Loyalty Management, Evolve Or Exit: Adapting Your Loyalty Program To The Ever-changing Landscape Powered By Loyalty 360 - July 2009

LOYALTY Volume 1 Number 3

July 2009

MANAGEMENT Powered by Loyalty 360

Flawless Program Execution

Is the Art of Client Service Dead?

EXPO 2009! Highlights & Reviews

A FREE MEAL?

The unfried chicken calamity

Marketing Automation

Marriage of Process & Technology Evolve or Exit: Adapting your loyalty program to the ever-changing landscape

Build true loyalty by building better relationships. A more strategic, data driven approach can help you move to the next level of loyalty. With genuine insights into the needs and expectations of your customers, you can talk with, treat, and reward different customers in unique ways. This is what we call true loyalty.

Bring this approach to life with comprehensive services from Maritz. It's our business to understand what matters most to people. Enable them with knowledge and tools. And motivate them to change behaviors. To start working on your relationships, stop by booth #100 at the Loyalty Expo. Ready to learn more now? Visit maritz.com or call (877) 4 MARITZ.

This Month in LOYALTY MANAGEMENT

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VOLUME 1

LOYALTY FORUM

W W W. L O YA LT Y 3 6 0 . O R G

FEATURES

DEPARTMENTS 6 What’s on Loyalty360.org 8 Letter from the Editor 10,12 Contributors

NUMBER 3



22 Building Relationships—Are your customers ready to bail on you, or are you already bailing on them? Jeff Anulewicz & Wayde Fleener – Carlson Marketing

14 Your Voice “What changes could an airline loyalty program make to their program to get you to switch your allegiance?” 16 Q&A: Ask the Experts “What factors should I consider as I look to open our program to multi-tender transactions?”

24 18 Behind the Brand/People Interview with Andy Wright, President, Brand Loyalty-U.S. – Carlson Marketing Worldwide 26 20 Books Loyalty Reads

Page 59

LOYALTY EXPO 2009 60 Expo Takeaways: “Keep it Real” Al McClain – RetailWire.com

62 Eye on the Future: Summaries from Loyalty Expo 2009

Are the Best Things in Life Free? Some say no. Holly Daly & Nicole Nunn Walker – MetroSplash Systems Group Navigating Today’s Stormy Loyalty Industry And The Merchant Network Component Andrew M. Cirmo – Consumer Benefit Services, Inc.

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Evolve or Exit: Adapting your loyalty program to the ever-changing landscape Kelly Passey – Access Development

Julie Sturgeon

68 The Loyalty Expo gets Social with Twitter Bill Hanifin – Hanifin Loyalty, LLC

70 Behind the Brand: Beverly Hollifield, AT&T



32 Avoiding the “Rooster Syndrome” Kathy Lambert & Tom J. Salutz – DataCo 38 If You Build It, Will They Come? What it takes to make your loyalty initiative successful. Phil Rubin – rDialogue

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Building relationships, one person at a time. Carlson Marketing knows how to take care of your customers. We have unparalleled experience launching and managing relationship marketing programs. Our deep understanding of customer data translates into insight – and value – for you. Our full suite of services, creativity, strategy, execution, end-to-end operational excellence and enthusiasm all combine to make us the perfect marketing partner. When you’re looking for direction on how you can turn customer engagement into organizational value, contact us. Let our experience work for you. carlsonmarketing.com | 763.212.4520

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This Month in LOYALTY MANAGEMENT

J U LY 2 0 0 9

VOLUME 1

TRENDS & REWARDS 40 The New 4 P’s of Customer Engagement Summary of Whitepaper by Affinion Group

NUMBER 3

W W W. L O YA LT Y 3 6 0 . O R G

BEST BUSINESS PRACTICES 46 The Mystery of the Missing Loyalty Effect Peter Gurney – The Cicerone Group

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42 Is There a Loyalty Marketing Generation Gap? Bill Hanifin – Hanifin Loyalty 44 Loyalty Insights Study Chris Cottle – Allegiance

Is the Art of Client Service Dead?

Loyalty Management Editorial & Production Team: Erin Raese – Editor in Chief Caitlin Schar – Editorial Director Victor Wilcox, Graphics Plus Inc. – Layout & Design Graphics Plus Inc. – Print Production

Chip Hall – Kobie Marketing

Loyalty 360 team:

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Marketing Automation: Marriage of Process and Technology Key to Unlocking Customer Loyalty Connie Hill – TFC, Inc.

Mark Johnson – President and CEO Laura Rusche – Director, Marketing Operations Amanda Chasteen – Associate Manager, Marketing Operations Thomas Scott – Sales Associate Jennifer Wickline – Marketing & Events Coordinator Julie Hellebusch – Controller

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Reeling Them In: How Orvis Nets More Sales with a Co-Branded Credit Card Partner Advisors & Bill Eyre – The Orvis Company

Contacts: Article Submissions: Erin Raese (630) 235-8251 Advertising: Caitlin Schar (630) 850-7867 To subscribe to Loyalty Management visit Loyalty360.org.

We Want Your Feedback As a “voice of the customer” focused publication we want to hear from you—our customers. What would you like to see included in these pages? Share your thoughts on articles and ideas for content. This is your platform. We would like to hear from you.

54 On front lines of loyalty, the mission is clear— Know Your Customer Acxiom – Featuring William Nipper and Janice Rudenauer 56

Program Success Story: RocketBux Brings More Traffic, Revenue Increases Paul Willerton – RocketBux

57 Loyalty Program Profile: Starbucks Card Rewards & Starbucks Gold

58 Job Openings

Write us at: [email protected]



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LOYALTY 360 ON THE WEB

What’s on Loyalty360.org BLO G

State of the Industry An interactive dialogue with seasoned industry leaders in the loyalty, incentive/ reward, and engagement marketing space. Hear from Bill Hanifin (Hanifin Loyalty), Marti Beller (Affinion), Mark Johnson (Loyalty360) and others. Join the discussion! Bill Hanifin

Survey Results and Participation Opportunities

LOYALT Y E XPO 20 09

If you missed it in This Week in Loyalty… Epsilon: Survey Results Show the Benefits of Permission-based Email Marketing Transcend the E-Commerce World

See who was there and what they had to say.

More from Loyalty Expo 2009!

WHITEPAPER Read Affinion Group’s whitepaper “The New 4 P’s of Customer Engagement Marketing” in its entirety (for summary see pg. 38)

Schedule of upcoming webinars and events. 6

Marti Beller

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knowledge. deliver y. results. how mot ivatin g. Let us motivate you. At Affinion Loyalty Group (ALG), we offer ways to drive profitable behaviors among your customers using any means possible: points, miles, rewards, incentives, enhancements. Our years of experience ensure we acknowledge, understand and anticipate marketplace and consumer trends, helping us design programs to motivate your customers’ behavior. Some of the most recognizable brands have employed our services to develop loyalty solutions to meet their profitability goals. We believe loyalty should be a business strategy with a positive ROI. And our proven loyalty solutions repeatedly result in profitability for our clients. n more about our loyalty about yalty our lo ar Visit us at www.affinionloyalty.com/loyalty or call 800.622.4863 to le learn marketing services and how we can help create loyalty between you and your customers.



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FROM THE EDITOR

The New Customer Heading home from the second Loyalty Expo, what a difference six months can make! We learned how technology has begun to reshape our lives again; from iphonifying and gamification, to conference updates, daily blogs and yes, tweeting. This technology is going to significantly change how our marketing is done. For those of you who’d like a quick lesson on tweeting, see Bill Hanifin’s tips on page 68. In the spirit of grasping this new technology, come follow Loyalty Management on Twitter.

Loyalty 360 has announced the first annual Engagement Expo to be held in Chicago at the Sheraton Chicago Hotel & Towers November 8–10 2010 Loyalty Expo to be held on June 6 – 8 in Orlando, FL at the Omni Champions Gate Loyalty Management on Twitter

LOYALTY MANAGEMENT

3 Volume 1 Number

Powered by Loyalty

July 2009

360

Flawless Program Execution

Is the Art of Client Service Dead?

EXPO ts20& 09!

While technology and social networking were hot topics, we also spent a great deal of time learning about the *new* customer. The economy fluctuations have changed us all. We’re still spending. But our approach to spending has changed significantly—we’re more educated and a bit more frugal. This means, as marketers, our messages need to change—simple, value focused messages and a strong focus on getting back to the basics are imperative. Highlights from our speakers are included in the Expo in Review section beginning on page 59. Dove-tailing with these messages, inside are articles from Kobie Marketing and TFC. Chip Hall from Kobie stresses the importance of strong client services and Connie Hill from TFC tells us why automation is imperative as we move forward. During the conference we lost a dear friend and one of the most knowledgeable and passionate loyalty supporters I’ve met, John Dawson. In the last issue and at the conference John and his team taught us about the retention imperative. In this issue they continue to wake us up to the need for analytics, go and meet the rooster on page 32. We’re dedicating this issue to John and his family. We will miss him greatly!

Highligh Reviews

A FREE MEAL? en The unfried chick calamity

Marketing Automation

ss

Marriage of Proce & Technology

Adapting EvoLv E oR Exit:

your loyalty progra

m to the ever-changin

g landscape

Loyalty Management will now be a bimonthly publication. Expect the next issue in late August!

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Sincerely,

Erin Raese Editor-in-Chief Loyalty Management [email protected]



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LOYALTY

Contributors

MANAGEMENT

Jeff Anulewicz

Wayde Fleener

Andrew M. Cirmo

Jeff Anulewicz

Wayde Fleener

Senior Planner, Mobile and Interactive Strategy. Jeff is responsible for developing and leading Carlson Marketing’s strategic mobile initiatives in the U.S. Getting an early start in the interactive space, he spearheaded some of the earliest online efforts at Ford Motor Company and on behalf of several Fortune 500 brands through his tenure at Carlson.

Director, Decision Sciences. Wayde ensures the right measurement and analytics are in place for Carlson Marketing’s clients, and then uses the data to design programs that will drive maximum value. He has extensive experience in decision making processes, and loyalty marketing, and he leads one of the company’s largest accounts.

Andrew M. Cirmo

Peter Gurney

Chief Operating Officer, Cbsi. Andrew joined Cbsi in 2002 with over 25 years of experience in the retail, direct marketing and loyalty industry. He has a broad executive management skill base and has held officer level positions in two Fortune 500 companies.

Managing Director of The Cicerone Group, a company specializing in customer experience strategy, measurement and management. Over the past 15 years Peter has written and spoken widely on the service-profit link, and has worked with organizations in many industries to create more profitable service strategies.

Chris Cottle Peter Gurney

Chris Cottle

Chip Hall

Holly Daly

VP of Marketing, Allegiance. Chris Cottle leads the brand strategy, public and analyst relations, events, lead generation and marketing communications initiatives for Allegiance. Chris has extensive experience in technology brand building in both B-B and B-C markets, and is a regular contributor to loyalty, engagement and voice of the customer forums and publications.

Chip Hall

Holly Daly

Bill Hanifin

Manager of Marketing Communications at MetroSplash Systems Group, Inc. Holly is responsible for brand management and integrated communications in both B2C and B2B communications. Holly is known for her creativity and ingenuity for the using social networking environments in an integrated loyalty schema.

Managing Director of Hanifin Loyalty, LLC. Bill is a recognized leader in the areas of loyalty marketing, payment systems and technology with an impressive history of developing and implementing loyalty customer strategies for leading organizations around the world.

Bill Eyre Bill Hanifin

Bill Eyre

Bill Eyre has been Director of Advertising at The Orvis Company since 1998, and for the past five years has also managed the Orvis Rewards Visa program. Bill has held creative and marketing management positions in the direct marketing field for 20 years, following several years in the editorial and photojournalism fields.

Director of Client Services at Kobie Marketing. Chip brings over 20 years of experience and expertise in managing successful client relationships with specific focus on strategy, organic and incremental portfolio growth, tailored marketing programs and promotions, and client communications.

If you would like to contribute to a future issue of Loyalty Management please contact Erin Raese at (630) 235-8251 or ErinRaese@ LoyaltyManagement.com. Deadline for the Nov./Dec. issue is August 10th!

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Michael, age 36 Combined his points for a well-deserved golf experience

converted

“I my credit card points to my debit card.”

Cbsi provides more ways to build rewarding relationships. www.consumerbenefit.com | 800.657.8167 | [email protected]



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LOYALTY

Contributors (continued)

MANAGEMENT

Connie Hill

Connie Hill

Phil Rubin

President and Founder of TFC Inc., an innovative provider of marketing automation solutions, brings more than twenty-five years experience delivering strategy and execution services to the marketing community.

CEO & President, rDialogue. Phil has more than 20 years of strategic marketing experience with an emphasis on loyalty and relationship marketing, integrated communications, partnership development, promotions and program development.

Kathy Lambert

Phil Rubin

Kathy Lambert

Director of major client relationships and marketing for DataCo. Kathy’s career has largely revolved around applying technology solutions to solve both internal and external client issues. Kathy has well-rounded experience in product management, sales, telemarketing management and business systems, implementing the right strategic tools to help clients sell more.

Al McClain Janice Rudenauer

Al McClain is CEO and founder of RetailWire.com, the online community for the retailing and related industries. He has spent 30+ years building businesses—both clients’ and his own—in the retailing industry.

William Nipper

Al McClain

Julie Sturgeon

Will has more than 26 years of database marketing and market research experience, including 16 years with Acxiom Corporation. He currently serves as Acxiom’s industry strategist over the media, communications and travel industries, advising clients on all aspects of integrated multi-channel marketing.

Kelly Passey William Nipper

Nicole Nunn Walker

Kelly Passey

Paul Willerton

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Executive Vice President of Incentive & Loyalty Services at Access Development. Kelly has over fifteen years of experience in the financial bankcard sector with specific focus on incentive and loyalty solutions including seven years at VISA managing Incentive Marketing Services.

Janice Rudenauer For more than 20 years, Janice has specialized in linking data-driven marketing with the brand experience to deliver on the brand promise across marketing, sales and customer service. Her expertise spans multiple industries with leading roles on CRM strategy practice, relationship marketing and online intelligence. Janice currently serves as a marketing strategist at Acxiom.

Julie Sturgeon Julie is an independent journalist with 20 years of professional writing experience in business and trade publications.

Nicole Nunn Walker VP of Merchant and Member Marketing at MetroSplash Systems Group, Inc. Nicole has a rich background in driving awareness and demand generation for an impressive list of both B2B and B2C products and services. Nicole has served in senior management roles in marketing and business development for organizations such as Texas Instruments, CA and Amdocs.

Paul Willerton VP Marketing for RocketBux. Paul is experienced in software planning and architecture for mobile payments, triggered messaging, location-based services, mobile barcodes and point-of-sale redemption. He works with all-size brands for deploying strong mobile strategies for retail and web.

Comarch Loyalty Management

The last puzzle piece in Customer Relationship Management Loyalty | Business Intelligence | Customer Experience For more information visit: www.us.comarch.com

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LOYALTY FORUM: Your Voice . . . Loyalty Programs

The following question was posted to the Loyalty 360 social network…

A senior executive at a top US based airlines asked:

“What changes could an airline loyalty program make to their program to get an individual (you) to switch your allegiance?”

H

aving been a member of a program for about 20 years I have seen a significant number of changes! I am not as loyal to United as I once was because the program became “devalued.” Here are some ideas that would win me back: • Make the program easier to understand. • Make it easier to use upgrade coupons for First Class or other services. • Waive the baggage and overweight charges for higher tiered members • Make me feel like I am important to them again with little perks or surprises. Some hotel programs do this very well.

Gerald Przybysz Operations and Marketing Executive

T

his is about the difference between treating people like a transaction and having a valuable relationship with their customers. I fly to 48 states every year and clients continue to ask me why I fly Southwest instead of an airline with 1st class seating. I always answer that I prefer the relationship I have with Southwest over that of an airline which offers a “no class” experience. You can’t buy my loyalty, you have to earn it.

Jeffrey Summers President at Restaurant Coaching Solutions

I

believe the core issue is equity. It is not always the changes that could be made to drive a person’s migration from one air carrier program to another. I am an American Airlines AAdvantage person with many miles in my account (actually way too many). The only way I would consider a migration is to ensure that my current program equity is not lost, either in miles or level (plat or exec. plat) for example. With the travel today being more of a hardship than a pleasure, my level is just as important as my miles, and knowing that everything from upgrades to taking care of me in time of cancelled flight. After the minor question of does this new airline fly where you want to go, the key element to switching my airline loyalty is equity migration.

T. Jack Williams Chief Executive Officer at eCommLink

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“It’s really the recognition of status and “soft benefits” that come with status that truly frequent fliers appreciate the most.”

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’d like to echo Mr. Williams comments above regarding portability of equity & status migration. It seems to me that this would be a/the primary hurdle for any true frequent flier that has become vested with any one airline. If an airline can offer to port over status at minimum, that’s probably half the battle. And of course, as anyone that has been on the program development side for any length of time understands about an airline’s “best customers”, although the miles (and “hard rewards” from them) are certainly important, it’s really the recognition of status and “soft benefits” that come with status that truly frequent fliers appreciate the most. So, if an airline can offer soft benefits that are innovative and truly superior to their competitors for their top-tier customers at least, I believe that’s the other half of the battle. Whether that’s priority coverage for cancelled flights and upgrades, separate Security lines for higher-tier members along with First/ Business passengers (BA, for one, has this I believe), and/or the waiving of so many of these new and most annoying “a la carte” fees. Remove the annoyances that customers feel with your competitors. None of this is should be “groundbreaking news” to anyone, but it I suspect it bears reinforcement.

George Dedes Direct Marketing./CRM/Loyalty Marketing Strategy

“Listen, this isn’t about points, upgrades, or other tactical issues; it’s about creating a better experience.”

