Hawthorne's Pizza Uses Digital Coupon Solution to Grow Sales
PROBLEM: Hawthorne's Pizza, a five-store chain in Charlotte, NC, wanted to grow its business through new customer acquisition as well as increasing the spend of customers already frequenting its restaurants.
SOLUTION: Partnered with a digital coupon/offer solution provider that works with banks to target relevant offers to consumers via their online bank statements. The offers are based on consumers' purchase histories.
RESULTS: Since launching the program in June, Hawthorne's Pizza has been tracking double-digit sales growth, a percentage of which the company attributes to its new digital coupon program.
Always willing to test new marketing tools, Hawthorne's Pizza's Director of Marketing Matthew Vincent was intrigued when he was contacted by Bank of America's (BoA) development team last spring about its new customer cash back deals program. The program, which is managed by Cardlytics, enables merchants to target BoA customers with deals when they log into their online bank account. The deals are customized to customers based on their purchase history.
Here's how the program works: Merchants tailor offers to specific customer segments. In the case of Hawthorne's Pizza, there are three segments: consumers who have never used their BoA card in one of its restaurants; infrequent customers, defined as those who have used their BoA card at Hawthorne's six times or less in the last year; and regular customers, those who have used their BoA card at Hawthorne's more than six times over the past three months to six months. After logging into their online bank account (the service is also available on mobile devices), consumers click on the offers they're interested in. Those offers are then automatically loaded onto their card. They then shop at the participating merchants, with the cash back reward automatically credited to their account. The merchants pay Cardlytics based on the sales lift these offers drive above a statistically valid control group (Cardlytics then pays the banks a small revenue share as well).
The retailers involved in the program don't have to make any changes to their processes (e.g., point-of-sale integration), which was a key selling point for Hawthorne's Pizza. In fact, they don't even know the customers that are being driven to their stores because of the offers; the transaction data never leaves the bank. Retailers participating in the program are only privy to aggregate-level sales and performance data.
"Since it's marketed on their bank statement, we're not going to get that private information," notes Vincent of Hawthorne's Pizza. "We haven't devised a way yet in-store to figure out who these Bank of America customers are. It's tough to ask everyone if they're here because of a Bank of America deal, but what we can see based on reports at the end of the month is how much value I'm getting from this. We're getting much more than four times to five times what we spend into the program at the end of the month."
Hawthorne's has seen its biggest success coming from its infrequent customer segment. Having its ads displayed to customers that are familiar with Hawthorne's but for some reason have lost touch with the brand is invaluable.
"For the infrequent customers, I've seen up to 70 percent to 80 percent redemption rate for a month, and that's insane," says Vincent. "When I see an infrequent customer, someone who has already been with us so they know us, I just need to push them over the edge to make them a loyal customer. When I see they're redeeming the offer upwards of three-fourths of the time, it just blows you away."
The targeted nature of the offers is particularly fruitful for a local merchant like Hawthorne's Pizza. With access to nearly 13 months of historical transaction data, Hawthorne's can target consumers in a specific ZIP code, based on purchases from a specific store name (e.g., a competing pizzeria), the category of the store (e.g., quick-service restaurants), the number of purchases and the amount of money spent on those purchases.
"It's low risk and high reward," Vincent says of Cardlytics' solution. "In the restaurant business the margins are already pretty slim, and this is a product that didn't eat into our profits. To have a program that significantly affects our business and that takes care of itself is real nice."