State of the Loyalty Industry: Glory Days by Ivan Frank, ePrize

Glory Days

If loyalty marketing were personified, he'd likely be found standing at the water's edge, reflecting on days gone by as well as his plans for the future. He may even try to skip a stone or two. Before judging where we've been and where we're headed, we usually start with where we are today. That intersection could be marked by acknowledging the presence of the Internet, the panacea of tools available to marketers, and an economic market with a sign "Recession" hanging overhead.

The Internet and related technologies have put consumers in the driver's seat. We are all spending our time more wisely - in full control of the media we choose. We spend over 30 hours a week online - not to mention the third screen: mobile.

As marketers, we are trying to crack the code of digital and engagement marketing. The good news? There are more tools than ever. The bad news? There are more tools than ever. It may be difficult to prioritize among all the choices. While the tools exist to create and extend loyal relationships, reaching the next level of loyalty and engagement remains elusive to many brands. In loyalty, as in life, setting the right priorities is more than half the battle.

The recession has also changed the way we make decisions – possibly forever. From now on, consumers will spend more wisely. From now on, credit will be different. From now on, businesses will act differently. From now on, our culture will be different.

When you see a fork in the road, take it.

What's ahead, and how do we move forward? We can see engagement loyalty on the cusp. There are some bright examples showing us it can be done well; such as with Zappos or MyCokeRewards.com. Yet, most brands have not jumped in with both feet. A recent survey of Loyalty 360 loyalty engagement panel members reveals some interesting findings:

· Most marketers rated the 'ability to drive personalized marketing via engagement loyalty' as critically important.
· Most marketers rated their brand's current capabilities to do so as 'below average.'
· Despite this gap, over half of marketers rated the #1 reason for not improving in these areas to be the 'inability to create the ROI model/case for change.'

Who invented this "Internet" anyway?

The retail marketing world faced a similar inflection point 10 years ago: the Internet. In hindsight, it seems obvious today how powerful the Internet would become for mainstream retail brands; but, at the time, major brands widely debated and doubted the future of the Internet.

Just for fun, consider the annual filings from a number of major retailers from the late '90s. Nearly all retailers failed to make a single mention of the Internet anywhere in their annual business reports -- not even in the competition section -- until the year 2000. When the market dropped out in April 2000, when many took that to mean the end of the Internet, it actually signified only the end of empty business models and the birth of true Internet retail marketing.

If you could travel back 10 years, think about the obvious investments you would make. Now, consider if board members of leading retailers could travel back in time 10 years. It's pretty clear they'd be SCREAMING at the top of their lungs about the Internet.

What will we be screaming about in another 10 years when it comes to engagement and loyalty?

ePrize recently celebrated its 10th anniversary – a milestone marking unbelievable success, unprecedented growth, and of course, a discovery of key learnings. In that time, we've been helping brands directly connect to their consumers and channel partners through promotions, loyalty, and engagement strategies. Timing is everything and we believe the time for engagement loyalty is right now.

As I contemplate our loyalty marketing future into the year 2019, I believe many loyalty winners will emerge amidst this inflection point. During great times of change come even greater opportunities.

"The best time to plant a tree was 20 years ago. The second best time is now…" – anonymous

"I wish I knew what I know now when I was younger…"

It's now 2019. Over the past 10 years, an entirely new category of brands has emerged. Many pundits call them "the connected brands." They've leveraged the power of new technology after new technology, embracing changing consumer behavior almost as quickly as behavior has changed. One-to-one marketing had been a promise for decades, but it was indeed in this decade that these connected brands took over, driving gains in market share, new product innovations, marketing efficiency, and superior profitability. Today, it's easy to see and admire their success, but in 2009, they made some very difficult choices:

· PRIORITIZATION: Despite difficulty in creating clear investment plans in digital technologies and engagement, this group took the time and pain to define ROI measurements around specific groups of consumers and specific engagement behaviors that drive value.

· DATA IS THE ROYAL FLUSH IN THE GAME OF MARKETING: These brands built and nourished consumer databases of consumers that spanned countries and continents, starting small at first but they remained steadfast to building the asset of the database.

