The Loyalty Podcast
Podcast 64 - Making the case for loyalty in the boardroom.
(upbeat music) - Had we had the board challenged us and said you have to pay back in X time, it would have been a very different program, which would not have resonated with our guests. (upbeat music) The rewards program drives X incremental revenue per year, per quarter, per month, per week, whatever. But when you look at the total value of that asset and the value of your members, over your non-members, you know, oftentimes it's three, four, five times what the non-member base is. (upbeat music) - Hi, I'm Ian Pringle. This is the Lawty Podcast from Lawty Wired. What we help you make the most of your lawty strategies while listening to us talk about what we like to talk about most, which is Lawty and Lawty programs. This year alone, we've seen the launch of a number of new lawty programs, particularly the Food and Beverage sector. Research by Mando Connect recently showed that from 2022 to 2023, it was 32% rise in the number of customers taking part in restaurant and coffee shop programs in the UK alone. So how do you make the case for Lawty in the boardroom and how do you make it stick? Joining me to explore this fascinating question are two experts who both have experience of making the case for Lawty at the highest levels. So please could I welcome Amy Barnett, VP of Lawty at Cracker Barrel from St. Louis. Hi, Amy. - Hi, Ian. Hi, Jay. Nice to be with you both. - Fantastic. And Jay Weinberg from Ascended Lawty, calling him from Chicago. Hi, Jay. - Hi, Ian. Hi, Amy. So just to get us started tonight, could we talk about your experience in this matter? So, Jay, you've done this many times. So would you like to talk us through how you've approached this in the past? - Sure. I work with the Ascended Lawty Marketing and we're an agency that focuses specifically on loyalty marketing programs in a variety of industries. So I have designed and developed many programs and of course, each of those programs needs to get approval and funding. And I think a few things that come to mind when it comes to what's worked and what we've done in the marketplaces. First is we really need to show that the medicine fits the ailment. And the fact that the ailment is not an aspirin level, but more of a morphine level ailment. And that loyalty marketing is what can solve this issue. Because not every problem is ideally solved with a loyalty program. You know, because we are in that space and it's a very specialized space, we tend to feel like we're a hammer and we look at every issue as a nail. And that's just simply not the case. A structured loyalty program has its place. And if we can prove that, if we can show that this is the right kind of a solution and that we've explored other solutions, then we have a much better chance and we've shown success in the board room. Because remember, people in the board room aren't loyalty marketing people. In fact, most of them aren't even marketing people. So we really need to show that we have the right solution for this issue. It's defining the issue and then defining the solution. That's one way that I've found that's really worked. - No, interesting. And Amy, what about your experience? - Well, so nice to be with you today. So I'm with Cracker Barrel, old country store. We like to be known as and I have the pleasure of working with them for the last couple of years and we recently launched a rewards initiative in this space. And one of the most important factors was that we're a hospitality company at our core. We're all about pleasing people and taking care of our employees and our customers. And first and foremost, we just had a lot of feedback from our guests and we just felt that the rewards program was a natural extension of extending core hospitality and really responding to what the guests really needed and wanted. So when we talked about selling it in at the board level, we did a lot of consumer listening, a lot of guest listening. And of course, backed in the financials, as Jay mentioned, we did a lot of work on traffic in the industry, what's happening with our core guests, we showed them the value of retention and then pulled it together with a customer facing statement that just really made, really resonated and made a lot of sense for us. - And did the initiative for that particular program come from the board or did it come from elsewhere? - I would say, first of all, the relationship we have with our board is very, very strong. And Cracker Barrel had been on the venture of thinking about retaining guests for a while. How to bring our guests back more frequently, how do we make them happier? How do we give them a better experience? So we have been on a roadmap of sort of pursuing that venture for a while with the board. This was just the next natural evolution. So a lot of it was driven by internal analysis and internal research, but it had been on the roadmap for several years. - And was there a natural alternative to loyalty? I mean, Jay mentioned it before, where it was the right solution for the right problem, but what was the alternative that was considered at the same time? - Yeah, so what's interesting about our brand in particular is that we, without calling it everyday low value, we pride ourselves in providing a delicious, full, hot plate of food at a very reasonable price. So we, historically in our brand, have not been a promotional brand. And so we took it to heart when we said that we're gonna offer rewards or complimentary meals for our more loyal guests. It really took some talking about providing a value statement in a way that the brand had never done before. So to us, this was an extension of hospitality, but it was a, I'll call it a discount because it is a discount. It's a discount focused on driving additional traffic in a very profitable way, meaning rather than providing a discount or a price break to every guest who comes into our front doors, we're rewarding our more valuable customers with a reward and extension of hospitality. So there were some alternatives, but nothing terribly appealing for our particular industry and vertical. Our profit