Loyalty Management - Powered By Loyalty 360 - January 2009

LOYALTY MANAGEMENT

Volume 1 Number 1

January 2009

Powered by Loyalty 360

THE VOICE OF THE

LOYALTY INDUSTRY

LOYALTY EXPO 2008 IN REVIEW

PREMIERE ISSUE FEATURING OTM Partners The Incentive Group rDialogue Connexions (CLTS)

Understanding Fuel Rewards Tackling Common Misconceptions

PREMIER ISSUE

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.

This Month in LOYALTY MANAGEMENT

JANUARY 2009

VOLUME 1

NUMBER 1

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

DEPARTMENTS

4 Letter from the Editor 6 Contributors

LOYALTY FORUM 8 Your Voice 10 Q&A 12 Behind the Brand/People Interview with Marti Beller

FEATURES 14 Customer Insulation Doug Press – The Incentive Group

(above) Steve Yastrow, Keynote Speaker, Loyalty Expo 2008

E XPO IN RE VIEW Susan Payton – Egg Marketing & Public Relations

16 True Loyalty in Tough Times Steve Yastrow – Yastrow & Company 18 Loyalty: a “Symbiotic System” Not a Program Paul Hebert – i2i 20 Comp CustomersTM Phil Rubin – rDialogue

With 475 attendees from seven countries, Loyalty Expo 2008 certainly exceeded even our expectations!

22 Dialing in on Relevance Connie Chesner – OTM Partners

39 / Expo Off to a Great Start

26 How Do I Value My Rewards Program? Sarah Phelps – First Annapolis Consulting

40 / True Measure of Customer Loyalty 41 / Engaging Your Customer 42 / Mobile Marketing 43 / Tech Talk 44 / Attrition:101 45 / Marketing to Millennials 46 / Expo Summaries

24 What is Loyalty and How Can I Get Some? Kelly Passey – Access Development

TRENDS & REWARDS 27 Gift Cards In A Down Economy Deb Merkin – Gift Card Partners 28 Get the Most Out of Your Travel Program John Miller – Connexions (CLTS) 30 The Rewards Revolution is Here! Jim Purdy – Bridge2Solutions 32 Fuel Rewards Marketing and Loyalty: Gaining a Better Understanding John Cullen – Pointe Advantage

BEST BUSINESS PRACTICES 36 Successful Hires Amy DeBerg-Ferwerda – R&P Group



January 2009

| Loyalty Management

3

FROM THE EDITOR

LOYALTY in the NEWS Welcome to the first issue of Loyalty Management, a one of a kind, customer driven quarterly publication. Here at Loyalty Management, we define a customer as every person your company touches—your end users, your key accounts, all of your employees, partners and vendors. We are committed to creating a documented customer-centric forum for sharing ideas, concepts, and trends across all industries interested in proactively communicating with their customers and each other. Loyalty Management belongs to you! This is your publication; a platform for you, our readers, to share your thoughts, ideas and experience with others. We are here to help you deliver your message and we believe your contribution is valuable.

The Motivation Show and Loyalty 360 Announce Partnership Plastic Jungle Appoints Gary Briggs CEO Former eBay Chief Marketing Officer to lead gift card services company.

Loyalty 360 and PCATS Announce Partnership

Supporting this, in our premier issue, we hear from Steve Yastrow, sharing his ideas on building a “We” relationship, demonstrating the importance of your brand approach. In addition, contributors from various backgrounds share their theories and strategies. Connie Chesner shares ideas on how to provide more relevant messages, while Paul Hebert explores the value in having a more consistent message across all business units. Be sure to check out the closing section, which brings you the highlights and insights from the first Loyalty Expo.

2020 Marketing to Offer RewardStream’s Lifecycle Marketing Platform as Core Loyalty Technology

We hope you enjoy this first issue! As always, your thoughts, questions, opinions and insights are welcomed.

Loyalty 360 Announces Two New Members to Leadership Team

Licensing Agreement to Provide Loyalty Marketers with Industry-Best Loyalty and Incentive Solutions

Sincerely,

Erin Raese Editor Loyalty Management [email protected]

Maritz Loyalty Marketing Launches Next-Generation Technology Platform LoyaltyHQTM Thanks Again Members Rewarded with Gas FuelLinks Joins Airlines, Retailers, Other Thanks Again Reward Partners To read more visit www.Loyalty360.org

4

January 2009

| Loyalty Management

LOYALTY

Contributors

MANAGEMENT

Connie Chesner Susan Payton

Connie Chesner

Susan Payton

Vice President, Director of Research for OTM Partners. A qualitative research and communications expert, Connie is adept at designing, analyzing and interpreting qualitative data for trends, and then converting those trends into themes used to understand the prominent perceptions and beliefs of a study population.

Susan Payton is the Managing Partner of Egg Marketing. Susan has worked as a writer in the creative capacity for ten years; harnessing her creative ability with her knowledge and experience in marketing, finance and business.

John Cullen John Cullen is President of Pointe Advantage Consulting and a recognized expert in the area of fuel-based reward and loyalty marketing.

Amy DeBerg-Ferwerda President of Recruiting & Placement Inc (dba R&P Group). For over 25 years Amy has been involved either directly or indirectly in the credit card industry. Since 1996, as a recruiter, Amy has specialized in the Cards and Payments world.

John Cullen Doug Press

Paul Hebert Paul Hebert is currently Managing Director of i2i – an influence consultancy that helps companies align the behavior of their employees, channel partners and consumers with the goals and objectives of the company. Paul is widely considered an expert on motivation and incentives and authors the highly rated blog Incentive Intelligence.

Amy DeBerg-Ferwerda James C. Purdy

Phil Rubin

Sarah Phelps leads the Loyalty Program Support services practice for First Annapolis Consulting. Her areas of expertise include strategic planning, outsourcing, operations management, negotiations and partnership.

Doug Press Doug Press, President & CEO of The Incentive Group, has over 30 years of Marketing expertise uniquely gained on both the agency and end user sides of the desk. He leads the formulation of winning customer loyalty programs for mid size to Fortune 500 brands and previously served as CMO for a billion dollar publicly held computer company.

James C. Purdy Jim is a founder and executive vice president of Business Development for Bridge2 Solutions, Inc. His career spans three decades in awards development and strategy, managing sales teams and client programs in various executive roles with S&H, Carlson and Marketing Innovators.

Deb Merkin

Phil Rubin

Chief Operating Officer and Partner for Gift Card Partners. Deb brings 25 years experience and global channel expertise in defining and marketing new products, creating strategic partnerships, and delivering solutions-driven programs for both channel partners and end customers.

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

John Miller

Paul Hebert

Sarah Phelps

Director of New Business Development for Connexions Loyalty Travel Solutions (CLTS), John brings over 10 years of loyalty travel experience and over 20 years of travel industry experience including positions within industry relations, product development and sales.

Steve Yastrow Founder of Yastrow & Company. Steve Yastrow has acquired a singular reputation among business decision makers as an outside partner who challenges organizations to take a fresh look at themselves from the inside out. As a consultant, speaker, and writer he encourages his clients, audiences, and readers to reinvent how they connect with customers.

Kelly Passey Kelly Passey Steve Yastrow

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

Erin Raese – Editor in Chief | Caitlin Schar – Editorial Director Victor Wilcox Graphics Plus Inc. – Layout & Design | Valerie Green – Cover Art Jet Lithocolor – Print Production

6

January 2009

| Loyalty Management

SUCCESS MADE FRESH When results go stale, CCG has the recipe to refresh your bottom line. Behind the counter: You’ll enjoy the benefits of an agency with more than 30 years of experience developing and executing customer relationship marketing programs in the retail industry. Our team members are thought leaders and sought-after speakers who are committed to using their expertise to help retailers attract, retain and grow profitable customer relationships. On the menu: Select the services you need from our full slate of offerings, including … Strategic CRM consulting

Customer research

Loyalty marketing program development

Creative execution

Loyalty program alternatives

Production services

Data analysis and data management

ROI measurement

Five-star rating: CCG has developed, launched and managed dozens of CRM and loyalty marketing efforts for top retailers in the U.S. and Canada. Let your store be the next to take advantage of our complete, proven approach — and start on the road to fresh sales and revived profits today.

