Source: Backcountry.com
Is good karma the newest customer reward?
By Adam Blair
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.
Several years ago, I heard a futurist predict that consumers by 2020 would begin monetizing themselves — “selling” their private information, their attention to a given marketing message, and the right to address personalized communications to them.
Now, four years ahead of schedule, some consumers are being rewarded for actions they take, but a difference is that they aren’t earning money but an incentive they can’t take to the bank: good karma.
Let me explain. A few weeks ago, I attended a web seminar about the highly successful referral program run by the outdoor gear e-tailer, Backcountry.com. Current customers are encouraged to become “advocates” with the altruistic call-to-action of “Give Your Friends $10.” If the friend accepts the discount, the advocate receives an e-mail adorned with “a cheerful image of people hugging on a rock in the middle of a lake,” said Marc Peterson, Organic Marketing Manager, Backcountry. The friend who was turned on to Backcountry.com receives one saying “[Adam] just gave you $10.”
Lest all this sound like hippie-dippy hogwash, the results speak for themselves. Backcountry.com boasts a referral index (the number of conversions per 100 advocates) of 42, well above the industry benchmark of 25. Since the program’s launch less than one year ago, nearly 34,000 customers have made at least one referral. “Influencers” and “Super Advocates” making multiple referrals also tend to be bigger spenders.
When you think about it, it makes sense. Facebook and other social networks have built multi-billion dollar businesses based on the non-monetary currencies of “likes” and “followers.” That’s feel-good social capital if not exactly karma, but it’s certainly not money in the traditional sense. And according to recent reporting, Facebook’s market value of $357 billion now outstrips that of Warren Buffett’s more traditional business conglomerate Berkshire Hathaway. (Now that’s real money.)
If there’s a lesson for other retailers, it would seem to be that not everyone can (or even wants to be) incentivized by money or a lower price. If you’re already lucky enough to have a customer base that feels positively about your brand, other rewards may be more meaningful than a few dollars.
Discussion Questions
Discussion questions: Do you see non-monetary incentives becoming central to retailers’ loyalty efforts in the years ahead? In what other ways might non-monetary incentives become more of an engagement tool?
Poll
BrainTrust
Paula Rosenblum
Co-founder, RSR Research
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
I’d see non-monetary incentives becoming a critical rather than a central element of successful loyalty programs. There’s always a market for ego gratification and social recognition, but the value of that market doesn’t necessarily surpass the value of access to special offers, deep discounts or other loyalty-based incentives. What these non-monetary incentives do is recognize the shopper first as an individual and then as an individual in their preferred social context — both powerful motivators and highly successful levers to employ in order to build engagement.
“Hippie-dippy hogwash.” That’s a good one, Adam.
One trait that has been pretty well documented among the Millennial generation, along with their interest in experiences over things, is their interest in doing good. TOMS shoes, Warby-Parker and others offer the option to give a pair free to a needy person for every pair you buy.
Translating that to “charity begins at home, we’ll give money to the person of your choice” is way cool as well.
The real lesson here is that good karma is good business. But then, you’ve just bumped into a certified old hippie who hopes that our legacy is a little bit broader than tie-dye t-shirts and the best music ever heard. 🙂
That was the late comedian, George Carlin: “Here is your hippie-dippy weatherman, with the hippy-dippy weather, man.”
This is a new spin on an old idea. Many retailers have offered loyalty program rewards donated to school groups or community programs for years. Now you can give that reward to your friends. This approach is one more arrow in the quiver of potential marketing tools. I do agree with Paula that good karma is generally good business; however, authenticity is key as Millennials tend to be especially sensitive.
I’m not sure how the examples given are “non-monetary,” but let’s let that go for the moment.
It may be because I have a meeting today about social capitalism and how we can help millions of kids all over the world actually have food to eat that I make these comments. So rather than “Adam just sent you $10” you get a note that you’ve provided lunch for six children today, which you can do for the same $10. Lest your mind goes to remote mud huts in Africa, 48.1 million Americans lived in “food insecure” households, including 15.3 million children. (“Food insecure” is the PC language for malnutrition if not starvation … right here in the USA.) If we’re going for karma … let’s go for KARMA!