margins are lower, I think perhaps than other verticals. So we really needed to be very strategic on who we offered our highest value and our exclusive access to. - Thank you very much. And in building a case, what do you think worked best? I mean, Jay, again, you've had experience of these. So what do you think of the key elements that you see work when you're trying to talk to the board? - Yeah, that's a good one Ian and I'd actually like to challenge Amy to understand how she got through this. And I'll explain it here is what we have to do and what we've shown success is really clearly showing the value in a very believable way. Again, these are not marketing people for the most part. You have a lot of good finance folks there. And that's where a solid financial model comes in. One of the issues that we have when developing most of these programs is the ability to show the return on investment and the true incremental value of the program. That's often a challenge just based on the nature of these programs. So what we've done is looked at it in a number of different ways. Now, obviously, when we're looking at it financially, we need to think about what would happen with the program and what would happen without the program if we could show that. I'm gonna give you a really good example that happened recently with a board presentation and actually before the presentation, but the challenge that we represented is these folks, they understand the conundrum that we're often in in loyalty. And the direction we got was don't assume certain amount of lift that you're going to get from the program. I want you to show me what it takes to overcome the cost of this program and provide a break even point or an ROI. You just show me that number or that set of numbers, and then I will tell you whether that's believable or not. And I thought that was a really interesting approach to it. So we basically showed them, well, if you can get a lift in, we look at lift in response or I should say lift in frequency, a lift in average sale, the take rate of the program, the redemption rate of rewards, things like that. And if we can show a very reasonable incremental lift in those like single digit percentages, for example, in many of them, in terms of lift, then we create what the board thinks is a very believable case. And that was, I think one really interesting way to do it. - Yeah, I think, I've got some experience. I mean, I didn't talk about my experience on this. So again, we're all to consultancy that advise on all sorts of different verticals. And I mean, I've again launched many loyalty programs and made the case. And probably the most difficult one being with BP and South Africa, we launched a brand new program where we didn't just have to convince the local board that we did, we're going to do it. We had to convince the international board and both of them had to be convinced that both of them had different foibles about the same issue. But I would, I would share the case with you, Jeremy. It's really interesting because I've, you must have been both being the same situation before where you either have the, you've got two choices here. You can either create a massive model with many, many, many assumptions in it to have the growth, to show what the potential growth is. But I think I like your perception there, Jay, where you're saying, or you can focus on the key thing that they need to understand to sign this off to make it work. Because if that's a believable number, who needs to worry too much about the assumption that got there to prove the case exactly? Is that what you're saying, Jay? - Yeah, for the most part, it is. It's more about, don't try and prove to me that the numbers you're giving me in Lyft are real because I know that they're not. I know that they're assumptions. So just tell me what it takes in order for this program to either break even or give me the return on investment I need. And I will make the decision as to whether that is viable or not. - And Dave, you're nodding your head here as well. So was that the case with you particularly? - Absolutely. We called it our believability scale. We did work backwards into the, you know, sort of what would it take to break even and start showing positive return. Very, very effective. And I will say, Ian, in response to your comment about sort of all the variables, we did many exercises where you have the very, very complicated models. And what I found is that's very effective internally to gain internal alignment. And but ultimately when it went to the board, it was a much simplified version. But the benefit of that is that we got a lot of collaboration and a lot of teamwork going into this. So there was no, you know, question sort of internally among the E team anymore. But yes, we did a break even and it's so hard to show direct attribution in these models as well. As you said, you know, sort of, they're all assumptions at this point. And so we worked backwards into a break even and cost analysis as well. - The other one I'd like to add to this is I often use personality types or try to explain personality types to the board. Because one thing that I found with board members, 'cause there's often only a small number of people there and they often bring personal views, 'cause you're right, Jay, they're not deep, they're not deep loyalty professionals. They don't have a deep understanding of it. But they'll bring a personal view on loyalty to the board. Especially people from finance will bring their, a very literal thinking to the discussion. And what I try to get across to board members is that we're not trying to convince people that are necessary, that customers don't necessarily perform in a completely sane way. You know, they, you see unusual behaviors within the customer base and they need to understand that we're not trying to convince everyone about it and that their personal traits might not be the people we're targeting. - Yes, and I'm fortunate that our board actually has several members who have managed or launched a run loyalty program. So they did come in, but you're right. Not every customer is going to respond