800.525.0313 • customer.com Greg Sultan, SVP, Strategist • ext. 122 • [email protected]

P E TCO

Ta l b OTs

C h EC k E r au TO Pa rTs



N O r d sT r O m

P i E r 1 i m P O rTs January 2009

G E N E r a l m OTO r s | Loyalty Management

7

LOYALTY FORUM: Your Voice

Favorite Loyalty Programs We posed the question: What are your top 3 favorite loyalty programs and why? Here’s what you’re saying.

Jack Williams CEO, eCommlink American Airlines AAdvantage: Able to earn miles from a large, diverse group of merchants. Multiple earn with one burn allows me to continue my “equity” in the program for years. The availability of seats for “burn” are limited at the last minute, or you have to use many more miles to get an “any time” seat, the reality is if played right you can save considerable dollars on long flights. Marriott Rewards: The earn here is not as broad as the AA program, yet at ten points per dollar spent, it can add up. It is the upgrades to much better rooms, concierge floor with free breakfast and snacks can really reduce your cost of traveling, and not require travel out of the hotel. When I am in New York City or Washington, these advantages seem to be nice, and in the winter, really nice. The Kroger program for rewards that sends a check of $5.00 after each $500 spent in a Kroger unit. While not real sexy, or fancy, if you are spending this much often, then you have a real 5% savings on your food costs. Caitlin Schar Director, Loyalty Management “Really Nice Restaurants,” Valued Member Program. Hands down the BEST loyalty program created! Besides providing excellent food, atmosphere and service…the instant and frequent rewards make this program easy and valuable, which keeps me coming back again and again. They understand who is trying to win whos loyalty. Don’t make me sweat to earn your loyalty—reward me to encourage mine! 2 & 3... Nothing compares! Truly, for me, any good program prioritizes ease of redemption and is quick to earn/ deliver value.

8

January 2009

| Loyalty Management

Loyalty 360 Team Laura Rusche, Director of Marketing; Amanda Chasteen, Operations Associate Manager; Ashley Bankes, Sales Coordinator, and Annie Lerner, Marketing Intern Kroger Plus Card: Love getting personalized coupons based on our spending habits, gas rewards/ rewards for everyday and essential spending. CVS: Purchase prescriptions each month and don’t realize how quickly the rewards add up / rewards for everyday and essential spending. Other Favorites: American Express Card: Free flights and can accumulate miles from shopping online /being rewarded for loyalty and usage in ways that matter to us. Speedway: Purchase so many gallons, get some free/ rewards for everyday and essential spending. Coach/Victoria Secret: Rewards for loyal customers / special sales, coupons / rewards for being brand loyal. LaRosas: Local pizza place, pay for a Buddy Card (typically a fundraiser), and you get all different types of rewards / joining philanthorpy and everyday spending. Sudhakar Boddu Principal at Computer Sciences Corporation I like the loyalty program which gives points (like airline miles). That’s because of the recent Delta’s turn around. Delta came out of its troubles, as its customers had invested their time and money with them over the years and it also became their collective responsibility to keep Delta moving. As long as Delta was offering reasonable fares and service Delta frequent flyers never deserted Delta.

Mike Wittenstein Speaker. Facilitator. Consultant at Mike Wittenstein Speaks My idea of the ideal loyalty program is one that simply provides a great customer experience. An experience so good and meaningful to me that I want to repeat it—and don’t need to be paid to do it! Lynne Marmulstein GP-Product, LLC One program that I like is the Discover rewards program and getting $$ back to use as I prefer and that Discover rewards me additionally when I shop at certain retailers & online. Secondly, the air miles programs are a favorite, as we enjoy traveling. Mike Kolowski Datavantage Corp My first Loyalty program I strongly endorse is the Charter One MasterCard Mega Rewards. Paying Bills is a must and being rewarded by my bank and MasterCard just makes it better. In the last 6 months just paying my bills online, I have ended up with $100.00 gift card to Best Buy (my choice), just in time for the holidays. My second Loyalty program to mention tonight would be CVS. They are not only paying attention to how much you spend, but your product types. So while the receipt coupons are printing out giving you $4.00 off your next $15.00 purchase, they’re also printing out $.50 off of Neosporin since you just bought Band-Aid’s for your daughter’s “boo-boo.” Lastly I have to throw in Micro-Retail’s “Relate CRM” software for my third selection. Our loyalty CRM product is in use at Bebe, New York and Company and quite a few other retailers. It’s a favorite because of the versatility. “Relate” does Customer Management, Loyalty modules, Gift Cards, Deal and Promotion Management. This isn’t just a plug for our product, it is one of my favorites. I love what I do with this product, helping retailers and their customers. L

Please write us! Do you have an answer? Question? Or comment? We want to hear from you. E-mail us at: [email protected]. You can also find us by visiting Loyalty 360 groups at: Twitter, Linkedin and Facebook.



In our next “Your Voice”...

Who, what, where are you loyal to without program incentives? Loyalty matters but it is not always earned through incentives, points or coupons. An expanded understanding of what makes us “Loyal” may help marketers think a bit outside of the box. What am I loyal to? My hairdresser… my jeans… my coffee shop (and I don’t just mean Starbucks, I am loyal to a very specific location). Why? The overall quality of experience, the fit and the people. There is something more personal than just a targeted offer, with any of those to whom I am truly a loyal customer.

Share your voice !

January 2009

| Loyalty Management

9

Q&A LOYALTY FORUM: Q&A

Ask the Experts

Q: “What are best practices in keeping employees engaged in this current economic environment?”

A:

A:

The best way that’s worked for me in my career has been honesty. This honesty comes about from rethinking the top-down models of management and to develop a real trust in the shared role all of us play in shaping an organization. Let’s talk about our challenges, our opportunities, our goals, and our purpose. Develop a dialogue around all of that to gain a broad range perspective that will help us all understand the pulse of an organization and help drive action plans and results that comes from everyone within the organization.

Understand what employees expect and meet or exceed their expectations. Set performance goals and reward them for meeting them or exceeding them. Let them understand the Lifetime Value of a Customer. A customer is not a “one sale customer” but an opportunity to build a relationship with that customer and eventually boost profits and sales to let you (employee) keep your job. Here’s a link to an article I wrote on the subject: http://loyaltycoach.com/articles/ expectations.html

—Langston Richardson, Executive Creative Director, VP at infuz

—Allan Katz, Owner, Loyalty Marketing Institute

A:

I think the process is the same in this environment as it would be in a better economy. To provide an environment in which people are encouraged to excel, develop their skills and delivery, and offer excellent customer service—is a challenge that requires special leadership and focused management. From the three secrets of the classic One Minute Manager (Ken Blanchard and Spencer Johnson): One Minute Goal Setting (clear goals/expectations/accountability for each assoicate) One Minute Praisings (frequent ecouragement—“Catching them doing things right”) One Minute Reprimands (Immediate, Specific corrective feedback, followed by encouragement for them to improve) When these steps are used often and repetitively they form the basis for achievement and help build a business relationship that can engender loyalty. There is much that can be done beyond these basic steps, but without all three of these, associate development will be difficult. —Gary Duke, Installation & Service Mgr @ ESS (Electronic Security Specialists

Q: Do you have a question? A: Maybe you have the answers. What are your best practices? What is your advice? You are our experts! We will publish your thoughts in our upcoming issue… Write us at: [email protected] or plug-in to the Loyalty 360 social network at: Twitter, LinkedIn and Facebook. Share your thoughts and start a discussion!

