Understanding cohort data.

The use of customer cohort level data allows us to examine and predict the value of repeat purchases over time. A cohort level analysis typically seeks to answer a question along the lines of, “If I bring a new customer in with these characteristics, how much value will they bring to my business in terms of continued purchases?” Typical characteristics that may be factored into the analysis could include type of goods or services purchased, payment method, device type and time of year the purchase was made.

One such example can be shown in the chart below, where we see new customers that enter in Month 1 (initial purchase month) and the value that we gain from repeat purchase of that cohort of customers over time.

This allows us to apply an average multiplier to any future new customer revenue based on the characteristics provided—showing us that for instance, new customers driven at a particular time of year, or through a particular category or payment type, are more valuable than others. One such example is shown below, where regardless of category, driving credit customer revenue is much more valuable than customers paying upfront in full. We can also see that it pays off much more in the long term to drive new customer revenue through category A in Q1 and Q4, whereas we drive more long-term value from new customer revenue through category B in Q2.

Leveraging MMM to drive profit.

These insights are interesting themselves, but drive meaningful action when combined with media costs, effectiveness and profit margins to optimize a media laydown. Rather than simply spending on media when our traditional “busy periods” are and adapting to that, we can instead optimize our media laydown to take advantage of customer lifetime value instead. 

This allows us to not only run scenarios that seek to drive profit but also scenarios to maximize long-term customer value in the most cost effective way.

For more information on how we can help with your Marketing Effectiveness measurement or Market Mix Modelling, visit our Measurement page or contact us. 

In this spirit, I've been down a two-year-long rabbit hole in the Web3 space, investigating various digital innovations and closely observing all the steps key trailblazers are taking. While our detailed “Future of Loyalty” report with Reddit, Salesforce and Polygon Labs lays out all the facts and figures, this article represents the condensed culmination of my exploration. To start with the conclusion for a change, I believe digital collectibles as a product and Web3 as a space are highly beneficial for brands to incorporate in their loyalty programs, as they help foster the future of customer loyalty.

Benefits that go both ways. 

Now, let’s take a few steps back. Loyalty programs, which are typically presented to people during the point of purchase, are designed to incentivize customers to shop both more items and more frequently, engage with the brand more often, and share it with more people they know—in a way, it’s all about incentivizing more, more, more. To actually realize these actions, loyalty programs offer rewards that unlock various branded benefits, from discounts to exclusive product deals. From a brand’s perspective, the purpose is to find out more about its customers, while offering a value exchange. 

Brands can use various metrics to measure the effectiveness of their loyalty programs, including customer lifetime value (CLV), average order volume (AOV) and conversion rate (CR). A successful program is able to maintain or increase one or all of these metrics. For example, this means that customers continue to shop from the brand and for longer periods of time. While customers search and purchase products, the brand is able to gather a ton of data on them. More information means more personalization, which, in turn, means more rewards for consumers. In short, the objective is to incentivize actions, interactions and return visits.   

The vast majority of high-performing loyalty programs are digital, accessible through a brand’s app or website. However, that may be about to move into a new direction, as we’re now ushering into the next era of the internet—Web3—and it’s all about culture and community-building.

NFTs: your ticket into a brand’s action.  

More than just a new tech infrastructure, Web3 represents a foundational shift in the ways people organize and engage with one another. Through the arrival of Web3, we’re entering an ownership era where everyone has a chance to own a piece of the action. This ownership partly lies in NFTs or digital collectibles, which can be many things—an artwork that evolves over time as users get involved, a digital object, and more. So, how exactly do NFTs fit into the next generation of loyalty ecosystems? 

While NFTs can take on any digital form, they all act as memberships. Think of them as traditional membership passes that are built on the blockchain, offer exclusive benefits, and serve as access passes into a brand’s Web3 loyalty program. NFTs are the new means of digital value exchange that help consumers unlock ownership over brand experiences. They are the future of loyalty and community in an increasingly tokenized world, where you become a small investor in a brand and its future success once you get your hands on its NFT. By joining a brand’s community and interacting with it, consumers tend to feel proud about the NFT’s value and their personal association with the brand. This, in turn, creates a new form of engagement and commitment.

