Value Exchange Optimization - Exchange Solutions

The ‘Secret Sauce’ for

Value Exchange

Enhancing Loyalty Programs:

Optimization

Loyalty programs offer retailers an effective tool to foster lasting relationships with their customers. Customers see them as a positive way to connect with their favorite brands. But not all loyalty programs are created equal. Some retailers see them as a cost center, a necessary evil — or worse, as an expense liability, because the cash value represented by the loyalty currency can noticeably reduce bottom-line margin if the program’s revenue generation is lacking. This view often results in a less-than-ideal program structure, ultimately limiting the amount of engagement and ROI you can generate.

With loyalty program enhancement moving up the priority queue for many retailers, Value Exchange Optimization can serve as a guiding principle to ensure your loyalty program design delivers a revenue- and profit-generating promotional strategy and an engaging member experience that works harmoniously cross-channel.

of retailers gained more multi-channel customers

These flaws in existing loyalty structures have become glaringly apparent since early 2020 when the COVID-19 pandemic shut down physical stores and drove brick-and-mortar customers online. During the pandemic:

saw more customers sign up for their loyalty programs

of retailers struggled to retain those customers because their loyalty programs were designed for in-store shopping rather than ecommerce

What is Value Exchange Optimization?

Value Exchange Optimization is achieved through understanding an individual customer’s current behaviors, identifying what incremental actions they could perform, and presenting an economically rational incentive in all available channels that delivers value to the customer while ensuring an incremental and profitable transaction for the retailer.

Does Your ‘Plain Vanilla’ Loyalty Program Fall Short?

If your loyalty program isn’t delivering the desired ROI, it’s time to make some changes. Here are some signs that you could benefit from the “secret sauce” of Value Exchange Optimization:

Your program has sub-optimal ROI

You’re rewarding customers for doing what they already do, rather than incentivizing incremental behavior tied to customer lifetime value and important engagement activities

You’re making offers when it’s not necessary or giving deep discounts that eat away at your margins

Your offer execution is not operationally efficient and lacks automation and optimization

Your program has stagnant or declining engagement

You are not maximizing the value of your member data to enable better personalization and communications

You’re tailoring rewards and offers based on segmentation rather than one-to-one personalization

As customer privacy restrictions grow and the death of the third-party cookie looms, a compelling loyalty program can help retailers gather first-party data they couldn’t otherwise acquire. To earn access to customers’ precious private data, however, retailers must provide the right incentives, along with the proper channels of communication, for customers to feel truly seen and heard — and do it profitably.

That’s Where Value Exchange Optimization Comes In

To optimize the exchange of value with their customers, retailers must understand each customer’s behavior on a one-to-one basis, answering questions like:

What are they doing?

What would you like them to do that is strategic to the business?

How can you deploy your incentive budget in the most efficient way and create a compelling offer experience to get them to do it?

Personalized offers that weigh both the shopper’s real-time propensity to purchase and the retailer’s desired margins deliver far more value to both parties than mass discounts or broadly segmented campaigns. When you can tailor an incentive that delivers value to the customer and profit to your business — and offer it at the right time to trigger the desired customer behavior — you’ve succeeded at optimizing value.

–Mike Hughes, Chief Executive Officer, Exchange Solutions

Retailers that understand customer behavior on an individual basis have a competitive advantage in today’s hyper-competitive retail environment. Our proprietary Value Exchange Optimization approach starts with deep data analytics to understand customer behavior at the individual level, which enables retailers to target individual customers with incentive offers to get them to buy more. It also enables the retailer to hold off on giving margin-eroding discounts to customers who are going to purchase without an incentive.

With Value Exchange Optimization, retailers can:

Increase customer retention and satisfaction

Gather deeper data

Identify customer behavior gaps and spur incremental behavior

Eliminate deep discounting and increase profit

Learning From Customer Data

Data is the secret to successful Value Exchange Optimization. While most retailers have more data than they know what to do with, many can’t access, package and learn from the information in real time to enhance their loyalty programs. The right loyalty platform can help.

–Brenda Higuchi, SVP, Analytics and Optimization, Exchange Solutions

What do we want the customer to do? What are we willing to give them to do it? What makes it economically rational? With predictive analytics and machine learning embedded into your loyalty platform, these decisions can be automated in milliseconds to make highly relevant, real-time offers at the point of interaction with the customer.

In a truly omnichannel loyalty program, all offers come from the same place and all data is captured in the same place. This eliminates data silos so you can access and learn from all the information you gather, then provide a consistent message that engages the customer with relevancy and increases conversion propensity.

In Retail TouchPoints’ 2021 Customer Loyalty Benchmark Report, insufficient/outdated technology was listed as a major challenge in driving repeat purchases by 25% of respondents. Working with an experienced loyalty solution vendor can provide the expertise and tools to power up your loyalty program.

What Should You Look for in a Loyalty Solution?

When selecting a loyalty solution that can upgrade your loyalty program for today’s customers and tomorrow’s challenges, seek:

Future-Proof Your Loyalty Program

As customer expectations for the retail experience continue to rise, use these best practices to future-proof your loyalty program.

By 2023, Gartner predicts that transactional loyalty programs focused on earning points, rewards or discounts will have given way to personalized loyalty programs that use unified customer data to automate dynamic offers. Exchange Solutions suggests that doing so profitably and efficiently while also increasing the engagement level of your customer base will be the most difficult part of the journey. If you don’t get those key elements correct along the way, you risk falling back into a view that your loyalty program is simply a cost center, reducing the value you’ll give to your customer and get in return.