10

January 2009

| Loyalty Management



January 2009

| Loyalty Management

11

LOYALTY FORUM: Behind the Brand/People

Marti Beller The other side of Marti Beller, the President of Affinion Loyalty Group A veteran in the loyalty industry with more than 14 years of experience developing and managing loyalty programs for some of the most recognizable brands, Marti is considered a visionary throughout Affinion as well as the industry. The achievements which make up a professional bio are only a fraction of the whole; personal experience, interests and ideologies shape the choices which lead to success and further distinguish great leaders. Loyalty Management asks Marti Beller questions to better understand who is Behind the Brand?

12

What do you consider your greatest achievement? Professionally, I became President of ALG at 32 and many people would assume that I would list that among my greatest accomplishments, but to loosely quote an old saying, “Getting there was the easy part, staying there… now, that has been difficult.” I could easily point to one of many product innovations we have made at ALG, or the culture that I have helped to create and foster; but when I consider what made that all possible I think it boils down to the consistency of leadership that has resulted from staying at one company for 15 years, weathering the inevitable storms that come over that time period. Like many, I could have jumped at any point and left any mistakes that were made behind for someone else to correct, but instead I feel they created a platform for the next level of professional growth. Over the past 15 years, this industry has gone through significant changes, and I’ve enjoyed making it through the hard times to savor the good ones. So, interestingly, I think it has been my commitment and loyalty to a company that I believe in so much that brings me the most pride.

Equally important would be empathy. I think it is both an innate and a purposeful skill to try to understand someone else’s situation, problem or viewpoint. The ability to put yourself in another person’s shoes sets the stage when trying to find win-win outcomes.

What are the qualities you most admire in a person? I admire people that are thoughtful regarding their intentions. I fundamentally believe in win-win and I think that there are too many times in life where people lose sight of that. Intent matters. People who are thoughtful, self-aware and will push their creative minds to their limits, regardless of where those limits are, receive my admiration. I believe that positive, thoughtful intent leads to positive results, even when momentary adversities arise.

Which person has made the most impact in your life? My daughter, without question, has had the greatest impact on me. She made me realize that not all results can be measured in a single day’s time. I became more intentional around the legacy I would leave—both personally and professionally—because of her. It was always important to me, but she changed the way I approached it. I have an innate intensity, and for me, results matter. After having my daughter, I became acutely aware, and

January 2009

| Loyalty Management

Which talent would you most like to have? I would like to be able to sing well. I love music. Music is a total mood changer for me. So if I could have brought that to life, versus just being a benefactor of it, that’s talent that I would have loved to have. What’s your personal motto? Things turn out best for those who make the best of the way things turn out. I believe you can look at most things either negatively or opportunistically. It’s not a rose-colored glasses thing, because I think I’m very realistic. I just choose to believe there are opportunities in almost every situation, and that those doors of opportunity open all the time—but many people miss them. Taking those opportunities and making the most out of every single one of them is a nonnegotiable for my life.

in turn more tolerant, of longer time horizons by which certain levels of success are measured. I think that changed me from being a good manager to a good leader and from running the company as a good vendor to a good partner. That’s just one of the many ways she has impacted my life. Which charities do you support? My favorite charities are Make-A-Wish and St. Jude’s. As a board member of Make-A-Wish for six years, I feel a strong local connection to it, but both charities show the power of children that fight through great adversity that most adults would handle with far less grace and optimism. Who are your favorite writers? My favorite writers are all business leaders. And those favorite writers change over time. John Maxwell and Stephen Covey have had the most long-standing impact on the way I approach every day. One book that I love that was more autobiographical than instructional is Carly Fiorina’s book, Tough Choices. It strikes me as being more realistic and less self-promoting than many books of its kind. What is your opinion on the current state of the economy? There is not much that I can say that hasn’t been said by so many people more qualified than I am. I’m clearly not an economist, but I think this downturn is going to last for quite some time. It took some time to get here, and I think it will take some time to get out. I personally see this as a huge opportunity for change. If necessity is what promotes invention, we will be in a very needy time, and through that will come great things where people put their minds to use to their maximum ability. I also think about the economy in terms of the types of programs we run. I think they’ll change slightly. I think they’ll still be very important as consumers will want and need rewards more than ever. However, I think consumers will move away from a sense of entitlement and more toward a joint alignment of goals between the people offering the rewards and the people consuming them. What were your biggest challenges in 2008? Amazingly, we did not feel the impact of the economy the way many companies did in 2008. I think our primary challenge in 2008 was to not lose sight of the fact that even though we were enjoying huge success, we are sure to face



“My daughter... has had the greatest impact on me. She made me realize that not all results can be measured in a single day’s time.” one of the hardest years in 2009. We realized that although we were doing well, we needed to challenge ourselves by not creating a false sense of security. When people ask me why I think we did so well, my instinct is that we have been born and bread as a fast, nimble company. We did not have to veer from our core competencies as the economy changed in order to meet the challenges inherent in such difficult times. What can we expect from ALG in 2009? A lot of energy. We didn’t weather 2008’s storm, so as other people are going in to their second year and it feels harder, we still have a lot of pent up energy and a lot of excitement for others to draw from. I could answer in terms of products, and we have plenty of them coming out. We’ve had the biggest product development year in our history in 2008, and have done incredible things in terms of new product development. But I think our energy is the highest I’ve ever felt it, and I think it’s because we survived so amazingly well in a year that so many people have suffered, and that has created a huge momentum for us that I don’t think will stop any time soon. Word of advice for a novice loyalty marketer? Don’t get married to your ideas to the point that you don’t see where it might not be working. I think loyalty marketing is really hard, and your reputation will be created on the programs you support. If you’re selling something you can’t deliver, you will be found out—and it’s close to impossible to come back quickly. I think the cycle of the comeback from a major miss in this industry is 5 to 8 years, and there will be many more new novice loyalty marketers in the space by then. Reputation matters, deliver what you say you’ll deliver and play a niche role if a niche role is all you can be—don’t try to be all things to all people. L

January 2009

| Loyalty Management

13

FEATURES

Customer Insulation by Doug Press – The Incentive Group

The warm and fuzzy Pink Panther is the branded mascot that most often comes to mind when we mention the word Insulation. Thanks not to Inspector Clouseau (Peter Sellers) but to the Owens Corning brand, this fiberglass form of insulation is the mental association we make at the mere mention of the word. But in the world of Customer Loyalty, Insulation has a much more profound and economically valuable meaning. It is the impenetrable marketing fabric we co-create and deftly weave around our customers to protect and preserve the relationship that they enjoy with us and our brand.

W

hen you think about the traditional use of home Insulation, it’s clear that this substance is often applied to areas that are in fact outwardly facing such as ceilings, walls and floors. After all, they’re exposed. Exposed to the elements of everyday environmental factors including snow, ice, rain, wind, cold, sunshine and humidity. Now, as we think of our business we know that our most valuable assets…our customers…are constantly exposed as well. Exposed to competitive offers, pricing discounts, substitute products (real and perceived) and especially true in recessionary times, exposed to customers buying nothing at all as a means of achieving cost savings. Therefore, it is totally logical that we take on, as a primary responsibility of the Enterprise, the task of creating Insulation around our Customer. How do we create Insulation? It is not one thing that we do but rather is the end result of 3 disciplined processes;

14

January 2009

| Loyalty Management

Step 1-Engagement, Step 2-Dialogue, Step 3-Loyalty. 1) Engagement—We begin by looking at the Engagement Level of customers based on both how well they understand our products and services and how committed they are to them. The Engagement Quadrant allows us to plot groups of Customers based on these two axes with the clear intent of moving them towards the Northeast quadrant and making them Brand Ambassadors. Not meant in any pejorative sense, but our failure to effectively engender our customers understanding and commitment can lead to brand sabotage. After all, people are media, and to the extent we can delight them with our brand experience and the relationship they have with us, their proclivity to act virally…by touting our brand and referring others…is greatly enhanced.

