ZING YOUR LOYALTY & REFERRAL PROGRAMS TOP 10 BENEFITS FROM LOYALTY REWARDS PROGRAM

ZING YOUR LOYALTY & REFERRAL PROGRAMS TOP 10 BENEFITS FROM LOYALTY REWARDS PROGRAM 102 Persian Drive Suite #101, Sunnyvale, CA 94089 +1 650-701-7759 www.zinrelo.com

CONTENTS 1. DRIVE REPEAT SALES...3 1.1 Suggested Strategies 1.1.1 360-degree Engagement with Users 1.1.2 Customer Winback Strategies 1.1.3 Habit Forming Strategies 1.2 Measuring Results 2. INCREASE AOV...5 2.1 Suggested Strategies 2.2 Measuring Results 3. LOWER CUSTOMER ACQUISITION COST...6 3.1 Suggested Strategies 3.1.1 Integrated Referral Program 3.1.2 Reward Loyalty Points for Marketplace Purchases 3.2 Measuring Results 4. IMPROVE STICKINESS AGAINST COMPETITION...9 4.1 Suggested Strategies 4.1.1 Integrated Referral Program 4.1.2 Reward Loyalty Points for Marketplace Purchases 4.2 Measuring Results 5. REDUCE DISCOUNTS TO CUSTOMERS... 10 5.1 Suggested Strategies 5.1.1 More Points for Products you want to Sell 5.1.2 Add these Products as Redemption Options 5.2 Measuring Results 6. INCREASE CONVERSION RATE...12 6.1 Suggested Strategies 6.2 Measuring Results 7. INFLUENCE PRODUCT SELECTION...13 7.1 Suggested Strategies 7.2 Measuring Results 8. BUILD RICH USER PROFILES...14 8.1 Measuring Strategies 8.1.1 More Points for Products you want to Sell 8.1.2 Add these Products as Redemption Options 8.2 Measuring Results 9. INCREASE USER GENERATED CONTENT...16 9.1 Suggested Strategies 9.2 Measuring Results 10. INCREASE SOCIAL PARTICIPATION AND CONTENT...18 10.1 Suggested Strategies 10.2 Measuring Results 1

ARE YOU PLANNING TO LAUNCH A LOYALTY REWARDS PROGRAM? ARE YOU UNSURE HOW TO JUSTIFY THE COST VS. BENEFITS OF A LOYALTY PROGRAM? This document describes the top 10 benefits that you can derive from your loyalty program. It also outlines strategies on how to achieve these benefits and how to measure success. This document can help you in justifying a loyalty program for your business. It will also assist you in setting objectives for a robust loyalty rewards program. Top 10 benefits from a loyalty program: 1. Drive repeat sales 6. Increase conversion rate 2. Increase AOV 7. Influence product selection 3. Lower customer acquisition cost 8. Build rich user profiles 4. Improve stickiness against competition 9. Increase User Generated Content 5. Reduce discounts to customers 10. Increase social participation & content 2

1. DRIVE REPEAT SALES This is the most important benefit of any loyalty program. The success of a loyalty program is measured by its ability to increase the frequency of purchases. 1.1 SUGGESTED STRATEGIES Here are some strategies to drive higher repeat sales. 1.1.1 360-degree Engagement with Users Keep users engaged continuously even when they are not making a purchase. The more they engage, the higher the brand retention and the higher the repeat sales. You can achieve this by rewarding users for not just purchases, but a variety of different activities. In the example below, Anna Scott engaged in 5 additional activities after the initial purchase which led to a second purchase within 20 days. These activities lead to frequent visits to the site and a reduction in time between purchases. Account Creation Share Reviews Social Media Activity Referral MODERN DAY LOYALTY PROGRAM Purchases Email Subscription Special Surprise Points CANDY STORE SWEET REWARDS Welcome Anna Scott! SWEET REWARDS ROOKIE Available Points 4270 Check Points Expiry ACTIVITY EARN POINTS SPEND POINTS Activity Points Status Date Made a $247 Purchase 2470 Approved 4 mins ago REPEAT PURCHASE Answered a question 100 Approved 15 mins ago Wrote a Review 150 Approved 7 days ago Uploaded a Photo 50 Approved 17 days ago CONTINUOUS ENGAGEMENT Referral Purchase by Friend 200 Approved 19 days ago Shared on Twitter 25 Approved 21 days ago Made a $127.50 Purchase 1275 Approved 21 days ago (Order ID: 57890) INITIAL PURCHASE Showing 7 of 7 << 1 >> Powered by Zinrelo 3

