How do marketers bring customers back to maximize revenue? Loyalty programs build customer devotion and retention by incentivizing repeat business. Buying becomes a habit.
Today’s guest is Matt Baglia, co-founder and CEO of SlickText, an SMS marketing platform. If a loyalty program makes sense for your business, Matt talks about what it takes to make a loyalty program work as a growth lever.
Some of the highlights of the show include:
Why loyalty programs matter? 20% of company’s customers make 80% revenue
Brand Champions: Pay attention to their interests, what they’re buying or not
What is a loyalty program? Distinct difference w/two purposes—register, rewards
Customer Behavior: Value-add messages give customers a reason to return
Getting Started with a Loyalty Program:
Step 1: Understand clientele
Step 2: Incentivize customers
Step 3: Talk and listen to customers
Step 4: Select a loyalty service
Growing a Loyalty Program:
Interaction: Ask, are you a member of our loyalty program yet?
Incentivize: Join loyalty program by providing value
Integration: Plugin pop-ups and other online opportunities for information
Marketing Metrics: Subscription velocity, click-thru links, opt-out rates, check-ins
Do’s/Don’ts: Get permission to send messages, or face legal ramifications
“You have a small cohort of your best customers, and it’s really important that we’re paying attention to what they’re doing, what their interests are, what they’re buying, what they’re not buying, how they’re buying, and make sure that we communicate and market to them appropriately.”
“When we think, loyalty program, we actually think, ‘Register for our loyalty program and earn points towards rewards’.”
“The value is very, very simple. For us, it serves two purposes. One, we need to get people to come back, and in order to do that, we need to give them a reason to come back.”
[Tweet “How to use rewards programs to build customer loyalty like the best brands around, with Matt Baglia from @SlickText.”]
Ben: Hi Matt, how is it going this afternoon?
Matt: Couldn’t be better. How are you?
Ben: Not too bad, not too bad. We were chatting a little bit earlier. It’s December and there is no snow in North Dakota. I’ll take as many […] as we can get right now.
Matt: You’re doing better than we are. It’s cold and we have snow.
Ben: Please accept my condolences. We’re going to be there with you probably sooner than we would like. Would you mind taking a moment just to introduce yourself to our audience real quick and explain what you do over at SlickText.
Matt: My name is Matt Baglia. I am a Co-Founder and CEO of the company. We provide mass text messaging, SMS marketing, and mobile marketing solutions for businesses ranging in size from small mom, pop up, to global enterprise. Personally, I oversee a lot of the search visibility stuff. More importantly, I focus a lot on the product and engineering. That’s really where my expertise lies. Have been doing this now for going on 10 years. It’s been a wild ride watching the company grow.
Ben: Very cool, very cool. Something that we’re going to talk about specifically within your areas of expertise is running loyalty programs and using those as a means of building customers loyalty and customer retention. I think that’s something that’s very top of mind for a lot of marketers right now, just given the challenges that we’re all facing—we’re trying to sell products or services, I guess what you could call a recession.
Your research shows that 20% of the company’s customers will typically make up about 80% of their revenue. I can’t remember exactly where that statistics originated, but it’s something that in the marketing and business world, it’s become just almost a common knowledge at this point. But I still think it’s something that’s really important to remember and it’s very relevant to why loyalty programs can be important. In your view though, what does that figure mean for the loyalty programs? Why does it matter if the bulk of your revenue is going to come from a minority of your customer base?
Matt: It’s the classic 80-20 rule. We see that that is used and applied to a lot of different areas. What it means in this particular case is that you have a small cohort of your best customers. It’s really important that we’re paying attention to what they’re doing, what their interests are, what they’re buying, what they’re not buying, how they’re buying, and make sure that we communicate and market to them appropriately.
It’s amazing. Those customers are typically repeat buyers, the most engaged, and the ones that you would consider to be brand champions.
Ben: Sure, that all makes sense. You mentioned that SlickText serves customers of all different sizes in different industries and in all different situations. From what you’ve seen, what types of companies typically do best with loyalty programs?
Matt: I would first start off by mentioning that some people have differentiating understanding about what a loyalty program actually is. Some people think that a loyalty program is really hey, I’m just signing up to receive text messages from a particular business, or emails from a particular business or something like that.