“We know that our most valuable assets… our customers…are constantly exposed to competitive offers, pricing discounts, substitute products, and exposed to customers buying nothing at all as a means of achieving cost savings.”

Th e E n g ag e m ent Qua dr a nt

Engaged Customers Deliver Results Understanding

Ambassadors Bystanders Weak Links

Champions Loose Cannons

Saboteurs Commitment 2) Dialogue—Next we need to establish a basis for having a meaningful and relevant Dialogue around the areas of mutual interest with our customer. This begins with having a web based Dashboard Loyalty tool that “speaks to the Customer”. It has to allow for timely inbound and outbound communications that help to educate, communicate and motivate the customer in a manner that is both convenient and comfortable for them. It should cause them to select a goal for themselves then measure progress on an easy to read Gauge. The Dashboard should bring forward relevant information that they are intrigued by on a regular basis, presented in a compelling and timely manner. Selecting rewards that the customer finds uniquely motivating to them is a critical success factor. Finally, a good Dialogue allows for the assigning of urgency to those behaviors that are of greatest importance to your Brand.



3) Loyalty—The commitment a customer feels towards your Brand or the Relationship with you is a function of many factors which you are quite familiar with. It is an emotional identification that your Customer makes with the Product, Services and Relationship you provide. We all measure Customer Loyalty in various ways, most commonly with metrics around intent to repurchase and recommend to others. But, we also have seen that leveraged cross sell of multiple products from the same brand can drive incrementally higher levels of loyalty across any customer set. It is clear that the most effective Customer Loyalty Program, and supporting initiatives, utilize expert structuring and best practices for engendering deeper, more pervasive loyalty across your segmented Customer Base. Why Insulate? Well in these economic times it is well established in B2B marketing circles that there are arguably fewer new customers to be had. Therefore, one very savvy strategy for growth is to reduce your Attrition Rate. Imagine effectively insulating your customers so we can drive your Customer Attrition down from 22% to 16%. All other things being equal, this would result in a 6% year over year growth in your business! With customers tightly insulated from competitive pressures, dramatic reductions in attrition and the aforementioned growth are not only possible…but the buzz fostered by the comfort of Insulation will have some new customers itching to get their head wrapped around your offerings. L

January 2009

| Loyalty Management

15

FEATURES

True Loyalty in Tough Times by Steve Yastrow – Yastrow & Company

Everyone is trying to steal your customers. And, with the current economic climate, you can bet that your competitors will step up their efforts to pilfer your customers.

So, what are you going to do? To answer this question, let’s first think about another question: Why wouldn’t a customer leave you for a competitor?

Your services? Are your services really one-of-a-kind?

S

What about your promotions and offers? Are they special enough to bond customers to you?

What happens when customers believe they are in a “We” relationship with you? They are loyal to you and to their relationship with you.

We live in a world of crowded store shelves and endless purchase choices. Your customers believe there is always another product, service or deal they can substitute for yours. You may believe your offerings are unique, but your customers may not agree.

Notice what I wrote. They are loyal to you and to their relationship with you. I specifically did not say that they are loyal to your loyalty program, or loyal to your weekly coupon offers, or loyal to your frequent buyer program. I said they are loyal to you and to their relationship with you.

What do your customers think is unique about you? What is it they “can’t get anywhere else?”

This distinction is very important. We often lull ourselves into a belief that we have a loyal customer just because the customer buys whenever we make them an offer. But this customer’s loyalty may be fleeting, and she may leave you as soon as a competitor makes her a better offer. I call this “transactional loyalty,” when a customer is loyal to your promotional offers, but is not really loyal to you. Transactional Loyalty is a fragile type of loyalty. And, it is the type of loyalty most companies are trying to cultivate.

Is it your products? Are your products so unique enough that no competitor can offer a substitute?

I spend a lot of my time helping companies differentiate themselves in their customers’ minds. What I see, time and time again, is that when people feel passionate about doing business with a company, when they say, “I can’t get it anywhere else,” it is usually because they have a strong relationship with that company. Simply put, relationships are the best differentiators.

16

January 2009

| Loyalty Management

o, what makes the best customer relationships? When the customer can’t think about you without also thinking of themselves—“We” relationships.

I

encourage you to think about a more valuable type of loyalty than Transactional Loyalty. Consider True Loyalty, where a customer is not only loyal to your promotional offers, but is loyal to you and to her relationship with you as well. True Loyalty is much more sustainable than Transactional Loyalty. How do you create “We” customer relationships that result in True Loyalty? Every relationship in your life was built one interaction at a time. If you have enough relationship-building encounters with someone, you will eventually have a strong relationship with that person. Which brings you face to face with a very important question you must ask about your current loyalty efforts: What do our loyalty programs and promotions lead to, more promotions or stronger relationships? If your loyalty programs become a dependency for your customers, without which they would have no reason to buy from you, you have created Transactional Loyalty that is vulnerable, fragile and weak. Take away the promotions, and you have taken away your customers’ reasons for buying. If, on the other hand, your loyalty programs and promotions are building blocks of a We relationship, your customer will develop reasons to buy from you that



transcend promotional offers. This customer will be an example of True Loyalty. At their best, loyalty programs and promotions eventually create their own obsolescence in customers’ mind. Sure, customers like the rewards. But their reasons for buying go well beyond the rewards. I am writing this article on a United Airlines flight from Chicago to Frankfort. I guarantee you that the most loyal 1K flyers (what is that?) sitting in first class appreciate the miles they are earning for this flight but, even more, they appreciate their relationship with the airline. On the other hand, those frequent flyers on this flight who are less loyal, and booked United primarily for the miles they will earn, are those who have only a transactional relationship with the company. American Airlines could probably steal this second group if they made a rich enough offer. Which brings us full-circle to my opening comment. Everyone is trying to steal your customers. As we fall deeper into an uncertain economic abyss, there is no asset more valuable to you than your customer relationships and the loyalty that comes out of those relationships. If you want to thrive in 2009, focus on creating True Loyalty, where every offer you make and every reward you give lead not just to more offers, but to sustainable We relationships and True Loyalty. L

January 2009

| Loyalty Management

17

FEATURES

Loyalty: a “Symbiotic System” Not a Program by Paul Hebert – i2i

Customer loyalty has been around for some time—over 100 years according to some sources. Starting with stamps given to customers who paid cash for purchases in the 1800’s to the more formal programs such as Green Stamps and the well-known frequent flyer programs of today. Some studies indicate that over 75% of consumers belong to a loyalty program of some kind. A Jupiter report from 2003 showed that companies spent over $1 billion on loyalty programs. Loyalty is big business. Customer loyalty is the holy grail of marketing. If a company has loyal customers their cost of customer acquisition almost disappears, price sensitivity is reduced, customers’ tolerance for mistakes increases and the company realizes higher profits. Customer loyalty is good business. Because customer loyalty drives so many great business benefits it’s no surprise that the industry continues to grow—more programs, more offers, more rewards, more points. But we’re not really getting all we can out of loyalty.

