Another Way Breakage Can Be Misused In Marketing
Over the last several posts I’ve laid out in detail my personal experience with one particular loyalty-rewards program, and how in my estimation it lost its way. Building a program based on building in obstacles and pitfalls that discourage people from actually gaining the advantages you — as a marketer — have promised, creates what I call marketing breakage.
As a final note, Winn-Dixie did change out their program about a year after I originally wrote this series. Their new program does correct some of the deficiencies I referred to, although not all. For example, customers can now once again simply give their phone number at checkout and have points credited. Also, the cards and keytabs all work pretty seamlessly now. As is often the case, the points appear to have been devalued, so that where before you had small numbers of points to earn rewards, now the structured deals in hundreds and thousands of points. This looks big…which is the point. I still haven’t figured out what they’re really worth in dollars and cents. This creates confusion and uncertainty…which I believe is also the point. I know I’m getting something…just not sure what. So whatever they tell me I get when I redeem them is what I get…but I have no idea how much value they hold until then.
I wanted to give you a couple of different takes using a guarantee and a bonus program, so you could see how the concept of marketing breakage can apply in areas other than membership loyalty/rewards programs.
When I first created The Cash-Flow Generator, the company it was done for (SDI) had never had a return, never had anyone ask for their money back. They sold programs that cost thousands of dollars, and overdelivered every time. Customers were so happy they let us actually include their names and phone numbers on our salesletters…can you believe it!?
The Cash-Flow Generator became uber-successful, eventually becoming the Longest-Running Lead Generating Infomercial Ever Made, and we sold hundreds of thousands of product nationwide every week. With that level of incredible sales, you are bound to start getting some returns (even 1% of 100,000 is 1000, and most programs average higher returns than this).
We had an unconditional money back guarantee, so sure enough, returns began showing up. The company had no mechanism to handle them! So our wise Chief Financial Officer decided to ceate all sorts of return policy rules to stem the flow. For example, buyers had to call in first, get a special return authorization number, do this, do that, do the other…” Never mind the guarantee was unconditional (“Still is! They just have to go through the proper steps!”) or that there were NO instructions in the product! All this for a course that cost $8 to fulfill and sold for $59. Talk about tripping over dollars to pick up dimes!
Can you see the breakage being built into the system? The intent was to create an obstacle course that would discourage people from seeking refunds…but still be able to promote our “Unconditional Money-Back Guarantee!”
I told customer service to take the return calls, offer to refund the money and let them keep the course anyway. Remember, this was a lead generator…designed to get more customers! I told our team to suggest they give it to their son or daughter, or neighbor if they wanted. Our referral and pass-along sales went through the roof. A few months later that CFO was replaced with another one, and sometime I’ll post one of his boneheaded mistakes trying to make himself look good…that cost us over $20,000 and probably 10 or 20 times that in sales.
Note: This series of posts is not meant to disparage Winn-Dixie or their parent corporation Southeastern Grocers, their people or their loyalty program or partners in any way. I’m simply relaying my personal experiences, which may be different from their average customer. Also, these represent my personal opinion as to how a well-meaning loyalty-rewards program can go awry, and serve to foster disloyalty and dissatisfaction in the process. I do not have insider information on their program, and I have not attempted to discuss these points with the company other than where indicated. When a program appears to be designed to be difficult for customers to utilize or redeem, and has multiple points where breakage can occur, I believe it’s bigger objectives (to create loyalty and increase sales) have either been intentionally or inadvertently subverted to save money through breakage.