1.1.2 Customer Winback Strategies Identify customers who have gone dormant for more than your average repeat purchase duration. Give them a personalized offer. For example, if your average repeat purchase frequency is 4 months and the customer has not bought for 4 months, send an email offering them double the number of points on their next purchase if they buy within 15 days. This is a great way to reactivate dormant customers. 1.1.3 Habit Forming Strategies Getting a new customer to become a 3-peat customer is crucial to building customer loyalty. Research shows that buying 3 times from a business is a habit forming event. Failing to get them to 3-peat will create attrition. Give new customers a bonus reward after their third purchase within 3-6 months depending on your business vertical. 1.2 MEASURING RESULTS To measure the success of your repeat sales strategy, look at the number of customers and number of transactions for the 12 month period before launching your loyalty program. Compute Purchase Frequency using the following formula: Number of Transactions Purchase Frequency = Number of Customers Now monitor this number 6 months after you launch your loyalty program. A good loyalty program should give you an uplift in the repeat sales frequency. 4

2. INCREASE AVERAGE ORDER VALUE (AOV) Loyal customers not only buy more frequently, they also spend more money per transaction. Increasing the number of loyalty customers will therefore automatically increase your AOV as well. However, you can deploy additional strategies to improve AOV even further. 2.1 SUGGESTED STRATEGIES Configure your reward program so the users earn a cash discount for their next purchase if they spend a little more than AOV. Say your AOV is $45 and you are rewarding 10 points for every dollar spent. You can configure the reward program so users get $5 off their next purchase once they accrue 500 points. Now a user spending $45 will be tempted to spend $50 instead because they will feel that they will get the incremental $5 they are spending back in rewards! Of course, to use the rewards they will have to make another purchase. $5 OFF A Future order 500 POINTS $10 OFF A Future order 1000 POINTS Blossom Season T-Shirt (25 reviews) $15 OFF A Future order 1400 POINTS $20 OFF A Future order 1800 POINTS $41.30 USD $59.00 USD Earn 413 Reward Points This information should be shown clearly on product pages and also on the shopping cart page. Otherwise this strategy is not likely to be very effective. This is similar to the free shipping messaging used by many retailers You are only $20.80 away from earning free shipping on this order. 2.2 MEASURING RESULTS Best way to measure the impact of this strategy is to run an A/B test. Show the loyalty points information on the product and shopping cart pages for half your traffic and do not show it to the other half. Make sure that everything else including page load time etc. are constant for both options. Measure the AOV. You should see an increase in AOV. 5

3. LOWER CUSTOMER ACQUISITION COST Customer acquisition costs account for a large part of any marketing budget. While loyalty programs are focused on retaining existing customers, they can also enable you to acquire new customers at a low cost. 3.1 SUGGESTED STRATEGIES 3.1.1 Integrated Referral Program Word of mouth is the most effective customer acquisition channel. By creating an integrated referral program that allows customers to earn a lot of loyalty points for referring new customers is a great way to acquire new customers and to lower your customer acquisition cost. Creating loyal customers is crucial to the success of a referral program. Refer your friends. YOU EARN 2,000 REWARDS POINTS (=$20). Your friends get 30% OFF. AnnaScott@gmail.com Sarah.jane@gmail.com, dolz_galaxy@yahoo.com, Niel.conner@gmail.com, NathanCraig@rediffmail.com, AntonioPero@gmail.com Import Contacts I love this coffee and I know you will too. You can get 30% OFF on your first order. TERMS Powered by Zinrelo 6

Loyal customers are 2.5 times more likely to refer their friends and be social advocates for your brand or business. Average number of people referred to retailer since first purchase 8 6 4 2 3.1 5.4 7.1 0 First Purchase 4 or 5 Purchases 10 or more Purchases Source: Bain & Company/ Mainspring Online Retailing Survey (n=2116), December 1999 3.1.2 Reward Loyalty Points for Marketplace Purchases Many retailers sell their products via marketplaces such as Amazon and ebay. These marketplaces are a great but expensive channel. Furthermore, currently there is no way for retailers to acquire these users. FAST WORKOUT Thank you for your purchase of Premium Resistance Loop Bands by FAST WORKOUT! Scan your receipt and earn 10 points per dollar for every purchase of Fast Workout products. Go to: http://www.fastworkout.com/rewards If you need any assistance or have any questions please reach us at info@fastworkout.com 7

Rewarding loyalty points to users for their marketplace purchases is a great way to create a direct connection with them. Users can be notified about your loyalty program via product insertions, email notification etc. It is important to make sure that you remain compliant with the policies of the marketplace. 3.2 MEASURING RESULTS A good referral program should have built-in reporting to help you measure the results. You should be able to see the number of users participating in the referral program, number of clicks, sales, incremental revenue etc. For the marketplace strategy, you should have a separate landing page for marketplace shoppers to enroll in the loyalty program. These users should then be tagged as marketplace users. You can now measure the incremental sales from these users. 8