Service Profit Chain Way back in the dark ages (1997) an idea called the Service Profit Chain was proffered by some Harvard academics—Heskett, Sasser, Jr. and Schlesinger—linking customer loyalty to employee loyalty and customer loyalty to profits and growth. Their basic premise was that customer loyalty was driven by employee loyalty, customer satisfaction was driven by employee satisfaction and profit was driven by customer loyalty. The typical representation of this idea was a “chain of events” that led to profit. This revelation drove an increase in attention on employee satisfaction and employee loyalty.

Separate But Equal The Marketing Department typically drives the customer loyalty program and helps the business drive sales. With the new-found connection to profit through the Service Profit Chain,

18

January 2009

Serv ic e P ro f i t Cha in

| Loyalty Management

Human Resources can now focus on employee loyalty and satisfaction and feel like they are contributing more to the business than just making sure W-4 forms are completed. Unfortunately—they don’t talk much. There is no connection between what the HR department is doing to drive loyalty and engagement with employees and what Marketing is doing to drive loyalty with consumers. But let’s really complicate this—Sales (sometimes Marketing) typically has the responsibility for driving sales within a distribution system—dealers, distributors, wholesalers, etc. There are a variety of promotions and incentives offered to distribution channels to drive sales. Sometimes called “frequent buyer programs,” sometimes they are hidden within “co-op” programs. By whatever form they are presented, they bear an eerie resemblance to loyalty programs—do “x” get “y,” hit a goal and be crowned a “Gold” member. But alas, and a lack—they aren’t connected. In other words… n HR runs employee loyalty programs n Marketing runs consumer loyalty programs n Sales runs distribution loyalty programs

Internal Service Quality

Employee Retention & Productivity

Employee Satisfaction

Profit & Growth

Customer Loyalty

Perceived Value of Service

Customer Satisfaction

Questions that need to be addressed include: n W  hat links the program for the consumer back to the employee?

No one runs the strategy that links these initiatives together. Now is the time to make that happen.

It’s a Symbiotic System— not a Program Loyalty is a system of initiatives that connect to, and rely on each other to be successful. Individually, programs can work—and work well. When you think of your programs in terms of a symbiotic system you can multiply the affect of any one program to create results that are greater than the individual results of each program. By definition, symbiotic systems are any interdependent or mutually beneficial relationship between two persons, groups, etc. A true loyalty strategy is symbiotic. If you’re really serious about loyalty with your customers—you then must also be serious about loyalty with your employees and distribution partners. One without the other is incomplete Consumer and less effective.

CHANNEL

The loyalty strategy is less a chain than a network, with interactions between all audiences. Loyalty strategies must take advantage of the fact that employees not only deal with consumers but with the channel partners and vice versa. In addition, loyalty programs targeted EMPLOYEE



n Do  the consumers have a way to interact and reward great customer service? Does your employee recognition program include customer input?

to consumers must take into account that for a majority of businesses, consumers probably interact more with the distribution channel than the sponsoring companies themselves.

n Do  consumers have a way to interact with each other? Can one customer drive another customer’s behavior? How are you leveraging the social networking aspect of the new economy?

It’s the White Space There is a lot of information and there are a lot of companies that provide loyalty program services from design and reward fulfillment through data analysis and business intelligence.

n Do  non-customer facing employees understand the loyalty program? Do they know what their role may be in driving loyalty?

“A true loyalty strategy is symbiotic.” There are also a lot of companies who can put together a great employee recognition program designed to increase engagement. Distribution incentive programs are very common and can be implemented easily. Each of these discrete pieces can be designed and implemented flawlessly—and effectively. But it is less about the individual pieces than the white space that is between them. Do yourself a favor and look for ways to connect the white space between your programs; take advantage of the symbiotic nature of loyalty and enjoy a greater return on your program. L

n Does  the distribution channel have a way to connect to employees at the sponsoring company? n Are  the members of the distribution channel consulted on how the customer loyalty program is designed and delivered? n D  o members of the distribution channel have any way to customize the consumer program for their audience? (Within the scope and strategy of the base program of course.) n H  ow does the program pull in the channel members and make them want to support the consumer program?

January 2009

| Loyalty Management

19

FEATURES

Comp Customers, a Better Customer Metric for Managing the Business TM

by Phil Rubin – rDialogue

T

here is a fundamental difference between metrics that report on the business performance (i.e., how are we doing?) versus metrics that enable you to manage the business (what do we do?). Take retailers, for example, who are struggling with double digit sales declines over the critical Holiday period. The metric they follow, along with investors, is “comp sales,” or comparable same-store sales. For loyalty programs, there are similar numbers for program performance; metrics such as “total program spend,” membership figures (growth, attrition, etc.) and now Net Promoter Scores (NPS). NPS is the loyalty metric most in vogue these days and while it’s a good, high-level metric for measuring broad customer “loyalty” (and significantly better than Customer Satisfaction), it’s not effectively used as a management tool. A promoter doesn’t necessarily equate with a valuable customer. Comp Sales can identify dips in sales by region and by product, but that doesn’t give an indication of how to fix the problem, other than mass promotion (i.e., discounting). These days, most retailers have loyalty programs and store-branded credit cards, giving them insight into spending at a customer level. The value of loyalty programs rest in the ability to track and manage customers. The data yielded from programs, along with the ability to relevantly communicate with customers is the power that is increasingly overshadowing effectiveness (and measurability) of other marketing activities.

20

January 2009

| Loyalty Management

With these data in hand, there is a much better metric to focus on: Comp Customers. Comp Customer metrics are similar to Comp Sales metrics, but don’t confuse the two. Comp Sales measures comparable stores sales over prior periods; it measures changes in the total revenue. It does not reflect changes at the transactional or customer levels.

“The value of loyalty programs rest in the ability to track and manage customers.” In contrast, Comp Customer metrics provide visibility into how individual customers are spending compared to a previous period. Comp Customer measurement provides insights into which customers are trending up and which ones are trending down, and by how much. This allows marketers (and others in a company focused on driving sales) to look at individuals and groups of customers (e.g., segments) in terms of spend and trend. With these insights, they can then treat them differently in terms of messaging, offers and timing of communications. So while many retailers struggle and default to mass promotion, there is a way for them to impact declines more profitably: with the right loyalty tools and Comp Customer analysis on hand. The following real world scenario illustrates the value of using Comp Customer metrics to guide marketing decisions and investments.

“Comp Customer metrics provide visibility into how individual customers are spending...{this} provides insights into which customers are trending up and which ones are trending down...”

L

et’s start with “Smart Stores” which is facing comp sales declines of 15%. Let’s assume their performance is on par with their competitors. Everyone has a loyalty program and everyone is basically running the same program (just like real life!). Just like their competitors, they know that sales are down in Region A and B for products X, Y and Z. But unlike its competitors, Smart Stores just developed Comp Customer reporting. Using a proprietary customer segmentation scheme, they divide customers into four key groups and assign each customer to one of those four groups. Analysis of activity among those four segments shows that two out of four segments actually show increases, with one segment performing significantly higher than the others. Based on this knowledge and their ability to send email to customers, Smart Stores decides to send different email versions to each segment, messaged different based on how each segment is doing from a Comp Customer standpoint. They smartly provide a richer offer to those customers with negative comps, knowing that it will take more to win them back. To those customers in the best performing segments, they employ a message more focused on reasons to shop, new merchandise and a more value-added offer, rather than a deep discount. They even recognize and thank these customers for continuing to patronize them and reinforcing their core value proposition.



Unlike Smart Stores, “Typical Stores” is resorting to the old mass marketing, spray and pray, discounting approach. This approach yields the same offer and deep discount to everyone, including those customers that are continuing to shop in spite of the downturn. While they might have slightly higher sales at the end of the period, they will erode profitability by offering deeper discounts than necessary to customers that would have shopped anyway (i.e., dilution).

“There is a way for retailers to impact declines more profitably: with the right loyalty tools and Comp Customer analysis on hand.”