For us, we see it as a lot more than that. When we think of a loyalty program, we actually think of it, hey, register for our loyalty program and earn points towards rewards. I think that there’s an important distinction that needs to be made there for people who are listening to this. Because they are two very different things. One complements the other.
We have both. SlickText obviously powers a lot, tens of thousands of SMS marketing programs that people might consider to be loyalty programs. But we also have loyalty software where merchants can have a tablet at the point of check out and at their store. When they make purchases, they can check in and receive points for visits or how much they spend and then get rewarded for that.
The value is very, very simple. For us, it serves two purposes. One, we need to get people to come back. In order to do that, we need to give them a reason to come back. You can do that by not only just giving them offers via SMS, but also give discounts in the form of points or rewards to come back. A thing that’s one big value add to the customer.
The other thing that is often overlooked, that when you pair SMS marketing with a loyalty program is that we get some interesting data in terms of the customer behavior. We start to learn when people purchase and when they don’t, what they purchase, what they don’t, and how often they purchase. Simple things like hey, we haven’t seen you in a month and you’ve got a $5 off coupon. Click this link now to shop and come back and see us. Those types of things are extremely important. They’re very, very relevant. I think that’s an important topic that we’ll cover as we get into this a little deeper.
Ben: How would you advise marketers assess whether or not a loyalty program might make sense for their business if they don’t already have one in place?
Matt: There are some very, very obvious things. I think the biggest one is do I have frequent repeat buyers? We see real estate agents who often want to take advantage of traditional SMS marketing. In that sense where you’re pushing out recurring offers to people, it doesn’t necessarily work that well. Because it’s not that often that you’re in the market to buy a new home.
Works very, very well for retail, ecommerce, restaurants—any type of industry or business where you have people that are coming back on a regular basis and you need to incentivize or remind them to come back.
Ben: Let’s say I’m a marketer listening to this episode and my company fits the description of what you’ve just laid out. We’ve decided we’re going to just test a loyalty program of some sort with zero experience doing anything of that nature. How would you recommend they get started? What’s step one for that team?
Matt: Step one would be to understand the clientele. Just because you’re in a space that has repeat buyers doesn’t necessarily mean that they are ones that are tech savvy or would be open to the concept of receiving messages via SMS—particularly promotional ones. I think that that’s the first thing that you would want to figure out.
In most cases these days, even if you’re 75, 85 years old, you may be just fine with receiving promotional text messages. It’s kind of a very, very top box to check. As you start thinking about it, it’s about getting sober regarding what your customers find valuable.
One of the things that we always talk about with SMS marketing is that every single message needs to provide value. If it doesn’t, it’s not what we’re sending. It is a completely different communication channel, it’s not like email where people expect to receive your spam every single day. No, people expect to receive one, two, maybe no more than four promotional messages that are high value and targeted.
The next thing that I would be doing is saying, hey, what type of value are we capable of bringing to our customer? If you find hey, we really don’t do discounts or we don’t do points back for this, we’re not willing to do that. It might not be a good fit.
In most cases, most businesses have bill problems, shaving a little off, or craving an incentive to have their best customers come back in. Think that that would be the next thing is am I willing to incentivize my customers? Do I have something of value? Value might not necessarily be a discount or some sort of offer. It really could be something as simple as an important piece of information or a timely piece of information. People find that very, very valuable as well. It doesn’t have to be a tangible thing necessarily.
Once you get past those two things, I would probably start talking to some of my customers. Some of the best customers that you see regular, hey, what would you think about us launching a loyalty program? Don’t tell me what I want to hear, but be honest with me. Would this be something that you would find value in?
If I was a coffee shop owner and I said to some of my best customers, what if your 7th coffee or 10th coffee, it was free each time? Would it be worth it for you to come in and punch your phone number and each time that you’re in line or scan a QR code on your code each time to rack up some points? Little customer feedback is always great and I think that can give you some directional learning about how your customers would respond to it. If things sound good, then it really is about selecting a service.
There’s a lot of loyalty services out there for us, our philosophy on the loyalty experience is that we can build a great one. But that’s not where our focus is. Our focus is that we have a great loyalty program, but it is just to power the intelligence behind the text message marketing. We’ve got a great, great loyalty program that people’s per spending is the lowest $29 can get in and start building today.
