No-Cost Incentive Program Helps Retailers Reach New Customers With “Prewards”

Written by Debbie Hauss
With zero up-front costs to advertisers, the edo Interactive Marketing Platform allows businesses to target specific consumer groups with incentives called “Prewards” that are loaded on to a facecard prepaid MasterCard. The advertisers pay only when the incentive is redeemed, so the return on investment is a built-in guarantee.

“Implementing the edo Marketing Platform was a no-brainer because there is no up-front cost,” says Jeff Wogoman, director of marketing for Cloudveil, the Jackson, Wyoming based outdoor apparel retailer and wholesaler. “That is the ultimate ROI to me.”

Cloudveil initially tested the program with a selected group of 5,000 consumers, who received a varied incentive of $5, $10 or $15. Wogoman decided that the test would be successful if 40% accepted the incentive and 10% responded. “We are well above the 10% goal at the four-week point,” he notes. Edo reports that many initial advertisers have seen double-digit redemption rates.

“I think this is a good concept because it allows us to reach an audience that we don’t typically get in front of,” says Wogoman. Cloudveil chose to market the program to college students, so Wogoman selected specific universities in targeted demographic areas. “We used internal information to determine that we have pretty good penetration in those areas and our brand is well known,” Wogoman notes. “In the future we may want to target areas such as the Southeast that we want to break in to, where sales may be weak.”

The program for Cloudveil was implemented quickly once the retailers gave it the green light, says Wogoman. “We selected the target areas, provided creative assets, decided on the chosen incentives, and then it was literally done in a week to 10 days.”

Five levels of marketing service
edo Interactive facilitates and services the marketing program via five specific steps:

1. Identify target consumers. edo identifies the target audience, in conjunction with the marketing partner.
2. Promote the incentive. edo promotes the incentive via email, test message or RSS feed to the target group. Consumers then have the option to “accept” or “decline” the incentive.
3. Deposit the incentive. edo deposits the “accepted” incentive onto the reloadable pre-paid MasterCard.
4. Process the incentive. After consumers redeem the incentive, edo processes the transaction behind-the-scenes by identifying the incentive, redeeming the incentive from the card member account, and deducting any remaining purchase balance.
5. Track the metrics. edo offers advertisers real-time information on metrics such as the number of redemptions, redemption locations and average sale size by relevant demographics.

The edo Marketing Platform was initiated as a beta test in June 2008 and will be launched formally in January 2009. During the beta phase, all interested advertisers were welcome to participate in the basic program that offered percentage-off savings. Beginning in January 2009, the platform will expand to offer Prewards in the form of dollar amounts, percentage-off savings and savings based on the amount of purchase. In addition, edo will offer “edoCash” that will allow advertisers to reward customer loyalty with financial or merchandise incentives.

Wogoman is looking forward to offering varied incentives, such as $30 off a $200 purchase, for example. “We also have talked about doing a promotion that we could run on our Cloudveil Facebook fan page that would give a $30 incentive to members who sign up 5 new members.”

Initially the Prewards are being offered to existing MasterCard card holders, but beginning in 2009, the platform will operate using additional types of cards.

Recovery ‘09: Retail Rebound To Take Shape Around Customer Segmentation

Sometime shortly after December 25 when the whirlwind of 2008 is in the books, retailers will need to face the reality of recovery. They will need new strategies for the aftermath of promotions, profit shortfalls and sheer change that the past year has wrought. Many experts are pointing toward customer segmentation as the best way forward.

It may seem obvious at first because most retailers already have some kind of customer segmentation program in place. But retailers can take advantage of changes in the way customer segmentation data is collected and then executed. New segments bring new sales opportunities; changing customer segments demand new cross-channel marketing approaches.

“One of the great things about customer segmentation is the built-in flexibility it provides to retailers,” says Josh Martin senior analyst for The Yankee Group and author of several segmentation research papers. “They show the pain points and the pleasure points for different customers. They are not necessarily a snapshot of today’s customer. They are an indicator of the latent behaviors customers will exhibit in the future.”

Martin sees a key trend emerging in the customer research and execution of segments. Demographic information is still important, but taking its place on the priority list is psychographic behavior, and in turn, psychographic segments. Martin calls psychographic segmentation a “totally different approach” and one that is more easily acted on by an entire retail organization. For example, a sales person at a consumer electronics chain can be relevant to a customer if he knows their technology behavior and aspirations. Knowing simple information such as income and age may not lead to a strong relationship.

For example, Martin’s September report on mass market consumer technology adoption focused on five customer segments, but none of them were demographically-based. High-income groups were not as actionable as a segment called “technophytes.” These are consumers with the desire to be cutting-edge, but who feel no urgency to do so. This group makes up 22% of the consumer population. They drive volume as prices drop and early adopters move on to new technology. "Outlet Jockeys” are defined as the road warriors who make up 15% of the consumer population. They are willing to experiment with new mobile services and devices to achieve total connectivity.

Similar customer were profiles were identified as part of a new Retail Consumer Dynamics Study, an analysis of consumer shopping behavior and attitudes in today’s difficult economic times, released by interactive marketing services provider Acxiom Corporation and conducted by BIGresearch. With the reality that many consumers will be deferring spending, the Consumer Dynamics Study looked at how behavior may change outside of pure demographic circles. The study identified that “Savvy Spenders,” defined as mostly married, affluent and living in out suburbs, are more likely to spend sooner than other segments. The “It’s My Life” segment, defined as young consumers living in urban areas without children, is not likely to let economic conditions change their shopping behavior.

“This challenging economy creates an exceptional opportunity for retailers and consumer product manufacturers to target direct messages to specific consumer segments in order to sustain and maximize a return on marketing investment,” said Jim Harold, industry executive for retail and consumer markets at Acxiom

Cross-Channel Segmentation
Customer segmentation is also affected by cross-channel strategies. Just as consumers will reveal their behaviors and aspirations via surveys and product purchases, they will also generate data through click-stream traffic analysis and customer engagement behaviors. Take for example, the home improvement customer that clicked on an ad for a lawn mower, but didn’t buy. He may have moved on to a lower-priced model, bought from a competitor or postponed the purchase. Online and offline advertising, and then collecting the engagement data, can provide behavioral clues. They can also increase conversion rates.

“When we first started to sell online advertising, retailers were just buying space,” says Vikram Sharma, CEO of ShopLocal.com. “Now they’re not interested in space, they’re interested in people. It’s not that consumers hate ads, they just hate the wrong ads.”

Sharma’s company has created several products that put local advertising products online. For example, SmartCircular, allows FSIs to do double duty as a print insert and then as an internet-based ad for local searches. The online ads feed in-store visits. They also provide key data for potential segmentation.

“Retailers need to think cross-channel,” he says. “Let the customers have a holistic experience. It is much more important to define customer segments within all channels, not just within a single channel such as e-commerce. Internet ads will become a more important part of the mix once retailers realize that online activity can feed offline activity. Consumers spend 20% of their time on the internet, but companies only put 8% of their dollars there.”