Reward Program Case Study June 2014
Reward Program Landscape
Reward Use is Growing Rapidly It is estimated there are over 3 Billion reward memberships in the US today Not just consumers; business owners are among the biggest users Program use is growing at over 11% per year Any type of company can benefit from a competent reward program Selling more to existing customers is easier than getting new customers Customer attrition is a big issue for tire & auto service Infrequent purchase cycle, grudge purchases lead to abandonment Reward earners far less likely to abandon vendor who offers rewards 3
Say Thank you to customers Reward them for being loyal Reward Program Uses Increase share of a customer s category spending Most use multiple vendors; will direct up to 40% more to reward provider Increase the average transaction size, total spend Volume-based offers encourage more purchasing Promote certain products/brands Vendor-funded offers help customers focus on certain items Reduce discounting The cost of a reward is typically far less & offers opportunity to grow Bottom Line: To increase sales & profit A Reward Program is A Profit Center, not a Cost 4
Lift & Shift Overview
Lift & Shift North American loyalty marketing specialists Provide counsel & development for turn-key loyalty solutions Merchant acquisition & management for established loyalty programs: Own and operate Gift Card Points Develop and manage private-label reward currencies for clients e.g. ABC Tire Points 6
Lift & Shift - Extensive Merchant Support Brand use & approvals Reward Issuance Tools Account Rep Program Reporting Staff Training Client Email Platform Program Signage
Automotive Client Experience 8
Popular Reward Programs Using existing reward programs to attract & retain customers works well Airline & hotel programs are popular over 120 million users Gift Card Points Most popular program in our mix and #1 in volume Most of your customers/prospects use/will use these programs 45% of people participate in 4 or more programs Business owners also index high in the use of these programs = commercial opportunity Program use is growing rapidly (11% per year) Many customers like earning a reward currency they already collect 9
Reward Program Case Study
Twin Tire operates 3 retail locations in the New Orleans area Background Conducts regular local market advertising, postal drops, email blasts Launched the Lift & Shift reward program in July 2013 Program data analysis covers the period July 1/13 - April 27/14 Analysis compares: Prior customers who began earning rewards to new customers who earned rewards from day 1 Reward-earning customers (prior and new) to non-reward customers Transactional behavior for customers 10 months pre & post program launch Analysis includes: Over 2,100 reward transactions post program launch Approximately 1450 transactions made pre-launch by people who have collected rewards Over 27,000 non-reward transactions (pre & post program launch) Comparing reward earners with non-reward earners acts as filter Helps ensure reward-earner activity changes are attributed to the program, not variable like weather, factory incentives, market conditions, etc. 11
The Data Reward Earners 766 unique customers: 424 pre-existing; 342 new 1447 pre-program transactions 2,105 post-launch transactions Over $600,000 of reward-related sales Non-Reward Earners Over 5,700 unique customers Almost 13,000 pre-program transactions Almost 15,000 post-launch transactions Over $8,500,000 of non-reward-related sales 12
Data Analysis All Stores Combined
Average Transaction Size Per Customer Average Transaction Size 10 months pre 10 months post 9 months pre 9 months post $362.38 $324.94 $294.37 +14% +23% +41% -0.2% -9.4% $254.28 $258.73 +2.9% $0.00 Non-Reward Earners Prior Customers Who Started Earning Rewards New Customer Who Earned Rewards From Start New customers who earn rewards spend 41% more than existing customers who began earning rewards and 23% more than non-reward customers. This suggests they come into Twin Tire with a specific (i.e. large) purchase in mind. Non-reward earners reduced avg. transaction size by 9.4% while existing customers who earned rewards increased slightly (2.9%) a difference of 12.3% 14
$739.36 $673.49 Total Spend per Customer +43% 10 months pre 10 months post 9 mos pre 9 mos post Total Spend Per Customer +38% $964.13 $867.80 +11.1% +38% -8.9% $556.28 $0.00 Non-Reward Earners Prior Customers Who Started Earning Rewards New Customer Who Earned Rewards From Start Existing customers who began earning rewards increased total spending by 11.1% vs. a 8.9% drop in spending by non-reward customers over the same period - a difference of 20% - and their total spend was 43% greater 15
Reward Earners: Prior vs. New Customers Reward Earners Prior Customers New Customers 45% 55% Not all new customers who earned rewards came in purely for the reward program but certainly some did; ideally, you d measure this 16