Totally agree Ian, with the caveat that nobility doesn’t always sell well in a venal world. Recognition of self is sadly probably more powerful than good works today. That’s why there are so many people hitting that Facebook “Like” buttons and so few working to eradicate poverty or feed the hungry.
The non-monetary incentive is more likely triggered by an emotional connection by the customer. In the example in this article, the customer feels good about sending his friend a referral with a $10 discount connected to it. Contests with non-monetary (or merchandise) prizes play off a customer’s competitive nature, ego and sense of “just plain fun.” Brands who can emotionally connect with their customers have higher loyalty, higher dollars spent per transaction and more.
Retailers do have to find new ways to connect. Traditional loyalty programs (with the exception of those that are travel related) no longer move a customer from one place to another. Points are points, dollars are dollars and it is almost a thoughtless transaction.
This idea adds the element of thought and connection. That is important to any human being. But alas, if this concept is a success and is adopted industry wide, it too will go the way of Pokemon Go.
Not a “central” but an ‘integral’ part of a loyalty program, yes. The idea appeals to that portion of the customer base to whom doing good and feeling good about it is of import.
I think we’ll all agree that emotional connections with brands and retailers drives loyalty. Connecting and giving benefits to friends is a plus, whether monetary or not.
Rewards without value are the story of stone soup in which the villagers invite the soldiers for stone soup dinner. On realizing there was nothing but rocks in the boiling water, the soldiers contributed their own meat and vegetables. Stone soup as a reward is just the context of contribution. Sure it works for a short time, then the jig is up and that soup of being taken advantage of leaves a bad taste in the mouth. Opportunistic merchandising does not always make good branding.
Let’s not overplay this. Why is it that we have to turn every smart merchandising or customer move into a “big idea”?
This isn’t about Karma. It’s a classic way to build customer lists — a method that’s been used by direct marketers for a century or more.
In this execution, Backcountry has done a nice job of sending responsible emails to customers. Excellent work on their part.
But is an error to aggrandize this and claim it represents a massive trend toward consumers “monetizing themselves” or a trend in fundamental goodness. I’m reminded of all the “new consumer” mythology we’ve been pestered with. Here’s a blog post where I looked at it as a knock off of the “New Soviet Man” theory from the USSR.
There are lots of promotions for what reward a customer can get for referring a friend, which is just another version of the traditional referral sales tactic. Giving a reward to the person being referred is a new approach which is likely to appeal to those who want to do something for others — especially their friends. If successful, this is another indication of the growing importance of social capitalism.
Backcountry takes refer-a-friend to a new level. Most attention is focused on how they turn referral incentives upside down by rewarding only the receiver, not the giver.
Just as impressive are the scalable marketing tools provided to advocates. Givers can choose email, Facebook or Twitter for mass communication. A utility from CloudSponge enables advocates to import contacts from one of six top email and address book programs. The Facebook and Twitter tools provide even broader reach.
Hippy-dippy goes high-tech. Now you can beam karma to your contacts, friends and followers.
At this point, retailers have spent their way into parity in loyalty programs. Ultimately, to differentiate their brands, retailers must use content and commitment to succeed. Sharing “karma” opportunities with consumers is one approach, but ultimately to reach a large share of their highly profitable best customers, retailers will need to personalize communications and develop communications that fit the needs of these highly valuable customers.
DM 101. It’s a classic and proven testing strategy to compare the response of different offers, including “no offer.” Customer loyalty and relationship building no longer requires more or richer transactional rewards, but rather a better experience. There’s nothing loyalty-building about “$10 off” but if it’s from a friend it’s more meaningful and trades more — but not totally — on emotion.
More importantly, the margin per sale is at least $10 higher without an offer for the one making the referral, making the campaign that much more profitable.