Ox&Pen

Many loyalty programs (including Ox&Pen Version 1.0) award points for check-ins at shops and restaurants—check-ins that don’t necessarily translate into revenue for the merchant.

Presumably it’s great if a loyalty app shows a shop owner that 89 people checked in at their establishment last week, but what is the value of each of those check-ins? Did each person who checked in spend $5 or $50, or $0? How does the average ticket of the “check-ins” compare to the amount the average customer spends? By rewarding check-ins with points that are redeemable for rewards, the shop owner is paying for each check-in, so the resulting revenue is of critical importance.

Is it possible to reward customer behaviors that bring in revenue for the merchant? Below are three actions that business owners value. At Ox&Pen, we’re working to redefine loyalty to include each of these metrics, which when coupled with a customer check-in, prove to be  more deserving of rewards than check-ins alone.

Ticket Spend
Arguably the most obvious desire of a small business owner is for customers to make purchases. Rewarding customers for every dollar they spend is something credit card companies have been doing for years; through strategic reward initiatives, it could be the norm for small business loyalty programs.

By offering rewards for shopping and dining at certain shops and restaurants, loyalty programs can influence consumers to do more spending at small, local merchants, which is a step in the right direction to competing with larger-than-life corporate chains.

Customers sharing experiences with the merchant through social channels
Even if a customer doesn’t spend copious amounts of cash with each visit, he or she may be broadcasting the merchant’s name to hundreds or even thousands of friends and followers on Facebook and Twitter, which could end up being just as valuable for a small business as money spent.

Word of mouth marketing has long been a favorite buzzword of marketers; Nielsen reports that 92% of consumers trust recommendations from people they know, while only 37% trust search engine ads and 24% trust online banner ads (Zuberance). In terms of creating brand awareness, channeling resources to get people to talk about a brand seems to lead to a higher ROI than a big media buy.

Social loyalty programs, in particular, are in the unique position to incite a word of mouth movement. By rewarding people for sharing merchant experiences on social networks, business owners are investing in the type of exposure that has been proven to spur visits and spending from a new, expanded pool of customers.

Customers returning to spend more money
The only thing better than a customer spending money at a small business, is a customer returning again and again to spend even more money (slaps forehead). This is, of course, consumer loyalty in its truest form, and something that can be achieved with the help of a strategically employed loyalty program.

Loyalty is changing
No, running a successful small business can’t be drilled down to three generalized items. Rather, I’m inviting interested parties to take a look at the changing game of loyalty. How can loyalty programs reward customers for their actions that matter most to the merchant’s bottom line?

Since inception, Ox&Pen has sought to bring real value to local businesses by focusing on increasing the consumer behaviors that they value most, like dollars spent and social shares. After working with Chicago’s local, independently-owned merchants for a year, we have learned so much about what they need from a loyalty program. At the end of the day, they need more customers spending more money.

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Let’s talk about universal loyalty programs. Those of us earning frequent flier miles with an airline that is part of an alliance can likely redeem those miles for free flights on any airline in said alliance. The same is true of some credit card loyalty systems; every dollar you spend translates into a point that can be used at one of several merchants within the credit card’s network.

While the above examples truly embody the idea of a universal loyalty program, neither caters to small, local business owners or their patrons. Rather, those programs work best on a bigger scale; their loyalty networks are typically reserved for large, national (or international) chains.

In the very early stages of conceiving what would later become Ox&Pen, I knew supporting local businesses would be one of our critical objectives and that the loyalty component would be a huge driver in achieving that. I knew the network effect of the above mentioned loyalty programs could be extremely powerful for small businesses, but there were challenges in creating this with seemingly disparate neighborhood specialty shops.

Often, if our favorite mom-and-pop shop has its own rewards program, it involves a punch-card, where, you get something free with every 10^th purchase, but rewards can only be redeemed at that location. This system works well for people who live or work nearby. But if a particular vendor is on the other side of town, the effort required to get there 10 times might outweigh the benefit of receiving something for free. In this case, the punch-card loyalty program isn’t really added incentive to visit that store over another, and both the consumer and the merchant miss out.

However, with Ox&Pen, you can earn loyalty points for purchases and social engagement at a card shop near your home on one side of town, for example, and later redeem those points using your smartphone at that new lunch place near your work on the other. You feel good because you are shopping locally and earning loyalty points at the same time. The owner of the card shop is also happy; he gains an incremental sale that otherwise may have gone elsewhere. What a novel concept: creating a “loyal” customer, even if just a one-time shopper.

Not only does Ox&Pen’s model provide its members with plenty of flexibility in how their hard-earned points can be used; but business owners benefit by joining forces with other small, local establishments. As a network, they can much better compete against their big-box rivals in the loyalty game.

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Like many other diligent and dedicated professionals, the employees at Ox&Pen jam to Spotify from 7:30 a.m. when the doors open until 7:30 p.m. when the last game of foosball wraps up. In between new Foster the People tracks and CCR marathons, there are a few commercials promoting the platform, one of which boldly (yet seemingly accurately) pins pirating music as “so old-fashioned.” With Spotify, however, you can share music for free and “every single track you buy makes money for the rights holders and the artists.”

Pirating music was once a de facto way to enjoy limitless music. Times have changed and, in essence, light has been shed on the fact that undervaluing music by snatching up free digital copies of songs is against artists’ best interest and is not sustainable for the industry as a whole.

In recent years, the daily deal industry has sprung up around the world in full force. An unexpected side effect of the access consumers gained to cheaper-than-ever lifestyle opportunities was a price renormalization. After a couple years of enjoying various luxuries at a steep discount, many can no longer fathom paying full price.

Fair enough. I mean, who doesn’t like a discount?

What we as consumers may forget, however, are the businesses that are hurt by offering up services for 50-75% off. We forget that the businesses most in need of these marketing and promotional services are typically the ones who have the least financial flexibility and the least room for error if this strategy fails. If the viability of our favorite merchants is compromised due to use of unsustainable marketing tactics, doesn’t that directly affect the character of the neighborhoods in which we work and play?

As a consumer, I can’t deny I like saving money. At the same time, I know I would be devastated if any of my local favorites had to shut their doors after inopportune deployment of uber-aggressive discount marketing. The streets, and blogs, are littered with accounts of small business owners who have regretted going this route.

So, the question becomes, “do customers really need a huge discount to feel like they are getting value?” Much in the way music fans are happy to pay a dollar and change for the work of their favorite artists, I’m inclined to believe that consumers are increasingly interested in patronizing local vendors. If they save money and receive rewards at the same time, then all the better! Wouldn’t it be nice if there was a sustainable model out there mutually beneficial to merchants and customers? Perhaps there is…

Continue reading “Price renormalization? Sustainability? What’s in the cards…” »