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ere’s my suggestion. When a program member reaches a certain point level, all flights booked become “refundable”. (and p.s.: Paul Allamby is right on)

would echo Paul Allamby’s thoughts and add that the bane of loyalty is commoditization. Regrettably that is the result many loyalty programs (the airlines and otherwise) have achieved. No doubt the airlines survey their top customers and hold focus groups time and again to determine the “appropriate” mix for their loyalty programs. As reflected in the postings here, the question often leads the respondent down a path that produces a predictable response--more miles, upgrades, expedited service, etc. This has resulted in a focus on the program and not loyalty in general, with customers “shopping the market” for the best deal--commoditization. As soon as the competition comes out with a better deal, the consumer jumps ship. True long-term loyalty isn’t about programs and perquisites; it’s about the customer experience from pretransaction through post-transaction. How many airlines bother with post-experience follow through? And I’m not talking about a boiler-plate thank you from the flight crew/ captain when arriving at the gate or an e-mailed customer feedback survey. Does the customer feel appreciated prior, during, and afterward? Did the experience exceed the customer’s expectations? Southwest is one of the very few airlines that comes close to getting it right. Consistently get your customer where he wants to go, on-time, without drama. Inform him of any changes in a timely manner. Treat him with respect. And, proactively make amends for shortcomings. A friendly smile, good humor, and empathy go a long way while costing nothing. So, my suggestion to your airline executive, would be for him/her to take off his airline executive and budget manager cap and put on his customer cap. Personally experience several flights (incognito if he is easily recognizable by airline employees), from several different cities in the US and abroad, flying in different classes, on his airline and others. Listen to unsolicited comments made by passengers in the terminal, at the ticket counter, and on the plane. I suspect this experience will provide him with significant insight. The proof will be in what he does with what he learns. Execution is everything.

Ron Shevlin Senior Analyst at Aite Group

Steven Glover International Association Executive

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ith all that an airline must do to stay competitive and in business, it is with sincere appreciation and amazement that they are able to maintain this level of service. 1st. Honor the competitor’s miles from making the switch. 2nd. “Pricebreaks” at different tier levels. (Why should I switch to a higher fee/price structure?) 3rd. Baggage “Free” if you fly with me on a regular basis, not tied to a mileage program reward/tier program. 4th. Make it easier to purchase on board products ie; Hawaiin Airlines no cash allowed to purchase. How about prepaid “Snack and drink cards?” 5th. If you have “premium” seating charges, waive those for certain tier level members. We complain because we think we want more (and we do) and yet I wonder if the airlines themselves are beginning to feel “maxed out?”

Leonard Buchholz Seminar Leader

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isten, this isn’t about points, upgrades, or other tactical issues; it’s about creating a better experience. If American or United could deliver a reasonable, CONSISTENT AND RELIABLE experience, they’d keep more clients. Southwest has invested more money in its employees and it shows. Wake up guys—would you really trade mediocre service for points?

Paul Allamby Brand-activist

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Q&A LOYALTY FORUM: Q&A

Ask the Experts

Q: “My current loyalty program is contained to only

transactions made on my card product, what factors should I consider as I look to open the program to multi-tender transactions?”

A:

When making the shift from a private tender approach to multi-tender, there are several factors to consider. First, I favor multi-tender especially if your core consumer offering is not financial services. The goal is to garner a relationship to the brand not just a product or service. At the same time, a specific product or service such as a card product is important to segments of customers. Therefore, it should not be diminished in a multitender approach. Depending on your situation, the card product can be very important to your customers and organization. So, as you move forward, keep in mind: The business impacts of the shift. The card product typically provides financial benefit through lower interchange, fee income and marketing support. Understanding the financial implications will be very important. The decision will hinge on your organization’s goals. For many organizations, visibility and consumer insight is a primary goal. The increased consumer insight gained through multi-tender will drive financial results across the organization including the card product.

—John Bartold, Vice President Loyalty Solutions, Epsilon

The consumer facing challenges at point of sale. Private tender and multi-tender will compete for position at the point of sale off-line and on-line. Do you promote multi-tender loyalty, the card product or both at point of sale? Again, once the customer can be identified and understood, it becomes easier to target the right mix of products and services to their needs. Design the value proposition to support the card product. Consumers using the card product should be recognized and rewarded. The card is a badge for the brand and it delivers financial benefit to the organization. Therefore, the value proposition should be designed to encourage consumers to adopt and use the private tender within the multi-tender effort. Focus on customer segments and their relationship to the brand. A successful loyalty effort will draw the attention. Everyone will want to use ‘loyalty’ as a way to drive their specific area. Single tender versus multitender will be one of many competing, internal interests. Defuse the competitive pressure by demonstrating how segments can be served through targeted mixes of product and services. It may take a little time before you have the visibility and insight needed to achieve success. Be diligent and stay focused. Serve the consumer and they will serve you.

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A:

Expanding a customer recognition and loyalty program to include multiple payment options can make a lot of sense—after all, you want to engage with your customers no matter how they choose to pay. But, you can also create a program that accounts for the difference in payment habits. For example, does a debit card customer have a different purchasing profile from a credit or private label cardholder? Probably so—and that means different strategies. Customers segment themselves by preferred payment type, so take advantage of the opportunity this presents you. Never forget that the cost of accepting payment varies by type; your earnings models should reflect this. The critical metric for the value of a merchant loyalty program is whether it’s creating value for the perceived “sunk” cost of payment acceptance. Work to determine what this value is for your organization and how to measure it. Take a fresh look at your loyalty program objectives and ensure you can measure its ROI. Finally, don’t leave the point of sale out of your program’s scope. It’s the last mile of loyalty; transform it into a point of engagement, so you can reconnect your brand with your customers at the very moment they pay, however they pay.

A:

CCG has worked with many clients to create “multi-tender” programs. Most recently we helped Talbots expand their Classic Awards program, which had traditionally been a Talbot’s Charge program, to all forms of tender. There are many compelling reasons for an organization to look to expanding its programs beyond their own credit card, a few are:

—Sandra L. Gudat, President and CEO, Customer Communications Group

360 View of the Customer. Programs that focus on only one tender type, such as a proprietary or co-branded cards miss out on collecting customer transaction behavior data when a customer pays with other forms of payment such as cash. They also miss out on identifying and understanding customers who will never carry the organization’s card. These customers often “fly under the radar” and can account for a substantial amount of sales (and are often resentful that they are not included in loyalty initiatives if they don’t carry your card). Programs that focus on only one payment type result in data that is skewed to customers who can or want to become cardholders. This presents a very incomplete picture to those who depend on the customer insights generated by the data collected by the loyalty program.

Q:

—Jake Sterling, Vice President Payment Technology, Maritz Real-Time Rewards

Customer Insights = Opportunity = Profitability. The more robust understanding of all of your customers and their spending habits results in better insights that can be used to inform the entire organization (not just marketing). Many years ago we worked with a retailer in Chapter 11. They had a very limited understanding of their customer which could be summed up as “female, aged 25 to 55, pink collar, married with 2 kids.” After looking more closely at who was actually coming into their stores it turned out that there were many important and diverse customer types shopping, including new college graduates shopping for career-ware for the first time as well as upscale grandmothers who wanted to look hip. The composite that the retailer had been working from actually wasn’t representative of their most important segments yet that was who they were targeting in their marketing, merchandising strategy, store locations and new product development. This disconnect between the real customers and the management team nearly sunk the business. It’s easier than you think. Luckily, in this day and age there are many options to help facilitate the capture and tracking of all customer transactions. Data storage and access is practically a non-issue as there is a solution out there to fit every pocketbook. Of course, organizations have used reverse append and other technologies in years past, which have become much more difficult and costly to utilize. However, everyday, there are new solutions going on the market to make it easier. For instance, one solution allows organizations to swipe a customer’s driver’s license when opting into their loyalty program thus eliminating the need for data entry. The license can then be used in the future to track purchases, thus eliminating the need for a loyalty card. L

Do you have a question for our panel of experts? Write us at: [email protected]



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LOYALTY FORUM: Behind the Brand/People

Andy Wright President, Brand Loyalty – U.S. Carlson Marketing Worldwide

Andy Wright joined Carlson Marketing Worldwide in 2005 and is responsible for Carlson Marketing’s global Loyalty Marketing, Enterprise Engagement, Creative and Interactive offerings. As a member of Carlson Marketing’s Executive Team, Andy is known for his thought leadership and his ability to knit together the talent that exists across Carlson’s global network that spans 21 countries. His team of experts is noted for bringing cool, new ideas to clients that deliver results. Which sports team is your favorite? How much time do you spend tracking your team? When I was a kid growing up, I played rugby and enjoyed it more than soccer, unlike most Europeans. So being from Wales, I follow two teams actually—the Ospreys, a club side and the Welsh national team. There is a quite an “underground” rugby-playing community in the U.S., certainly at college level, but not much to go and see. Even so, the U.S. national squad is getting better and better; I saw them play against Munster, the European champions, last year in Connecticut. I track team news through RSS feeds (everybody does these days from the club) and try to watch the big games if possible. And then occasionally I will travel to see an international—wherever they may be.

Which talent would you most like to have? I would love to possess a true ”fine art” skill. I love just about any form of visual art and have collected bits and pieces over the years. But I have always dreamed of having the skills to make my own work. My lack of skill hasn’t stopped me dabbling, even to the point of creating some garden sculpture many years ago when I wanted a piece and couldn’t afford one. But the results would have been far better if I had true talent.

Which person has made the most impact in your life? Without a doubt it would be my wife who has influenced me the most over the years. She’s been my life partner for 18 years and we make all crucial life decisions together.

“The way he taught was to let you make mistakes and then help you figure out how to make the situation right. It really opened my mind, helped me think “beyond the box.” What do you consider your greatest achievement? I’m very happy with my career and some business milestones over the years do ring out, but ultimately my greatest achievement, jointly with my wonderful wife Liz, has to be my family. We have managed to raise two great kids, Ellie (10) and Luc (7), and still manage to retain our sense of fun in an environment where work is all encompassing.

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However, if you are looking at this from the business context, it would be very hard to pick just one person. I really believe I learn from everyone I meet. But, if I absolutely had to pick one person, it would be a fellow named Roy Boss, who was the Managing Director of Brann Worldwide when I was there some years ago in the UK. He really helped me transform from a senior manager into an executive with responsibility for running a business. In addition to developing my operational management skills, he also took the time

“This summer I will be riding in the Etape du Tour in France—basically the Tour de France for amateurs.” to come into my office regularly on an ad hoc basis and just debate business strategy, and kick around ideas. The way he taught was to let you make mistakes and then help you figure out how to make the situation right. It really opened my mind, helped me think ”beyond the box.” I have never forgotten that. I still call him and he is still a mentor to me even today.

If you were not doing what you do today, how would you be spending your time? If the question is really referring to what other activity would I be doing, it would be very hard to imagine something where I wasn’t able to use my brain or able to grow a business. That is very important to me. In terms of an activity outside of the business world, I would love to spend more time outdoors cycling, which is my passion. In fact, this summer, I will be riding in the Etape du Tour in France—basically the Tour de France for amateurs.

What’s your customer loyalty philosophy? Before Carlson, I had been in the business of Relationship Marketing for many years. When I came to Carlson, I was really struck by the difference between standard relationship marketing and loyalty. I had done Relationship Marketing programs and been involved in everything from analytics to database marketing to the creative side of the business over the years. But, it was fascinating to see what loyalty marketing does for above and beyond standard Relationship Marketing— to the point where I think loyalty marketing will be a fundamental principle of most marketers; some get it now, more will learn it in the future. The fact that loyalty programs involve a notable exchange of value really drives much more of an emotional relationship between the brand and the customer. And from that you can build a much stronger connection and I think that’s fascinating. And that’s really why I got into this business. Relationships count. And we believe in the value of building strong relationships. It’s loyalty marketing that enables the development of enduring relationships between a brand and its customers. So every day, with each interaction, our philosophy is to build valuable customer relationships for our clients.

What can we expect from Carlson in 2010? We’ll continue to grow! We’ll grow in the traditional loyalty sectors that loyalty marketing has always played



to—financial services, travel, retail -- and in newer sectors as well, packaged goods for one! In addition, you will see us more involved endto-end. While we were once considered more of a loyalty operations agency, we are now experiencing huge growth on the front end of our business: the strategic and conceptual parts of our business with brand planning, analytics, and insight to drive more communications and engagement. A strong loyalty program is as much about engaging the consumer with great communications as it is about being able to bank points. You will see a lot more digital, mobile (we’ve mobilized 25% of our client companies so far!) and interactive activity from us this year and going forward as well.

Word of advice for a novice loyalty marketer: I would say “first of all, you have made the right decision.” Assuming you’re a novice to marketing in general, loyalty marketing is a great place to start your career because you’ll see every aspect of marketing in which you could ever possibly get involved. Everything! From marketing strategy to database marketing and IT, analytics, communications, rewards and measurement; you will gain an understanding of how everything fits together. Even if you came from another branch of marketing and haven’t been involved in loyalty before, as I did, you’ll find this industry is a great place to be because it’s a great driver of growth in the future. Pretend for a moment that you are thinking about a loyalty strategy for your clients. You’ve gone through the steps of figuring out the financial implications; determined the needs, wants and behaviors of your audience; determined your communication strategy and figured out how to really deliver value back to your client’s customers to build a relationship. If you’re thinking in these terms, then you are truly engaging customers in the brand and you’re right on. If your ideas are creating a value exchange that drives engagement with the program that allows you to get your message across, then that drives further value. Thinking about it in those terms, you can see how loyalty marketing can affect just about every industry you can imagine. And, thinking about that makes you realize that no industry is immune from building relationships with customers. You have made the right decision. L

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LOYALTY FORUM: Books

Loyalty Reads COLLAPSE OF DISTINCTION:

Stand out and move up while your competition fails By Scott McKain

April 2009 | Nelsonfree | http://collapseofdistinction.com

A cross country road trip or a flight across time zones today will teach you a sobering lesson—the faster we move, the more everything begins to be the same. From Starbucks in Singapore to McDonald’s in Memphis, a sobering conformity has taken hold. Whether you’re buying a meal, an insurance policy or even a new car, the customer experience has a scary sameness that has buyers growing less impressed, and less loyal, than ever before. A challenging economy makes it all the worse, as customers become infinitely more discriminating about where and how they spend. Scott McKain’s new book, COLLAPSE OF DISTINCTION: Stand out and move up while your competition fails, takes a close look at this growing problem and offers cogent, practical advice for businesses searching for ways to truly stand out from their competitors, especially in a challenging economy. The book offers four key steps to truly differentiating your company from the pack: clarity, creativity, communication and customer experience focus. Together, these four components provide a jumping off point from just being different to being truly distinct. McKain says an economic downturn is the perfect time to grab market share from your competitor and COLLAPSE OF DISTINCTION provides a road map to do it.

ANSWERING THE ULTIMATE QUESTION:

How Net Promoter Can Transform Your Business By Richard Owen and Laura L. Brooks, PhD November 2008 | Jossey-Bass

Answering the Ultimate Question is a how-to manual for designing and deploying a successful Net Promoter® program from authors Richard Owen and Laura L. Brooks, PhD, or Satmetrix. The book is a follow-up to Fred Reichheld’s 2006 best-seller, The Ultimate Question, in which he introduced the Net Promoter® Score, the customer loyalty metric co-developed by Reichheld and Satmetrix. Based on one question—“how likely is it that you would recommend this company to a friend or colleague?”—the Net Promoter Score enables organizations to categorize customers into “Promoters” and “Detractors.” The motivation for Answering the Ultimate Question was to identify the actions that organizations have taken to deploy a successful Net Promoter program and create a practical guide on how to improve customer loyalty and drive growth. Owen and Brooks spoke with more than eighty organizations that have implemented Net Promoter programs to identify best practices. Owen and Brooks combined their years of experience in the field with their research to develop the Net Promoter Operating Model targeted at executives and practitioners who seek to implement a Net Promoter program. The book introduces and explains the six elements of this model and shares a number of case studies from companies including Experian, Intuit, LEGO, Symantec and Virgin Media.

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WHY LOYALTY MATTERS

By Timothy Keiningham and Lerzan Aksoy 2009 | BenBella Books

In Why Loyalty Matters, prominent loyalty management experts TIMOTHY KEININGHAM and LERZAN AKSOY draw from the most comprehensive study of loyalty ever conducted, the landmark Ipsos Loyalty Study, to show why our loyalties, large and small, are critical to our happiness as individuals and our success as a society. Loyalty is essential to maintaining stable family and personal relationships, influential businesses, and high-functioning communities. When loyalty dies, there’s a chain reaction of negative consequences. CEOs worry more about shareholders than the companies they serve. Businesses start to view workers as expendable. Employees job hop and lose passion. Consumers buy what’s cheapest. Marriages break up and loneliness increases. And children grow up without knowing the value of service and citizenship. In Why Loyalty Matters, readers learn: n How to leverage 10 relationship building blocks to shape your interactions at home and work n How organizations can gauge and strengthen employees’ loyalty—and why they should n How to boost your company’s profits by finding and developing loyal customers n How to achieve career fulfillment through loyalty to your job and coworkers n How to develop more loyalty in your friendships, family, and community Throughout, the authors present practical ways to examine your loyalties across multiple areas that have been scientifically proven to correlate to happiness, and offer strategies for changing how you relate to others in your professional and personal life. The book culminates in a four-step process, called P2R2, that gives readers tools to strengthen their loyalty bonds at work and at home. Why Loyalty Matters is the definitive guide to understanding what loyalty is, why we need it, and how to unlock its power to achieve more happiness and fulfillment.