· SPEED IS A GAME CHANGER: They reorganized their marketing and loyalty teams for speed and agility, responding to consumer feedback in real time, leveraging technologies such as "Tweets." (You may remember the name Tweets from a firm called Twitter 2006-2010, which began the micro-blogging revolution, later acquired by Facebook 2010 and changed to Twupdates, later acquired by Microsoft in 2012 and now called Bingdates).

· APPLICATION INNOVATION: Building on a carefully managed database asset, this group further invested in loyalty and engagement applications on top of technology platforms ranging from Internet, Mobile, and Social Media among others. These apps were not designed solely to market messages to consumers. These brands delivered applications that created value for their consumers such that people consumed these applications and brought the brand into the consumer's inner circle of protected time. Some of these applications have become more popular (or widely used) than the brands themselves.

· CUSTOMER AT THE CENTER OF ALL MARKETING PROCESS: With their head start, these brands further leveraged these tools to build the marketing process around the consumer. These brands pioneered and mastered the Internet and the Social Web and integrated communication mediums to drive consumer feedback and real "participation" as part of their ongoing development of new products, services, and marketing campaigns.

What does the "you of the future" want you to do now?

It's 2009. And, as loyalty marketers, we have a bright future in front of us. The obstacles may be steep but they are man-made. As consumers, we are fighting for every dollar in our pockets. As brands, we are fighting against the competition for every share of the consumer's wallet. The long-term advantage boils down to a loyal relationship between the brand and consumer. Without the presence of loyalty, the fight for every consumer dollar will become primarily about price, as commoditization sets in. Some of us are already facing this prospect all too well. Unless we prioritize, and plant the necessary trees today, they will never take root.

This inflection point presents a great opportunity to ride a wave like we have never seen. Think about how obvious some of today's reality will be when we reflect upon it in a few years. Can we really have a loyalty effort without a deep Internet and Social Media strategy? Can we really afford not to spend the time to focus, prioritize and justify new investments? While each brand's specific journey is not set in stone, the future of loyalty is gaining more and more daylight. The question is, how will you respond? Yes, there are challenges. Yes, there is risk. And yes, the time is now.

What's right about America is that although we have a mess of problems, we have great capacity - intellect and resources - to do something about them.

"Whether you think you can or can't, you're right"--Henry Ford


Contact Ivan Frank, Chief Marketing Officer, ePrize, LLC
Follow Ivan on Twitter: ivanateprize
Email: ivan@eprize.com
Call: 877.837.7493


About ePrize, LLC
As the worldwide leader of interactive promotions, ePrize creates one-to-one relationships between advertisers and their individual customers. With a focus on motivating specific consumer behavior, campaigns range from online sweepstakes to global points-based loyalty programs. Since 1999, ePrize has successfully launched 5,000+ promotions for 74 of the top 100 brands including Coca-Cola, Dell, General Motors, The Gap, Miller, Yahoo!, P&G, Disney, and Wendy's. In 2008, ePrize was named to the Red Herring 100 as one of the top private technology companies in North America. All 325 ePrize professionals are dedicated to delivering extraordinary service, along with immediate and measurable results. Headquartered in Detroit, the company also has offices in New York, Chicago, Los Angeles, Dallas, and Atlanta. For more information, visit http://www.eprize.com/.

State of the Industry: Thou Shalt Monetize? by Michael Hemsey

Not too long ago, I received an email from a client and longtime industry veteran, wanting to chat with me about the state of the loyalty industry. In her message, she mentioned that the vendor landscape seemed particularly crazed. Her quote was, “Many of the vendors knocking on my door seem desperate. Their frenzy has reached almost insane levels!”

While it is tempting to claim that the recession has been tough on many in our industry, the fact is that the recession, based on Economics 101, has also been just.