4. IMPROVE STICKINESS AGAINST COMPETITION It is easy to lose customers to competition. Strategies that improve user stickiness will avoid loss to competition, leading to higher margins. 4.1 SUGGESTED STRATEGIES Allow users to earn extra points for a competitive purchase. Survey the competition and offer a better rewards program to keep your customers. Look for signs that the user may be switching to competition lack of website visits, no purchases in the last 3 months etc. Create targeted strategies to win them back. Some examples are: Points for visiting website Points for opening or clicking email promotion Double points for next purchase 4.2 MEASURING RESULTS Track the number of users who participate in competitive switching program to earn points. Tag these users and track subsequent sales. These users are good measure of how sticky your offering is compared to the competition. Tag users that are identified as risky or dormant, run win-back strategies and measure the impact. 9

5. REDUCE DISCOUNTS TO CUSTOMERS Direct discounts to customers are a drain on your revenues. Additionally, discount-oriented customers often switch if competitor offers higher discounts. Use the strategies listed below to reduce the discounts to customers and increase your margins. 5.1 SUGGESTED STRATEGIES 5.1.1 More Points for Products you want to Sell Allow users to earn a higher points multiple for products you want to move. Choose a points multiplier such that the users will earn enough points to hit a reward tier. Rather than discounting the product by $20, you can discount the product by $10 and let them earn enough points to get $5 off their next purchase. It is likely to generate better results. $5 OFF A Future order 500 POINTS $15 OFF A Future order 1000 POINTS $10 OFF A Future order 1400 POINTS $20 OFF A Future order 1800 POINTS 20% on this product use code VACAY You are giving up $11 Earn Double Points - 1098 Reward Points You are only awarding $5 worth points which need to be spent back on your site! 10

5.1.2 Add these Products as Redemption Options Users will see a high perceived value and will use their points to get these products for free rather than using points to get gift cards or store credits. Say the product has a regular price of $30 and you were going to discount the product down to $10. You can give users the option to get a $15 store credit or get a $30 product for free for the same number of points! LOYALTY REWARDS Welcome Anna Scott! SILVER Available Points 4270 check points expiry ACTIVITY EARN POINTS SPEND POINTS $10 COUPON $28.00 VALUE 1000 Points 1000 Points Powered by Zinrelo 5.2 MEASURING RESULTS Create a baseline conversion rate using the regular discounting method (you may already have this data). Now simply offer a high points multiple for these products with a smaller discount. Compare the conversion rates. You may need to do a few experiments to find the right combination of discounting + more points. Simply count how many users are using these products as redemption options. 11

TOP 10 BENEFITS FROM YOUR LOYALTY REWARDS PROGRAM 6. INCREASE CONVERSION RATE A good loyalty program can help increase the conversion rate. 6.1 SUGGESTED STRATEGIES Show the number of points users will earn on product pages and shopping cart pages. That makes it very clear that you have a rewards program and it will increase the overall conversion rate. Earn 1,290 reward points for this purchase 6.2 MEASURING RESULTS Run an A/B test of product pages, one without the points mentioned and the other with the points mentioned. Figure out the uplift in conversion rate to estimate the overall impact on conversion. 12

7. INFLUENCE PRODUCT SELECTION You can influence product selection using the loyalty program. 7.1 SUGGESTED STRATEGIES If you want to encourage users to buy higher margin products or house branded prodcuts, you can offer a higher points multiplier for these products. Once again, the perceived value from earned points is higher than discounts that you may offer to customers. Discounts are often treated by customers as a birthright. Points are perceived as a value delivered to them. HOUSE BRAND HOUSE BRAND BenGay Pain Relieving Cream, Ultra Strength, Non-Greasy (4 oz.) 07430000536 4 oz. House Brand Pain Relief Cream With Lidocaine (2.7 oz.) 31191717918 2.7 oz. $7.99 $9.79 (59 reviews) $5.99 $6.99 (15 reviews) Get 80 Reward Points Get 180 Reward Points Offering more points for house brand will influence product selection 7.2 MEASURING RESULTS Measure the percentage of sales that are currently coming from higher margin products. This is your baseline. Then, deploy the strategy to influence product selection and measure it again after a few months. 13

