Cats vs. dogs. Hash browns vs. home fries. Loyalty vs. discounts. The battle has raged on for millennia.
Where does loyalty lie? For margin’s sake, it would be great if loyalty points alone were enough to inspire a purchase. But multiplied points (i.e. future discounts) are becoming more essential for marketers. Read on to discover the ultimate winner.
Who
I was managing the email marketing of a brand with a very low repeat purchase rate – less than 1.5x – in a low loyalty industry. I chose people in the loyalty program because they had demonstrated interest in the staying with the brand, whether they had made a purchase already or not.
What
I wanted to uncover the bigger determinant of purchase likelihood during a peak period: multiplied loyalty points or their lifetime purchase history with the brand.
- Is there a difference between people who had never made a purchase, people who had only made one purchase, and people who made multiple purchases?
- Does multiplying the number of loyalty points they receive for making a purchase drive conversion?
Methodology
I gave all members of the loyalty program an offer of $15 off. I split the loyalty members by number of purchases, then randomly split each of those groups into thirds and sent Single, Double, or Triple points messages.
Results
The best responders were people who had some history with the brand, with a surprising conversion rate for people who had only ever made one purchase. As to be expected, people more familiar with the brand had a higher open rate.
| Audience | Open Rate | CTR | CVR | Unsub Rate |
| 0 purchases | 24.67% | 0.30% | 0.04% | 0.04% |
| 1 purchase | 29.75% | 0.35% | 0.11% | 0.06% |
| 2+ purchases | 35.21% | 0.44% | 0.06% | 0.04% |
The only variation in the emails was changing the words Triple, Double, or Loyalty (Single) Points in both the creative and the subject line.
| Variation | Open Rate | CTR | CVR | Unsub Rate |
| Single Points | 23.23% | 1.30% | 0.02% | 0.02% |
| Double Points | 23.67% | 1.34% | 0.05% | 0.03% |
| Triple Points | 23.61% | 1.23% | 0.05% | 0.02% |
People wanted their $15 discount, so their open rate was the same no matter how many points they would receive for their purchase.
But Double or Triple Loyalty Points (future discounts) bumped the conversion rate by 150%. In order to protect margin, we could lean into Double Points and feel confident we weren’t missing out on potential sales.
Consolidated Loyalty Program Results
That year we saw a lot of gains in Loyalty with more points awarded and redeemed, a whopping 68% increase in orders, and a 90.7% increase in margin.
Conclusion
For this brand, offering a discount with a 2X points multiplier was a winner for conversion while protecting future margin.
Does the amount of discount influence consumers more than loyalty points multiplier? To potentially protect margin further, I would test ramping down the discount and still offering multiplied point tiers to see where drop off occurs.
Every industry is different, and your customers may not be as discount-focused as the brand I performed this test for. However, it is always worth testing to see what truly motivates your customers. “Your points expire soon” emails are always a great motivator. 😀