What do economics have to do with it? Bob Garfield, author of “The Chaos Scenario,” explains: “Twitter, Facebook and YouTube have altered human behavior on a grand scale. Two and a half years ago, Google paid $1.65 billion for YouTube. The 2008 payoff: about $90 million in ad revenue -- which might (but probably won't) cover the costs of copyright-infringement litigation and certainly won't cover bandwidth charges. Facebook, whose 2007 valuation of $15 billion has shrunk to about $3.7 billion, had 2008 revenue estimated at $300 million. And Twitter had $0.”

Thus, Garfield continues, the mantra: “We have the audience. All we need is a business model. As if adequate revenue were somehow guaranteed by physics or heavenly deity. It isn't. I've pored over Isaac Newton and the Ten Commandments. There is no ‘Thou Shalt Monetize.’”

Whether you’re a sponsor or service provider of a loyalty and rewards program, can you state that you’re program is meeting your financial projections and bottom-line ROI?

One innovative, if bucolic, example of coping with the fact that monetization and bottom line results are no longer guaranteed – through a loyalty program or otherwise – comes from a Dayton, Ohio café owner’s approach to pricing his menu: the customers simply pay what they want. When the meal is finished, customers have to look the owner of Java Street Cafe, Sam Lippert, in the eye, and say what they think their meal was worth.

Doesn’t that sound like an idyllic approach for new business proposals, contracts and RFPs?

(Are the crickets chirping?)

At a recent marketing technology conference in London, Ed Thompson, Vice President at Gartner, spoke about the shifts in the customer-relationship management space from “operational CRM to analytical and collaborative CRM strategies.” He coined the phrase “customer experience management” and identified three major challenges facing those companies attempting to address that gap in their organizations. He states:

1. Customers are becoming more powerful.
2. No one in those companies "owns" the customer.
3. On the whole, employees don't care.

Thompson reported “the challenge is to find someone who cares about customers in the company and then put the right measurement frameworks in place.”

Thompson also shared an interesting insight based on his analysis of data from the American Customer Satisfaction Index (ACSI). It turns out that the companies with the highest customer satisfaction scores are “food companies, Internet companies, and the like.” The interesting point was his view that “those with good customer satisfaction scores didn't actually deal directly with customers.”

"Humans screw up the customer experience," he said, warning, “and companies shouldn't confuse customer intimacy with good customer experience.” Isn’t it true that at a fundamental level, all companies, with or without a formal loyalty and recognition program, must focus on the customer experience?

If slogging through your day-to-day client and program issues hasn’t been enough to educate you on the state of our industry, or, if you’re embattled by unreasonable objectives or new executive mandates which are affecting your ability to succeed in your job – I highly recommend sponsorship and participation in the conference circuit. CardForum, LoyaltyExpo, CRMC – to name just a few – continue to afford the opportunity to speak, present, network, host and learn the true mindset of our industry elite. Even though the attendee mix has changed this year, certainly, the messages coming from the conferences are telling. For those of you who have participated this year, tell me: how many presentations have you sat through that spoke of growth and positive results over the past 6 to 9 months? Then think – whether you’re wearing a client or vendor hat – is your program growing and meeting your financial objectives?

(You can almost hear the crickets)

Participation (or lack thereof) in today’s stock market provides another analogy for the obvious separation between the players (either client or vendor) who are in a position to take advantage of today’s economic climate, versus those players who continue to sit on the sidelines – paralyzed by fear, change and inertia. The prices of blue chip and emerging companies hark back a generation, and yet some of us continue to ignore the fundamentals of business economics and hesitate to invest. We should be jumping in with both feet.

Just as we should be jumping in with both feet in launching, revitalizing or reimagining our loyalty strategies and the customer experience with our companies.

Who is John Gault?

Indeed, at every point in the economic spectrum, the bottom line matters and dictates the direction of your company, program, widget or service. It’s time to pay the fiddler, as it were. The typical client – be they an issuer, retailer, coalition, or product manufacturer – is currently plagued with Reorganizations, RIFs, budget changes, and new directions. This, in turn, unsettles the vendor and partner landscape. Projects are delayed or put on hold. Things stall…

…but not always. There are a few, select brands who have decided not to slow down. They have decided to relish the economic climate, which, in a Darwinian fashion, has helped thin the herd, and take advantage of the market grabbing opportunities that abound. There are brands who have decided, in spite of today’s economy – to change, to innovate, to demand more of their program and vendors who supply those services and solutions.

