November 8, 2005

Loyalty and direct marketing gurus visit Shanghai

Filed under: Direct Marketing,Loyalty — Administrator @ 7:18 pm

Last week, Eric Tilenius and Steve Markowitz were in Shanghai visiting, etc. I had the chance to sit down with with these two loyalty and direct marketing thought leaders and chat about what makes a good loyalty program worth investing in.

Their core message was that any loyalty program worth its salt will work to achieve the following four goals/benefits:

1. Acquisition
2. Activation
3. Stimulation
4. Retention

Makes a lot of sense…funny thing is that 99% of these programs are okay at the “acquisition” part but fall dramatically short of the latter bits; most likely this has to do with an underdeveloped network/partnership and flat direct marketing campaigns…

I’m talking from experience: In 2000, I was a Director at Hong Kong based online brokerage, Boom.com and one of the most time consuming yet ineffective services we offered was a loyalty program called “Boom Points”. The idea was to give Boom Points to our customers each time they placed a trade; the amount of points were based on the size (value in HK$/US$) of each trade.

Some of the places we went wrong was in the following ways:

1. Trade sizes were not large enough for customers to earn nearly enough points to make it worth their while; they would have had to make institutional size trades

2. Because each Boom Point represented a $ amount, customers could calculate each points exact worth; in other words, what incentive did you have to trade more if you knew you could purchase the same radio Boom offered at Fortress for 30% less?

3. We didn’t offered any perishable goods, such as airline tickets ( high perceived value, yet low marginal cost); and thus we lost real money each time a customer redeemed points

4. Customers could only earn points at Boom; we should have build a platform or leveraged our branding to build a network effect

5. We didn’t create any impactful direct marketing campaigns to stimulate or enlarge our network

Hard lessons, for sure, but lessons nevertheless…I’m waiting for a company in China or Hong Kong to come along that can successfully address the four points Eric and Steve waxed on about…

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