It’s easy, but again, our thought is that we want to start to understand our customers behavior so that we can message them in higher value ways. If they’re not just coming in for discounts, but we’re getting them right at that time of the months where we know they get paid and then are much more likely to make a purchase because of it, or they’re interested in this product that’s coming back in stock or this or that.
I don’t want to overcomplicate it, but it’s really just about hey, is this a fit for my business? What’s the criteria, do I have repeat buyers? Would those buyers find value in what I have? Do I have something they can get value in, get some feedback, see what they think and ultimately about just putting one in place and trying it. If you own a coffee shop, or a restaurant, or a retail store that has multiple locations, try it in one and see how it works. See what the adoption rate looks like. If you see people are signing up for it, then great. You can step on the gas and continue to pursue it. But I don’t think it has to be that long of a process.
Ben: Before we get too far along, it’s important to ask whether a loyalty program truly does make sense for your business. Now, like Matt said, if for example you’re a real estate company, you’re probably not going to get frequent sales from the same customers very often. They’re not going to come back to you to buy houses on a repeat basis.
Say if you’re a restaurant, a coffee shop, any kind of service based company that people use all the time. You solve something that people need frequently, then you might be onto something here. If incentivizing customer loyalty isn’t something that maybe you’ve been proactive about incorporating into your marketing strategy in the past, then from listening to Matt, it really sounds as though it definitely could be something for you to consider. Especially considering the tough economic climate that all businesses are weathering right now and are really going to have to continue to find ways to navigate, at least for the near future.
Now, back to Matt. Once a company has established the basics of a loyalty program. They’ve moved past the testing phase, they’ve determined that this is potentially a really valuable growth lever for them and a really good means of building customer loyalty and retention. How would you recommend the approach growing it? Things are up and running and you’re seeing some success, what’s next?
Matt: It goes back to what I had said earlier. The first thing that you want to do once you realize, hey, this is important, this is going to drive value. I think it’s important to know are we doing this just for the loyalty program? Are we doing this just to get people to come back in with their points? SMS serves no further purpose than just to let people know how many points they have when they check in.
Or is it that plus we’re going to use SMS as a driver to market to these people. That’s the first piece of it. Because it changes how you’re going to want to grow it. As you want to grow it, obviously there’s the hey, we’re going to roll this out to all of our other stores. There’s a lot of different levers that you could pull to grow your SMS marketing list and your loyalty program. .
Some of them are really simple. Have you ever walked into Abercrombie, Gap, Banana Republic or any of these other stores. The first thing they’ll say to you when you throw your clothes on the counter is, are you a member of our loyalty rewards program yet? Particularly in retail restaurants. Any type of business where there’s an in person interaction there, you have to ask for it. It’s simple.
I’ve seen so many cases where businesses don’t prioritize that simple thing. They don’t make it something that’s required for all of their employees to ask when the interaction is actually happening. It was a lot of opportunity. Asking for it is huge.
Another big one is to incentivize the joining of the program. Whether that’s opting into your SMS marketing program or joining the loyalty rewards program in the beginning. You have to provide value. You walk into that restaurant or you log on to that site and you see a pop up and it says, hey, get 15% off your first order. Get a coupon code right now if you texted this to that short code.
The idea behind it is that we’re going to give them something extra special to get it now. That is the second most important in most cases. The strategy is very based upon a type of business that you have. Ecommerce is blowing up right now, especially given the whole COVID thing and everybody’s doing the shopping online. We see a lot more of these pop ups on the websites that are calling people to take action right then and there. We have some great integration, we have a great integration with Shopify right now. Anybody that has a store, whether it’s a small boutique, whether they’re doing tens of millions of dollars a month in sales. Whatever it happens to be, we power the SMS marketing for those types of companies and it’s very easy to plug what we have into their online stores so that they can have those pop ups come up and capture that information, or capture that stuff at checkout.
You’ve got to look at every point at which you’re going to interact with a customer or a potential customer. You look at that as an opportunity, capture their information and get them to join if they already haven’t.
Ben: For the last question that I have for you, I imagine the answer is potentially going to differ based on what kinds of offers you’re providing or some of the specifics of the program that a business might be running. But what are some really key metrics that marketers should be monitoring in order to really understand whether their loyalty program is actually effective?
