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)