The real value of a loyalty program, and loyalty marketing, comes in using the data and the program to do better relationship marketing through better insights. The Comp Customer metric provides that window of insight into how customers are behaving and who we want to target to behavior differently. In any market, but especially a tough economic market, it’s a vital tool in prioritizing limited resources to drive customer behavior at the greatest profit. L

January 2009

| Loyalty Management

21

FEATURES

Dialing in on Relevance by Connie Chesner – OTM Partners

T hink like your audience . Talk like your audience .

As customers we all have been on the receiving end of some really bad marketing. We’ve seen marketing communication that clearly misses the mark. Whether it is the direct mail package from your existing credit card company treating you like a brand new prospect, or the poorly timed “would you like an apple pie with that?” you hear just after ordering a salad—we know what an irrelevant message is and what it does to your perception of a brand. To hit the mark, a message must be relevant to consumers. But what are the hallmarks of relevancy? How can we be sure that our communication is on target? And what are the associated benefits for your product, service or brand? When a message truly connects with its intended audience there are two principles at work. Relevancy is achieved when: n We think like our audience n We talk like our audience.

How to get started: think and understand. Learning how to think and talk like our audience begins when you engage consumers in strategic conversations with two overarching strategies. First, determine who to talk to. You need a diverse group of customers to ensure that the insights gleaned from your conversations are applicable across your markets. Next use trained researchers to ask pointed questions and probe for information in areas of additional insight. Leave bias out of the conversation by engaging outside resources not entrenched on a day-to-day basis with your industry. During analysis, look for commonalities in thoughts and language across customer segments. In structuring your conversations you may end up asking questions similar to those that led to the development of your products and services. In addition, you’ll delve into customer psychology getting to the core of what really makes them tick, even in areas of their lives which may seem only tangentially related to your products or services. These areas often prove to be the

22

January 2009

| Loyalty Management

most valuable in effective communication. Understand how customers think about your category and then your product, service or brand. How do they make decisions specific to your category? For instance, someone who values independence is driven by different motivations in making financial decisions than someone who places a greater value on family security and work ethic. When underlying motivations for the same action are different, uniform messaging will not be very effective. By taking the time to truly understand your customer’s motivational drivers via these conversations, your efforts will be appreciated and rewarded. Engaging customers in a meaningful dialogue and then messaging back to them in terms they are familiar with, creates a sustainable point of differentiation. When customers know they have been heard, they will flock to your brand. The idea is to know what to ask, how to ask it, and then develop your marketing communications accordingly.

Then talk in a familiar voice. Your customers likely do not think about your products, service or category in the same way that you do. The words and phrases they use will vary, sometimes dramatically, from yours. For instance, most customers do not use phrases like “financial instrument,” “service area,” or “share of requirement.” Relevance comes when we actively seek to understand the customer’s language and adopt it in our communication. It is about moving from corporate-speak to a tone and voice that customers can respect and relate to.

In order to do this effectively, you must carefully listen to how your customers are phrasing their talk around your category, products, and services. Don’t judge their choices, embrace them. After all, your goal is to learn about the world from THEIR perspective and to then mirror that back to them through your communication choices. Because this can be difficult to do, trained researchers are often brought in for their active listening and interpretation skills which reveal language choices and patterns of the audience which can later be engaged during message design.

Caution: Know your own voice. Does this mean you should inject “dude” into every communication? Should you defer to using slang or even crass language because of common usage among your target audience? Of course not. The important thing to remember is that relevance is about context—how your target audience thinks, talks and makes decisions and how this impacts their perceptions of your brand and how your brand is expressed via different communication channels. Don’t judge your customers’ choices, embrace them. Thinking like your customers and picking up on language cues can help you understand how to make a compelling connection between your brand and your audience. However, what you say and how you say it must also be brand appropriate. Otherwise, you end up with a transparent attempt that panders to your audience—a mistake that most audience segments will recognize and reject.

Take the process further. Now that you are thinking and talking like your audience, what can you do to move these ideas into actionable strategies that can improve your business? Consider these two general approaches. 1. You now understand that your customers do not think and talk about your products, services or category the same way you do. Also, your customers probably differ from one another in terms of how they talk and think about your products, services, or category. Often you can segment customers based on motivational drivers and the language they prefer. For example, not all customers within the same financial institution are enticed by the idea



of consulting with an investment group. Some customers view the term “investment” as riddled with risk. Therefore, any mention of “investment” in messaging will turn them off right away. To keep customers engaged, the message must be relevant and individually tailored.  nowing how best to segment and customize K communication to an audience based on motivational triggers can be a challenging task. Identifying existing customer segments through conversation is the first step—an actionable step toward making your messaging most effective. Then develop a strategy to get the right messages to the right customers. Your strategy will vary based on the specifics of your project and objectives, but will get your brand noticed and promote loyalty among your customers. 2. Use customer conversations to help you assess their desires, then improve your current offerings to better align with your target audience. For example, in a healthcare setting, it was found that minor changes could be implemented in routine patient-staff interactions to greatly improve the patient experience, thereby increasing satisfaction, loyalty, and advocacy. A sports nutrition distributor learned that retail customers desired to have persons educated on product offerings to make deliveries to their locations. By making a small change in operations, great gains in customer satisfaction and loyalty were made. Once changes have been made to align with customer desires, communications to existing customers and prospects alike can inform them of the availability of desired products and services in language they understand. With little effort, your product or service now aligns with customer desires making your offering closer to customers’ ideal image than the offerings of your competitors. In the end, the goal is to make consumer messages highly relevant. When marketing messages are highly relevant and brand appropriate, the connection is made with your brand and the relationship begins. By continuing to use highly relevant messaging over time, the relationship will evolve and customer loyalty will emerge. But it all starts with a conversation and careful listening which focuses on your customers and what it’s like to live in their worlds. L

January 2009

| Loyalty Management

23

FEATURES

What is Loyalty and How Can I Get Some? by Kelly Passey – Access Development

Today’s consumer is savvy enough to know that just because you say it’s a deal, doesn’t mean it is a deal. If you want real loyalty, deliver real, relevant value—and make sure redemption is frequent and encouraged.

I

may have over 40 ties in my closet, but not all are created equal. I am most loyal to the one my daughter gave me two years ago for Fathers’ Day—it’s 100% polyester, probably from K-Mart, and may have cost as much as three dollars. However, there is an ‘emotional tie’ to that tie that does it for me. In the marketplace, I like to define loyalty as the increased likelihood a consumer will engage or re-engage with a brand or product upon an identified need. Put simply, loyalty means new business, repeat business and referrals—loyalty means revenue. If your loyalty program isn’t having an impact in these areas, it’s time to reassess that emotional tie. Loyalty methods vary widely and many venture into staggering complexity, yet too many of them disregard their fundamental purpose—to ‘emotionally’ connect with the customer. Simply having a loyalty program isn’t enough, it must offer the customer relevant value and make them feel special frequently enough to actually create the ties that bind. Offering true value is important, because a customer never tires of getting a deal. They never stop wanting to feel smart or special. Getting a good deal feels good and it never gets old—“deal fatigue” just doesn’t exist. Contrast that with “loyalty fatigue,” an increasing buzzword in our industry. The average household in the

24

January 2009

| Loyalty Management

U.S. now participates in upwards of 12 loyalty programs, but is the average household a very loyal household? Or, more likely, is this 12-program phenomenon an indicator that people are still looking for the right deal and haven’t found it yet?