Yes, there are many vendors and widget providers foundering to remain profitable – they may have grown too fast, or may be hemorrhaging clients because they took their eye off the client service ball and are now desperate. You see it when you stroll their booths at the conferences. And when you realize that the conferences and breakout sessions, while shouting about the next big thing, have become glorified job fairs.

Have Twitter, Facebook, MySpace, Digg and the endless parade of mobile technologies paraded before us become the next big thing? Do your clients and consumers really care that you had an egg sandwich for breakfast? Do your clients and consumers grow their affection for your brand because you’ve essentially plagiarized and “retweeted” someone else’s article? What is your differentiator?

Can anyone (preferably from the client-side) who has taken the plunge and believed in the promise of merchant-funded rewards – speak of a merchant-funded program that has delivered on its consumer promise, and subsequent revenue streams? Or, from another angle, can anyone who has implemented a “loyalty-in-a-box” solution share a success story with data demonstrating consumer incrementality?

(Did a pin drop?)

These tools and widgets and emerging applications are not a panacea for a faulty foundation in your program strategy, or your customer’s experience with your product and service. We have to let the numbers speak for themselves. If, as a partner with a widget, or a vendor with a solution, your claims haven’t been supported by the results, as magnified by the P&L, it’s time for you to pay the fiddler. Darwin works.

U-Adapt?

The most recent and relevant example of bottom-line impact and the changing landscape of monetization, and, of course, the subsequent lessons which will be learned, comes from one of the most established sponsors of loyalty in our industry: the banks and the credit card.

The Credit Card Bill of Rights was signed into law in May 2009, ending unfair and arbitrary interest rate increases; stopping excessive “Over the Limit” fees; ending unfair penalties for cardholders who pay on time; requiring fair allocation of consumer payments to balances; and protecting card holders from due date gimmicks. In addition to this Bill of Rights, there are amendments referred to as “UDAP” and “Reg Z” which are pending approval with different timelines.

And the buzz on the street? “Banks are losing 50% of their fee income! Loyalty programs are in trouble!”

Not so. Let’s take a look at how the banks and issuers can, and invariably will, respond to the legislation, starting with interest rates.

Good ol’ fashioned A.P.R. Interest Rates will increase across the board: whether they are Introductory, or based on Purchase, Delinquency, Cash Advance, Employee Promotional, or Balance Transfer – nearly ALL of the APR changes banks are putting into affect will increase their rates prior to February 2010.

What’s more, banks will have other means, besides jacking the APR, to manage the new regulations so that their credit card loyalty programs can remain untouched. Those banks that were healthier prior to the economic tsunami will not have to add or raise loyalty program fees, and they will not have to change their rewards grids. They can continue, as a predictable result, to increase acquisitions, transactions and volume.

Finally, what about all of the other ways banks monetize the income streams from credit cards?

• Grace period. Essentially, banks will have to notify their consumers when their payments are due with a 21-day grace period. Prior to the legislation, a bank could give somewhere between 17-12 days notification to pay a bill. Now, statements will have to drop nearly 30 days prior to the due date so that there is assurance that the notification period is met. This means funds will come sooner to the banks… and with earlier returns on the interest.
• Annual fees – These can now be removed because the APRs are going up. Conversely, program fees for loyalty are under different rules and can remain unaffected.
• Minimum Finance Charges? They will go up.
• Over Limit Fees? These may go away, not only because Congress is rabid about them, but because APR, in some cases, can be raised by 7-10%.
• Balance Transfer Fees? They will go UP, maybe by as much as 3-5%.
• Allocation of Payments – Interest and fees will continue to get paid, first. But, banks must then allocate any payments over and above interest & fees to the higher balances before the lower balances.

