking all things loyalty, subscriptions and memberships. The differences between them all, the value they provide, and how to implement to meet your brand’s needs. So, if you’re interested in building a community of loyal customers and learning the value that it can provide your business, tune-in for more. 

Timestamps:

1:33 Allison’s background story

3:07 Customer retention as a focus

4:49 When does it make sense to implement a loyalty program?

6:18 How authentic experiences build a community of loyal customers

8:48 What is AMA?

9:54 Membership program examples

15:00 Can loyalty programs translate into profit?

17:49 Subscriptions vs Memberships: Which one is right for your business

23.41 Leveraging a loyalty program as an acquisition tool

25:40 Switch up the standard demand gen strategy, and get creative

5 reasons to launch a paid loyalty program banner.

Transcript

Brian Weinstein: Welcome everybody to Sippin’ & Shippin’. I’m your host, Brian Weinstein. We’ll be kicking it here every other Friday, quenching your thirst for an insider’s take to enhance your customer experience. So grab your drink of choice, kick back, it’s Sippin’ & Shippin’ time. All right, welcome everybody to another episode of Sippin’ & Shippin’. I am your co-host Brian Weinstein-

Caitlin Postel: Co-host?

Brian Weinstein: And I am here this week with the other co-host, Caitlin Postel.

Caitlin Postel: Oh, you threw me off. I’m like, “Oh my goodness, I’m hosting today.” You would do this to me, Brian.

Brian Weinstein: Yes.

Caitlin Postel: My co-host, I guess. We’re co-host. I didn’t know that was happening. Okay.

Brian Weinstein: We’re splitting it up, right?

Caitlin Postel: All right.

Brian Weinstein: There we go.

Caitlin Postel: Awesome.

Brian Weinstein: Wow, Caitlin’s a little thrown.

Caitlin Postel: I’m excited for today’s episode.

Brian Weinstein: I’ve never seen Caitlin thrown. She’s always-

Caitlin Postel: All right, let’s go. Reset.

Brian Weinstein: Reset. All right, we are here with a very special guest from Inveterate, Allison Spalding.

Allison Spalding: Hey guys, great to meet you. And so excited to be on the podcast today.

Brian Weinstein: Great meeting you. And thank you for agreeing to come on into this little chaotic world that Caitlin and I have created.

Caitlin Postel: You created-

Brian Weinstein: Oh, I love it.

Caitlin Postel: With that cohost. Yeah.

Allison Spalding: I fit in right at home. I’m just sliding right in. It feels nice.

Brian Weinstein: This is fantastic. And we’re going to need to give Caitlin a few minutes to recover because I really did throw her, I’ve never seen her like that before, so we won’t expect much out of her for a few minutes. But in the meantime, can you give us, for the listeners, a little bit of background on you?

Back to “Brand Loyalty” index

Allison’s background story

Allison Spalding: Yeah, absolutely. So I have been in e-commerce my entire career. I started out on a marketplace side, exclusively for military, first responders and really got my e-commerce chops doing everything from merchandising to UX experience, to customer service, and really fell in love with e-commerce then. But after marketplace, I moved to agency side and that’s where I’ve spent a majority of my career working as a strategist and connecting directly with direct to consumer brands to help them grow their e-commerce sites.

Brian Weinstein: Yeah, so it’s interesting. Where are you focused with the brands? I mean, where are you helping them? What’s your subject matter expertise, if you will?

Allison Spalding: Yeah, so I would say I really have focused a lot on how customers interact with brands through their onsite experience. And how we can do a lot of storytelling and strong merchandising tactics through the onsite experience to help conversion and increased cart value sizes. And so really taking that strategic approach to how we view customers’ interactions with direct to consumer sites.

Brian Weinstein: Yeah, it’s amazing how much focus you need to put on, not only bringing the customer or the prospect to the website, getting them to buy and getting them to continue to buy. We talked about this a little bit last week, over the last few weeks, about that initial purchase is great, it’s exactly what you want, but it’s actually a major loss if you can’t get people to come back. And buying the court site size, sorry.