CATALYST CODE:

The Strategies Behind the World’s Most Dynamic Companies By David S. Evans; Richard Schmalensee May 2007 | Harvard Business School Press

Google has done it with search-based advertising, Sotheby’s did it more than two centuries ago and Facebook is doing it with GenY. They all cracked the catalyst code—and they couldn’t have done it using traditional business strategies and tactics. These two-sided businesses generate value, engagement and customer loyalty by creating simultaneous and mutually beneficial relationships among the different groups of customers they serve. In a book that challenges conventional wisdom about pricing, product design, organization, incentives and rewards, David Evans, Richard Schmalensee and Karen Webster provide the first step-by-step framework for launching and sustaining these dynamic businesses. They examine the most successful catalysts of all time, as well as many that tried and failed, and provide original insights into the secrets of success. Catalyst Code draws lessons from early history, modern-day business, and the author’s groundbreaking research into what really makes these companies tick. L



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FEATURES

Building Relationships

Are your customers ready to bail on you, or are you already bailing on them? by Jeff Anulewicz & Wayde Fleener – Carlson Marketing

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In these tough times, it’s easy to cut back on your customer loyalty efforts and easy to stop spending money on building relationships with your valuable customers. But, at what price does this come? If you’re ready to bail on them, don’t you think they’re one step ahead and ready to bail on you?

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elationships are tricky; they’re fickle and take time to build. And, ultimately they require a great amount of trust. But, if you’ve invested anything at all, in building relationships with your customers, here are a few points to stay ahead and keep from falling behind:

Customer data is at the core of building relationships. A sophisticated loyalty/relationship program typically offers one of the richest customer data sets a firm will hold. Organizations who adopt a relationship-based loyalty strategy are building it on an understanding of fundamental strategic questions about their customers. Who are they, what they are worth, and what are their desired and actual behaviors? From this information they can determine who to target and what tactical executions are required to drive an increase in the economic value they add to the business. A loyalty program not driven by data is usually driven by discounts. These programs don’t discriminate between truly valuable customers and the occasional discount shopper. A relationship-based loyalty program, on the other hand, will reward and build customer value.

Powerful, insight-rich communications reach customers at an emotional level, driving deeper dialogue to change behavior. Done right, loyalty marketing programs provide a powerful communications channel for relevant and timely dialogue and messaging designed to add to that customer information set. They also provide a mechanism to reinforce the brand experience to create and enhance the emotional component of loyalty. The power of enabling the customer’s voice and then listening to it, creates a strong relationship. And, with decreased noise, comes increased relevance. While data may be considered dull, it’s what enables the fun “stuff” in which customers can engage. To maintain that relevancy, a brand needs to ensure the data which drives these communications decisions is diligently captured and maintained in order to evolve along with the consumer relationship. Using technology enables you to do it at the right level. The inherent strengths of the mobile medium for instance; the concepts of consumer impulse and proximity, uniquely position it as the ultimate loyalty mechanism. This allows brands to get closer than ever before to true 1to1® marketing and fulfill on the promise of right-time, right-place,

“The relationship you have with your customer is not about the transaction. It’s about the interaction.” From data to insight; loyalty marketing is the fastest path. Loyalty marketing is the fastest path to the insight needed to “know” your customers, engage them in an ongoing dialogue and build an exchange that will help realize optimal value from every customer relationship. By recognizing and rewarding valuable customers, they will in turn exchange information that can be used to create better products and services to more closely fit their needs and desires. It’s pretty basic. Listen and respond with content, information, access and tangible benefits relevant to your customers’ needs and wants. Yielding rich data-driven insight, loyalty marketing will identify those behavioral and attitudinal elements that will inevitably drive engagement up or down. As Don Peppers says, “customers don’t want choices, loyalty schemes, newsletters—they simply want what they want.” The key element is about providing relevant experiences.



right-message. In the mobile world, trusted relationships are driven by relevance and value. Mobile’s ability to enable high value, relevant offers—delivered in the correct context, at the correct time—is in the center of loyalty marketing’s sweet spot and drives the ultimate goal of interactivity. The relationship you have with your customer is not about the transaction. It’s about the interaction.

Now isn’t the time to bail; you need your customers more than ever. A loyalty program is the price you pay to know your customers and, the price you pay to connect. This is the best time to take your relationship to the next level. With integrity, commitment and trust, the strength of your customer relationships will remain strong. Now isn’t the time to bail; you need your customers more than ever. L

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FEATURES

Are the Best Things in Life Free? Some say no. An examination of the psychographics that are motivated by “free.” by Holly Daly & Nicole Nunn Walker – MetroSplash Systems Group

Free [free] –adjective 1. Provide without, or not subject to, a charge or payment: free parking; a free sample. 2. Given without consideration or a return or reward: a free offer of legal advice.

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ow can we start a conversation about consumers being motivated by “free” without acknowledging Oprah’s free chicken giveaway? For those who live under a rock, Oprah Winfrey, the talk show queen offered a coupon available exclusively through her Web site, oprah.com for 24 hours on May 6th. The coupon offered “two pieces of grilled chicken, two individual sides and a biscuit” for free at participating KFC restaurants. The coupon was sought out so frequently that “Oprah Winfrey KFC coupons” was the fifth most-searched item on Google Trends by Wednesday afternoon, only hours after it had been posted. Stores across the country reported they were inundated with customers looking to redeem coupons for a “free chicken meal.” Some restaurants quickly sold out and told customers, who have until May 19—excluding Mother’s Day, May 10— to use their coupons, to come back. More that 10 million coupons were downloaded from the offer website and over 3 million Americans have already “tried” to redeem the internet coupon for their new “unfried” chicken. The redemption demand became too overwhelming for KFC and their franchise operators. So much so, that the President of KFC had to go on the Oprah show and extend the program by staggering redemption dates among geographic regions and offering an additional “Free Pepsi.” Stories of long-lines, sit-ins and angry customers fueled the news for the days following.

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So what is the moral of this story? Since the 19th century economist have used the term, “There is no free lunch” to warn prospective investors of expecting easy money or windfall results from their efforts or lack thereof. Perhaps the adage should now state “There is a free lunch if you can redeem it.”

“In reality, there is Free in the truest sense of the word and then there is the accumulation to free, which is the tender loyalty marketers use in their negotiation with the consumer.” The flaw in the Oprah and KFC free unfried chicken offer is that it was truth in advertising. In other words, there was really an offer of “free” with no strings attached. Downloading the coupon, redeeming the coupon and eating the meal involved absolutely zero commitment from the consumer.

Since the 19th century economist have used the term, “There is no free lunch” to warn prospective investors of expecting easy money or windfall results from their efforts or lack thereof. Perhaps the adage should now state “There is a free lunch if you can redeem it.” There was no purchase required, nor identification requested. While there are several seasoned marketing departments around the globe that offer sophisticated promotions that use a “Free offer” as a negation technique with the consumer (for example: Buy one, get one free), they all require something in return from the customer. Which, by definition, changes the connotation of “free.” In the Oprah/ KFC example, they had to alter the original offer to, “bring your downloaded coupon to a location near you, provide your contact information and we will mail you a voucher redeemable for not only the Unfried chicken meal but a Pepsi soft drink as well.” This gives KFC the opportunity to capture the motivated consumers data and continue to market to them in the future. Presumably under this new redemption model, the demand will decrease significantly. In reality, there is “Free” in the truest sense of the word and then there is the “accumulation to free,” which is the tender loyalty marketers use in their negotiation with the consumer. There is plenty of “free” in loyalty programs, but there is always a price associated with that “free.” The price comes in the form of a frequency, a referral, an accumulation or a preferred behavior. There is something very democratic about the “price of free” barter exchanges hence, the beauty of free enterprise. No pun intended. While it is debatable among our peers, we believe there is a psychographic profile that is immune or resistant to offers involving “free.” There is an extremely analytical personality type (typically male) that fundamentally distrusts “free”; giving credence to the motto, “there is no free lunch” or “if it is too good to be true it probably is.” With that said, we do have evidence that this same analytical profile is highly motivated



by accumulation of wealth, and the accumulation can be monetized with several different tokens: points, miles, rewards, fuel, discounts, cash back etc. The key is the process of “earning” the accumulation of the reward. When the consumer feels like they have “earned” the free token then it becomes a “Freemium” in their mind (a premium reward for their loyal behavior). Which are exactly the perception loyalty programs set out achieve. While no program should be designed around one set of demographics or psychographics, I do think there is something to be learned from the free unfried chicken calamity. There is also a consumer profile that has a deliberate desire to “earn” their rewards in life and it is very doubtful that they downloaded Oraph’s coupon (or even watch Oprah for that matter). Would that same individual have completed a survey for the coupon or used a coupon that stated “buy one, get one free?” Perhaps. It will be very telling if KFC uses this new rain check strategy to capture analytics about who redeems their free lunch and then comes back for more unfried chicken. L

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FEATURES

Navigating Today’s Stormy Loyalty Industry And The Merchant Network Component by Andrew M. Cirmo – Consumer Benefit Services, Inc.

We’re faced with a “perfect storm” of conditions in today’s struggling market, financial institutions must apply a spirit of innovation to set up both short-term and longer-term solutions to restore profitability to all programs. The pressure is on for current loyalty programs encompassing debit or credit card transactions and even an enterprise wide solution covering a full range of retail products. Maintaining and growing revenue, while controlling margins by improving portfolio quality and lowering operating cost for all programs, presents a daunting task for financial institutions and loyalty program providers.

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oyalty program providers owe it to their clients and to themselves to apply that spirit of innovation the loyalty industry was built on, as far back as the days of “trading stamps,” and to step up with both short term and long term solutions. It’s time to look at all facets of programs, including the delicate balance of points per dollar assigned, point valuation and other means of reducing ongoing costs and supplementing income. Yes, even the seemingly obvious needs to be weighed and analyzed to determine the right course of action. We are beyond the easy fix to relieve pressure and to restore profit levels by adjusting customer reward pricing (point values) upward and adjusting points per dollar earned downward. In fact, there is serious risk involved. While on paper it may seem that these quick fixes will improve margins by lowering costs, they may dilute the value proposition to the customer and put entire programs at risk. The lynchpin of any program is a value proposition that offers the customer reasonably achievable point reward goals, while providing the financial institution with a cost structure delivering the necessary ROI. The value proposition, or the point levels set per reward value, must be both recognizable and reasonably achievable by the cardholder. The goal is to produce improved transaction frequency and size, thus improving overall activation and frequency with resulting retention and LTV. However,

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adjustments too far in minimum reward redemption threshold, or in overall point value per reward, will produce results opposite those desired.

As experts in this arena, with knowledge of downstream redemption percentages and case studies of account acquisition, activation and overall program profitability, we must provide cost alternatives and cost containment alternatives. But, we must do so cautiously and with an emphasis on managing the risks of solely leveraging costs, without looking for ways to generate additional revenue. Back in 1898, prior to the current credit and debit card economy, the trading stamp business began in a small Milwaukee department store named “Schuster’s”. By the mid 20th century, it had grown into a multibillion dollar industry. It was a success because it leveraged a merchant network approach, where multiple retail locations participated in the overall cost of the reward program in order to provide their customers with additional value for each purchase at a very low investment cost. In this type program literally “a rising tide lifts all ships”. The merchants participating realized increased customer loyalty,

“Innovation is not always something new, but many times an updated version of a time tested solution.” increased transaction frequency and volume per transaction. Best of all, by promoting these “stamps”, they created a value proposition which supplemented their product margins and created top of mind awareness for their participation in the program. Customers realized the value of the stamps upon redeeming them for a selection of gifts. Sound familiar?

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nnovation is not always something new, but many times an updated version of a time tested solution. The trading stamps system is long since gone, but in 1999 Consumer Benefit Services, Inc. (Cbsi) leveraged this great old idea and developed one of the first new generation merchant network programs for financial institutions tied to the usage of a financial institutions’ core loyalty debit and credit card programs. They developed and tested a program by which card users were rewarded with bonus points per dollar by using their credit or debit cards at specified merchants both national in scope, web-based and at hundreds of locally-based merchants (in the geographic footprint of the financial institution). These points were funded by special purchase rebates provided by the merchant network participants.

A merchant network is one option, but it may not be a significant income generator for all financial institution card programs. However, the time has never been better to consider this option. A merchant funded program will not be the sole offset to point reward costs because the percentage of overall transactions, which would have to go through the merchant network, would typically have to exceed 15% to do so. It is rather one way to reduce overall point cost and create a number of tangible benefits for cardholders and financial institutions alike. When deciding to add a merchant network program, consider the size and type of the card portfolio, the geographic footprint of the financial institution and the merchant network provider itself (there are several to choose from with strong differentiated capabilities). Extensive research should be completed when selecting one to partner with to assure the depth and sophistication of their program. This research is important when considering the scale and pertinence of the merchant network itself, the ability to add and manage a local merchant component, and the technology to process data and to support, report and analyze the program.

“The financial institution could name a specific nonprofit organization to which a portion of all merchant network purchase rebates would be donated. The good will for the social consciousness that this generates for the financial institution is priceless.” Cardholders benefit from bonus reward points on purchases. Financial institutions benefit from the top of wallet positioning of their card, increased card usage and the generation of more reward points per transaction at no incremental cost, providing a lower overall point cost. Merchants gain a promotional vehicle to draw new customers at a very low acquisition cost. Cbsi worked closely with its merchants and with the financial institution to develop special offers from the merchant network targeted to their cardholders, thus further stimulating sales for them, points for cardholders and obvious benefits to the financial institution. They also explored a nonprofit organization element by which the financial institution could name a specific nonprofit organization to which a portion of all merchant network purchase rebates would be donated. The good will for the social consciousness that this generates for the financial institution is priceless. Cbsi worked with nonprofit organizations to promote the financial institution’s card to their members to stimulate donations! Today, with charities hard pressed for donations, the timing couldn’t be better. This early merchant network program served to differentiate, generate excitement and to add a new income stream to enhance the value proposition of the core program.



We need to step up with smart innovation while maintaining the value of our programs. And merchant network funding programs are but one of many ways to supplement income, differentiate and excite cardholders and add value. As a loyalty industry, we are still nascent in our use of the web to provide our financial institutions’ customers with real time and exciting relationship-based, one-on-one marketing opportunities designed for individual needs driven by sophisticated file segmentation and transaction analysis profiling. The use of wireless device technology in personalized marketing, to stimulate usage and loyalty, is another exciting opportunity, which we all need to be ready to participate in. As loyalty program marketers, it is not a good plan to ride out the storm. We need to turn into the storm and sail aggressively. As an industry, let’s look back at what has worked, be avid students of current conditions and look forward to create what will be. Most of all we need to supply practical solutions for our clients. We need to navigate today’s stormy financial industry conditions using the compass of experience acquired over years of developing and supporting viable value propositions for the cardholder. As we follow the map of the successes and failures of the past we must be open to the uncharted waters of innovation, from pricing to technology to advanced analytic-based targeting. L

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FEATURES

Evolve or Exit: Adapting your loyalty program to the ever-changing landscape by Kelly Passey – Access Development

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In loyalty, as in everything, change is the only constant. And, we have all seen the pace of that change accelerating as technology advances. Consider the radio industry, which took 38 years to become a 50MM consumer industry. Television took 13 years to reach the same benchmark. The Internet? Four years. And texting? It surpasses the number of people on the earth daily.

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espite the rapidly changing landscape, the goal of the loyalty marketer remains the same: to increase the likelihood a consumer will (re)engage with a brand/product upon an identified need. To achieve this goal in such an evolving marketplace, loyalty programs need to adapt just as quickly. Of course, evolution occurs naturally in the wild. It is far less natural in business, requiring proactive data collection, analysis, decision making, retooling and implementation. Apple, as an example, has mastered adaptation to an evolving marketplace as it moved from desktop to iPod to iPhone. But more often, companies are reluctant to force evolution of our programs, and, in the loyalty industry, the results are sobering.

Data is the Key: “Time will tell if industry stakeholders are able to gain real advantages by leveraging transaction data.” —Frank Andrews, First Annapolis

The Consequences of the Status Quo A 2006 Colloquy study evaluated the “Best of the Worst” loyalty programs over a 16-year period. During this time: • 24% disappeared, with no replacement plan • 14% disappeared, intending to replace • 7% relaunched • 21% underwent “major modifications” • 34% “evolved” In the end, 45% of programs had to retool or exit. These failing plans had three things in common: • Costs: 85% of programs reported flat funding across all customer segments—meaning the best and the worst customers were earning and being recognized at the same level. • Conversation: 75% of programs reported having little to no consumer dialogue built in to the program. If there is no capture or analysis of the customer voice—how does one know what works and what doesn’t? • Data: 82% did not appear to be collecting or using member information, usage or transactional data.

These results reflect a failure to acknowledge change in the three fundamentals of a loyalty program: its financial demands, the voice of the customers it serves, and the data that represents that voice. However, the results do not reflect a lack of consumer interest in loyalty programs. In fact, loyalty membership grew by 25% from 2006 to 2008 across all program types. The financial services area alone saw an astounding 77% growth, with an estimated 80% of all consumer cards (both credit and debit) now equipped with rewards programs. Yes, loyalty saturation exists. Nonetheless, consumers remain more attracted to companies that offer loyalty programs, and 80% of loyalty members indicate the program impacts their purchasing decisions. So, what is our mission if we decide to accept it? 1) Cut through the noise by keeping the program simple 2) Instill trust by delivering what is expected, and 3) Reward or recognize for everyday behavior—redemption for the right customers should be easy, encouraged and embraced. (continued on next page)



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Evolve or Exit (continued)

“It is not just where the cardholders spend (dining and shopping) and how they spend (brick-and-mortar) that matters, we needed to know when they spend.” TABLE 1

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ollectively, no one works toward failure of a program. We all work hard to build and launch successful rewards and loyalty programs, and we can’t afford to be passive in monitoring their results. Ongoing reevaluation is essential, as the noise in the marketplace continues to increase and more programs miss the mark with complexity or weakened value propositions, ultimately eroding consumer trust. As further evidence of this, the average household now belongs to 14 loyalty programs, yet participates in only 6 of those programs at least once annually— the fundamental definition of ‘loyalty’ has been muddied in the consumer mind. We are compelled as loyalty marketers to work harder to earn customer ‘share of the mind and wallet’ with programs that remain relevant by evolving along with our members’ changing needs. How do we determine these needs? The booming CRM and data analytics industries are more than willing to help answer these questions. The Aberdeen Group recently reported that Data Analytics will capture a higher percentage of loyalty programs spending in 2009 than any other effort—and for good reason (see Table 1). Yet, while data analysis has never been more important, budgets for these efforts have never been tighter. The good news is, you can affordably and effectively retrieve much of the needed data by thoroughly analyzing your existing program and combining the results with existing external research.