Gartner, Market Guide for Loyalty Management, Benjamin Bloom and Claire Tassin, 6 July 2020. For full Gartner terms, click here.

Embracing Value Exchange Optimization can prepare your organization to compete successfully in the future and help you use your loyalty program to build more engaging relationships, not just reach further into your customers’ wallets.

GET STARTED

Loyalty solutions that automatically test offers and use machine learning to provide immediate feedback on their success help to ensure continual improvement.

Choose a provider who’s constantly innovating

Think beyond transactions to relationships

Maintain a profitability mindset

Dive deep into customer behavior

Test and learn

Be agile

A provider with extensive analytics capabilities can help you gather data that goes beyond the basics, to customer characteristics such as impulsivity or price-consciousness.

Track KPIs such as customer acquisition cost, active membership rates, total member spend, incremental revenue and incremental margins to demonstrate the dollar value of your loyalty program.

Particularly in commodity industries, your loyalty program should align with your brand and focus on building lasting customer relationships by incenting on non-transactional behaviors, such as logging healthy habits or promoting sustainable alternatives.

A loyalty program vendor that can share its expertise, listen to customer needs and develop features customers request will keep you ahead of the pack.

Whether you use a third-party solution provider or DIY your loyalty program, prepare to pivot. Keep an eye on your industry and competitors and learn from their loyalty programs.

Be agile

Choose a provider who’s constantly innovating

Think beyond transactions to relationships

Maintain a profitability mindset

Dive deep into customer behavior

Test and learn

Predictive analytics and machine learning for real-time insights and recommendations

A vendor with expertise in loyalty and retailing, not just technology

Time-saving features such as self-serve capabilities and automated decisioning to help create operational efficiency and maximize learning

Seamless integration with your existing loyalty program tools

Modular configuration so there’s no need to rip and replace your existing platform

Increase customer lifetime value and strategic engagement behaviors

Go beyond transactional and demographic data and create a fuller understanding of individual customers’ motivations

Turn mid-tier customers into top-tier customers by accelerating and deepening member engagement

Automate and optimize offer personalization at-scale, in real-time

Offer experience is not consistent (i.e., syndicated) across all channels

Your customers encounter friction in earning and redeeming rewards because the program’s earning structure is not compelling

What does Value Exchange Optimization look like in practice?

Consider these examples.

Members are also able to link key resources and tools to their Be Well account, such as their preferred pharmacy, current prescriptions, family health history and third-party apps tracking healthy behavior such as exercise. The data Rexall gathers from these interactions, as well as the rich transactional history, illuminates the customer’s lifestyle so Rexall can suggest more relevant content and personalized offers.

Integrate pharmacy and front-of-store sales

Designed to support Rexall’s vision of making healthcare easier and more rewarding, Be Well aims to:

Develop an integrated customer experience in-store, online and in-app

Drive customer engagement across parent company McKesson’s family of healthcare businesses

Issue personalized offers that are relevant and compelling to customers, while remaining profitable

A loyalty program that aligns with and adds value to your brand is key to optimizing value exchange and building customer relationships. That’s the approach Rexall™, a retail pharmacy chain with more than 400 locations across Canada, took when launching its Be Well™ loyalty program in 2020.

Rexall chose Exchange Solutions’ SaaS loyalty solution, which allowed it to take advantage of Exchange Solutions’ deep loyalty expertise and analytics to help optimize their program while retaining in-house control of data and promotions.

Just three months after launch, Be Well had:

RESULTS

million+ members

loyalty scan rate

R for Success

Pharmacy Retailer Enjoys Healthy Benefits from Value Exchange Optimization

R for Success

Best Dressed

Luxury Retailer Delivers Value Online and Offline

Consider these examples.

increase in promotional efficiency with same resources

10X

increase in transaction size when client fulfills offer

Just three months after launch, the program had:

RESULTS

A men’s luxury apparel retailer had a highly successful loyalty program with 70% participation. But the program relied heavily on in-store consultations from sales advisors who built personal relationships with clients. It also suffered from operational inefficiencies, limited ability to personalize offers, and slow deployment. When the pandemic shuttered its stores, the retailer used the opportunity to enhance its digital channel reach and build a true omnichannel loyalty program. Using Exchange Solutions’ Promo Enhance, they were able to upgrade their loyalty program without the need to rip and replace. Promo Enhance is an advanced targeting and personalization engine for loyalty promotions that sits on top of an existing loyalty platform, allowing the marketer to plan and execute highly targeted promotions and member experiences. The technology drove additional revenue and profit, reduced inefficiencies and time to launch, improved the member experience, and saved the marketing team time previously spent preparing and executing promotions.

What does Value Exchange Optimization look like in practice?

Best Dressed

of sales via offers are incremental

of online clients have fulfilled one or more offers

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ABOUT EXCHANGE SOLUTIONS

Exchange Solutions is a cloud-based marketing technology company that delivers personalized loyalty solutions to retailers enabling them to build deeper and more proﬁtable engagement with their consumers. With more than 20 years of experience in the industry, Exchange Solutions transforms loyalty programs and promotions from being costly applications to productive and proﬁtable capabilities for clients across various verticals in the US and Canada. Current clients include Harry Rosen, Esso™ and Mobil™, Sobeys Inc., Rexall Pharmacy Group, Loweʼs, Indochino, McKesson, and Todayʼs Shopping Choice.

https://www.exchangesolutions.com/contact_us/

About Exchange solutions