Allison Spalding: Yeah, absolutely. And so that’s a lot of what my focus on too, was not only those first interactions and how we get customers to convert, but more importantly, how we get those customers to be sticky and how we can retain them over time. And so through that work have built a lot of great programs with customers in the past including premium loyalty experiences that I know we wanted to talk about today, and I’m super passionate about. So an example of one of those that I have built in the past is with a children’s accessory and apparel brand that had this incredible community built around their product, but it was a bit more of a premium price point. And so some of the work that we did together was identifying what type of experiences we could build for them to get them converted into the brand, but also getting them to buy more and spend more overtime. And that eventually rolled out into this incredible membership premium loyalty experience for their customers.

Caitlin Postel: Yeah, I love that. And I always say how I’m into the storytelling, the storytelling is what gets the people there, or maybe a push from their for you page, whatever the case may be. But then what keeps the folks coming back, and I’ve been seeing it with a lot of brands I love, this formation of rewards and loyalty programs. When does it make sense? Is it, I saw our competitor started a loyalty program, let’s start a loyalty program? Or what are you seeing, Alison, is triggering that starting point?

Allison Spalding: Yeah, I think that’s a really great question. And so I think there can be a lot of different factors that tell a brand it’s time to offer something like this. So one place I like to start is what type of community have you built up? Are you a brand that has this authentic voice, and has products that have this really authentic following? But maybe we’re only getting one order from customers a year, or two orders from customers a year, but we have this community that’s telling us how much they love us. What are those experiences that can help create this bridge into getting them to be sticky and spending more and interacting with us more at the transactional level? But also getting them continue to be bought into the brand over time. And so tapping into that authenticity of who your community is, if you have that foundation there, I think that’s one really strong indicator that a premium loyalty program would be a good fit for you.

Caitlin Postel: Yeah, I think the community part makes a lot of sense to me. And then you said something that I love which is, experiences. So aside from just come fill up your cart, love our product. I’ve seen that as well, meetups or exactly exclusive offers if you shop at our popup. And I think there’s nothing more authentic than that than to put yourself in front of, and really immerse with your loyalists

Allison Spalding: 100%. And so that’s actually how I go about building and designing premium loyalty for the clients that I work with, is identifying, there’s two different ways really you can think about providing a premium loyalty program. So the first is obviously this hard value, super transactional path. So things that fall into that are member-only pricing, deeper discounts for Black Friday, Cyber Monday, maybe you get first access to Black Friday, Cyber Monday deals. We’re in the thick of that right now. And so these really hard value things that make it enticing and get those customers to convert into the experience. But over time, those may lose their value, so to speak, if the customer isn’t also bought into the brand experience. So that’s the other portion of a premium loyalty experience, that I really work with customers to figure out how to design and tap into is, how customers experience your brand. And so those could be things like meet and greet the founder. I mean, I think that’s one of the great things about D2C brands is how involved founders are and-

Brian Weinstein: How accessible, right?

Allison Spalding: How accessible they can be. Exactly. And so that’s authentic to how they’ve grown their brand. And so being able to do a monthly or quarterly AMA with the founder that only members have access to, or the product team saying like, “Hey, we have this awesome membership community, let’s ask them what they think about some of these designs we’re playing around for the next season and what do they gravitate to.” And so those behind the scenes personalized touchpoints where the customers get to be bought in. So it really is these two pillars to building out premium loyalty programs that are super important. Obviously, they transactional side where they feel like they’re getting value, but then the experience side where it’s this buy-in in the community that they feel like they’re a part of.

Brian Weinstein: I’m sorry, just for the listeners who may not know, what is AMA?

Allison Spalding: Oh, ask me anything. I think it’s a Reddit thing. I’m not sure if I’m saying that correctly or not, but I think that started via Reddit. But this opportunity where you have someone at a high level at the company or a brand who opens up the floor for their employees or their brand customers to ask them anything that they may want to know about.

Brian Weinstein: Interesting. Okay. I appreciate you clarifying that.

Allison Spalding: Yeah.

Brian Weinstein: So I will tell the brands out there that are listening, so I’m a Taurus, and Tauruses are extremely loyal.

Caitlin Postel: Zodiac signs. You are completely… Who are you?

Brian Weinstein: Don’t spend any of your money on marketing dollars on Tauruses. But other than that, this can bring a lot of value.