“If every program truly delivered a real deal—‘loyalty fatigue’ simply wouldn’t exist.” Effective loyalty programs do have significant power to influence purchasing behavior, with 80% of those who participate in a loyalty program reporting that their membership in the program impacts their purchasing decisions. In fact, 60% of consumers say they are spending 27% more than they did before joining their favorite loyalty program, and would spend less if a company were to discontinue. So, why the fatigue? Consumers keep adding yet another program into their wallets—even as they are literally awash in a flood of points, miles, beans, xyz-bucks and pennies on the dollar rewards all in the name of “Loyalty.” Put simply, not every program delivers the deal it promises, and customers are getting soured on that. If every program truly delivered a real deal—“loyalty fatigue” simply wouldn’t exist.

O

nly creating a true emotional connection can remedy loyalty fatigue, and luckily, delivering true loyalty has a simple formula: 1) know your customer, 2) deliver true value and 3) keep your program simple.

principle, many loyalty programs have evolved that require program administrators to discourage redemption to keep the programs solvent. Ironically, this is currently the standard model for much of the financial sector.

First, know your customer. Take a look at your loyalty program. What is the emotional tie? Have you assumed that your customer must want points, simply because you created a points-based program? What does your customer think is important? Yes, the answer is different for everyone, but there are some universal favorites: We all like to save time. We all like to save money. We all like to feel smart. We all like a good deal.

This phenomenon disregards a fundamental factor to loyalty—redeemers outspend non-redeemers three to one. It is not the existence of an incentive that will get customers to bring you more business, it is the redemption of that incentive. A successful loyalty program both encourages redemption and drives revenue. In a very successful program, redemption directly drives revenue.

For example, a few years ago HSBC created a Cab ride program in NYC to help customers get to the bank’s branches. That one cab ride probably created more loyalty than could any number of points or miles. The program was personal, practical and memorable, and it earned HSBC an emotional tie with its customers. HSBC got to know their customers—and they offered them a good deal. And, although this approach may seem pricey, if you consider loyalty for the buck, it surely compares more favorably than your average banking loyalty program. Next, deliver true value. Today’s consumer is savvy enough to know that just because you say it’s a deal, doesn’t mean it is a deal. If you want real loyalty, deliver real, relevant value—and make sure redemption is frequent and encouraged. A healthy loyalty program brings you “goodwill dollars” when the customer is rewarded—you invest in an incentive, and the return comes in the form of repeat business, referrals, or a larger purchase. Despite this fundamental



Keep any rewards/loyalty program simple. Value your customers’ time. Don’t make them count points or accrue miles for years. Save them money without requiring them to jump through hoops. Make them feel smart because they got a great deal, not just because they finally figured out how your loyalty program works. An easy-to-use program simply increases the redemption factor, which in turn increases the power of your loyalty program. If you want repeat business, give repeat rewards. If you want frequent business, give frequent rewards. If you want customers to think of you first, then think of them first, by valuing their time, money and intelligence with a practical program that promotes brand redemption—and therefore, brand allegiance. Offer real value. Encourage redemption regardless of your ‘currency’. Make it easy, and make it often. In this economy, it has never been more critical to refocus on these fundamentals and create that emotional tie—the one that will bind your customer to you for years to come. L

January 2009

| Loyalty Management

25

FEATURES

How Do I Value My Rewards Program? Let me count the ways… by Sarah Phelps – First Annapolis Consulting

L

aunching and sustaining a rewards program requires investment, focus and above all, patience. Once in market, the only way the program is optimized is if the sponsor utilizes marketing and other resources to call attention to the program and remind current members and prospects of the benefits of being a “loyal” patron of their business. Today’s environment has all program sponsors, financial institutions and retailers alike, evaluating each line item of expense in their business looking for ways to generate savings that go straight to the bottom line. Certainly rewards program reserves and administrative expenses are not immune to such scrutiny and can be an easy target for financial analysts. After all, it really is just returning a portion of precious margin to customers…or is it?

“Financial analysts have a tendency to underestimate the value that an organization garners from a rewards program.” Financial analysts have a tendency to underestimate the value that an organization garners from a rewards program. Financial institution sponsors will look at per card performance for rewards and non rewards customers, compare interchange revenues, net out the rewards reserve rate, and call it a day. Retailers, on the other hand, sometimes limit their evaluations to average sales per ticket, net out in-store discounts provided to rewards members and look no further. In each case, the broader benefit of the rewards program is underestimated, potentially…grossly underestimated. There are several additional elements of rewards program value to consider. Perhaps the most under recognized with the greatest potential impact is customer attrition. The length of a rewards customer relationship as compared to a non-rewards customer can be eye opening to skeptics of the value of rewards programs

26

January 2009

| Loyalty Management

to its sponsor. Not only should the revenue over time of the relationship be considered but also the cost of replacing that customer in the event that they do attrite. In addition, the number of products carried by the customer, or the number of incremental visits is also important to include. Another example, but perhaps the hardest to quantify, is the marketing value of various forms of communications that the rewards program supports. Each statement, e-mail and web visit supported by the rewards program would have to be replaced by another, less permissive, and often more costly, form of communication that equally impacts member awareness of the program and the sponsor’s value and brand. This is not to say that opportunities do not exist to reduce rewards program costs. There are several strategies such as segmenting programs to target top tier customers with the most compelling value. There is also the potential for adjusting redemption options or raising redemption costs. Adding a nominal membership fee is also an option to consider. The impact of any of these changes however, needs to be closely monitored to quantify their impact on customer revenues. At the end of the day, the value of a rewards program and of the customers participating in it should be carefully evaluated before employing any cost cutting measures. Those evaluating rewards program costs should look to the items mentioned above and consider others that may be unique to their organization. One potential challenge in all of this is the availability of behavioral data to support such an analysis. Those embarking on a new program construct should carefully consider the data points that will be necessary to support continued program analysis such that the program’s performance can continually be measured. L

TRENDS & REWARDS

Gift Cards in a Down Economy by Deb Merkin – Gift Card Partners

W

e agree, we’re in a down economy. Budgets are being stretched or eliminated, customer behavior is harder to predict, and getting the biggest bang for the buck is more important than ever. A down economy can certainly have an impact on any loyalty program. However, unlike other sales and marketing programs, loyalty programs have historically endured economic downturns. A recent Incentive Research Foundation (IRF) study, “Effects of a Down Economy on the Incentive Industry,” looks at ways incentive program administrators are adapting their travel and merchandise incentive programs in response to current economic conditions. Results of the survey show that a down economy has more of an impact on travel incentive programs than on merchandise non-cash programs. Some 81% of survey respondents say that a down economy is having a negative impact on their ability to plan travel incentives, while only 48% say that it’s been harder to plan and implement merchandise non-cash programs. “We are certainly seeing a significant increase in gift card redemptions in all of our client’s programs. In addition to having a broad choice of appealing cards in our programs, the economic downturn has accelerated redemptions in general,” shared Nancy Berg, Vice President of Operations at Kobie Marketing. Since most survey respondents agree that the use of gift cards is increasing, certainly you should be looking at ways to use closed loop gift cards to your advantage. A closed loop card is one that is issued by a specific retailer. Looking at these cards there are those that can be used to purchase everyday consumables like gas, food, and those that can be used to purchase wished for items like electronics, travel, dining, or apparel. Because gift cards have become so prolific they give the recipient the freedom to choose a



“Gift cards have both “trophy” and “halo” value. Recipients are reminded of how the card was acquired when they redeem it or share it with family or friends.” gift they really want. Berg added, “As you’d expect, we are finding the most popular redemptions are a mix of brands that provide “everyday needs” like gas, groceries, discount merchandise and home improvement items, yet we are also seeing an increased interest in experiential rewards that provide a reprieve from life’s daily demands!” For consumer promotions you can tap into the versatility of gift cards to stimulate trial purchase, stimulate repeat purchases, stimulate larger purchases, introduce a new brand, combat or disrupt competitors, reward employee performance. Gift cards have both “trophy” and “halo” value. Recipients are reminded of how the card was acquired when they redeem it or share it with family or friends. Gift Cards are here to stay. Even as the retail market struggles, at this difficult time, consumers value Gift Cards from the right merchant. Using them can enhance your program more than any other vehicle. An additional tip from Berg, “As a buyer we are far more conscious about the brands we are working with and the inventory levels we are carrying… we believe it’s important to differentiate your value proposition through these rewards. We anticipate customers will find loyalty/rewards programs increasingly appealing as a way to supplement their income and enjoy access to value-added discounts and other benefits.” L

January 2009

| Loyalty Management

27

TRENDS & REWARDS

Get the Most Benefit out of Your Travel Program by John Miller – Connexions (CLTS)

The Travel Industry of America (TIA) reports 2008 overall travel spend to be down 9% with 2009 dropping even further. So what does this mean for loyalty travel? The answer might surprise you. Although there has been a decrease in travel demand across all travel sectors, leisure, business and incentives, loyalty travel program members have remained committed to their program and continue to value how far their points can take them.

