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/