In aggregate, with APR changes and fees going up on a number of daily and typical banking occurrences, banks (especially the healthier ones) are in a position to make more revenue on the new legislative mandates in comparison to what they’re giving up with compliance to the more consumer friendly Bill of Rights.

Ironic? Beautiful? Maybe not as onerous as it seems? Now what?

“Can we play the Fiddler?”

There are always, in any period of time, things we can do to move from paying to playing the fiddler. As all the best ideas come from the people I interact with, here are just a few from some of the best brands in the business:

• Make bold and foundational moves, which address your customer experience.
• Ensure that your consumer-focused program encompasses your employees and partners.
• Invest in your clients and invest in your consumers. Help them through the hard times, and know that your investments will pay off longer term.
• Do good work – if your client’s bottom line is met, even at your sacrifice, your bottom line will be met as well.
• (Re-) Focus your resources – and demand the best of your teams. They’ll deliver it. Reward your stars – employees, consumers, and partners – as they will carry you through the tough times.
• As reaction to UDAP will show, there are always ways to monetize. Find and leverage them appropriately.
• And finally, measure everything. Loyalty programs are an investment, not a cost center, and they should generate a positive return.

____________________________________

Michael F. Hemsey is President of Kobie Marketing, Inc. – a full service loyalty marketing agency based in St. Petersburg, FL – and frequent writer, contributor and industry speaker.

Feedback and Areas of Interest for This Week in Loyalty, State of the Industry, and Loyalty Management

I wanted to thank all of you for your recent suggestions regarding the 2009 Loyalty Expo, input for the 2009 Engagement Expo (www.engagementexpo.com), and how we can improve the Association and our media publications. We have listened and will incorporate much of your feedback.

Since we are market focused / member driven “voice of the customer” focused entity, we want to make sure all of the topics that we are bringing to you are relevant, timely and engaging, and to that end, we would love your feedback.

If there are areas of concern that you have an interest in, areas of opportunity that you would like us to focus on, or questions that you need an answer to, we want to address them. We have an active membership of sponsors that focus on the loyalty/reward/engagement marketing arena and we want to continue to evolve Loyalty 360 to meet your needs. What are your challenges, what do you need answered, how can we help?

Over the next couple of weeks, we will be updating our website with new functionality, ease of access, and more content to provide value to our growing member base and answer the questions that we continue to hear. We will be announcing our webinar series, as well as a slate of amazing talent for “This Week in Loyalty,” all of this will be accessible via a soon to be rolled out on line calendar. Our goal of becoming a neutral, market driven clearing house for loyalty, reward, and engagement marketing content requires your input.

We look forward to hearing back from you. Please feel free to email me or call me with any questions or input you may have.

Regards,
Mark Johnson
markjohnson@loyaltyexpo.com
President and CEO
513-290-5147

Eye on the Future (Loyalty Expo 2009)

The Loyalty 360 Expo in Hollywood, Florida, offered yet another chance for our association to show the industry how far we’ve come in one scant year. We’ve partnered with the International Marketing Association, the Motivation Show, the Petroleum Convenience Alliance for Technology Standards, and the National Restaurant Association.

We’ve just rolled out an innovative best practices database on the newly launched website. Look for us to roll out councils, offer more webinar series and focus on innovations in the time of economic uncertainty.

In short, our goal is to find the answer to today’s vital questions on how to retain loyalty, how to engage consumers and how to measure effectively.

But we can’t drag the baggage of our past along on this journey if we intend to get to our destination, as Timothy Keiningham, global chief strategy officer and executive vice president of IPSOS Loyalty , made clear in his keynote address. “We see with our brains, not our eyes, so we accept the myths in this industry,” he told the audience of 300-plus. “That’s a problem.”

Unfortunately, our brains are wired to see things consistent with our normal world — we do not see things we think are impossible. And as marketers, there’s a second twist: Our brains see patterns in everything. As a result, Keiningham says, we think that correlations are the cause, which means we buy into myths such as customers become more profitable the longer they stay with the company. (Wrong. Buyers fall into either profitable, break-even or unprofitable buckets.

