Loyalty glossary · 6. Retail and grocery (20)
Targeted Promotion
Targeted promotion is an offer sent only to a selected subset of loyalty members, chosen by spend, inactivity, or other behavioural rules, rather than to the entire programme base.
A mass promotion spends the same points liability on members who would have bought anyway and on those who needed a nudge. A targeted promotion redirects that spend to the second group, where behaviour can actually change. The first requirement is transactional data accurate enough to split those groups.
Once an offer goes to a selected subset, the expected points earned by that subset are a real liability, not a marketing expense. Account for it on the same day the promotion launches. This is the accrual point most operators miss, because a promotion with a start date but no redemption yet looks like nothing happened.
Activity-based qualification is the only targeting rule that can be defended to members. A promotion aimed at members who have stopped staying or buying is aimed at people who can be won back. A promotion aimed at the top tier is a thank you note with extra points attached. The first is targeting, the second is a dividend.
An actuarial model estimates redemption for the targeted group, not for the whole portfolio. A blanket 20 percent redemption rate for a new offer to lapsed members is a guess, and a dangerous one. Lapsed members redeem at a different rate than active members. Use a model built on the segment, not on the average.
A programme runs a targeted promotion offering 10 percent bonus points to a tier of 50,000 members who average 2,000 points each month. The additional points liability is 50,000 members times 2,000 points times 10 percent, which is 10,000,000 points. At a redemption cost of 0.8 cents per point, the gross exposure is 80,000 dollars. If only 35 percent of that tier redeems within 12 months, the expected cost is 28,000 dollars, and the remaining 52,000 dollars is breakage.
Targeted promotions are opaque by design. The member who receives a bonus rarely knows why, and the member who does not receive it never sees the offer they missed. That privacy is acceptable when the programme uses it to test better value. It becomes unacceptable when the same data is used to quietly lower earn for members who are already loyal. That is not a promotion, it is a surcharge on loyalty.