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AN EXAMPLE: INTERNAL DATA ANALYSIS At Access Development, we have witnessed the impact of using internal program data analysis and external data proof statements to add greater value and relevance to one particular banking client and its cardholders, thereby capturing greater spend with our merchant-funded rewards program. Initially, we set out to simply understand the basics of the client’s cardholder spending patterns—namely, where they spend, how they spend, and when they spend. We then reviewed transactional activity to determine which categories saw the greatest spending. This data informed our strategy as we added merchants to our network prior to launching the program, to ensure relevant and meaningful merchant content where cardholders were already spending.

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hen, over a two-year period we watched to see where members actually earned their rewards. Out of hundreds of categories, we saw a polarization occurring into two—dining and shopping. The customer voice, through the data, was telling us these are areas where they like to shop and earn rewards. We saw 64%-75% of transactions and 55%-74% of spend falling into these two categories respectively. Listening to that ‘customer voice,’ we again mobilized our merchant acquisition efforts accordingly. Over the next year of the program, we set aside less relevant categories and increased dining and shopping locations within this client’s footprint, delivering a 117% lift in dining partners, and a 294% increase in shopping locations.

“This simple, affordable, threestep exercise resulted in increased cardholder engagement, with 22% of cardholders active and engaged in the rewards program and top earners receiving up to 14% in merchantfunded rewards.” Meanwhile, we noted several online discount networks launching in market. Analyzing both internal transactional data and external studies, we saw limited value in an extensive online strategy. Brick-and-mortar retail captures 95% of discretionary consumer spending over online shopping, with 80% of that spending occurring within a 20-mile radius of one’s home. We added an online shopping component simply to enhance the perception of value, yet continued to focus program expansion on brick-and-mortar locations within the region of our banking client, based on the fundamental usage data. It is not just where the cardholders spend (dining and shopping) and how they spend (brick-and-mortar) that matters, we needed to know when they spend. Again, we turned to usage data to find that cardholder spending directly correlates with when they have the most time and money—on payday and the weekend. Clear spikes were seen around the 15th and 30th of each month. We evolved our email marketing efforts accordingly to coincide with these peaks in spending, customizing emails to feature merchants within a 25-mile radius of the cardholder’s zip code. We then initiated weekly “thank you” emails on the weekends to remind cardholders of the rewards they had earned.



This simple, affordable, three-step exercise resulted in increased cardholder engagement, with 22% of cardholders active and engaged in the rewards program and top earners receiving up to 14% in merchant-funded rewards. This amounted to hundreds—and in a few cases, thousands— of dollars in rewards a year. We evolved the program to maintain an affordable, relevant offering that was simple to use, delivered what was expected, rewarded for everyday behavior, AND had the intended impact on loyalty. In the end, creative data mining both saves and makes money. Don’t let the complexities of data analytics lure you away from the common-sense questions. Start simply. Start at your next team meeting and ask these questions about your loyalty program: • Would you sign up? • Would you actively participate? • Would you tell your friend about it? • Would you tell family about it? • Would it reward you enough to change your existing behavior? If the answer is no, it’s time to look to your program data, get your customer feedback and adapt your program. The customer marketplace we serve is evolving—with or without us. L

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FEATURES

Avoiding the “Rooster Syndrome” by Kathy Lambert & Tom J. Salutz – DataCo

The Rooster Syndrome [shorthand for the Latin: cum hoc ergo propter hoc (“with this, therefore because of this”) is an easy trap for marketers to fall in to when they explain why things happen the way they did. Using a control group allows you to avoid believing that the rooster’s crowing causes the sun to rise. As an eternal optimist, the headline of an article which said, “Loyalty schemes likely to breed ‘WOM champions’” seemed promising. Incentive and rewards programs are powerful weapons in the marketers’ tool kit. Especially in times when those rewards and programs may be providing the main competitive differentiation or at least an important element of the value proposition against an increasingly wary, informed, frugal, and just plain jaded customer base. But, if loyalty programs could be shown to “breed” Word Of Mouth champions—rather than just identifying the likely WOM champions—that would really be news. Further in to the research summary the article stated that the study had revealed “significant evidence of a direct correlation between reward program activity and consumers’ positive WOM endorsement activity.” And it included factoids along the lines of: loyalty program members were 127% more likely to be WOM champions than the normal population. But while the title said the loyalty program was likely to “breed” these champions, the article stopped short of saying that they were WOM champions because of the program. Unfortunately, other recent articles have not been as cautious as they should be. So it is time to quickly discuss a couple of points the article’s title raises, because this is not simply an issue of semantics or serendipity. We believe that it has never been more important to determine what is working—and how—in your marketing budget. You can no longer settle for what appears to be working, or what your “gut” says is working. You need to know in order to allocate your resources as effectively as possible to maximize your results. And, since it is possible to actually know what’s going on, there is no excuse to operate blindly.

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For most companies, the objective of reward, incentive and loyalty program is to increase customer retention and revenue. But since these programs come in many different forms, the statements made about the performance of customers in any particular loyalty program or scheme should be properly measured against a control group to prove that the objective is truly being met. Let’s look at some real world data where misinterpreting it could create a significant problem for the marketer.

Because there is a difference, the program caused it: Often loyalty program members are compared to nonmembers to determine the value of the program against real objectives. The point is—while not refuting the claim that the sales performance of the reward customers is greater than non-rewards—that it is not sufficient to attribute those differences in sales as being caused by the reward program. It is a logical error to attribute cause and effect to statistical differences between a result and a prior fact. In fact, statistical analysis does not provide a proof of cause. It only states that some relationship exists between the two sets of data. In the example we began with it’s the loyalty program membership and the WOM champion. In the example below, we show a relationship between average spend and joining a rewards program. In either instance, even when the differences are great, it still doesn’t mean that the Reward program generated the incremental sales or ‘bred’ WOM champions. Let’s review the hypothetical results from a program we ran for one of our clients. Credit Card A sends a direct mail campaign to active cardholders, encouraging enrollment in their Rewards program. From the active cardholders in good standing, we created a mail target and a control group. As part of the campaign results, we analyzed spend activity for 4 months subsequent to the mailing. Here’s a summary of results which did not find any incremental sales from the rewards: Credit Card A - Test Failed Post-Campaign Behavior % of Total Mail

No Mail

Average Spend

Joined Rewards 10%

Did Not Join Rewards 90%

Total

100%

$1,000

$444

$500

% of Total

N/A

100%

100%

Average Spend

N/A

$500

$500

Incremental Value:

$0

We found that the Rewards customers spent more than twice as much ($1,000 versus $444) as those that didn’t enroll, and twice as much relative to the control group ($1,000 versus $500). However, in reality, there was no increase in sales that

“The statements made about the performance of customers in any particular loyalty program or scheme should be properly measured against a control group to prove that the objective is truly being met.” could be attributed to the mailing ($0 in Incremental Value). How is that possible given the results? What happened? As with many Rewards programs, the customers who responded to the offer in this case were most likely to already be the client’s “best customers”. These customers have the most to gain from a Rewards program because they intend to continue to spend. They are active buyers and the Rewards offer is just an opportunity to either save money now or accumulate points that will provide additional value in the future. So the Rewards program did not generate incremental sales; rather, the rewards program segmented the more loyal customers into the rewards program, and the non-loyals into the non-reward group.

Predictive analytics and modeling are critical tools for the marketer. And the use of control groups will keep your measurements reliable, your vendors honest, and your CFO happy with the results. In this example, the Reward program appeared to generate additional sales, but the control group showed that the program was in fact ineffective. However, the only way you would immediately know that the program was ineffective would be through a comparison with the control group. Otherwise, you might be inclined to actually increase the funding to this effort, and then be left wondering what happened at the end of the year when the budget was gone and sales were flat. In our opening example, it is far more likely that the Loyalty schemes that were described actually identified the WOM champions in the customer base rather than bred them. Why does it matter? Because it tells you as a marketer who is in your loyalty program and—when added to some qualitative research—it will suggest what to do about it. Conversely, it may explain why adding more regular customers to the loyalty program may be unlikely to “breed” more WOM champions— as was implied.

(continued on next page)

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Avoiding the “Rooster Syndrome” (continued) Yes Virginia, you really do need a control group: In the example we used, the client was able to set aside control groups, but for many Loyalty Marketers, that is simply not an option. Unfortunately there is no shortcut. In fact, there is just no other way to guarantee that you are measuring the right things and actually achieving your goals. The control group is literally the ruler you need to optimize your efforts. Without it, you might think that your loyalty program created advocates instead of just enrolling them. You might think you had generated incremental spending on the part of your customers instead of just identifying the ones who spend the most anyway. And, you might think that by enrolling a lot of customers in the Rewards program that you had also identified the most easily incentivized to spend more. In every case, the opposite or counter-intuitive was precisely the case. Predictive analytics and modeling are critical tools for the marketer. And the use of control groups will keep your measurements reliable, your vendors honest, and your CFO happy with the results.

As Mark Twain once said [to the chagrin of our ilk], “there are liars, damn liars and statisticians.” We told you right from the beginning that we are optimists by nature. So we like to think that Mark meant that dictum as a friendly and cautious reminder to be careful when interpreting the meaning of any statistical measure or relationship. Because—while it would be very easy to fall into Mark’s continuum—you can stay out of trouble by remembering the simple rule: measurements are important but you can not always draw a cause and effect from them. Or, as my mother used to say: “The road to hell is paved with unsupported conclusions drawn from measurements that ignore the fact that statistical relationships do not guarantee cause, that averages can be comforting but deceiving, and that not all customers behave the same way. Consequently, identifying segments of customers and targeting them appropriately is much better done utilizing control groups.” Alright, alright, Mr. Twain. It just might have been more like something about the rooster not causing the sun to rise… L

I’m beIng pulled In a mIllIon dIfferent dIrectIons. except yours.

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mobile

website

display ads

direct mail

call center

point of sale

connect wIth more people In more ways. In a world where consumers are bombarded by marketing impressions, Acxiom enables marketers to reach the right people with the right message across all key marketing channels: email, mobile, website, display ads, as well as offline.

34 July 2009 | Loyalty Management GLOBAL INTERACTIVE MARKETING SERVICES

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| Loyalty Management

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Dare to be different!

You don’t have to settle for a “me too” program. Discover loyalty strategies that stand out. At Fairlane Group, it’s all about results!

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“Engaging People for Better Results” Loyalty • Incentives • Recognition

www.fairlanegroup.com For more info, please contact [email protected]

July 2009

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FEATURES

If You Build It, Will They Come? What it takes to make your loyalty initiative successful. by Phil Rubin – rDialogue

Many marketers share this expectation of loyalty programs: that if you establish a program, then customers will join, and wonderful things will happen. Sales will go up and profits will soar. Your company’s CEO and the board will rejoice. Ultimately, you’ll get promoted and live happily ever after. We call this the “Field of Dreams Fallacy,” which is to say that simply building and launching a loyalty program is not enough to ensure its success—even one with a great value proposition. The reality is that customer marketing success is not really about being good at loyalty programs as much as it is about being really good at relationship marketing. Here’s why.

The Common Refrain or Those Who Do Not Study History are Doomed to Repeat It Over the years as we talk with new clients and prospects we hear them express dissatisfaction with their existing programs typically as follows: “We built this program XX years ago, basically copied our competitors’ program and …” 1. “…are unsure whether it’s working or not” 2. “…are now spending $YY million per year” 3. “…no longer sure if it’s as good as what our competition is now offering.”

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Regardless of how this statement is phrased, it’s not the place you want to be after years of loyalty investment.

Why Aren’t More Programs Working? The recent study from Aberdeen Research, referenced in “1to1 Weekly” on May 11, 2009, quantifies this anecdotal evidence, concluding that a majority of retailers, over two-thirds, are dissatisfied with their loyalty program performance. In our experience, this is usually caused by two things: 1) A poorly designed program 2) A poorly managed program The truth is that there is no silver bullet that ensures on-going success. It takes a continuous stream of hard and smart work that extends long after the program launch. Successful loyalty initiatives (loyalty programs, relationship marketing, etc) evolve over time, as does the ability of a company to make the most use of them.

Success is dictated by the discipline to properly build and then run a loyalty program; to ensure a company gains critical competencies in customer insights, measurement, and optimizing customer profitability. Without continuous improvement of those processes, performance will diminish over time.

their data and information are valuable, and therefore, expect a company to be smart about the data it collects. Customers expect companies to know what they’ve bought, if they need service related to a purchase, and how and how often they like to hear from them.

Aberdeen reports a sizable disparity between best-in-class retailers and the average and laggard ones, largely around, “the use of customer data mining and analytics.”

Insights Can Improve Relevance of all Customer Interactions

“Customers expect companies to know what they’ve bought, if they need service related to a purchase, and how and how often they like to hear from them.” Information Exchange Feeds Customer Relationships The challenge of program design lies in using that information to drive customer engagement—a requisite to building a customer relationship. We need to answer this important question: “Can we put forth a loyalty proposition that will motivate a customer to opt-in to a relationship with our brand?” Customer engagement is the starting point in creating brand relevance, as engagement leads to data collection and, in turn, customer insights. These insights then can drive more relevant communication and ultimately put the brand in a position to drive incremental business from the customers. Therefore, the most perfect loyalty proposition in the world, at its best, is a driver of relationship marketing. Loyalty marketing is really about giving customers a reason to opt-in and identify themselves at every point of contact, then using these data to drive communications through CRM functionality. Each point of contact creates data and customer insights around what customers look like, who they are, how they behave and when, how often / how much they buy, whether they refer, etc.

Data Collection Also Raises Customer Expectations The flip side to collecting and using customer data through a loyalty program is that it simultaneously raises the bar in terms of what a company should do with that information. Customers are increasingly smart about data and privacy. They know that



When a company has customer insights it can, and must be, more relevant to its customers in every way it serves them. These types of customer insights are not only valuable for marketing, but they are often even more valuable for other areas of the business like customer service, operations and product/ merchandising/store managers—from the products and services it offers, to how it promotes, distributes and prices those goods and services. The typical marketing metrics can be expanded to customer metrics that measure how customers impact specific functional areas and the business at large. The more a company can understand which customers are impacting its business, positively or negatively, the better a company is able to manage these trends. (See “Comp Customers”, Loyalty Management, January 2009, Volume 1, Number 1)* Loyalty marketing shouldn’t be structured just as a “department”, nor should it be a stand-alone program that designed in a vacuum within a firm. From the beginning and as long as you run your program, loyalty needs to be integrated into the entire organization. It’s vital to make sure everyone understands, has input and informs the loyalty program. True success comes when key organizational leaders are always thinking, “How does/can/should (a new initiative) relate to our customers and through our loyalty program?” Long term loyalty success comes when a company has customer insights that enable it to be more relevant to its customers, and in turn, makes its customers more relevant and integral to the company’s business planning, operations, marketing and financials. Ultimately it’s what you do with the program (how you use, adapt, and innovate it) that really makes a difference to your top and bottom lines. L *Available online at: http://www.loyalty360.org/loyaltymanagement.shtml

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TRENDS & REWARDS

The New 4 P’s of Customer Engagement Summary of Whitepaper by Affinion Group

Customer engagement has become an important concept to businesses in various industries recently; so important that we regard it as a prerequisite to business success amid one of the most challenging economic environments in recent history.

W

ith consumer confidence sinking to record lows and nearly every business rethinking its value proposition, there is no better time to develop and deploy a customer engagement strategy that will earn a sustainable competitive advantage. We propose a framework for building emotional bond through the new 4 P’s of Customer Engagement Marketing, which build upon the traditional 4 P’ s of Marketing (Product, Price, Place, Promotion); the new 4 P’s include Perspective, Purpose, Proliferation, and Praise. The new 4 P’s are not considered replacements for the traditional 4 P’s, rather, they supplement them adding an additional layer of factors that accelerate and guarantee customer engagement. This forwardthinking approach will help solidify the brand’s position in customers’ minds through an engagement strategy that ultimately meets or exceeds business objectives.

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What is Customer Engagement? The term “customer engagement” is often invoked as a catchphrase to mean any number of items from customer satisfaction to repeat purchase behavior. To keep customers sincerely loyal, a company must involve them with its brand to an extent that transcends the discrete, transactional interactions customers have with a business, and elevates those interactions to mutually beneficial partnerships that are both resilient and profitable. This level of involvement is the true hallmark of customer engagement. Achieving customer engagement requires ongoing, dedicated effort. Every interaction with a customer represents an opportunity to build engagement through repeated, positive encounters. Therefore, every consumer touch point should be carefully evaluated for its potential to build and nurture essential emotional connections.

Achieving Engagement: The New 4 P’s of Customer Engagement Marketing While the business and financial benefits of customer engagement are quite clear, the process of connecting emotionally with customers may not be. True customer engagement is not an ambiguous goal, but a measurable outcome with a definite ROI. Building this kind of engagement is an ongoing process that requires a specific, targeted strategy. The strategy we propose, the new 4 P’s of Customer Engagement Marketing, can help develop a comprehensive customer engagement strategy that addresses all of the major factors that drive engagement.

Proliferation Engagement is built over time through a series of individual positive encounters. By utilizing an array of communication vehicles, a company can develop a clear, memorable message at all touch points. Customers will naturally interact in the channels that best meet their needs; it’s up to the company to meet them there by proliferating a consistent presence across each one. Proliferation requires a cross-channel communication strategy that allows customers to control how, when, and where they engage with a brand and products. In accommodating customers and the ways in which they prefer to interact, a company improves the chances that its marketing message will be acted upon.