in the same way, right? It's not a one for all. And nor should loyalty try to appeal for everyone in your base. We ran through an exercise as well, which was very helpful is we ran through a competitive review in our space and our board members or board members typically aren't, you know, avid users of rewards, I would say. They're observers, casual observers, primarily. And so we went through an industry review and did a best in class, you know, and sort of what we modeled ourselves after and who we believed was doing a fantastic job. So in addition, and there was a lot of socializing, right? Prior to ever getting to the board room and having a financial review, there was socializing along the way. And we brought them along that knowledge curve and that knowledge base, the whole way through, from consumer feedback to financial modeling to the design of the program to the research and then ultimately how we launched it to our guests. - Yeah, I want to add to that a little bit Ian and Amy. And I think that it's almost a pet peeve of mine and something I try not to do, which is to present my personal viewpoint on specific things in loyalty. Because, and what I see very often in a leadership team in the board meetings is somebody will say, well, I wouldn't do that or I wouldn't do that or I would do it a certain way, which is fine. However, that's a focus group of one. And that doesn't mean that you can extrapolate the way you would behave over the customer that we're trying to reach. And that's a very dangerous thing because, you know, how do you argue with somebody who says, well, I wouldn't do it, I wouldn't do that, I would never do that. And in many cases, they actually would, you know, because people who say they would never be influenced by a loyalty program, when in fact, we all are influenced by loyalty programs in some way or another. So that's been a challenge at times when somebody does that, how to overcome that. You have to be very, you have to dance very carefully around that issue. - No, but I think if I could summarize what you're saying there is honesty absolutely has to be there. You know, you have to also be very honest and very open with them. And it can't be a case, you know, it can't be just a case for the prosecution or the case for the defense. It has to be balanced on both sides because they can see straight through that. - Yeah, true. And, you know, my point too is that one person, any person is not the example. You know, the example should be what most people think and how most people would react, not how you would react as a consumer. - No, and the way I cover that off is when we approach it is we say, there's these types of customers out there, there's customers A, customer B, customer C, because if they can put themselves into that box, then that's good thing, because they can see, I'm that type of customer. And then if we then explain to them, we're not trying to target, we're not expecting a big uplift from these types of customers, they can suddenly say, "Ah, right, I get that." So I can't bring my own personal views on this because I can understand that I'm not the target market. Yeah, that's a good way to stave it off. - So are there any things that you've worked with, I tried that don't work, that you'd say, don't try this? You know, that you've tried it. And, Amy, you mentioned before, I mean, I was, is the complicated model. You need it, but you don't want to take it to the boardroom. Is that what you're saying? - That's right. Jay and I have worked together in the past and it's right. You need to work through some of those data exercises in many ways to create sort of your high, medium, low scenarios and ultimately your sensitivity analysis. But as each level of leadership, you know, progressives, focusing on your three main points and, you know, honing into your audience as well. As you said, Ian, finance is gonna look for something one way, marketing is gonna look for something another way. Ops brings in a whole new perspective on what they want to see in terms of lift and metrics. So yeah, definitely tailor your message to your audience. And as you progress and gain buy-in and agreement on those assumptions, level it up, summarize it and take it to your next, take it to your next audience. - Yeah, I think, you know, one of the things that I found to be an issue when we've kind of had issues with getting funding is there's two things that I try to tell any client when we first start out. One is you have to have patience. This is not a program where you just send out an offer and you read response in the next two weeks. This is something, the nature of the loyalty program is all about patience. And secondly, this is not a set it and forget it kind of a program. This is something that needs nurturing, that needs weeding, that just needs attention, that needs pivoting in certain aspects. This is something that, you know, you have to, it's a major program. You have to provide attention to this program. So when we've brought programs to the board or to the leadership council against, sometimes against our better judgment that has restrictions based on that. So for example, we brought one recently where they really needed to have, they didn't want any kind of a hit on EBITDA. So this is a program that had to pay out, break even within the first three months. Now, you know, that is a big challenge if you're doing a program like this. And the board can really, you know, they can see right through that. It's something that, you know, how do you create a program that's so watered down that doesn't have that much value that you can actually overcome the expenses to bring the program to life and then to manage the program for a simple three month period. And that's something that's really failed miserably is when you try and stick a program that just doesn't have any kind of resonating value with the customer because it has to pay out so fast. That's a challenge. - So I was gonna add something to you. I think that's a fantastic point of view. I'm gonna add to that though. I think the other challenge that as loyalty marketers and brand leaders that we