Expensive futility of “loyalty programs”
“Brother,” he says, “accept my heartfelt greetings!” Didn't I see you in the south of Missouri last summer, when you were selling half a dollar colored sand for a teaspoon and assured you that you just need to pour it into the lamp and never drop kerosene?
“Kerosene never really explodes,” I reply. - Only gas explodes.
O'Henry "Noble swindler"
Before you do anything, you should always think about your goal.
If the goal fails to articulate clearly and convincingly, then most likely you intend to undertake crap.
')
Even more important is the preliminary awareness of the goals of your own undertakings in business. If you cannot simulate a realistic situation in which the result of your event will be a rise in profits - do not go to your grandmother, you have thought up nonsense.
This incredibly simple test rule, applied consistently, would save trillions of dollars to businessmen from all countries. But ... In general, you understand.
Apply it to the topic of the publication - “loyalty programs” (PL).
All submarines, regardless of their appearance, ultimately are a distribution of money to customers. Whether through “bonuses”, whether granting discounts, gifts or something else.
Theoretically, the submarine of a single market player should somehow differentiate it from the others, and thereby increase the likelihood that the buyer will prefer this particular player (other things being equal).
But ... Comrades, the PL is the same for everyone! / Something we wrote about this earlier: www.ultimaerp.com/results/gangnam_style
And the same submarines are unlikely to be able to single out anyone. Well, if only stamped nonsense.
Massively used submarines have the following inevitable consequences:
1. The loss of PL value for the consumer - because all active customers have cards of all competing networks. Because, in turn, these cards are distributed to one and all: “Do you have our card? do you want to issue? ”
As a result, everyone has at home a fucking thick, stuffed-up moshna with multi-colored cards.
That, undoubtedly, greatly differentiates each issuer.
2. In a highly competitive market, the margin is always so high that you simply cannot give your buyer any substantial discount. Well, who is motivated by a discount of 1-3%, guys? From the check in 300 rubles. Or even in 5000.
3. Even these ridiculous discounts for the buyer are too expensive for the seller. The simplest mathematics is: if your net profit is 2-4% of the turnover, then, by abandoning the submarine, which is an average discount for customers of 3%, you can, roughly speaking, double the net profit margin (in fact, the net profit will be even higher, as we will show below), without losing, by virtue of paragraph 2, anything in sales.
4. In addition to direct losses in sales profitability, you incur costs for the processing of PLs - printing, distribution, registration of cards, proceedings with problems of charging bonuses, etc. Monkey job, the purpose of which is to reduce profits.
5. In all submarines, the main beneficiary is not the buyer, but the seller’s employees, who steal very good money from this.
By virtue of the arithmetic of paragraph 3, sales managers, cashiers, depending on the technology of processing submarines, can earn much more than the company's shareholders. Such non-trivial cases are known to us.
On the contrary, we do not know of a single case in which the work of the submarines in the company would NOT be accompanied by the distant theft of personnel. This is for a normal buyer 2% discount-bonuses from the purchase of 800 rubles - three pennies. And for a cashier who’s letting in a few hundred of such buyers a day, how many have already been calculated? Especially in comparison with his salary from the employer.
And do not expect, dear managers, to their control systems - firstly, their content is also oh, how free it is, and secondly - in the competition between employees and managers / shareholders “who deceives anyone who brings to clean water” employees always win. Both by virtue of the number of the latter, and owing to the many times stronger material motivation and the possibilities of focusing on a single goal.
If you are counting on the opposite - we sympathize with your naivety.
Exactly with tax breaks \ state support of business - officials (not business and investors) always earn (= steal) them, and the best option is a flat tax scale and no state support.
So our valuable recommendation to almost all (almost! Who NOT - see below) sellers - give up this nonsense and enjoy the growth of profits and the rest from monkey labor.
Spare the efforts to direct to what is really important to your customers and really affect the increase in the probability of sale:
Correct marketing strategy of the company - correct positioning (think for yourself or contact us)
the range and prices (at one time we had a whole series about it published, the beginning: www.ultimaerp.com/results/purchase_matrix )
the correct location of stores for offline retail (location here is even more important than the range and prices) and the correct design and directory structure for online merchants
the overall efficiency of the organization of the company's business processes (http://www.ultimaerp.com/ecommerceerp/)
PS However, there is a very small percentage of cases where the discount submarine really works. A combination of the following features is required:
the size of the average check makes the purchase so important for the target audience of buyers, so that the proximity / convenience of the location of the stores has faded into the background
There are relatively few players in the market segment, so sales points are not located at every corner
business is so marginal that it allows you to give such a serious percentage discounts, so that the money saved in real terms would be significant for Central Asia
The submarine is highly selective: it’s not easy to get cards, it’s prestigious to own them, the transition between the submarine steps requires a considerable amount of money (for target audience) money, and each next step gives a significant increase in benefits
From what is remembered to the author, only Comrade has a working discount submarine. Kusnirovich - Bosco di Ciliegi.
And further. There is a vanishingly small set of cases where, due to the coincidence of such a large number of factors, that it makes no sense to analyze them, it turns out to implement a working submarine, the essence of which lies in the plane of consumer involvement in the game.