“Organizations must dedicate themselves to exploring the innate potential of each customer touch point to spark an emotional bond that can grow over time.” The traditional 4 P’s are familiar to every marketer as the foundation for all marketing strategies. As we enter a new era of marketing where messages must be precisely targeted to create an emotional connection with increasingly savvy customers, we need to add a new layer to the traditional marketing approach. This new layer, the new 4 P’s, consists of elements that complement the traditional marketing mix. The elements of this new mix—Perspective, Purpose, Proliferation, and Praise—work together to effectively connect with today’s consumer and help outline a specific approach to developing meaningful emotional connections with customers.

Praise Companies that are successful in creating customer engagement understand that engagement is an ongoing relationship that requires dedication by all parties. Praising customers at key milestones gives them the needed motivation to continue interacting with a brand, with many companies recognizing that rewards have become the most common form of praise and implementing them as such. Praise, if executed appropriately with a long-term vision, can become a mutually beneficial proposition, where customer rewards become a profit center for an organization.

Perspective

The Fifth P

Perspective requires a deep familiarity with internal data sources to closely analyze and understand customer and prospect behavior and to gain insight into their personal preferences. While achieving perspective may seem simple, it requires exploring the data well beneath the surface to expose what truly motivates customers. Simple demographic segmentation is no longer enough. Perspective demands uncovering underlying motivations through expert segmentation and psychographic analysis to precisely target the best responders.

Layered upon the traditional marketing mix, the new 4 P’s of Customer Engagement Marketing—Perspective, Purpose, Proliferation, and Praise—will become necessary elements for any customer engagement strategy. Engagement prompts interaction, innovation, and brand loyalty among customers that positively influence business objectives. We’ve discussed the new 4 P’s of Customer Engagement Marketing, but there is an underlying Fifth P that drives all the others: Profit.

Purpose Purpose demands closely examining a company’s brand image and marketplace positioning, and knowing how it stands in the minds of customers. Honing a sense of purpose is particularly important in today’s economy since customers rely on brands they know and trust to bring them comfort and reassurance in a turbulent environment. Companies must present a stable image to consumers through all available channels, and understand how their brand promise best resonates with specific customer segments. To be effective, a brand must understand diverse viewpoints of consumers and respond to them with a unique approach. A strong, clear brand drives engaged customers to form an emotional attachment with the brand, and is the foundation for a lasting relationship.



In its simplest form, customer engagement drives profit. Customers will become more loyal to and spend more money with a brand that they are emotionally engaged with. Organizations must dedicate themselves to exploring the innate potential of each customer touch point to spark an emotional bond that can grow over time. The ways in which the new 4 P’s of Customer Engagement Marketing are implemented into an overall strategy are only limited by a company’s creativity. L

To watch Marti Beller’s presentation of, “The New 4 P’s of Customer Engagement Marketing,” or to read the whitepaper in its entirety, visit Loyalty360.org.

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TRENDS & REWARDS

Is There a Loyalty Marketing Generation Gap? by Bill Hanifin – Hanifin Loyalty

Meeting the Millennials where they are sets the stage for engagement.

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T

he promise of social media to Loyalty Marketers should be clear. We’ve been advocates of establishing two-way dialogue with program members for the past 20 years, touting that only within the trusted environment of a loyalty program will customers share their preferences, aspirations, and concerns relating to your brand. Don Peppers and Martha Rogers coined the term “1 to 1” marketing in what seems an ice-age ago. While the concept was right, 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”. With CRM’s legacy of unfulfilled potential, one would think that Loyalty Marketers would be tearing apart the box labeled “Social Media” like a child on Christmas morning to see what’s inside.

Imagine you are standing on the crest of a ridge with the entirety of loyalty marketing knowledge under your arm. Across a deep ravine on the next ridge is Generation Y, all 80 million of them. You can’t just walk over and engage them in what you have to say as there is a river running swiftly through the bottom of the ravine. You’ve got to build a bridge to reach the other side or you will miss the opportunity to engage this massive consumer audience.

“I am not telling you that Social Media is THE answer or the ONLY answer. But, it is the best opportunity we have ever had to fulfill the promises of 1 to 1 Marketing.”

I’m not sure it’s happening and here’s why: Attending Card Forum & Expo in Marco Island this past April, I heard a great keynote from Joshua Peirez, MasterCard Worldwide. His topic was innovation and he took an informal poll in the room of 200 bankers: n Who’s on Twitter?—less than 5% raised their hand n Who has a MySpace?—no one raised their hand n Who has a Facebook page?—25% said “yes” n Who knows what a Kindle is?—10% positive response

Given the median age in the room, I was almost relieved with the MySpace answer, but noticed the uncomfortable murmuring that waved through the room upon the mention of Twitter and Facebook. Mr. Peirez had made his point that “we” in the banking and card issuing industry need to understand, if not embrace, these new communications tools if we are to stay current in the market. Listening to other sessions, my suspicions that all things social media were regarded as distractions to be enjoyed by the younger generation but not to be taken seriously by business, were reinforced. There was a fascinating panel of “Retail Loyalty Leaders” facilitated by my friend and colleague, Rick Ferguson, Editorial Director Colloquy. Executives from Best Buy, Macy’s, and Saks shared how it was their most loyalty customers who continued to shop even after the economic downturn last fall, but made no mention of social media until an attendee posed a question at the end of the session. Responses from the panelists were general and non-committal, indicating that social media was “interesting and deserved study” while not citing any ongoing programs.



Social Media could be the bridge. Read carefully, as I am not telling you that Social Media is THE answer or the ONLY answer. But, it is the best opportunity we have ever had to fulfill the promises of 1 to 1 Marketing. The technology allows business to tailor messages to small groups if not individuals and the Millennial Generation is the first ever to be so forthcoming with personal insights and opinions. There is evidence of experimentation in the space, with AirMiles Canada adding a community to its web site. Its purpose is clear as the landing page advises, “Now there’s a place where you and other collectors can swap tips, experiences, and chat about anything and everything Air Miles”. And there are a few active Loyalty Marketers with a presence on Twitter. If you open your own account and wonder who you should follow, you could start with @andrewkinnear, @barrykirk, @Phil Rubin, @Kobie Marketing, @LoyaltyLab, @Loyalty 360 and don’t forget @billhanifin. One of Hanifin Loyalty’s rules for engaging Generation Y is this: n Don’t rationalize the need—you don’t have to like it or even fully understand it, you just have to do it.

Meeting the Millennials where they are sets the stage for engagement. How you present your brand from there is a topic for another day. Follow me... L

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TRENDS & REWARDS

Loyalty Insights Study Key findings from a loyalty practitioner joint industry survey conducted by Allegiance and Loyalty 360 by Chris Cottle – Allegiance Allegiance and Loyalty 360 conducted a survey of loyalty practitioners to understand the current adoption of loyalty, satisfaction, and engagement programs and enterprise feedback management (EFM) practices within organizations. These ‘listening’ programs involve surveying and voice-of-thecustomer data gathering activities from various touch points throughout the organization. These activities can be categorized into three main groups: 1. Data Gathering—Collecting data from multiple sources and events within the organization and the customer lifecycle, including:

a. Operational data



b. Market research



c. Ad-hoc survey



d. Post-transactional survey

2. Understanding the Data—Seeing the data from a macro view, including metrics and processes that help to drive decisions, such as:

a. Customer experience management



b. Engagement / Net Promoter science measures



c. CRM

3. Acting on the Data—Using data gathered from feedback to respond and take new actions to increase loyalty, including:

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a. Product creation



b. Communication / positioning



c. Complaint management



d. Incentive / rewards

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Enterprise Feedback Management (EFM) The emergence of enterprise feedback management (EFM) promises loyalty practitioners a simpler way to realize greater return on their efforts through new feedback technologies. Enterprise feedback management (EFM) is the gathering and management of voiceof-the-customer or employee feedback collected through surveys, unsolicited comments, suggestions and complaints, text mining, etc. into a single software platform. By using fewer solutions and vendors, and by gathering data into a single platform, data analysis is easier and more accurate, showing trends and revealing opportunities not seen with separated data.

Adoption of EFM Programs The survey data reveals a pattern of adoption of tactical loyalty and EFM programs that is summarized into three main groups: near-universal adoption, high adoption and low adoption. Near universal adoption shows that most respondents have heard of these programs and are participating in them, most usually through internal resources. High adoption shows that most respondents have heard of these programs, and many are participating through a mix of internal and external sources. Low adoption reveals that many participants have not heard of these programs and are not using them.

the employee purchase process such as price structure, discount yield, lifetime value, product experience, etc., but they fail to factor the employee into these equations. High employee engagement and loyalty not only positively impacts customer loyalty, but it also contributes to reduced costs of advertising, recruiting, on-boarding, and training, due to lower turnover resulting. For more information about the employeeto-customer loyalty connection, read the paper The Spillover Effect by Dr. Gary Rhoads, Allegiance co-founder. Insight Summary from Allegiance and Loyalty 360 Organizations of all sizes revealed in this survey that they utilize multiple vendors to accomplish their loyalty programs—often leading to potentially high duplication of effort and cost. By bringing traditionally separated data, such as marketing surveys, product quality surveys, contact center customer satisfaction metrics, ad-hoc surveys and company-wide comments, suggestions and complaints into a single system, the yield on that data is much greater. Reducing disparate vendors and separate processes into fewer tools and procedures simplifies the workload and lowers costs. Combine Loyalty Programs to Realize Greater Insights Loyalty Science Adoption The survey shows that adoption of a scientific ‘north star’ such as Engagement Index, Net Promoter Score, Human Sigma, C-Sat score, etc. varies widely based on the size of the company. Larger organizations have a much higher adoption of these measures than smaller organizations. These results also show that employee loyalty science measures lag behind customer science measures. This is unfortunate because employee loyalty has a direct impact upon customer loyalty. Employees are often the first and last experience customers have with a company. Therefore, to have an accurate view of the drivers of customer loyalty, companies should measure employee loyalty alongside customer loyalty. Key Insight—Adoption of a Scientific Measure Only slightly more than half of the respondents in the survey claimed to use a scientific measure such as an Engagement Index, C-Sat, Net Promoter Score. Great insights can be gained by using a scientifically-based score as part of your overall program initiatives. Many larger organizations currently use these scores as a part of their best practices. This helps to align the organization’s efforts and create a culture of higher adoption and unified effort. Key Insight—Don’t Forget the Employee Factor Employees play a critical part in the success of every company. Often today’s loyalty programs measure many factors close to



• Combine complaint management and incentive/rewards programs to launch an effective customer recovery program • Combine customer relationship management data with feedback/survey data to create a more holistic view of the customer and provide better service and loyalty offers • Combine post-transactional survey/feedback data with customer experience management processes to realize new and unique statistical experience metrics • Combine customer engagement and employee engagement together to realize greater targeted departmental insight • Combine operational data with engagement science to realize greater behavioral ROI information • Combine unsolicited feedback (comments, suggestions, complaints) with solicited feedback (surveys) and engagement science to create a comprehensive view of the customer • Combine market research and complaint management together to establish an effective closed loop feedback process • Combine engagement science and communications/brand positioning to better capture the hearts and minds of customers About Allegiance, Inc. Allegiance offers feedback management software to help organizations grow customer and employee loyalty and engagement. For more information, visit www.allegiance.com. About Loyalty 360 – The Loyalty Marketer’s Association The mission of Loyalty 360 is to provide an unbiased, market driven, “voice of the customer” focused clearinghouse and think-tank for all loyalty, incentive / reward, and engagement marketing opportunities, insights, and responses. For more information, visit www.loyalty360.org. L

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BEST BUSINESS PRACTICES

The Mystery of the Missing Loyalty Effect by Peter Gurney – The Cicerone Group

I

t would be nice if the link between customer loyalty and profit were simple, clear and easy to prove. The theory is certainly attractive: Customers with high satisfaction and commitment levels form a bond with a company, and this bond leads to a variety of desirable behaviors. Loyal customers stay longer, spend more, complain less and make recommendations to their friends and family. If companies invest in loyalty, the theory goes, the rewards will come pouring in. In practice, however, this scenario doesn’t always play out as predicted. The loyalty-profit connection can be complex and muddled, as the following case demonstrates: At a large retail bank (which we will call Bank Z) analysts from the Finance Department teamed up with the Service Quality Group to examine the relationship between customer loyalty and profitability. The Finance analysts calculated profit at the individual household level. Service Quality managed a large survey program and calculated household loyalty scores, which were based on a combination of satisfaction, commitment, advocacy and brand identification ratings. The teams linked the profit measures and loyalty scores, with the expectation that they would discover a nice, upward-sloping line showing that the least loyal customers made less money for the bank than the most loyal customers. What they found, instead, was a flat line. There was no difference in the average loyalty scores between low-profit and high-profit customers. This finding caused considerable consternation. Bank Z spent a great deal of money on programs to measure and improve customer loyalty, and the loyalty metric was a key part of the executive incentive structure. If there was no return on these investments, what was the point of making them? Further analysis revealed there were at least three factors confusing the results: 1. Competing Segments. When examined more closely, it was found that there were two large, distinct groups among the most profitable households. The first consisted of high-income, older customers who had long tenure with the bank. These customers generally used multiple products and services, and kept large balances in their deposit accounts. Their loyalty scores, as expected, were extremely high.

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The second segment looked very different. This group consisted of younger, low-income customers who typically held a single free-checking account with a low average balance. However, they bounced a lot of checks, which brought in significant revenue from overdraft fees. Unlike the first segment, these customers had exceptionally low loyalty scores. In fact, they hated the bank. The only reason they stayed was that the situation would be the same wherever they went.

“Not all of the predicted financial benefits of loyalty are included in the standard profit formula, at least at the level of the individual customer or household.”

Taken together, the loyalty scores of these high-profit groups cancelled each other out. But, what about the low-profit customers? As it turns out, there were competing segments in that group, as well. One segment consisted of customers who were highly dissatisfied with the bank. They had experienced errors or service problems, and consequently had begun shifting their business to competitors, resulting in lower profit levels. As one would expect, their loyalty scores were abysmal. The second segment consisted of renters with modest but steady income. They did not have mortgages or equity loans, kept fairly low account balances, used free checking, and never had overdraft fees. In other words, they were stable, financially responsible people – and they made no money for the bank. They were also among the bank’s most “loyal” customers. And why not? They were getting a valuable service for free. The existence of competing segments at the opposite ends of the profit spectrum may in itself have been enough to flatten out the loyalty curve. But there were other factors at play, as well.

“The teams linked the profit measures and loyalty scores, with the expectation that they would discover a nice, upward-sloping line showing that the least loyal customers made less money for the bank than the most loyal customers. What they found, instead, was a flat line.”

2. Imprecise Profit Calculations. Profit, as we all learned in school, is calculated by subtracting cost from revenue. Companies are usually pretty accurate when it comes to assigning revenue to individual accounts. Banks, for example, know to the penny how much someone has paid in fees and interest. But costs, particularly in service businesses, can be more difficult to assign to individual customers. This is important, because according to some experts, loyal customers are cheaper to serve. By staying with the company longer they learn more about its products and services, and they develop more realistic expectations about what the company can do. As a consequence, they become less reliant on support services and less likely to complain. In addition, with time and knowledge they may migrate from high-cost to low-cost channel usage. In the case of banks, that means using ATMs and on-line banking instead of relying on tellers and call agents. But, if loyal customers at Bank Z were cheaper to serve, that fact was not reflected in the profit calculations for individual households. The Finance Department ignored such details; they simply took an average cost-to-serve for all accounts and applied it evenly, irrespective of the individual households’ actual behaviors. Some of the cost details were, in fact, available at the household level. But, the information was scattered about in various databases and was controlled by Marketing, Operations and other groups. It would simply have been too difficult for Finance to find and extract all the information needed to get a true picture of household service costs, so they took a shortcut - and consequently masked any insight about cost-related loyalty behaviors that might have been contained in the household profit data.



3. Financial Benefits Outside The Formula. Not all of the predicted financial benefits of loyalty are included in the standard profit formula, at least at the level of the individual customer or household. One example is retention – or its flipside, attrition. At Bank Z, those who severed their relationship with the company because of dissatisfaction or lack of loyalty were removed from the household profit figures altogether. The revenue lost from their defection would impact profitability at an aggregate level, but as individual households they had effectively ceased to exist, and would not have been included in the loyaltyprofit analysis. Another supposed loyalty benefit is new account generation from referrals. Analysis of customer survey data at Bank Z indicated a strong correlation between a customer’s satisfaction and the number of referrals given. Furthermore, about 40% of new customers said they had joined the bank primarily because of a referral from an existing customer. But, household-level profit calculations have no way of accounting for the value of bringing in new business, and this benefit would, like retention, have been excluded from the loyalty-profit analysis. Bank Z learned more than one lesson from this exercise. First, it stopped treating loyalty as a one-size-fits-all proposition, and began looking at how best to leverage loyalty-driven behaviors within specific customer segments. Second, it started searching out and consolidating cost-to-serve data from across the organization (an effort that is still far from complete). And third, it designed a loyalty benefits calculator that incorporated a wider range of variables than the profit formula used by the analysts in Finance. Even with these changes the loyalty-profit picture remains fuzzy, but it’s getting clearer all the time. L

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BEST BUSINESS PRACTICES

Is the Art of Client Service Dead? by Chip Hall – Kobie Marketing

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n the ever-advancing age of technology we are more connected, more in touch, and more accessible to our clients than at any time in the history of modern communications. We can scour through our plethora of e-mails, voice mails, tweets, Facebook updates, and presentations from practically any location on the globe. There is a common sense of pride and of accomplishment in our ability to be responsive to our clients. We are executing on all of our tasks, and taking advantage of all of the latest tools at our disposal to provide what we perceive as exceptional responsiveness and service to our clients. We are dispensing with our workloads at increasing levels of speed and proficiency. However, are we engaging our clients as they wish to be engaged, and effectively positioning their businesses for growth and profit? Before the advent of the supermarket, the corner drug store knew to prepare your root beer float every Friday when you walked in the door, as well as to anticipate the needs of your household by making recommendations based on the preferences and buying trends of your spouse. That concept

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“By focusing primarily on your client’s goals, your opportunities for new business, additional product launches, and program enhancements will increase exponentially.”

has gotten lost with the emergence of malls, where merchants began relying on traffic volume to make sales and thus ignored the personal touch. Today, retailers who have taken the steps to know their customers, track their behaviors, and engage them in relevant ways are the ones who are surviving and thriving in today’s highly competitive economic environment. This personal engagement example is highly applicable to the Client Services world today. According to Bain and Company, 80% of companies believe that they deliver a superior level of service, however only 8% of their customers agree! Client surveys tell us with increasing frequency that companies have lost the client in the equation. Resources are increasingly constrained across the entire business spectrum. What sets the 8% that are delivering a superior level of service apart? If we are more connected than ever, why are the vast majority of companies not receiving the service they expect?