run into oftentimes is that to make that three month mark, you cut back, right? You prioritize on aspects of the program that make it special. And especially for our guest at Cracker Barrel, Cracker Barrel is an experience. It's in a very experiential program. And had we had the board challenged us and said you have to pay back in X time, it would have been a very different program which would not have resonated with our guests. We really took the time upfront to make sure that we designed a program that had sort of that emotional appeal that was brand right for us and built in the operational timeline to get it right. And on the other side of that, the timeline to read it appropriately. So I do agree with that, Jay. I would just say be patient on the read, but also be patient on the sell-in and be patient as you work that negotiation to make sure that you're not carving off too much of the key benefit that's right for your brand. - On the patients, I've definitely had experience of that because if you sell into the board that you're going to, this is what's gonna happen and we're gonna launch this program. The first thing we want to do on day one is measure ROI and we're just saying, "Whoa, whoa, whoa, whoa, whoa, whoa." It's gonna take a while for you to measure that. The second thing is, Jay, when you were talking about the investment, we often focus on the P&L and loyalty, but actually the cash flow is really, really important because finance have to know how deep the Jay curve is going to be and be prepared for that and also be prepared to go deeper if it's really successful because that can often come and bite you soon after launch, if it's phenomenally successful. I've seen that several times where the take-up has been higher than you expected, which means the investment's going to be more than you expected, which means finance get very, very worried about that quite quickly. - Yeah, that's why we try and partner with finance very quickly in the process because one of the concepts on loyalty, especially, mainly if it's a rewards program and you're providing some kind of a value certificate is liability and most businesses haven't really had experience with liability and when they realize that you actually have to account for value that's potentially going to come in later that's in the marketplace, especially here in the US that you have to account for that in full, that is a big challenge and often a difficult issue to overcome. We've seen that derail many a program. - I would add, you reminded me of something, Jay, that I think has worked for me in the past is bring in the experts, bring in the folks. Often it's a third party which is yourselves, Ian and Jay, but bring in the experts. What I have found working with several folks on my finance peers, as well as even my marketing peers, they don't come with that really deep background in that knowledge. So do it well, do it right, either hire internally those experts or bring in the experts externally. And not only does it neutralize the, well, I think this and I think this, it actually, you bring in a lot of best practices that you've seen for years and years and years for how to do this. And I know that you won't be held to accounting necessarily, but bringing in that objective and best practice point of view was incredibly valuable to me, very valuable. - I'll give you a really good example of that. I was reminded of it when Jay was talking actually, where I worked for a utility company that was part of a loyalty program. And within the argument to launch this loyalty program, we came up with the core assumption that Jay was talking about before and the utility program is the churn differential. So the argument being that customers who are on the loyalty program will churn less than customers who are not on the loyalty program. And that was a core underlying assumption within the business model. Now, we should have brought in experts, Amy, because that core KPI proved to be incredibly complicated and incredibly complicated. Because in day one, we launched and the churn differential in the first month was 90%. So the customers that were on the loyalty program were churning at 90% less, the customers not on the loyalty program. Month two, it got less, month three, it got less, month four, it got less, it got less, it got less, it got less, it got less, until it started to become negative where customers on the loyalty program would churn at a greater rate than customers that weren't on their loyalty program. And if we brought in experts at the time, but we should have known that the greatest loyalty program ever invented is inertia, where customers who are existing customers in a loyalty program don't leave. And yet they're not the people that were joining up to the loyalty program, because what we'd really done is turned on, is really attracted or attracted customers that actually read media and read. And we didn't make that assumption. So actually, we started off with a very poor assumption of the business model, and we had to change that later, which looks a bit embarrassing to the board. (laughs) But if we were loyalty experts, we would have known that, because we would have seen that in other things. Does that make sense? - It does. You know, the other best practice that I think a third-party partner can bring, is how do you appropriately set up a test? How do you set up, whether it's a geo-based test, or it's test versus control, or it's some sort of, how are you actually, what are you measuring against? And I'll give you an example. Early in my career, we had a team who is responsible for setting up how you read the program, right? And it was an internally-based team with not a lot of experience, and they selected inaccurate test markets, right, and did not match our control markets. On another example, the control wasn't sizable enough, so then the year's worth of rewards program that we had just launched wasn't capable of being read. That doesn't work in every business. Not every business should launch in a test and control mindset, but there are several examples in my career that we have. But I think had we brought