Discounts are also present here, but this is a completely secondary factor. Here is an example of such a program of our authorship: www.ultimaerp.com/results/on_heaven
“Kerosene never really explodes,” I reply. - Only gas explodes.
O'Henry "Noble swindler"
Before you do anything, you should always think about your goal.
If the goal fails to articulate clearly and convincingly, then most likely you intend to undertake crap.
')
Even more important is the preliminary awareness of the goals of your own undertakings in business. If you cannot simulate a realistic situation in which the result of your event will be a rise in profits - do not go to your grandmother, you have thought up nonsense.
This incredibly simple test rule, applied consistently, would save trillions of dollars to businessmen from all countries. But ... In general, you understand.
Apply it to the topic of the publication - “loyalty programs” (PL).
All submarines, regardless of their appearance, ultimately are a distribution of money to customers. Whether through “bonuses”, whether granting discounts, gifts or something else.
Theoretically, the submarine of a single market player should somehow differentiate it from the others, and thereby increase the likelihood that the buyer will prefer this particular player (other things being equal).
But ... Comrades, the PL is the same for everyone! / Something we wrote about this earlier: www.ultimaerp.com/results/gangnam_style
And the same submarines are unlikely to be able to single out anyone. Well, if only stamped nonsense.
Massively used submarines have the following inevitable consequences:
1. The loss of PL value for the consumer - because all active customers have cards of all competing networks. Because, in turn, these cards are distributed to one and all: “Do you have our card? do you want to issue? ”
As a result, everyone has at home a fucking thick, stuffed-up moshna with multi-colored cards.
That, undoubtedly, greatly differentiates each issuer.
2. In a highly competitive market, the margin is always so high that you simply cannot give your buyer any substantial discount. Well, who is motivated by a discount of 1-3%, guys? From the check in 300 rubles. Or even in 5000.
3. Even these ridiculous discounts for the buyer are too expensive for the seller. The simplest mathematics is: if your net profit is 2-4% of the turnover, then, by abandoning the submarine, which is an average discount for customers of 3%, you can, roughly speaking, double the net profit margin (in fact, the net profit will be even higher, as we will show below), without losing, by virtue of paragraph 2, anything in sales.
4. In addition to direct losses in sales profitability, you incur costs for the processing of PLs - printing, distribution, registration of cards, proceedings with problems of charging bonuses, etc. Monkey job, the purpose of which is to reduce profits.
5. In all submarines, the main beneficiary is not the buyer, but the seller’s employees, who steal very good money from this.
By virtue of the arithmetic of paragraph 3, sales managers, cashiers, depending on the technology of processing submarines, can earn much more than the company's shareholders. Such non-trivial cases are known to us.
On the contrary, we do not know of a single case in which the work of the submarines in the company would NOT be accompanied by the distant theft of personnel. This is for a normal buyer 2% discount-bonuses from the purchase of 800 rubles - three pennies. And for a cashier who’s letting in a few hundred of such buyers a day, how many have already been calculated? Especially in comparison with his salary from the employer.
And do not expect, dear managers, to their control systems - firstly, their content is also oh, how free it is, and secondly - in the competition between employees and managers / shareholders “who deceives anyone who brings to clean water” employees always win. Both by virtue of the number of the latter, and owing to the many times stronger material motivation and the possibilities of focusing on a single goal.
If you are counting on the opposite - we sympathize with your naivety.
Exactly with tax breaks \ state support of business - officials (not business and investors) always earn (= steal) them, and the best option is a flat tax scale and no state support.
So our valuable recommendation to almost all (almost! Who NOT - see below) sellers - give up this nonsense and enjoy the growth of profits and the rest from monkey labor.
Spare the efforts to direct to what is really important to your customers and really affect the increase in the probability of sale:
Correct marketing strategy of the company - correct positioning (think for yourself or contact us)
the range and prices (at one time we had a whole series about it published, the beginning: www.ultimaerp.com/results/purchase_matrix )
the correct location of stores for offline retail (location here is even more important than the range and prices) and the correct design and directory structure for online merchants
the overall efficiency of the organization of the company's business processes (http://www.ultimaerp.com/ecommerceerp/)
PS However, there is a very small percentage of cases where the discount submarine really works. A combination of the following features is required:
the size of the average check makes the purchase so important for the target audience of buyers, so that the proximity / convenience of the location of the stores has faded into the background
There are relatively few players in the market segment, so sales points are not located at every corner
business is so marginal that it allows you to give such a serious percentage discounts, so that the money saved in real terms would be significant for Central Asia
The submarine is highly selective: it’s not easy to get cards, it’s prestigious to own them, the transition between the submarine steps requires a considerable amount of money (for target audience) money, and each next step gives a significant increase in benefits
From what is remembered to the author, only Comrade has a working discount submarine. Kusnirovich - Bosco di Ciliegi.
And further. There is a vanishingly small set of cases where, due to the coincidence of such a large number of factors, that it makes no sense to analyze them, it turns out to implement a working submarine, the essence of which lies in the plane of consumer involvement in the game.
Discounts are also present here, but this is a completely secondary factor. Here is an example of such a program of our authorship: www.ultimaerp.com/results/on_heaven
Source: https://habr.com/ru/post/301602/
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