You simply want to encourage the profitables to stay, not everyone in a blanket statement.) Or we believe loyal customers pay higher prices. (Just the opposite: they are quite price sensitive because they’ve learned how we tick.)

“There is no magic bullet, no simple solution to loyalty,” Keiningham said. “We have to satisfy customer needs and wants at a sustainable profit. It’s the last part marketers forget.”

Coming soon: a glimpse of how other loyalty marketing players are using what we know today to reshape our future as seen at the Loyalty Expo.

(Written by By Julie Sturgeon)

State of the Loyalty Industry: May 26, 2009

By: Bill Hanifin, Hanifin Loyalty LLC

When I think about the State of the Loyalty Marketing industry today, I see a business that is somewhere between adolescence and adulthood. From the launch of American Airlines AAdvantage in 1981 to the GM MasterCard launch in 1992, our collective experience in two pillar industries is equivalent to children between 17 and 28 years of age.

It’s not a stretch to say that the vast majority of strategic thinking and program design evidenced in Loyalty programs today have been built by Boomers for Boomers. That’s right, we are the creators of the strategies for which we are also the target audience. Reminiscent of GM’s campaign to invigorate a troubled brand in the 1980’s by proclaiming "This is Not Your Father's Oldsmobile", we’ve built the "loyalty" car that we’re comfortable riding in, but we are learning that an increasing number of others don’t necessarily want to go along for the ride.

There is at least one group of consumers who are not sure they want to jump in our car and they are 80 Million strong, representing almost 25% of the U.S. population. Generation Y (the Millennials) are largely disconnected from traditional loyalty models, and it is not surprising given that some of the oldest in the group were born in 1981, the year AAdvantage was launched. To illustrate how the world has changed since then, in that same year IBM launched its first Personal Computer and Arnold Schwarzenegger was still walking around in a Speedo.
The benefits from investment in Loyalty Marketing programs have never been more evident. Creating a community of customers that are recognized and rewarded for their patronage is the precursor to understanding their preferences, needs, and desires. Loyalty works - whether in booming or troubled economic times.

If there is any criticism to be leveled towards the mirror, it is simply that we may have spent too much time on planning with not enough emphasis on executing our recommendations thoroughly and with flawless perfection. Why else would we be still urging clients to leverage the valuable data they have collected to engender more sincere two-way communications with their customers. Or, why do we plead to invest in the disciplines of program measurement to understand performance, justify budgets, and proactively manage financial liability?

As Marti Beller stated in her article in this series, it is clear that the market is demanding innovation and we, as practitioners, must re-tool to deliver the next wave of thought leadership to benefit both our clients and consumers. The challenge is more formidable than it first appears, as we are comfortable with current structures and consumers have adopted a strong sense of entitlement to their rewards. We need to tap into a way to migrate the foundational elements of building successful Customer Strategies to meet the needs of Generation Y specifically, but also the demands of an ever evolving marketplace.

An area of focus that deserves attention is communications. Peppers and Rogers coined the term "1 to 1" Marketing and almost everyone today promotes the concept of creating meaningful two-way dialogue in the context of loyalty and rewards programs. It was not long ago that the tools available to execute a communications plan were direct mail and catalogs. Adding websites as program portals added functionality and email became the preferred communication medium with its low-cost structure and potential for personalization.

Web 2.0 came along and handed the reins of relationship building to the customer. We now find ourselves in a world offering a range of communication channels, many of which have not earned our full confidence and which we don’t even use on a personal level. I am speaking of all the options that fall under the umbrella term Social Media Marketing and includes communities, blogs, social networks, micro-blogging, and content or feed aggregation. We know these as Facebook, Flickr, LinkedIn, MySpace, Twitter, and many more.

Everyone knows about Social Media, few understand it, and there are proponents and opponents voicing opinion with increasing volume. To some, employing a social media strategy can accelerate achievement of business objectives, to others it is a greater waste of time than watching your teenager play one more round of their favorite video game. The one unifying question is "how do all these pieces fit together?" Almost every business person I know expresses interest in executing a social media strategy that is right for them.