Matt: Yeah, certainly. I just split this down the middle and I’ll talk from an SMS marketing side and then from an actual loyalty program side. On the SMS side, some key metrics that you want to look at in creating your subscription velocity. We want to see how many people are coming on and how quickly they are coming on. That gives you a very, very good idea at a high level of whether or not your employees are asking people to join at checkout. Gives you a very good idea about whether or not the incentives that are behind that initial opt in are strong enough. It gives you a signal as to whether or not people care about your product.
I think that’s an important one. Obviously, when it comes to text messaging, there’s less that we can track because we can’t track opt ins, we can’t track a lot of things that you can in email. We recommend that you’re providing links on all of your messages so you can track click through rates, a very, very easy one. You want to see how many people are clicking to go to the website or clicking to go place an order or whatever. That’s certainly one there.
The third one, this is a big one, is your opt out rate. Very simple things, but looking at how much of your list churns every single time you do a blast, and maybe once you’re really get going a little bit, changing the frequency of your blasts in such a way that you can start to see are there certain times of the day that when I send the message we have more opt outs. Or is there a point in which we’re sending too many messages where we’re starting to get some people to churn off that list. Those are three very, very easy metrics that you can pay attention to that give you a really, really good idea about how things are performing.
On the loyalty program side, the actual counting of the beans, so to speak, and offering people rewards and getting them to come back in, it’s very, very easy to see the check ins. We can look and say, okay, the average customer checks in x amount of times per month. Maybe if my best customers, how often do they? You really can’t look at your custom base as a whole, you need to break them down into smaller segments. You want to look at whether or not they’re actually taking advantage of their rewards. Let’s say you send a message to 500 people who have rewards sitting waiting to be used. How many of those people actually come back into the store and redeem those things? Those are all metrics that you can see in any good loyalty program’s analytics dashboard, including ours.
Those give you an idea about whether or not people care. This was years ago, but it makes me think about QR codes. Again, QR codes have become more popular since COVID. I heard a statistics somewhere for one of the popular QR code scanners that this app had 250 million codes scanned and the average number, I can’t remember exactly what it was, but it netted out that each app scanned 1.1 codes. If you think about that for a second, that very, very clearly tells you that they download the app, they use it once, and then they trash it.
The same thing goes for loyalty programs, is that people can say we’ve got thousand customers in my loyalty program and they’ve all checked in once or 1.1 times on average. That tells you that they’re not finding the value in it or the employees at the store are not pushing to make sure that people check in each time they come.
Ben: Those are some really important points to keep in mind. Before I let you go, is there anything else that you think is really important for our listeners to be aware of if they’re entertaining the idea of starting a loyalty program that you haven’t had a chance to touch on yet.
Matt: One thing that I would definitely throw out, there’s a lot of different things that I could cover today. One thing that we’ve seen more of, particularly around this time, right before Black Friday, going into the holidays, is we find a lot of people who say, yup, I want to give this a try. I’ve been collecting phone numbers in my POS for the last five years. I want to take all of those people, load them in and start blasting them with text messages.
The thing that I would say is don’t do that. Unless you have been abundantly clear that people are signing to receive text messages and special promotions from you, don’t do it. There are legal ramifications that can be pretty hefty. If you look at the previous TCPI lawsuits, it really just boils down to getting people’s permission before you market to them. It’s the case regardless of channel. But there’s a lot more at stake when it comes to SMS, particularly in the United States.
Make sure that when you are collecting opt-ins that you are doing it appropriately, you’re doing it correctly, you’re following the guidelines. We’ve got a lot of resources in our website that make it very clear about how you go about doing this the right way. It’s not hard. But start from scratch and get the people who are really, really interested in receiving your messages via SMS.
Ben: I’m glad you just threw that out there because I think any time you start potentially getting legal issues involved, that’s definitely pretty important to keep in mind because if this is something that you’re going to do with an eye toward customer retention, that could turn costly really quickly.
Matt: It can. It doesn’t need to scare anybody away. Everybody has some sort of SMS communication component to their business it seems these days. Don’t be a bad human. Think about what your customer is going to feel like if you did business with them five years ago and now you think that you can message them, they’re going to be upset. Don’t do that.
Our platform makes it really easy. It’s very easy to say hey, text this to this to opt in to our program. Or if you’re online, you fill out a form, and you double opt in to join the text program. It’s easy. You have your bases covered, you grow your list, and people are happy to receive that, people also know that they can opt out anytime by replying stop or cancel. A happy list is one that’s going to be the most performing.
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