Reward Earners % of Total Customers Program Penetration of Sales ## of of non-reward Customers 10-9 months post-launch # of of Reward Customers - 109 months Months post-launch 11% 555 89% Minimum penetration goal for a loyalty program is 30% after 12-18 months; in this way, the program can truly have an impact on an appreciable amount of your business 17
Observations Converting customers to reward program participants makes a lot of sense The average reward earner begins to become far more valuable Total $ spent for the 10 month post-period exceeded the pre-launch period by 11% Existing customers who began earning rewards spent 43% more than non-reward earners Average transaction size for existing customers earning rewards increased by 2.9% while it decreased by 9.4% for non reward customers Reward earners don t get more expensive discounts Regular use of bonus offers is a good way to attract new, hi-value customers They tend to come in first time for big purchases Avg. transaction is 23% larger than non-reward customers, 41% more than existing customers who began earning rewards Be sure to use bonus offers in all marketing, especially broad-based tactics Getting new customers to become repeat customers is key Be sure to communicate monthly bonus offers Use dedicated reward program email address e.g. Rewards@TwinTire.com Reward program members must provide email and open rates are 3X higher Using the program to try and re-activate lost/inactive customers is a possible tactic 18
Data Analysis By Store
Average Transaction Size Per Customer 910 months pre 910 months post 10 9 months pre pre 10 9 months post $324.94 $294.37 +2% -9.4% +23% $254.28 $258.73 +1.8% +40% $362.38 $269.49 $244.83-9.2% +13% +31% $209.29 $202.19 +4% -3.3% +60% $320.57 $0.00 $0.00 Non-Reward Earners Prior Customers Who Started Earning Rewards New Customer Who Earned Rewards From Start Non-Reward Earners Prior Customers Who Started Earning Rewards New Customer Who Earned Rewards From Start All Stores - Average Hammond 10 9 months pre pre 10 9 months post 10 9 months pre pre 10 9 months post $386.06 $350.43-9.2% -4% +11% $388.00 +52% $315.47 $306.75 $320.23 $286.43 $292.27 $260.74-2.7% +10% +30% -9% +26% -5% +24% $397.20 $0.00 $0.00 Non-Reward Earners Prior Customers Who Started Earning Rewards Harvey New Customer Who Earned Rewards From Start Non-Reward Earners Prior Customers Who Started Earning Rewards Marrero New Customer Who Earned Rewards From Start 20
Total Spend Per Customer 109 months mos pre 9 10 mos months post post 10 months 9 mos pre pre 10 9 mos months post post $729.57 $738.84 +2% $739.36 $673.49-8.9% $964.13 $867.80 +11% $556.28 $539.89 $509.02-5.7% +13% +1.2% +4% $468.36 $0.00 $0.00 Non-Reward Earners Prior Customers Who Started Earning Rewards New Customer Who Earned Rewards From Start Non-Reward Earners Prior Customers Who Started Earning Rewards New Customer Who Earned Rewards From Start All Stores - Average Hammond 10 months 9 mos pre 910 mos months post post 10 months 9 mos pre pre 109 months mos post $1,212.58 $1,043.34-14% -4% $1,244.24 $1,059.85 +17% $528.24 $490.80 $465.69-5% $1,156.54 $971.02 +19% +30% $707.40-5.1% $0.00 $0.00 Non-Reward Earners Prior Customers Who Started Earning Rewards Harvey New Customer Who Earned Rewards From Start Non-Reward Earners Prior Customers Who Started Earning Rewards Marrero New Customer Who Earned Rewards From Start 21
Reward Earners: Prior vs. New Customers Prior Customers New Customers Prior Customers New Customers +2% 45% +13% 42% +4% 55% 58% All Stores - Average Hammond Prior Customers New Customers Prior Customers New Customers -4% 48% 52% -5% 46% +30% 54% Harvey Marrero 22
Reward Earners % of Total Customers # of non-reward Customers - 9 months post-launch # of non-reward Customers 10 months post-launch # of Reward Customers - 9 Months post-launch # of Reward Customers 10 months post-launch +2% 11% # of non-reward Customers - 9 months post-launch # of non-reward Customers 10 months post-launch # of Reward Customers - 9 Months post-launch # of Reward Customers 10 months post-launch 14% +4% +13% 89% 86% All Stores - Average Hammond # of non-reward Customers - 9 months post-launch # of non-reward Customers 10 months post-launch # of Reward Customers - 9 Months post-launch # of Reward Customers 10 months post-launch 7% -4% # of non-reward Customers - 9 months post-launch # of non-reward Customers 10 months post-launch # of Reward Customers - 9 Months post-launch # of Reward Customers 10 months post-launch 10% +30% -5% 93% 90% Harvey Marrero 23
Contact Info Graham Farrell Peter Steele President Director, Automotive 1-416-427-0578 1-289-795-3906 graham@lift-and-shift.com peter@lift-and-shift.com Mr. Dennis Richard Owner, Twin Tire drj@twintire.com 24