If you are skeptical about incorporating Social Media into the communications stream of your rewards program, even hoping that the world will just "grow out of it", let me provide encouragement. Peppers and Rogers had the right concept with "1 to 1• Marketing, though execution was too costly for most companies to absorb. It is one thing to craft promotions, offers, and communications by segments, but to drive personalization to the individual account level was not financially sustainable. After the first wave of failed CRM installations, the ambitions of "1 to 1• Marketing were softened to a more practical "Mass Customization".

The unfulfilled potential of CRM and "1 to 1" communications is made possible with the range of Social Media tools available, and it will be interesting to see how our industry embraces the opportunity to transform program communications and, in doing so, find clues to engaging Generation Y with its favorite brands and creating the enduring brand loyalty that benefits all parties.

State of the Industry - State of the Industry: Industry Trends by Marti Beller - President Affinion Loyalty Marketing

Industry Trends
By: Marti Beller, President,
Affinion Loyalty Group

At ALG, we believe in the constant evolution of loyalty, it’s the foundation of our product development and something you’ll hear us talk about quite often. We pride ourselves on being able to interpret industry cues to create the next iteration of loyalty strategies. We are listening intently to what our clients, competitors, and consumers are all talking about, while seeking out further information and clarity on factors that may affect our industry as a whole.

We’ve watched trends form around us within the industry: prepaid and variable models are proliferating; rewards program owners are more cost-conscious and customers are shifting their redemption behaviors. In the past several months, we’ve witnessed changes to legislation that will affect how we market to consumers. But the most influential trend we’re watching unfold is our clients’ interest in customer engagement.

1. Customer engagement is the end goal
The focus on engaging existing customers and acquiring those through engagement strategies is a topic of conversation at almost every major financial institution, retailer, airline and hospitality company these days. True customer engagement generates strong emotional attachments to brands that are resilient even in the most adverse conditions – and the industry is moving toward further developing these emotional attachments through specific offerings tailored to customers – where usage and ongoing interaction is the goal. Customer engagement ultimately means increased revenue for those companies that are able to implement successful strategies. Rewards programs create a natural platform for engagement strategies. To that end, many of our clients are re-looking at the communication vehicles (statements, newsletters, online sites) that surround their rewards offering and re-vamping them to help empower more regular engagement with the program. The added benefit that our clients have found is that they are able to steer those engaged customers towards redemptions that help manage the rewards costs more effectively. This engagement requires a focus on the cost of usage; but it is ultimately imperative for long term success.

2. Re-valuing rewards with minimal customer impact is the pervasive goal
As you would guess, many program owners are looking for ways to save money in their loyalty programs. Those program owners are looking for various ways to control costs without harming
their relationships with consumers or the perceived value of their rewards programs. We’ve developed ways for our clients to lower their cost-per-point without losing consumer confidence through innovative redemption steering models that continue to drive a high perceived value of the rewards program at a reduced cost to the program owner.

One way program owners are saving money without harming the consumer is through an implementation of 100% variable redemption model. This feature allows the redemption value in points to be set based on the cost of the redeemed item, thus eliminating expense risk for the program owner. These variable models drive down the costs of rewards in general without de-valuing the program for the customer, since the benefit is usually increase customer choice and earlier access to rewards. Customers are able to use points and cash, or miles and cash, in one transaction. This functionality creates a seamless, one-step process that benefits the customer from an ease-of-use perspective and the program owner from a cost control perspective.

Customers are also shifting their redemptions towards everyday activities. We’re seeing a shift in the types of gift cards being redeemed with many more redemptions for gift cards to everyday retailers within the categories of grocery and casual dining rather than specialty retail shops. Through understanding these trends in redemption behaviors, we help our clients position various offerings to their members to achieve their customer engagement goals by implementing cost effective measures and tactics. Our ability to extrapolate various data points from the loyalty programs we manage allows us to make recommendations to all of our clients helping them to provide quality offerings to customers while maintaining cost efficiencies for themselves.