Allison Spalding: I would argue if I can hook a Taurus up front, then those are dollars well spent.

Brian Weinstein: That is true. That is true. It just doesn’t take much to keep us around after that, we’re very loyal. Sometimes it’s hard to get us to leave.

Allison Spalding: That’s great. I love that. I don’t want anyone to ever leave a membership program.

Brian Weinstein: That’s awesome. So tell us a little bit about some of the membership programs maybe that you’ve set up for your customers.

Allison Spalding: Yeah. So I have two examples. They’re both on opposite spectrums and really great job of showing the breadth and the range of experiences that you can offer, if you overthink about offering premium loyalty experiences. It can be really small and really simple, low barrier to entry. And a great example I think of that is Fresh Clean Threads from really known as Fresh Clean Tees. They launched a $19 program, so it’s only $19 to join for a year, a yearly membership. And with that they get 20% off of everything, and free shipping. And other small things like early access to new products. And so it really is just that simple. And it allows customers to maybe make products, buy more products at a lower price. And so it’s really no-brainer when you’re shopping to sign up at that first touch point. So from the brand perspective, it’s this really incredible tool to get customers to stick longer and having that low barrier to entry. So that’s one great example that I’ve seen out there.

And then my personal favorite is Flamingo Estate, which is this really curated brand. It’s based out of Los Angeles where they grow everything that is put into their products, and they’re very experienced based brand. And so that one’s on the higher end, it’s $96 a year, but with that you get invites to the estate. You get exclusive luxury gifts with purchase on a quarterly basis. These touchpoints that are much more authentic to their brand fabric. And so there really is such a range that you can offer and that’s why it’s so important to understand who your customers are when you’re thinking about building out this type of program.

Caitlin Postel: Yeah. I love those examples and I actually appreciate that they couldn’t be more different. And as you were laying out the groundwork of them, I think what piqued me was, all right, okay, T-shirts, right?

Allison Spalding: Mm-hmm.

Caitlin Postel: If I had a T-shirt is a T-shirt, I may buy whatever. I won’t give away my shopping habits, but maybe I’ll buy quite a few T-shirts. But if I know that I have that free shipping with Fresh Clean Tees who we’re very familiar with, and I know that I have that 20% off, I’m less likely to go to their competitor, right? Because this is a low price product. If I see something jump up, I get an ad pushed to me, I may switch if I didn’t make that $19 investment, which is low enough to keep me engaged with that company.

Allison Spalding: Exactly.

Caitlin Postel: And then when we switch over to Flamingo Estate, you said the price point is $96. Okay, then you said you get invites to the estate. I perked up, oh, I get to go to it estate tell me more. Is it worth the $96? So I guess the $19 versus the $96 is all very relative to the product. But are you seeing any type of threshold where folks are just not going to bite like, $100 for membership seems like a lot of money.

Brian Weinstein: Right.

Allison Spalding: Yeah. And we were concerned with that with Flamingo State. Is this too expensive? But just due to the signups we had right at launch, it proved not at all. It was very comfortable for them. But a lot of what I recommend when you have those concerns is serving your customers. So with almost every program that I help build, I put surveys together and I go to customers and I try to understand their likelihood, how interested are they in programs, what are all the different benefits we offer and how do they rank them against each other? And then put together sample programs and just say, how much would you pay for this if we offered it? And how often would you want to pay for it? Would it be yearly? Every three months? Monthly? And we learn so much from these surveys that we feel really informed and validated when we launch these programs.

And so there’s a lot of different levers to figuring out what the right price point is. Sometimes I look at AOV. We also want to make sure we’re covering the cost of the benefits that we’re providing so that way we’re not being detrimental to the cost of the program to the business. But I really am a big proponent of validating those ideas with your actual customers. And particularly, within that super loyal segment of customers that are going to be the ones that are likely going to join this type of program. So don’t be afraid to talk to your customers, send them a survey and it can be five to 10 questions. It really doesn’t have to be this super formal, super scientific survey, just send out a couple of questions or even poll them if you have a Facebook group or an IG poll in stories, there’s a lot of ways to get that feedback from customers and get a sense of how to price things.

Brian Weinstein: With the money that you’re charging the customer, you might be giving free shipping, you might be giving early alerts, discounts that are not out there to the public. Is it a profit center, or is this just really a way of creating a loyalty both ways?