Supercharging memberships to cement customer loyalty. 

From Gucci to Starbucks, both luxury and everyday brands are looking for ways to launch into the world of Web3 and reach new communities, and the most common route is through NFTs. In partnership with SuperRare and NiftyKit, Vault—Gucci's experimental online platform—launched the Vault Art Space. It’s a place where fans of the brand, art lovers and crypto-natives can bid on, mint and collect exclusive, curated digital artworks. This future-forward move made Gucci the first legacy brand in the world to own and manage its very own digital art marketplace, demonstrating its literacy and legitimacy by using the right body language in the Web3 space as well as its ability to move beyond the hype.

As for Starbucks, the popular American coffee company has just brought a blockchain-based loyalty platform to market titled “the Starbucks Odyssey Beta experience.” This will offer its members the ability to buy and earn digital collectable stamps in the form of NFTs, which create access to new immersive coffee experiences. By integrating NFTs into its industry-leading loyalty program at scale, Starbucks is building an accessible Web3 community. The coffee company’s loyalty program is already a success story, with more than half of all sales coming from its reward members. Besides, it’s a great way for the brand to gather first-party data. Starbucks getting into Web3 is a big deal for the industry, for innovation and for brand spectators—if done right, this loyalty integration will increase its conversion rates and help the brand collect even more user data. 

This goes to show that brands from across the board are building new supercharged memberships as part of loyalty programs. Our recent “Web3 and the Future of Luxury” report, which my fellow Monks wrote and released together with Salesforce, states that “Memberships open people up to a community of others—something that’s missing from traditional loyalty programs, which provide only a relationship between an individual and the brand. And while loyalty programs are designed to reward consumers through continual consumption, memberships give them the opportunity to shape the brand and generate value.” The power of Web3 is that it builds on people’s desire to be part of a tribe by giving them a more significant role after they’ve bought into a brand, thereby cementing their loyalty. 

It’s time to launch your loyalty program into the next era of the internet. 

Though many people only know of NFTs as digital artworks, the Web3 space encompasses so much more than just aesthetics. First up, there’s identity, as you would only purchase a product to enter a space that aligns with your personal interests and values. Next up, it’s about community and connecting with a group of people that have similar passions and interests. The Web3 space is also about cooperation and teaming up with your peers. Finally, there’s also some good ol’ luck involved, as some NFTs are only available to those that had also bought into the brand’s previous NFT projects. Sometimes it’s really just a matter of being in the right place at the right time. Then again, this exclusivity is tempting. Overall, these are the guiding principles from a consumer perspective, and highlight what loyalty programs should be able to provide when customers engage with a brand’s NFTs.  

Circling back to my conclusion, I believe NFTs and Web3 are beneficial for brands to incorporate in their loyalty programs. Enhanced customer lifetime value, average order volume and conversion rates are all huge benefits that NFTs and Web3 can bring to a loyalty program. First, they allow customers to get exclusive perks for an upfront cost and continuously uncover deeper layers of the loyalty ecosystem, keeping them engaged with the brand at an ownership level. Second, NFTs offer exclusive access to unique items and benefit those who buy multiple items, which increases what people are willing to pay for an item and how much they will purchase. Third, they enhance conversion rates, as exclusive items and token-gated experiences sell out more often than not when done well. 

These are just three of the primary perks that loyalty programs supported by the next era of the internet can bring. Depending on your business and other KPIs, there may be many other benefits. This goes to show that NFTs and Web3 help foster the future of customer loyalty, as many people are eager to get into projects they believe are cool, innovative, interesting, relevant and set to deliver long-term value. How to get there? Just follow our three-step process: culture, community, and then commerce.