The answer is elementary: The 8% that are delivering on their client’s expectations have engaged in the way the client expects! To begin, we must determine what is of utmost importance to our individual clients in the relationship. It is imperative to be intimately familiar with the client’s core business as related to their long term company objectives, target markets, growth targets, and future opportunities that are on the horizon. Buoyed by this level of knowledge, you are able to bring tailored marketing recommendations, with the goals of the client front and center. By focusing primarily on your client’s goals, your opportunities for new business, additional product launches, and program enhancements will increase exponentially.

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common mistake in client services is to execute on packaged recommendations, generic programs, promotions, etc., which are not tailored specifically to the client’s primary objectives. In the loyalty business, this would encompass a onesize fits all approach (Loyalty in a box with an on/off switch). The concept is there, but in the client’s perspective, you have not



uncovered the true motivation on why you were hired in the first place! Keeping the client’s goals in lock step with your own and being proactive with your recommendations (not just relying on meeting SLAs) will establish the foundation for a true partnership.

“According to Bain and Company, 80% of companies believe that they deliver a superior level of service, however only 8% of their customers agree!”

The Elite 8 is focusing their entire organization on customer collaboration. They are developing their capabilities to satisfy customers over and over. They are establishing direct accountability for the customer experience. They are utilizing the latest innovations to communicate the most recent trends, data, and relevant news to their clients at an everexpanding level.

A key conclusion should have unfolded as you digest the concepts discussed. Executing for your clients is critical. However, it is how you are progressing in your relationship with your clients that will be the true measure of your success! Are you bringing new ideas to your clients? Are you creating the level of trust that will facilitate areas of partnership that are not currently on the radar? Are you being invited to speaking engagements with your clients to discuss the success of your relationship model? Are you engaging your customers in the way in which they wish to be engaged? If the answer to these questions is a resounding yes, then you are truly practicing the Art of Client Service! L

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BEST BUSINESS PRACTICES

Marketing Automation: Marriage of Process and Technology Key to Unlocking Customer Loyalty by Connie Hill – TFC, Inc.

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hile marketers today seem to recognize the importance of developing customer loyalty through customer centric marketing efforts, many marketers are at odds as to how to implement and integrate strategies, processes and technologies that fuel customer relationships. In fact, in the recent Routes to Revenue research paper, the CMO Council cites that a surprising 76 percent of senior marketers believe that they are not realizing full revenue potential from their current customers. Moreover, only 46.5 percent say they have insights into retention rates, customer profitability and lifetime value. In today’s economic reality, marketers are motivated to retain existing relationships and sustain customer loyalty. With so much opportunity on the table, why aren’t more customer relationship and loyalty marketers embracing analytics and process automation? According to Forrester Research, organizational as well as data and technology- related issues prevent marketers from stitching together a comprehensive view of the customer (Creating a Multi-Channel View of the Customer 2008). So what action can loyalty and relationship marketers take?

“To build meaningful strategies for customer retention and loyalty, marketers need a centralized data repository.” Action 1: Integrate Disparate Data Scattered Throughout the Organization Relationship marketers need a comprehensive view of the customer to develop meaningful strategies based on customer interactions. A comprehensive view means capturing behavior data across multiple communication channels, including financial data, service data, campaign data and any relevant external data. As Forrester Research indicates, data collection challenges occur when companies are organized in functional marketing silos, data is not shared. The problem relationship marketers face is that customers today interact with companies via multiple communication channels as they consider their purchase or request service. To build meaningful strategies for customer retention and loyalty, marketers need a centralized data repository. Data repositories or data marts can be automated with routine extractions from original data sources, transforming that data and reloading it into an organized data mart. Data marts are unique to each business and are designed and built based on marketing’s objectives and key performance indicators. Marketers can look to their internal IT team to help them build their data repository, or can consult outside providers that also build and host data marts. The value contained in the data mart lies in the ability to slice and dice the information which yields the important insights from which successful strategies are created. The key to success is the marketer’s ability to analyze, calculate and utilize customer information to drive profitable campaigns.

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Action 2: Turn Insight into Strategies that Drive Profit Analysis of customer data can be used to understand customers at various levels of profitability; data can be mined for customer behaviors that lead to attrition and analysis can be done to understand behaviors of the most loyal customers. Relationship marketing can soar to new heights with this type of analysis based on meaningful data. For example, marketers that understand the customer by profit level can calibrate service or product offers commensurate with the customer’s value to the company. In addition, understanding profitability can help to set pricing or establish bundled offers. Loyalty and retention programs designed to target profitable customers outperform standard campaigns in terms of ROI in three primary ways: achieve premium price levels, reduce cost per customer contact, and gain greater response and conversion rates. Analysis provides a dramatic benefit to programs that are designed to reduce churn. Relationship marketers can model and track customer behaviors to predict only those customers that are likely to defect, and then build programs designed specifically for retention. Analysis at this level not only creates efficiency to reduce communication costs, but also prevents the mistakes made by messaging customers who have not yet crossed over to potential defection. Similarly, the reverse strategy can be deployed to reward customers when behaviors indicate loyalty. The bottom line for marketers is to analyze data to determine where to apply, increase or drop resources as it applies to program effectiveness and results.

Action 3: Manage the Complexity of Relevant Communication To build relationships with customers, marketers must ensure that communications are relevant. Managing the right communication, to the right customer in the right channel at the right time is a complex task without the help of automation. This is where single platform, multi-channel delivery systems deliver efficiency and value. Most platforms have built-in asset management systems for content and creative management, and the ability to deploy via templates to easily deliver personalization and relevant content in customer preferred channels. Timing is an essential strategy for relationship marketers. Over contact customers, and marketers can potentially damage a company’s reputation. But, contact your customer at just the right time, and build lasting trust. Many of today’s platforms contain trigger or event based marketing capabilities, such as pre-set business rules to thank customers for a purchase, remind them of service needs, or invite them back to your website. Effectively used, trigger campaigns meet both profit and customer experience objectives.



“How do you really know if your marketing program worked if a customer responded to a campaign by using a communication channel different than what was planned?”

Action 4: Close the Loop, Measure, Report and Continuously Improve Marketers, including relationship marketers, are accountable for demonstrating contribution to revenues and profits. Proving the contribution to the top line and the bottom line is a unique challenge for relationship marketers because customers interact across multiple channels. How do you really know if your marketing program worked if a customer responded to a campaign by using a communication channel different than what was planned? As customers interact in multiple channels, the data collection process continues to feed your data mart so relationship marketers can pinpoint customer behaviors and create closed loop metrics. At the onset, it’s important to define success criteria and key performance measures to ensure the right data is captured for meaningful metrics and reporting. Thinking ahead allows the cumbersome process of response collection and performance reporting collected from multiple sources and departments to be fully automated. Performance reporting specific to relationship marketers can be displayed and updated daily via a published dashboard. Drill down analysis of what performed and why is the key tool marketers can use to continuously improve program ROI. There’s no doubt relationship marketers have unique challenges to perform the job of customer retention and creating loyalty. Gaining a comprehensive view of customers when data is scattered throughout the organization, analyzing that customer data to develop high performing strategies, managing a myriad of content and creative delivered through multiple channels, and proving campaign effectiveness is definitely a full plate. Successful relationship marketers recognize that customer potential to deliver revenues and profitability should not be overlooked, whether we are experiencing good economic times or challenging times. Marketing automation processes and technologies work together to help relationship marketers manage and conquer the challenge. L

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BEST BUSINESS PRACTICES

Reeling Them In: How Orvis Nets More Sales with a Co-Branded Credit Card by Partner Advisors & Bill Eyre – The Orvis Company

To differentiate itself and gain competitive advantage in a crowded market for credit card offers, Orvis created a co-branded credit card that is delivering on its promise. The results have not only provided more value to the customer and improved the customer experience, but have also deepened customer loyalty and significantly improved Orvis’ financial performance. BACKGROUND

SOLUTION: A CO-BRANDED CREDIT CARD

For more than 150 years, the Orvis brand has stood for outdoor traditions, quality, and customer satisfaction. In 1856, Charles Orvis founded the Orvis Company in Manchester, Vermont, offering the finest fly fishing equipment, and priding himself on customer satisfaction and service. Today, along with its world famous fly-fishing gear, Orvis offers distinctive clothing, home furnishings, gifts, and dog products, as well as a variety of sporting services from fly fishing schools to endorsed lodges and guides to international sporting travel. Fifteen years ago, Orvis launched the Orvis Rewards Visa Card—a card designed to build loyalty, provide more value to the customer, and for altruistic reasons. With each new card account opened Orvis donates $5, plus 5% of overall company pre-tax profit to protecting wildlife habitat worldwide, every year.

In March 2007, Orvis seized the opportunity to drive increased revenue and improved member engagement by re-launching the Co-Branded Orvis Rewards Visa Card with a greatly enhanced value proposition to the customer. The revamped program— implemented and managed by Orvis and Partner Advisors—offers members the ability to earn rewards more quickly and to enjoy free shipping on all purchases made with the Orvis card. With such innovative features as enabling members to “bank” their points and redeem them for products and services in all consumer sales channels, the improved program was designed to meet the tough expectations of today’s consumer who is looking to stretch their dollars further. As a result, today Orvis relies on the CoBranded Orvis Reward Visa Card as an integral component of its customer relationship and retention strategy.

OPPORTUNITY

ORVIS CO-BRAND CARD RESULTS

While the Orvis Rewards Visa Card has been giving back to its customers and to conservation programs for more than a decade, Orvis challenged itself to differentiate its card-based loyalty program to deepen customer relationships and to capture greater wallet share. The vision of the new Orvis Rewards Visa Card needed to maintain its philanthropic efforts with conservation programs while, at the same time, enable its members to earn free shipping and bonus points, and get special offers when they shop. Specifically, Orvis needed a solution to help:

Card holders’ spend at Orvis increased 33% (net) during the 12 months after they became a card holder compared to the prior 12 months. This improvement was achieved throughout the current tough economic environment, while average customer spend was declining 11%. Further results include:

n Drive incremental sales and improve loyalty n Generate more orders in stores, by phone and on the Web n Decrease attrition n Differentiate from the competition

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n Improved new account acquisition by 140% during the first year n New account approval rate exceeded 85+% n 45% higher frequency of orders

“Partner Advisors played a key role in bringing Orvis and Chase together to enhance the customer experience with a best-of-breed program,” said Eyre. “The Partner Advisors team collectively have a breadth and depth of credit card experience second to none. They are in this to ensure a succesful program, and achieve results as an extension of our team.”

PROGRAM HOOKS n Free standard shipping on all Orvis orders, which has proven to be a motivator for today’s catalog and Internet shopper n Enhanced user experience and value, which means more customers shop using the card n Instant credit approval on orvis.com, allowing customer to use and earn benefits with immediate purchase n Increased customer points earned from three to five points for every dollar spent at Orvis, and one point per dollar spent elsewhere n Points convert to rewards dollars stored in an easy-to-access virtual rewards bank. Cardholders easily redeem their rewards for Orvis products and services online, in stores and by phone. ORVIS HIRED A GUIDE One of the hallmarks of the Orvis brand experience is to enjoy the sage advice and services of one of its more than 200 endorsed fishing guides, who are renowned experts in teaching people how to tie flies, read the water, and catch more fish. In Partner Advisors, Orvis found an expert guide of its own to help navigate the unfamiliar waters of co-branded credit cards. Bill Eyre, director of Advertising and manager of the Orvis Rewards Visa program at Orvis, hired Partner Advisors to provide Orvis access to core-competency in the credit card industry, drawing on Partner Advisors’ extensive expertise on both the issuer and partner side. “Coming from an advertising background, I didn’t have experience with the nuances of how a credit card program should work,” said Eyre. “I’ve been very pleased with how Partner Advisors aligned us with Chase to create such a strong co-branded card program. From the beginning, they partnered with me to drive marketing planning and implementation, to ensure its success day in and day out. They continue, to this day, to have an active hand in managing the program.” “Partner Advisors played a key role in bringing Orvis and Chase together to enhance the customer experience with a best-of-breed program,” said Eyre. “The Partner Advisors team



collectively have a breadth and depth of credit card experience second to none. They are in this to ensure a succesful program, and achieve results as an extension of our team.” In an economic time when every dollar matters, Orvis is now able to offer its customers an innovative credit card with great rewards benefits that will keep them coming back. Specifically, Partner Advisors helped Orvis through skillful structuring, management, and execution of the program by: n Helping to redefine and redesign the Orvis card program and value proposition n Developing and optimizing new channels n Structuring a profitable long-term model for Orvis n Managing the overall program from start to finish WHAT’S NEXT? Orvis is planning for continued program growth in all its channels—including catalogs, Website, and retail stores. Future card initiatives include: n Launching an email campaign to tell card holders how much they have in their rewards bank that can be redeemed for products and services n Testing double points promotions in key spending categories like gas and groceries, designed to get the Orvis card “top of wallet” n Creating a more tailored approach to the customer whereby the customer is identified as an Orvis Rewards Visa Card holder when they call, allowing Orvis to accelerate specific benefits and/or special offers to the customer n Optimizing cardholder spend behavior to make the customer relationship as profitable as possible for all constituents of the partnership L For more information about the Orvis Rewards Visa Program visit: http://www.orvis.com/visa

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BEST BUSINESS PRACTICES

On front lines of loyalty, the mission is clear— Know Your Customer Before you can talk ‘loyalty,’ you must understand who you’re talking to and what they value. by Acxiom – Featuring William Nipper and Janice Rudenauer Companies today are constantly pressured to do more with less and cannot afford to waste time and money on ineffective marketing. Amid the doom and gloom of the recession, companies are striving to retain their current customer base to survive. How well a company knows its customers and understands their needs will determine how successful it is at weathering the storm.

The roots of loyalty: Relationships and individuals “The business definition of loyalty is retaining customers in a profitable way by understanding and meeting their needs,” said Janice Rudenauer, marketing strategist with Acxiom® Corporation’s global consulting group. “Those needs can be met through a variety of initiatives such as offering incentives, investing in a higher level of customer service, or through simple recognition for their business. Whatever the need, companies should have a clear picture of who their customers are, an understanding of what drives them, and a complete view of the kind of relationship they currently have with them.” For loyalty to exist, there has to be a dialogue between the business and consumer. A relationship is created by combining ongoing value delivery, a satisfactory experience and perceived familiarity (knowing your customer). Take away any one of those elements and your loyalty ship runs out of fuel before it even leaves the dock. “Knowing your customer means more than just identifying a broad demographic and tagging it as your target,” said Will Nipper, an industry strategist at Acxiom. “Companies need to have an educated relationship with each consumer. It’s critical that they know exactly what that customer is interested in and understand what the customer has indicated they like and dislike.” Companies should keep in mind that relationships are established with individuals during the first engagement. Companies that inform, learn from and build upon that first engagement are on their way to establishing loyalty.

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The building blocks: Insight and relevant action “The fuel of customer loyalty is insight, which is inherent in the data,” said Rudenauer. “Trying to develop ongoing interactions with customers without insight is like flying blind—the outcome won’t be pleasant.” Merely accumulating data from customer interactions doesn’t guarantee your communications will be relevant. Analytic insight is needed to provide the building blocks for a dynamic and strategic roadmap for sustained customer engagement. A limited understanding of the business-to-consumer relationship manifests itself in the interactions between companies and customers. Irrelevant communications often stem from companies taking more of a product focus instead of a customer focus. “People are so inundated with offers these days,” said Nipper. “If companies don’t have a relevant and targeted message, they get lost in the shuffle. To tailor the message, companies need to know what their customers want, what they don’t want, and the company needs to demonstrate that understanding through its interactions with them. “Analytics help you derive value from your data and decide which individuals are likely to be most interested in, and profitable to, your business,” said Nipper. “Analytics take into account the history of the customer’s interactions with the company. Combining the insight gathered creates a clear picture

of how to proceed in your relationship with that customer. Once the optimal message is determined, companies must be able to execute.” When a company has established a clear picture of its customer portfolio, it must demonstrate that knowledge through relevant communications that drive a holistic experience across channels, through marketing, customer service and sales. Technology plays a big role in execution and can be a boon if a company has it or a barrier if it doesn’t. “The advantage goes to companies that have the necessary prowess and infrastructure that allow them to take advantage of actionable insight,” said Nipper. “Businesses must have the tools to constantly update customer information and keep track of interactions and any feedback from the customer. Any communications sent today should be based on yesterday’s interactions.”

“For loyalty to exist, there has to be a dialogue between the business and consumer.” “If companies believe that their programs are hit and miss, chances are they’re operating without a clear picture of all customer interactions or they don’t have the ability to gather insight from those interactions,” said Nipper. “If companies are serious about forming a loyal relationship with customers, they need the tools to pull the data together, analyze it, derive knowledge from it, execute on that knowledge, and then measure the results and do it all again.”