Allison Spalding: Yeah, I absolutely view this as a profit center. And that’s what the data tells us, both in what we’re seeing in performance, and also what a lot of market research tells us too. So a 2020 McKinsey study told us that when customers pay to be part of a loyalty program, they’re 60% more likely to spend more with that brand. And I believe it’s 47% likely to come back in place twice as many orders. So there is this connection with paying for something and wanting to utilize what you’ve paid for, which is why I’m a big proponent for leaning into this type of program over a free program, because of how much more compelling it is for customers that are bought in to come back and actually use those benefits. So it absolutely is a profit center where we are seeing that members, customers who are members, are coming back and placing orders more frequently. And not only placing orders more frequently, but actually spending more on their orders. And so it’s a really, really valuable group of customers for your business, when you can construct the right program, right price point and the right balance benefits.

Caitlin Postel: So rewards and loyalty programs have nothing in common with gym memberships, even though you’ve bought it, you don’t feel compelled to use it.

Allison Spalding: But I think gyms may have been excluded from that McKinsey report. I’ll have to get back to you.

Caitlin Postel: I would think so. Not that I have personal experience in that space, just putting it out there.

Brian Weinstein: But one requires suffering and you can forego suffering. You’re like, “Eh, I spent the money, why do I have to suffer?”

Allison Spalding: Yeah. Exactly.

Caitlin Postel: Exactly. Exactly. I’m suffering enough.

Allison Spalding: Exactly. But I think maybe to the question you were getting at, is it a profit center or not? I think maybe another question in that same category is, goes back to the cost of the membership. And I think it’s totally doable for some brands to consider that you may price something low as a loss leader to get these high value customers in the door knowing what you can forecast for their uptick in repeat order frequency, in their uptick in AOV. Maybe it’s okay to price low at the sake of volume. There’s a lot of different levers to play with, and it all this master formula of value to benefits to experience.

Brian Weinstein: It sounds like it’s really brand specific, but is there a point where, whether it’s monthly, quarterly, or annually, that the annually maybe becomes too sticky to customers and they’re more resistant to take it? Whereas if you make it a monthly, it’s very easy for them to move in and out of a loyalty program?

Allison Spalding: Yeah, absolutely. There’s arguments for both. And so with the brand, the two examples I mentioned, those are both yearly programs and that is by design. You’re not necessarily maybe purchasing at quite as high of a frequency volume as maybe like a CPG brand. And so that’s why I make an argument for maybe a monthly or an every three month membership program, because those customers are coming back and refilling those products on a much more frequent basis. And to that point, when we think of CPG, we also synonymous put subscriptions there as well, right?

Brian Weinstein: Right. Yeah.

Allison Spalding: But on average, subscription may be 20 to 35% of a brand’s business. And so that leaves this whole other chunk of customers that love your product but maybe don’t want to get put into this auto fill cycle and then get too much product. And then all of a sudden you don’t actually like these products because you have too much of it in your cabinet or your pantry. And so that’s where I think also these membership programs can sit really nicely along subscription too and offer up this new way for customers to shop your brand.

So it’s a little bit of a different use case or a different mindset from this more experiential-based premium loyalty program. But the same type of idea. You’re charging a customer for benefits where maybe I don’t want to commit to a subscription, but I still want the 10% off and I still want the free shipping, and I want maybe things like first access to the seasonal exclusive drink flavor that you’re going to offer. And so I think there’s also a really great use case, and people shouldn’t shy away from also offering it along CPG. Where even if you have a solid subscription program, membership can sit really nicely alongside it.

Brian Weinstein: It’s funny because I was thinking in terms of, and this is just completely thinking out loud, we had talked a while back about returns and how returns… When returns first became a thing, the brands tried to make it as difficult as possible for the consumer to return the product. Until one day that backfired, and really was probably Zappos, that was the first to really push the returns simplicity and ease and frictionless. But that became such a staple. And then I was thinking, okay, well if you’re asking for an annual subscription, does that cause an issue with the stickiness and then starting to turn people off? But I can see why it would be brand specific in that regard. And in terms of subscriptions, I have about 240 pounds of dog food in my basement for my 34 pound cockapoo because I can’t figure out how to reset the subscription, and it just keeps coming month after month.