3. Prepaid cards represent an untapped opportunity
Buzz surrounding prepaid cards has reached a fever pitch lately in the financial services and loyalty industries. We’ve helped many clients include and/or transition to prepaid cards in their redemption matrix. While they are a good alternative to cash back models, they have also been used to decrease the risks associated with retailer bankruptcies and unused gift cards. These prepaid cards have the appeal of universal acceptance for the consumer and a breakage model for the client.

As a leading loyalty provider, we’re constantly listening for pieces of information that help us fine-tune our offerings to provide valuable products and services to our clients, and subsequently, their customers. We continually invest in analytics and research to develop a breadth of offerings to help our clients meet their overall loyalty and profitability objectives. As Loyalty 360 emerges as the voice of the consumer and a forum for all loyalty providers and program owners, I invite you to leave your comments on trends you’re seeing throughout the industry to further promote Loyalty 360 and its communal learnings.

What do you think? Post comments and responses on the Loyalty 360 Blog: http://blog.loyalty360.org/

Day 3 - From the National Restaurant Association - State of the Loyalty Industry

The State of The Industry – questions from the audience for the Givex Loyalty Panel at the National Restaurant Association. I thought this would provide insight into some of the questions restaurants are asking about loyalty and engagement marketing programs.

1. Are you using data from your loyalty program to enhance the customer experience at the Point of Sale?
a. Response one from panel participant who has a large coalition program: No
b. Response two from a restaurant considering a loyalty program: They use customer feedback, but it is not integrated into the POS

2. How much time should you spend on your loyalty program development and continued support if you are a small chain (2 locations)
a. Response one from panel participant who has a large coalition program: You should allocate ¼ of an FTE for program development and administration

3. For a small regional restaurant chain, how do you address the logistic challenges? How do you get them to enlist?
a. Response one from panel participant who has a 20 location loyalty program: Servers, wait staff, and front line people are the best way to accomplish that. Yet you need a detailed training program to make sure they understand the program, and the objectives / value proposition.

4. A medium sized restaurant asked, “Margins are low (12-13%) in my restaurant, and I have heard the mention of 10% reward payouts and discounts, is that an effective discount? Is it still profitable?”
a. Response one from panel participant who has a 20 location loyalty program: Yes, our program is very profitable. We look at total spend, lift and change in spend patterns.
b. Response two from a restaurant considering a loyalty program: They have a 2% current cost for customer solicitation and they are themselves trying to figure out if a 10% reward make sense
c. Response from Loyalty 360: Consider all soft and hard benefits of the programs. There is no set threshold for rewards, make sure you engage and listen to you customer to make sure you develop and continually monitor the program to make sure it is engaging in the manner that the customer need/want. Always consider the perceived value of the reward and the ability to drive behavior.

5. Do loyalty programs provide a return?
a. Response one from panel participant who has a 20 location loyalty program: Yes, our program is very profitable. Yet ongoing maintenance is very important.
b. Response from Loyalty 360: Absolutely, yet programs cannot be developed and rolled out in a vacuum. They need to be pro-actively monitors with the end user in mind.

6. There is a concern about the proliferation of cards and getting someone to card “one more card.” Are there different methods (credit card, alternative technologies) by which you can identify them.
a. Response one from panel participant who has a 20 location loyalty program: Yes there are several “new” technologies, but they may not drive the behavior, not integrate with your systems. It was mentioned that Givex has several of these technologies that are integrated into their loyalty offering.

7. The final question was around the percentage of sales that come from a membership program, as well as when sales fluctuate (up or down) in total, how do the sales of the loyalty program participants change?
a. Response one from panel participant who has a large coalition program: He would not give the percentage of sales from the loyalty program, but he said when same store sales are up, the loyalty program participants are up more, and when same store sales are down, the loyalty program participants are down, but by not as much.
b. Response two from panel participant who has a 20 location loyalty program: 70% of their sales come from their loyalty program members, it was quoted by the CEO last fall and he was free to divulge the information. They loyalty program, its database and information base are integral in all of their marketing initiatives.