Nurturing the relationship: Communication and change “Knowing your customer isn’t a one-time deal, and loyalty is not built overnight,” said Rudenauer. “That’s why having a strategic roadmap is so important because you work your way there over time, picking your engagement points as you go. In today’s volatile environment, companies can’t take anything for granted. Everything is moving so fast—if a company doesn’t look at transactional data to understand what’s going on in ‘real time,’ any success is going to be short-lived. Your best customers six months ago likely aren’t the same best customers today; current dynamics in the financial services realm are changing everything.” Because loyalty is built over time, through thick and thin, companies have got to stay in touch with their customers over the long haul.

Looking to build loyalty? Here are some tips from the experts: Janice Rudenauer

Acxiom Marketing Strategist Do your homework: Analyze your customer portfolio to find out who your best customers are and reach out to them in a channel-agnostic way, leveraging preferences as applicable. The key is knowing where to focus your efforts based on customer insight. Communication is key: If the recession has your customers spooked, talk them back from the ledge. Bring them good information and reassurance in a relevant way . . . then target relevant offers as applicable to make their decisions easier and more timely. Seize the opportunity: Meeting needs in a down economy presents a huge opportunity for companies to build loyalty. Companies that proceed with confidence and keep their efforts focused on the customer will survive and thrive in the downturn.

Will Nipper

Acxiom industry strategist

“Frequent, relevant communications based on the customer’s preferences increase the engagement level,” said Nipper. “Constantly analyzing data from touch points with the customer enables companies to plan the next series of communications. For example, based on analytics, a company can pick which products or promotions are most relevant and in which sequence they should be presented to keep a customer highly engaged over time.”

Know your customer: Know what they want, what they bought in the past, what they are interested in, and if they have any life events coming up. Be a value to them.

Keeping customers engaged over time is the foundation for effective loyalty management. Companies that enjoy a devoted customer base are the ones that take the time to know what their customers value and connect with them through deep consumer insight. L

Customer vs. product focus: Focus on how the individual is performing instead of how the product is performing. Let a customer-centric view influence your campaigns and communications.



Don’t skimp on analytics: Budgets are stretched thin these days and are likely shrinking. That increases the need to target those dollars in the best way possible. Analytics can both save you money and make you money down the road.

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BEST BUSINESS PRACTICES P R O G R A M S U CC E S S S TO RY

RocketBux Brings More Traffic, Revenue Increases by Paul Willerton – RocketBux

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hen Kerri Stewart opened her Dutch Bros. Coffee franchise in Junction City, OR in February, 2008, she had hopes as high as any new business owner. Dutch Bros. is a successful chain of drive through coffee stands that is rapidly expanding beyond 170 locations.

Kerri Stewart’s Dutch Bros. Coffee stand in Junction City, OR opened its doors into the jaws of a rapidly shrinking economy. Every dollar counts, and RocketBux has made a difference. After its first month, Stewart’s results were as follows:

Stewart’s chosen town of Junction City, however, was

about to go through unprecedented change. The local economy was based heavily on vibrant RV sales. Almost immediately, high gas prices and a slowing overall economy started to impact Stewart’s traffic. “It seemed like every day there were businesses closing, and every week we noticed a slowdown in our traffic.” says Stewart. “I decided to get proactive. I need people to show up here and we need to sell coffee.” Stewart turned to RocketBux.

Week 1: $1 off a large hot drink. Conversion rate: 16% Revenue increase: 31% Week 2: $1 off a large hot drink. Conversion rate: 16% Revenue increase: 39% Week 3: Any 16oz. drink for $2.00 Conversion rate: 19% Revenue increase: 34%

RocketBux’s technology is centered on text

messages that it sends on behalf of its clients, generally advertisers or businesses with direct marketing campaigns. Customers either opt to receive the text messages by providing their mobile numbers to an advertiser or they send a text message to a specified number in an advertisement, which triggers the immediate receipt of a coupon-bearing text message.1

Week 4: Any 16oz. drink for $2.00 Conversion rate: 20% Revenue increase: 38%

“Because they are saving, customers often purchase other items like pastries. RocketBux is so easy, it’s like I hit a button and make more money.”

Within a week, the Junction City stand had signed up over 500 mobile rewards customers. In a town of only 4,500, she has since been able to grow her list to over 1,000 members. “They love it!” she says, “I can add a local touch to a text message that makes our customers feel special. Unique. And they are.” In the toughest economy in generations, Stewart is optimistic. “These are hard times. We need to use the most powerful tools we can. I know that when I use RocketBux, I get results. Immediately. More cars show up and the register rings more.” That speaks volumes. “When we use RocketBux, we get results. Immediately.” L

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—Kerri Stewart Dutch Bros. franchise owner RocketBux user

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“ Rocketing through the recession: As people look for more ways to save, they’re opening up to new ideas—and a Bend startup is reaping the benefits” By Andrew Moore / The Bulletin. http://www.bendbulletin.com/apps/pbcs.dll/article?AID=/20090319/ BIZ0102/903190365; Published: March 19. 2009; Accessed May 8, 2009.

BEST BUSINESS PRACTICES

LOYALTY PROGRAM PROFILE:

Starbucks Card Rewards & Starbucks Gold It took a while, but Starbucks finally found a way to reward the regulars; and there many of us out there. As I would wait in line for my daily latte, I often marveled that the staff was so good at remembering my name and my drink, and took special attention to recognize me as their regular. The customer service from my friendly barista was never taken for granted. Yet, if I was ever away from my regular shop, I felt a bit neglected by Starbucks. That has changed. Starbucks is now offering rewards that keep me coming back for more.

ENROLLMENT EXPERIENCE – 2 OPTIONS Starbucks Card Rewards – Purchase a Starbucks gift card online or in-store, then visit Starbucks.com to register your card. There you can manage your balance, reload your card and sign up for your AT&T Wi-Fi access. By registering your card, Starbucks has a record on file. Should your card ever be lost or stolen, Starbucks will freeze your funds and issue a new card – protecting you from loosing your balance.

Starbucks Gold – The Starbuck’s Gold card as $25 annual membership fee, can also be purchased either online or at POS. Again, you need to visit Starbucks.com to register your personal information to receive full reward benefits. This card can also be preloaded to carry a balance.

PROGRAM BASICS Starbucks Card Rewards

Starbucks Gold Membership

n Free drink extras like syrup, soymilk or whipped cream.

n 1 0% off most in store purchases

n Free refills on drip coffee. These are unlimited and apply to any size drink.

n A free drink when you join at Starbucks

n Free Tall beverage with 1 lb. whole bean coffee purchase n Free AT&T Wi-Fi Access (2 hour daily session) To receive your benefits, at least part of your purchase must be made with your registered Starbucks card.

n Friends and Family discount days/coupons n S pecial “surprise offers,” i.e. free drink on your birthday n Free AT&T Wi-Fi Access (2 hour daily session) Although you can load $ value and register your Starbucks Gold card, the benefits are separate and DO NOT OVERLAP (except Free Wi-Fi) those of the Starbucks Card Rewards. You must choose one or the other. Decide what works best for you!

OUTSIDE THE PROGRAM Starbucks offers the option of customizing your card. For just $4 you can create your very own unique card. It is easy and done on-line. Many options are available. Mine has my name and favorite drink with all my personal preferences printed right on the card.

Overall take Friendly service and a warm familiar place go a long way in a time when true “Cheers” style customer service may have been long forgotten. Starbucks has done this well and now has sweetened the deal, giving me another reason to get my daily fix!

You can set your Starbucks Card to reload automatically when the balance falls below a designated amount or on a set schedule, so rewards are always accessible. Starbucks also has a co-branded credit card, the Starbucks Card Duetto Visa®.

RECOMMENDATION Starbucks Card Rewards: There is no reason not to! Starbucks Gold: Depends on what you buy and how often. Where is your break even on that $25 annual fee?

Each issue we’ll be sending our secret shopper out to experience a particular brand first hand. Our shopper will sign up for the loyalty program, if one is available, and interact with the company at least 3 times, then share their experience with all of us. Your suggestions for the next brand review are welcomed: email your suggestions to [email protected]. *Visit www.starbucks.com/card for full program rules, participating locations and AT&T WiFi information.



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BEST BUSINESS PRACTICES

Job Openings Sales Executive / Loyalty Industry

Independent Sales Contractors

Consumer Benefit Services, Inc.

Connexions Loyalty Travel Solutions

We are currently searching for a seasoned Sales Executive with a successful and proven track record selling loyalty reward programs to the financial industry. Our candidate must have direct executive sales experience including loyalty program development and high level contacts in the financial industry. We want a sales executive who is a creative self starter who possesses excellent organizational and communication skills. The position will require periods of significant travel and offers a strong compensation package.

Position Overview:

If you are interested in this exciting and rewarding position please forward your cover letter and resume to: [email protected]

These positions require an outgoing and energetic personality with the skills and desire to develop and close business for individual incentive travel products needed and used by businesses across a wide spectrum of industries. As an independent sales contractor you will be responsible for lead development and revenue targets.

FIND MORE AT... Loyalty 360 Career Center Do you have an opening to fill in the loyalty industry? Or maybe you are looking for a fresh challenge. Loyalty 360 is connecting top talent in the loyalty, incentive/reward, and engagement marketplace like never before! Looking for a job? Submit your resume to our resume bank. Looking to hire? Post job opportunities on our site. VISIT: www.Loyalty360.org/career-center.shtml

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Connexions Loyalty Travel Solutions, an industry leader in individual incentive travel and travel reward fulfillment, is looking for independent sales contractors to sell our Distinctive Departures travel incentives. These are key sales positions within strategic territories nationwide. Contractors will be home-based and must have the ability work independently.

Candidates will have excellent closing skills, a client service focus and a desire to earn based on production. An existing clientele and relationships with incentive buyers is a plus. Products include pre-packaged and custom designed incentive travel awards which can be delivered both online and via call center agents. Distinctive Departures Incentives products • Jewel Collection Hotel Stays • Distinctive Departures Custom Packages • Distinctive Departures Classic Packages • Getaway Points Loyalty Program • Distinctive Departures Travel Gift Card To learn more about Connexions please visit: WWW.CLTSLOYALTY.COM For more information please contact: John Miller Director New Business Development (952) 914-6539 [email protected]

LOYALTY EXPO 2009

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FROM THE EXPO

Expo Takeaways: “Keep it Real” by Al McClain – RetailWire.com

Some marketers are more in love with putting together programs and setting rules than they are in really connecting with their customers.

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LOYALTY EXPO 2009

S

o here’s the thing about loyalty—it’s whatever the individual shopper/consumer wants it to be, not a marketer’s program. One person is loyal due to personalized service, another likes the one free after ten purchases deal, while someone else wants to accumulate points, etc. The problem seems to be that at least some marketers are more in love with putting together programs and setting rules than they are in really connecting with their customers.

Citibank and American Airlines have a program, for example, where one can earn 20,000 Aadvantage® miles for doing the following: Open a checking account with at least $1,000 by 6-30-09. Make one direct deposit or pay two electronic bills or make five qualifying non PIN-based purchase transactions with their debit card per month for twelve consecutive months. Oh, and you have to remember to register for the program using a special code and once it’s all over it takes up to 120 days from completing all the activity to receive the miles. Meanwhile, speaker after speaker at this week’s Loyalty Expo advised marketers to “simplify”, “connect with consumers ” and “keep it real”. With the above example, we can see why that advice is necessary. BrandMIND noted that households have an average of 14 loyalty cards yet a Colloquy presenter said that only 6.2 of those 14 memberships are active. In other words, consumers have a lot of loyalty cards and can’t keep up with them all. Yet, here’s the program that started it all in 1981 making consumers jump through nearly impossible hoops to claim their award. For the 80 million 12 to 31 year olds classified as Millenials, programs like the above example make even less sense. Panelists at a session on “Building Engagement with Millenials” said that this group is very connected with friends and family, relying heavily on word-of-mouth for everything. Millennials want instant gratification—they prefer instant cash back (who doesn’t) versus mileage rewards that take a long time to accumulate. Traditional media with this group is less effective, and they have the ability to opt-out of everything, so marketers need to find reasons to keep them engaged with their brands. If a brand doesn’t deliver, they can tarnish it pretty quickly, via social networks and W-O-M. Panelists felt that marketers should take away complexity because, although this group can scan information more rapidly than previous generations, they are better at “scanning” than really reading in-depth. My overall impression is that consumers, if left to their own devices, would really prefer to just have better prices than wade through piles of special offers and loyalty program rules. (Can anyone say Wal-Mart or Southwest Airlines?) But, since there can be only one low price leader for any given type of business, everybody else needs to think about what else will work best and perhaps try the following tips:



“The Loyalty Expo was a well run conference with many great presentations and significant networking opportunities with clients, partners and prospects.” —Bob Fetter, Pluris

• Keep loyalty programs and special offers simple enough that harried consumers can figure them out easily and quickly. • Don’t try to trick consumers with onerous rules and regulations—you’ll get trashed via social media. • Personalize offers enough so that shoppers will know you are on the same page with them, but not so much that they think you are snooping on them or trying to be their “friend”. • Think about what you offer from the perspective of consumers who are going through tough times more often than not, and are continuously bombarded by “deals” from marketers of all sizes and stripes. L

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FROM THE EXPO

Eye on the Future by Julie Sturgeon

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

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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.” Here’s a glimpse of how other loyalty marketing players are using what we know today to reshape our future. L

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L O Y A LT Y E X P O S U M M A R Y

Census Talk 2009: Sizing Up the U.S. Loyalty Marketing Industry Rick Ferguson, editorial director of Colloquy, knows a few disheartening facts about the loyalty marketing industry. In a nutshell, we’ve reached saturation, with the average household enrolled in approximately 14 programs. Yet the average consumer carries only three or four of those cards in their wallets. Additionally, the engagement numbers his company is seeing are flat. “There’s a lot of signing up and walking away going on,” Ferguson said. “It’s loyalty marketing’s dirty little secret: a lot of these programs are a waste of money.” So, if you’re not a member of the card-carrying set, do you push the envelope or get out of the game? Ferguson recommended that participants who attended his session survive by stop expecting a revolution and begin concentrating on the four Cs of the current evolution: Convergence: When different technologies like telephone, video and computers merged, the world welcomed broadband. In marketing, this convergence will be partnerships, as airlines and Citi have begun to demonstrate. The idea is to reward people for behavior across an entire network of partners as opposed to limiting them to one brand. For marketers, it means critical mass, which is why Citi teamed up with Expedia to use points toward travel in 2008, and even in the midst of a financial industry meltdown forged forward with a similar plan with Amazon. Coalition: Air Miles was revolutionary, and its position has proven strong enough to bear repeating in the U.K., Germany, Australia, New Zealand and Brazil. So far, the United States hasn’t had a successful attempt at a coalition. “But I’ll stake a body part that it will happen here in three to five years,” he said. “At that point, you’ll either need to join or compete. Get your plans together for that direction now.” Cooperation: When it comes to word-of-mouth advertising, Colloquy has found that 71 percent of the U.S. population is willing to recommend any given company, but whether their actions meet their attitude is uncertain. Fifty-eight percent of the population is a connector who has the ability to recommend the product to folks in their real-life and social networks but aren’t necessarily into your brand. The sweet spot—that interaction between advocate and connector—Ferguson calls a champion. The best news: 55 percent of loyalty members are champions, “so your database has a ton of people who like you and talk about you.



“There were many improvements this year...The content was strong and very relevant for the times, the location was easily accessible to many airports and the venue allowed for easy networking.” —Adam Bashe, Destination Maternity “Now, how do you get them involved in your business model?” he added. Ask Club Lego, which let its members design a kit that proved to be the biggest seller in the company’s history. Cause marketing: No, we’re not just talking about going green. Customers are demanding companies to do business in socially responsible ways, like American Express’ Members Project that let participants vote on where to donate nonprofit dollars. Likewise, Air Miles suggests ways its members can burn points in green ways. “We have the ability to put the right products on the shelves to hit our profitability numbers,” Ferguson said. “All we have to do is focus on the things that matter. L

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FROM THE EXPO

L O Y A LT Y E X P O S U M M A R Y

Gamification of Loyalty: Driving Deeper Customer Engagement Through the Power of Play A large chunk of our society evolves around games: American Idol is clearly one, and some viewers swear the TV series Lost is as well. But when you define “game” as a structured experience with rules and goals that is fun, suddenly all of life is eligible for this label. And, as Barry Kirk and Tim Crank of Maritz advocate, that includes loyalty marketing programs. “Games tap into competition, status, flow, play, reward, achievement and mastery—primal psychological needs,” Kirk told his audience. And that’s exactly why they could be the big ticket to solving pervasive challenges in the loyalty marketing arena, such as commoditized programs, the public’s growing attention scarcity and social media’s message that everything needs to be interactive and immersive. Kirk offers three steps to take immediately: 1. See yourself as a game designer: Call it a loyalty program if you insist, but the goal is still to tap into the same power engagement triggers. The real transformation happens when you throw in the fun. 2. Focus on your player. As a game designer, your role is to be an advocate for the player. Yes, it’s a radical shift for folks who traditionally think in terms of price per point. 3. Master these game mechanics: Points, or even more precisely, scores. Coca-Cola has turned its bottle caps into tokens; YouTube encourages participants to strive for hits and ratings. Anything you can do to create experience points to go with the spend points is golden. Tiers to let people know where they are relative to the game. Think of American Express’s card color progression, or Yahoo Answers passing out gifts built on interaction levels. Collecting, because if you put it in a set, the human brain feels compelled to gather the entire thing. Think Boy Scout badges, Burger King Star Trek glasses, and McDonald’s Monopoly cards. According to Kirk, if you bundle behaviors you currently aren’t getting with actions the public is comfortable with, they’ll strive for it.