in some experts, I think they quickly would have identified, hey, these geos aren't equitable, or your testing controls aren't looking similar and key characteristics. So that is something that a third-party expert would be very helpful in. - Yeah, you can't start measuring later, especially things like fallow sale, creating those things, or having, you're absolutely right. I've seen that many times. So just to close tonight, if we're going to give three tips to others who are thinking about making a case for loyalty, what would those three tips be? - I'll start, and this is not so much a sort of P&L, financial, perform a review, but I would just say that the value of loyalty goes far beyond the P&L, particularly in brands and industries that lack insight to their own consumer data or their own guest behaviors. And I call it capital L versus little L, little L being the rewards program, capital L, meaning the full set of benefits that the rewards and the CRM and the data acquisition and the behavior modeling actually brings the entire organization. So don't underestimate the value. Yes, we all have to do the P&L. We've got to show a return. It has to be profitable revenue, but the insights, the ability to target consumers, the ability to build a database that has true value, actually, there's true equitable assignable value to a guest asset, as you know. And the value it'll bring across all of your partners in the organization. So don't underestimate that value, particularly when you're selling into the board. - And when you say don't underestimate, did you actually put a financial value on that? - You can, and I have in my prior, no, I didn't need to. I was fortunate enough to know that my stakeholders knew the value. They understood it, they can conceptualize it, but I have been in other scenarios. In fact, I think Jay helped me with this once upon a time that we did value our asset, our database as an asset. And I love to use this term, I won't reveal the brand, but we valued it as a billion dollar asset. That really does have monetary implications for a brand that's thinking about the value of a rewards program. The rewards program drives X incremental revenue per year, per quarter, per month, per week, whatever. But when you look at the total value of that asset and the value of your members, over your non-members, oftentimes it's three, four, five times what the non-member base is. So when you're thinking about prioritizing resources, prioritizing strategic initiatives, focusing on that higher value basis is critical. - One thing I would counter on that though, Amy, is I'm always very careful when it comes to comparing members versus non-members. There is that selection bias in there that provides, we don't know whether somewhere between 0% and 100% of that difference is truly incremental. And it's really a challenge to figure out how much that really is. - It gets back to that believability scale, right? So you sort of have to look at the two measures together, not anyone in isolation. - Right. And there's also the other ones you mentioned today, which is keep it simple, make it personal, have the finance team on side, 100%. They have to understand the detail, but the board need not understand that. Get everyone on side and keep it honest. Have patience. - Have patience. - Yes. I have one tip though that's a little less financial than some of the ones a little less tangible. And that's that the program needs to have a wow factor to it. So many of these programs have become me too. There's been, there's so ubiquitous out there that most things have been tried and attempted. And if you, if you can have something that really has a wow factor to your program, obviously they have to have solid financials and commercials. But something unique that you can point to that really provides, you know, something that's going to draw attention, that's going to provide additional value. Even if it's just a small benefit that could go viral among your customer base, I think there should be something in there that's really unique and the board and the leadership team would just say, wow, that's really great. - It's what Rory Southern calls psychologic. And I think he's absolutely right about that. Is we keep forgetting that if you, you can't create law to programs in finance, you need to create, creating law to programs is as much art as it is science because ultimately we're human beings. We still need to be entertained and we still need to make it. I love that wow factor, Jay, it's brilliant. - Speaking of wow factor, I'm going to build on that just for a moment. When you launch a program or you relaunch a program or you're trying to get the attention of the consumer, do something big, make it, make it a brand priority, make sure your guests know that the programs that fail are the programs that sort of quietly launch something in it's sort of a digital CRM play, but the brand really hasn't invested and gotten behind it. So look at your TV spots, look at your paid media, look at your out of home messaging, in addition to all of your digital channels that will make it highly profitable. But for example, when we recently launched Cracker Barrel Rewards, we partnered with the one and only Dolly Parton. And Dolly Parton was the wow factor in our program and it really stood up and got everybody to say, wow, Cracker Barrel's done this, they've done something different. And not only did it give Cracker Barrel Rewards much more brand equity, but it drove traffic for several months for us. So when you're building the model, build in the investment to do it right at launch. - And on those really wise words, it just leaves me to say thank you to our panelists today. So thank you very much, Amy Barnett. Thank you for joining us. - Thank you, Ian. - And thank you. - And thank you, Jane Weinberg for joining us. - Thanks Ian and Amy, this has been really fun. - And if you like the podcast, please like, share a comment on social media using the hashtag the loyalty podcast and we'll look forward to your company again soon. Thank you and goodbye. (upbeat music) (upbeat music) (upbeat music) [BLANK_AUDIO]