Caitlin Postel: Buster is well fed

Brian Weinstein: Buster is well fed.

Caitlin Postel: Good to know.

Brian Weinstein: Exactly. So in terms of subscription, and again, I know this is probably specific to brand, but do you see a trend in the industry of consumers moving maybe less inclined to that subscription and more of that membership?

Allison Spalding: I don’t know if I’m qualified to be the one to speak on that, but generally I think there could be fatigue. Like you said, you just have so many subscriptions, and now there’s even apps to tell you what your card is going to run a subscription for that you may have forgot about so you can just quickly cancel it. So I think maybe there is this sense of fatigue around subscription, but what I’m seeing when I interact with customers is that subscription is still a very healthy part of their business and a very valuable piece of business. Where when done churn can be low, where they get a certain amount of orders out of those customers that they find to be value. So I definitely wouldn’t say subscription’s going anywhere anytime soon. My more thoughts around it is not everyone wants a subscription to everything, but they do like a brand and particularly if it’s CPG, they want that brand in their bridge frequently or they want it their cupboards frequently. So how can we make sure that we’re unlocking opportunities that makes them easy for them to do that, where they also don’t feel like something’s going to ship to them where they forgot and now they’re stuck with something. So I think it can be a creative exercise in how can you unlock this new type of way to shop your brand by providing a membership program for your non-subscribers.

Brian Weinstein: I do like an exclusive offer. I am a sucker for an exclusive offer.

Caitlin Postel: Me too.

Brian Weinstein: Makes me feel so special.

Caitlin Postel: They just put that word at me and I’m like, “Yeah, that’s it. Exclusive, at the estate.”

Allison Spalding: Yeah.

Brian Weinstein: If they would put in there, “We’re only sending this to you,” I would buy whatever it was that they wanted me to buy.

Allison Spalding: Yeah, yeah. It’s true. There is that feeling of you want to be a part of a community and you feel special for that and this is an authentic way to do that. I think a lot of people have started to, “If you’re on my email list or if you’re on my SMS list, well then you’re automatically a VIP.” But I think customers are starting to catch onto that that doesn’t necessarily mean much. And so by really creating these gated experiences, we’re living up to what it really means to have a VIP experience.

Caitlin Postel: Yeah. So we’ve been talking a lot around as far as the loyalty and membership programs as means of retention, and retention’s such a huge part of discussions this season on our show. Can you talk a little bit about how brands can leverage these type of programs as acquisition tools? Not necessarily as retention, but to get that person on board. Is it a little presumptuous to say, “I haven’t even bought anything from you yet? Hey, join my club. Brian and I are in,” if you just call it exclusive, but what have you been seeing in that space?

Allison Spalding: Yeah, so our theory when we started Inveterate, that this would be a really heavy retention model. And that definitely is true, but in the case studies that I’m pulling, I’m seeing anywhere from 25 to 35% of customers that are signing up for our loyalty programs that we’re launching are actually first time customers.

Guide to Retention Marketing banner.

Caitlin Postel: Wow.

Allison Spalding: Yeah, it really blew me, because-

Caitlin Postel: Surprised.

Allison Spalding: I thought so too. I felt very strongly this was an easy way to tap into those already loyal customers and make them even stickier. But it turns out that, and maybe this is a follow-up topic once I get more research, but it turns out that this is actually making it a way for customers to see even more value into opting into a brand that maybe they follow on social, maybe they’ve seen influencers post it, maybe they’ve just been getting hit with the ads, but they haven’t come in and this is the final thing that makes them bought in. I’m not sure what that is, but I mean it is pretty consistent that I’m seeing anywhere around a third of members are first time customers.

Caitlin Postel: Super interesting.

Allison Spalding: Yeah, so this notion that this is just for recurring customers, it’s definitely not true.

Caitlin Postel: Yeah. So the tipping point may very well be that program, that loyalty or membership that you’re offering right out of the gate. Yeah, I was not [inaudible 00:25:38] that number to be so high.

Brian Weinstein: We talk about it on our side a lot too. I mean, if you’ve got this demand gen strategy where you are getting in high intent customers because they’ve educated themselves on your product or service or whatever, they’ve probably done their homework, they’ve probably asked a lot of friends and associates. So they come in eager to be a part of it.