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“I had a great time at the expo and found the sessions helpful and insightful. I was particularly impressed with the Gamification of Loyalty.” —Adriana-Vethencourt, Office Depot Leader boards give players status to compare. It’s basically the YouTube “most watched video” hits announcement, but in loyalty, that might translate to a lifetime point accumulation recognition. Exchanges make the games social. When you let people interact—think sending gifts on Facebook or retweeting on Twitter—they’ll play longer Customization, such as avatars, cement folks to your program. The more time they invest in creating their stamp, the higher the exit barrier. PetSociety gamers did exactly this when they discovered players had made a point to collect the different color dog poos in the competition. Now, there’s an added goal: to earn golden and rainbow poo. “We have as much data on how people use loyalty as gaming companies do,” Kirk pointed out. “Why not use it to fit the program to the players?” Feedback shows where you stand relative to a personal goal in addition to the big picture. Randomness plays on the popularity of slots. Psychologists will tell you that variable reinforcement is the most powerful carrot. Take, for instance, Charter cable company’s loyalty program. Participants know how to collect points (yawn) but they have no idea when the window to redeem them will open and close. The suspense means they open every email just in case. It also helps with a program’s liability if you control when people can redeem, Kirk said. Spectators are a given. Face it, without an audience Facebook wouldn’t exist. Bosses, as the last great Herculean task before completing a level or game, intrigues the best of us. If you fail, it’s human nature to work to get that second (third, fourth and fifth) crack at it. And when you do conquer the obstacle, the emotions are very positive. “It’s all about looking at your existing programs to see where game tactics fit,” Kirk encouraged. L

LOYALTY EXPO 2009 L O Y A LT Y E X P O S U M M A R Y

iPhonifying Loyalty—Micro Offers and Mobile Interaction: Leveraging Today’s Mobile Technologies to Move Product, Reduce Inventory and Increase Communication It’s official: On May 21, 2009, Vatican City launched www. pope2you.net to reach out to Catholics around the world via Facebook, YouTube and iPhones. In his public relations announcement, the Pope told 20,000 listeners in St. Peter’s Square, “to use the technology in a positive way to build up bonds of friendship and solidarity that contribute to a better world.” Consumers certainly haven’t waited for this blessing. Don Hughes, CIO of Kobie Marketing, says 1.6 billion people are connected to the Internet today, while 140 million smart phones will be in use by 2013. At least 65 percent of mobile web browsing takes place on an iPhone, the device that now accounts for 32 percent of AT&T’s business. Even more damning for ordinary phones: 72 percent of iPhone users told surveyors in December 2008 that they are very satisfied with their smart choice, while 52 percent at Blackberry (RIM) rate echo that sentiment. Other cell phones have fallen into the 30 percent ratings category, and Nokia, which clocked in at only 32 percent on the very satisfied scale, lost 10 percent of market share in the last quarter. “With the advent of the iPhone we’re seeing a seismic shift in the market” said Hughes. “We saw a huge opportunity to integrate that experience into our customer’s loyalty experience and so we developed iPhone and WAP applications that integrate into Kobie’s Alchemy loyalty platform. It has been an overwhelming success from our clients perspective.” The medium’s user profile only makes the story better. The average smart phone user is 35 years old, works more than 50 hours a week, and has double the average U.S. household income. Fifty-four percent are college educated, 61 percent have kids, and 53 percent say they don’t have enough “me” time compared to 40 percent as the national average. Best of all, 24 percent of smart phone users make purchases with it today, and 81 percent use their smart phones while shopping. Kobie’s studies even show that 94 percent of customers will complete a loyalty profile over mobile versus the 47 percent who follow through on the web. What’s more, the idea of registering and not returning is a foreign concept to smart phone users. After all, they have it at their fingertips to tinker with when they are bored at the airport, the doctor’s office, or between seminar sessions at a conference.



“Had a great time at Loyalty Expo. Met a lot of great people, looking forward to building partnerships for Dukky.” —Mike Paine, Dukky The sky is the limit on how companies can use this tool. Already, the iRewardsCard application allows users to store their loyalty program bar codes on one iPhone and simply scan the appropriate one at the point of sale. This means they carry all of the cards virtually and constantly. Companies are also experimenting with models that push information about products and offers to the screen when the user takes a photo of a UPC. Surveys, point auctions on rewards, and sweepstakes games are a snap to do on a mobile platform as well. The only thing that’s failed so far: GPS tracking inside specific stores. According to Hughes, the accuracy is still too weak to be effective as an in-store GPS. Convinced this is the next frontier? Then your assignment is to plot a way to “earn attention” via the right content and the right distribution because customer intimacy— knowing what the consumer wants and being relevant with your message—rules this medium. And Hughes assured his audience that armed with the right loyalty platform architecture; the technology actually takes no more than two to four weeks to implement. L

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FROM THE EXPO L O Y A LT Y E X P O S U M M A R Y

L O Y A LT Y E X P O S U M M A R Y

Going from 0 – 120 MPH in 18 Months:

Wake Up and Smell the Loyalty:

How Sainsbury, UK is Using Granular Customer Data to Shape the Shopping Experience, Build Customer Intimacy & Drive Customer Loyalty in One of the World’s Toughest Markets Putting the infrastructure together to build the Nectar coalition in the U.K. wasn’t easy, and Mike Blyth, president of LMG USA (Groupe Aeroplan) will be the first to admit that. Simply connecting earners and burners alone presents a challenge, since everyone thinks their points are worth more than the next guy’s, he laughed. Yet grocer Sainsbury did just that , pulling together 16 earners and 30 burners that now have 50 percent of households in the United Kingdom participating. Together they collect information on 3 billion transactions—and this is in a country where the gross domestic product is far lower than the United States. The marketers’ challenge, of course, is keeping the program fresh. So far they’ve done this by adding a credit card, a music store, an insurance program and a wine and film club. The public expects innovation, not just “me, too” add-ons everybody else has. In 2007, the Nectar coalition added an emotional aspect, calling its rewards, “treats you deserve,” and pumping up the fact these prizes are all about thrilling experiences. It’s given out more than $1 billion GBP in rewards value to date. From a database side, the challenge is even greater. For starters, Sainsbury opted for speed on the report runs, coming in at 2 minutes, 32 seconds, a time that fundamentally changes the business. Now the consumer package goods brands can access information themselves without waiting—and everyone from the sales department to public relations is helping themselves to the facts, figures and patterns stored here to improve their game. They’re accessing tings like spend per customer, daily sales, which stores stock their products, repeat purchasing patterns, crossshopping, and even how their product high loyalty buyers rank compared to category loyal buyers. You can even see which pop singer album more Kit Kat Senses bar buyers have purchased. (Psst, the answer is Mariah Carey.) “A very well thought out service agreement between the players is crucial,” Blyth warned. On the other hand, the work is worth it, as every piece of data helps determine how to communicate with target customers. That makes NextGen tools, and NexGen digital content and management crucial. “If you don’t think through the process, you just have data,” Blyth added. L

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How Loyalty Metrics Could Have Prevented Starbucks from Burning the Brand (and Other Predictive Loyalty Applications) Certainly the famous coffee company out of Seattle isn’t the only company to hit hard times. General Motors and The Gap have also run into problems with brand identification and the loyalty that fosters. But when the executive vice president of client services at Brand Keys, Leigh Benatar, needs an example of how loyalty models can provide the information CEOs need to steer a company, it doesn’t get much better than Starbucks. For starters, coffee is a category Brand Keys has watched for 12 years now. Its researchers know that four areas drive customers: location/value, quality, service/surroundings, and variety/selection, with quality and service weighing in more heavily. So in 2006, Starbucks was sitting pretty ahead of Dunkin Donuts and Krispy Kreme. After all, it brought the European coffee experience with its handground beans aroma. But by 2007, sales slipped and research indicated it was because of the long lines. Corporate axed the hand-grinding, killed the sofa and stopped the newspapers in an effort to fix the problem. In essence, they took out the theatre of coffee— an area loyalty metrics could have warned him mattered to his customers. Starbucks consumers began rating other coffee competitors above this once cherished brand. Oh, the brand tried to introduce new blends and coupons, but these attempts addressed the lesser categories and thus didn’t have the impact CEO Howard Schultz wanted. “They used brand marketing but not brand strategy,” Benatar noted. By 2008 the service/surroundings category shot up in both importance and consumer expectations—a normal phenomenon in Benatar’s experience, with product and service expectations increasing an average off 24 percent annually across the board. So Starbucks continued to fall from grace, with stock prices plunging and many stores shutting their doors. By 2009, even McDonald’s has surpassed Starbucks in coffee satisfaction surveys. Brand Keys’ predictive model also shows premium media touch points in the same way, helping executives to fine-tune their marketing channels for the right audience to boost sales. “The idea is to anticipate various audience segments’ needs, wants and expectations. Then you can identify the true value proposition that drives behavior,” he wrapped up. L

LOYALTY EXPO 2009 L O Y A LT Y E X P O S U M M A R Y

Economic Downturns: Is Loyalty Dead? As a marketer, John Bartold ignored economic data. Now, as the vice president of loyalty solutions at Irving, Texasbased Epsilon, he is slicing and dicing the 2009 recession. Most loyalty markers know a recession is defined as two or more quarters of negative GDP. We’ve seen 11 recessions since World War II, with the expansionary period afterwards substantially longer than the recession. “It’s like the ocean. The tide will come back,” Bartold told attendees gathered Sunday morning.

“The market will turn around when real wages increase, which is happening now. Retailers will start to see an upsurge in personal spending, so get ready. We will fight for every customer.” Yet, while holiday retail sails were down but not dismal, gift card sales plummeted because of folks’ perception the companies might not be around to redeem them. It’s just one tidbit that signals to Bartold and his co-presenter, senior vice president and Epsilon’s loyalty sector lead Todd Nelson, that this time, the game is changing. Some predict loyalty marketing could be dead.

“Thanks for everything you did at the EXPO. I thought it was an outstanding meeting, and I am looking forward to the next event.” —Chip Hall, Kobie Marketing

Bartold and Nelson assure the opposite is true. Certainly, enrollment rates and activity levels on the consumer side are down, and because 80 percent of a loyalty program’s cost is awards, CFOs are itching to cut down on that part of the budget. Bartold understands that reality, but said savvy companies will put half of the savings from such changes into infrastructure and future loyalty analysis. “The market will turn around when real wages increase, which is happening now. Retailers will start to see an upsurge in personal spending, so get ready. We will fight for every customer,” he warned. Indeed, in 2000 the marketing model heavily emphasized economy and emotion. Today dialogue and continuity is king, Nelson added. Simply putting a name on an email doesn’t equal “personal” any longer—today returning guests at a hotel chain want the check-in staff to recognize their status and treat them like they know the score. That takes more precise internal data gathering for starters, and a revamped way to measure results.



“It’s about best processes more than best practices,” Bartold said. “Finding out her birthday and sending a card is a tactic. Everybody does it. It’s more import to understand how you identify the innovation, not how you copy innovation.” Finally, 66 percent of Americans say they intend to spend more or the same as always in this recession—do you know who they are in your loyalty program? Once you find them, drive them to redeem their rewards. After all, there is no value until there is consumption. One of Epsilon’s clients saw flat sales until its consumers began redeeming their $10 certificates at the company’s urging. Most spent far more since the $10 didn’t cover the whole shopping trip, and boosted sales for the entire period. “A recession is a stress test to clean out garbage and force us to grow,” Nelson summed up. L

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FROM THE EXPO

The Loyalty Expo gets Social with Twitter by Bill Hanifin – Hanifin Loyalty, LLC

Whether using mobile handsets or social media for communications with loyalty program members, the discussion of new communications platforms and channels was a hot topic at Loyalty Expo 2009.

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LOYALTY EXPO 2009

A

ttending recent conferences around different vertical markets, I had been struck by the stark contrast in conference style and structure. At one banking event, there was almost palpable embarrassment in the air when attendees were asked to raise hands acknowledging their use of Twitter. At another more digital-friendly event, interest in the keynote speaker was validated by the sea of attendees tweeting and texting on their mobile devices during the presentation.

Given these contrasts, the suggestion to engage an experiment with Twitter at Loyalty Expo 2009 seemed to make sense. After all, if we are to lead innovation in loyalty marketing for the next generation, how can we do so without being familiar with the tools of the trade? The use of Twitter was designed to enable real-time communications with fellow attendees opting-in as “Followers” while listening to chosen colleagues and competitors participants were “Following”. The effort was complemented by the texting program sponsored by Vayulogic and allowed conference participants two new ways to keep abreast of schedule changes, provide evaluations on presentations, and facilitate networking. In all, about 40 people were seen posting updates using the “hashtag” LE360 to designate the event. Hashtags are a Twitter convention used to make comments (Tweets) searchable when used in the message. Over 100 messages were bantered about and there were probably 10 power-users of the micro-blogging tool posting during the 3 day event. Given the size of the event, adoption of Twitter could have been much higher. Reluctance to participate is partly due to misunderstanding of the tool and its implications for corporate users. A pre-conference Twitter webinar (Twebinar) was held to answer many of these questions and I have done my best to put social media tools in perspective in a recent post on my blog Loyalty Truth. During the Social Media Roundtable on Day 2 of the event, value was at the center of our discussions. A common concern was how smaller brands would use social media as opposed to corporate brands to differentiate in crowded markets. The answers seem to lie in understanding corporate objectives for social media campaigns. There are many examples of large corporate brands (Comcast, JetBlue, Zappos) using social media, Twitter specifically, to meet customer service needs, offer promotions, and to listen to what consumers are saying about their brand. For smaller organizations, the same tool could be a channel for promotion, public relations, brand awareness, and networking. Another recurring question asked “If you had to choose just one or two tools, what would they be?” Again, the answer is found in defining objectives. If customer service and primary



“Kudos to Mark Johnson, Erin Raese & the Loyalty 360 crew for putting on a great event in Florida. Met great folks; learned a lot!” —Mark Frisk, Thinking Like a Customer research are top on the list, then Twitter and a Facebook Fan page might serve the purpose. For more established brands, building a community (we used to call this a forum) might be the right venue to encourage candid comments from preferred customers. If brand building and awareness are the goals, then a corporate blog might be the foundation of an evolving social media strategy that would include Twitter and other tools. Concerns were express in our Roundtable about the time investment needed to “do social media right”. The choice of who sits at the keyboard to execute blog posts and Tweets was a related issue and most in the group acknowledged that the value of executive time should be weighed against the risk of unapproved voices speaking out about the brand. The fact that consumers continue to be empowered, first with the information generally available on the internet and now with tools to share this information at increasing velocity should be the focus of our energies. Whether Twitter survives and becomes the Google of its category remains to be seen. Less in doubt is that micro-blogging and other forms of social media are here to stay. L

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FROM THE EXPO: Behind the Brand

Beverly Hollifield AT&T

Panelist at the 2009 Loyalty Expo! Beverly is responsible for the strategic development and management of the AT&T Select Business Rewards program, the AT&T Universal Business Rewards credit card and third party offers for the AT&T small business customer base. She spearheaded the introduction of numerous exciting enhancements to the small business loyalty program to include partner points, a mobile application and an online community. What do you consider your greatest achievement?

Where do you go to keep up to date on the latest trends in your business?

While I am extremely proud of my company and my accomplishments in the areas of bringing new products to market and bringing loyalty initiatives to our customer, my greatest pride would be my children and seeing the amazing young adults they are today.

An avid reader of books, I also read numerous publications related to loyalty and attend conferences and seminars related to loyalty and the customer experience.

Which talent would you most like to have? The talent I would like most to have would be to be able to sing. My fellow church members would probably really appreciate it if I had this talent as well.

“Wonderful”—A word I feel expresses appreciation and has the power to make people feel good about themselves and what they are doing. Wishing someone a wonderful day will hopefully make the day just that.

Which person has made the most impact in your life?

What can we expect from AT&T Select Business Rewards in 2010?

My great grandmother is the person who had the most impact on my life. She was a woman before her time, the epitome of a “steel magnolia”. She taught me that a woman could be and achieve anything as long as she stayed true to herself, her faith, stayed committed to whatever endeavor she undertakes and maintains the highest integrity.

The AT&T Select Business Rewards program is currently in the southeast. As we continue to see the critical impact of loyalty initiatives, especially in this economic downturn, our strategy will be to expand its current boundaries. At the same time, new enhancements will be made to the current program to keep it exciting and relevant to our current member base.

Which book(s) are you currently recommending? I am an avid reader. Team of Rival about Abraham Lincoln’s rise to the presidency would be my first recommendation. It is amazing how little politics have changed over the last 100 years. My second recommendation would be Outliers by Malcom Gladwell. Interesting and entertaining at the same time about how successful people arrive at the top of their field.

If you were not doing what you do today, how would you be spending your time? I would work with children who have been abused, emotionally and physically, pursuing with the greatest passion improvements in their rights and the systems that protect them.

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What words or phrases do you most over use?

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| Loyalty Management

What have been your biggest challenges in 2009? As with everyone, the economic downturn and its impact on our small business customers is our biggest challenge. Our focus has been to find ways to provide services and benefits that would ease the pain of the current environment for them.

Word of advice for a novice loyalty marketer: Loyalty Programs should work to strengthen your relationship with your customers, recognizing them for what they are already doing with your company. These programs, in no way, replace your commitment to deliver best in class products and customer service. Never loose focus on “what brought you to the dance.”

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Thank you to the 2009 Loyalty Expo Sponsors The show was a great success!

Media Sponsors: Colloquy | PayBefore | The Nilson Report | RetailWire.com

We are looking forward to seeing you all again next year at the Omni ChampionsGate in Orlando, Florida, June 6th–8th. Visit LoyaltyExpo.com for details.

LOYALTY

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PAID

MANAGEMENT

8190-A Beechmont Avenue #332, Cincinnati, OH 45255

CAROL STREAM, IL Permit No. 475

SAVE THE DATE:

engagementEXP

™

NOVEMBER 8 - 10, 2009 Sheraton Chicago Hotel & Towers Chicago, IL The Engagement Expo will take a deeper look at the best practices of engagement and

experience management, focusing on brand, client and product perspectives. We will address

the various areas of engagement such as word-of-mouth,

experiential marketing, social media, interactive media and technologies, forums and communities, as well as traditional media — and how to leverage these as part of your marketing communication mix.

FOR MORE INFORMATION, CHECK OUT:

engagementexpo.com

Engagement Expo sponsored by