Candy SF Gift 007335 $127.50 Bread 00345 $002.88 Eggs 00346 $003.50 SubTotal $133.88 Total $133.88 Visa Tend $133.88 TOP 10 BENEFITS FROM YOUR LOYALTY REWARDS PROGRAM 8. BUILD RICH USERS PROFILES User data is your biggest asset. Know more about your customers and build rich customer profiles. 8.1 MEASURING STRATEGIES 8.1.1 Points for Profile Complettion Allow users to earn points for profile completion such as uploading birthday, signing up for email news letter etc. You can also give them points for connecting their social profiles such as Facebook, Twitter, Instagram etc. This will help determine their name, birthday, age, gender, likes, interests, number of friends/followers (therefore social influence) etc. 8.1.2 Receipt Scanning This is a great strategy for brands that are selling products via retail channels. Allow users to earn loyalty points for purchases from retail channels by scanning their receipts. This will allow you to directly connect with these users and know who they are. Additionally, receipts will contain data about where they are buying your products, what else are they buying, are they buying any competitive products etc. This will give you an incredible insight into your customers. Grocery Store Annascott@gmail.com Candy SF Gift 007335 $127.50 Bread 00345 $002.88 Eggs 00346 $003.50 SubTotal $133.88 Total $133.88 Visa Tend $133.88 Receipt receipt@candystore.com Hi there, Please find my receipt for Candy Store. 3 Grocery Store Uploaded Send 14

8.2 MEASURING RESULTS Roll out this program and measure how many users are participating in profile completion, receipt scanning etc. If the numbers are too low, then you know that you need to promote it better. 15

9. INCREASE USER GENERATED CONTENT (UGC) User-generated content is a critical component of driving organic traffic to your website. The loyalty program can help you increase UGC. 9.1 SUGGESTED STRATEGIES There are three types of UGC content that is most common on websites reviews, customer Q&A and customer photos. You can reward customers with loyalty points for all of these actions. Make sure to take steps to prevent fraud e.g. allow users to earn points only once a day or 3 times a week so they don t abuse the program by uploading 50 photos in one day! Of course you should have a good idea of how much each piece of UGC content is worth on an average. E.g. just three reviews can typically increase your product conversion rate by up to 2%. As a rule of thumb, a good review is worth about 2.5% of your AOV. Once you have a good estimate of how much a UGC is worth, you can then calculate the maximum number of points you can award. Make sure that you promote it clearly. E.g. say earn 100 points for writing a review in the review section of the product page. 16

9.2 MEASURING RESULTS Measure the rate of UGC creation for various categories. This is your current baseline. Roll out the program and then measure it again in a few months. You should also experiment with adjusting the number of points to see the cause and effect. E.g. increase the number of points for writing reviews to 150 from 100 for two months and measure the impact. After a few experiments you should be able to figure out the optimal number of points for each piece of UGC content. 17

10. INCREASE SOCIAL PARTICIPATION & CONTENT Any good business has more happy customers than unhappy ones. Yet the voice of the unhappy customers always seems to dominate social media. This is simply due to human nature. A happy customer may talk to 2 or 3 friends. An unhappy customer is likely to talk to 30 or in the world of social media, 300 or even 3,000. Fortunately a loyalty program can help tilt the balance in your favor. 10.1 SUGGESTED STRATEGIES Give users loyalty points for social sharing and social advocacy. Note that timing is critical here. You need to engage customers at the points where they are most likely to talk positively about you. For example, users will share immediately after they make a purchase or receive the product. 10.2 MEASURING RESULTS You can simply measure the number of users participating in social sharing. For a more sophisticated measurement, use a social sentiment analysis tool. Create a baseline of social sentiment and then see how it changes. This article describes the benefits you can derive from a well-designed loyalty program. Use it to do a cost vs. benefit analysis of a loyalty program. You can also use Zinrelo Value Calculator (www.zinrelo.com/loyalty-value-calculator) to estimate the ROI that you can get from a loyalty program. 18

ZING YOUR LOYALTY & REFERRAL PROGRAMS Zinrelo brings you the world s best loyalty rewards and referral programs, helping to maximize revenue per customer and new customer acquisition through 360-degree customer engagement. It supports omni-channel interactions including desktop web, mobile web, mobile apps and in-store engagements. Zinrelo loyalty rewards program boosts per-customer revenue by 2.4 times and repeat purchases by 80%. It creates fiercely loyal customers that are rewarded for all forms of engagements including purchases, social advocacy, reviews, sign-ups, referrals, photo sharing and more. It is fully customizable and is easy to deploy. Zinrelo referral program delivers up to 25% uplift in new customer acquisition by converting your customers into brand ambassadors. To zing your loyalty and referral programs contact Zinrelo. zinrelo.com info@zinrelo.com +1 650 701 7759 102 Persian Drive Suite #101, Sunnyvale, CA 94089