Caitlin Postel: That’s a good point.

Brian Weinstein: Want to buy. I think that’s probably more the trend.

Allison Spalding: Yeah. And I think too, we’ve all grown. I think part of it is, I don’t know about you guys, but I pretty much exit out of every welcome offer intent now when I hit a new website because I don’t want to fall into the email flows and I want to make that decision. Maybe I should blame that on my day job. But I [inaudible 00:26:27] exit out of those. But I have heard anecdotally that those offers aren’t necessarily even working as well as they once did. Not to say that it’s not a valid technique and to turn those off, but just anecdotally, those aren’t as high converting offers as they once were.

Whereas I think to your point about, okay, I’ve done my research, I’ve understood this, and now I see this program compared to it, that also matches my expectation of what I’ve come to understand this brand is by the experiences they’re offering as this program, I think is one part of it too. But I don’t want to also glaze over the fact that if you can easily show the math in half a second of, okay, I may be adding something for $19, but I’m going to save $25 because I’m joining it. Okay, I’m actually netting out positive on this order. I think that’s another great way of saying, okay, how can I get those customers hooked? And now you have this incredible segment to hit for the next year to get those orders, to get them coming back for more orders. But I definitely think there’s a math element too, to getting why we’re seeing that such a high number of first time customers converting.

Caitlin Postel: And I’m following that same consumer behavior. And I don’t know if it’s because I’m just over it or if it’s because that cheeky way that they presented on the button like, “No, I want to pay full price today.” “No, I’d rather not say 5%.” “No, I don’t actually,” decline.

Brian Weinstein: Exactly.

Allison Spalding: Yes, exactly.

Caitlin Postel: I’m really looking to research, you would’ve spam you actually, this is my day job.

Allison Spalding: Great.

Brian Weinstein: Yes.

Caitlin Postel: Yeah.

Brian Weinstein: Exactly right. Well this has been fantastic, Allison. Really appreciate you coming on. This was a lot of insightful options for brands to think about as they’re creating this, again, and Caitlin, we talk about this all the time, just creating the community, the buzz around the community to get and retain loyal customers. Allison Spalding.

Allison Spalding: Yeah. I always call it part science when you’re building these programs. So I think let’s keep that in mind if you feel inspired to do this, there’s definitely that science piece. But also get a little creative, have a little fun with that.

Brian Weinstein: That’s a good point. And you know what? I think that speaks volumes to the brand. I mean, it’s just that they’re out there. You’re giving it a try. And I was just about to sign us off what I’ll keep us on with this. It’s very interesting to see how, and I’m probably going to piss off a lot of people in brick and mortar retail, but that it just really became very sterile. And I go back to… My wife and I were junkies for The Marvelous Mrs. Maisel, and that department store experience when she goes walking in and there’s like this buzz and this feel and everybody felt special and really catered to, and that became less and less so in brick and mortar over the years. And then it just became very sterile and generic. And I think that’s also, forgetting convenience factor for a second, I think that’s also brought the rise of e-commerce, is where you do feel special. You feel community. You feel like you’re a part of something and that people actually care for you.

Allison Spalding: Exactly. I completely agree.

Brian Weinstein: Fantastic. Now we’ll take us out. Allison Spalding, really appreciate you coming on. I think this was great and very informative. Thanks for agreeing to be a guest from Inveterate.

Allison Spalding: Inveterate, yes. Close.

Brian Weinstein: Inveterate.

Allison Spalding: Yes.

Brian Weinstein: I was so close. I told you I was screwed up like 10 times, but I only screwed it up once.

Caitlin Postel: Awesome.

Allison Spalding: Brian, Caitlin, it was so great chatting with you. Really appreciate you bringing me on. And I can’t wait for our next conversation.

Brian Weinstein: Absolutely.

Caitlin Postel: Yeah, couldn’t agree more. And thank you so much, Allison. Thank you everyone for listening. Make sure you tune in every other Thursday on your favorite podcast platform and we’ll see you soon guys. Thank you.

Brian Weinstein: Thank you.

5 reasons to launch a paid loyalty program banner.

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