I

n tough economic times program members look to the value of their program to stretch their spending. Industry statistics show general purchase travel is down, however loyalty travel remains strong as members use their points to take that trip they may have just purchased in good economic times. As program members look to their travel programs to provide even more value in today’s market it may be time to ensure you’re getting the best value from your travel rewards. As the travel industry changes it’s vital to keep abreast of those changes to deliver the expected customer experience and value to your program members. Due to the complex nature of travel rewards historically many had to be fulfilled using a travel agent or concierge service. Also program members have been trained to pick up the phone if they wanted to book travel rewards. Using online self-booking redemption tools, like Connexions Loyalty Travel Solutions’ Online Rewards Exchange (ORX) program, members have the ability to select travel rewards at price points that meet both their and the program’s requirements on a website that is available well beyond traditional call center hours. By exceeding 60% of transactions online, the ORX platform helped CLTS clients save in excess of $3M in operating costs in 2008 while improving customer satisfaction scores. Using a travel reward strategy of shifting to an online delivery has many positive features for both the loyalty program and its members. Travel is one of the web’s most prevalent products and consumers are very in tune with

28

January 2009

| Loyalty Management

searching various websites and making travel reservations online. It is very American to “do it yourself ” and online redemption tools provide that service. Loyalty programs can also reduce fulfillment costs by using online booking tools which shift travel redemptions away from high cost call centers. Call centers will still be required for select programs and segments of the cardholder base but used appropriately online booking tools will increase the program member’s engagement with the program as they come online to shop itineraries and see how far their points will take them. Going beyond just the airline ticket many program members are using points to take the sting out of their entire vacation. Many programs are now flexible enough to allow travel rewards that include hotel stays and other components of vacation packages. While hotel stays have typically been in travel programs, they were traditionally presented as a certificate based reward which provided access to limited hotel brands and came with associated “blackout dates.” With the advent of the modern online booking tool program members have the ability to book any hotel property in the travel provider’s reservation system thus greatly expanding the reward choice, usability and lowering the cost of delivery for the program not to mention eliminating the issue of managing certificate inventory. The same is true of rental car rewards. The most important recent evolution in travel redemption has been the introduction of dynamic points plus cash, where even when the customer is penalized for a partial redemption, programs are experiencing up to 70% voluntary utilization of points + cash. Additionally, this

enables a customer to utilize their reward currency toward any travel product (air, car, hotel, cruise, etc.) The message from customers is clear, when the cost of travel goes up, I don’t expect my reward program to carry the entire burden, but look to my reward program as a savior that enables me to take a trip that I otherwise couldn’t afford on my own. CLTS expects that partial reward utilization will continue to grow in 2009.

O

nline self-booking redemption also provides program members the option to use points + cash to buy down part, or all, of their desired travel itinerary. This leads to accelerating the redemption of a traditionally high value reward and creates more engagement with the program. Rather than waiting 15 to 24 months or longer to get a “free” airline ticket many program members are opting to use the points and cash model to get their reward now and using split pays to do so. Satisfied they can get the high value reward when they want, program members start earning for the next reward sooner. There are a variety of pricing models available for program managers allowing for the cost per point to be managed to meet the program’s economic model. As online redemption tools evolve to make the redemption process easier, access to travel reward inventory at competitive rates is going to be a key ingredient for a successful program. Just having a delivery tool won’t make you competitive. For many programs travel rewards are a key enticement and the reward cost, even if in points, needs to be on par with the large online travel agencies (OTA) in the market place. Unlike merchandise travel rewards don’t have the option of using a different model



or brand to try to distinguish the reward. The travel supplier network is very upfront with item costs and the sheer number of travel web sites makes masking a ticket cost nearly impossible. Due to the clearly visible product pricing working with a provider of scale will only benefit a program. Proactive deal sourcing by your travel provider is another great way to keep program members involved with the program web site. Rotating specials and last minute deals, especially in today’s economy will drive traffic to a program site. The key here is speed to market and consistency of the message. Members need to know that on designed times to check their program site for the latest offer. Adding ancillary travel components to the redemption mix also benefits programs. Components such as destination activities and events can be booked in the same travel redemption itinerary creating a complete solution for the program member. Gone are the days of booking a reward ticket and then searching for companion tickets at another source. Not only is this a better customer experience but it drives additional card spend for the ancillary products. The future of travel rewards continues to evolve with new tools and creative applications all designed to reduce delivery costs and improve member experience. The ability to shop and redeem for cruise and packaged vacation inventory are two of the rewards on the horizon for online fulfillment. Working with the right travel provider is the key to getting the most benefit from your travel rewards. L

January 2009

| Loyalty Management

29

TRENDS & REWARDS

The Rewards Revolution is Here! by James C. Purdy – Bridge2Solutions

The new rewards revolution has begun in earnest, evolving from the convergence of online consumers with new robust technology such as sophisticated web services and services oriented architecture, reward programs now provide real-time online catalogs offering millions of choices—all branded and easily managed for the program sponsor’s specific needs. With it, the sales incentive, employee recognition and consumer loyalty program marketplace has a new spark of life—emanating from the power of personalized choice and selection that the rewards side of the performance equation can now offer. Technology has brought speed and vast selection to our everyday lives and redemption options in point programs have now caught up.

P

articipants and programs have changed over the years, from the stamp programs of 100 years ago, to the online breadth and depth of rewards today—in between and still valid are emblematic jewelry, logoed merchandise, BOGOs, plaques, trophies, premiums, plateaus, catalogs, gift certificates, debit cards, gift cards and of course cash discounts or cash back. Participants have become more savvy and consumerism has made them more impatient—when they know they have earnings, they demand their rewards. Bank loyalty programs currently offer various reward options for different portfolios. Personal preference has become imperative as we all have grown accustomed to searching online for the exact item that we want– cardholders want experiential rewards, events, various activities and tours, online travel planning and seemingly limitless merchandise choices. Having millions of reward options already accessible online then opens up future opportunities for accessing desired redemption options. My company, Bridge2 Solutions, offers bridge technology necessary to present millions of rewards, in easy-to-browse user interfaces, for those companies operating point accrual systems/programs. The white label plug and play ability along with real time rewards pricing, availability and accessibility has been made possible through advances in web services technology. We are helping to revolutionize rewards redemption for

30

January 2009

| Loyalty Management

all categories of point programs—mostly avoiding dollardenominated media—equating the earnings currency to the redemption currency. If you earn in points, you redeem in points. What about results? Our collective vision to bring the widest breadth of rewards to the marketplace in a real-time environment started less than five years ago—while we knew we had a good reward solution, we didn’t know the extent of the results that vast selection and real-time inventory could bring to a rewards program. The excitement and changing environment of a realtime “living” rewards catalog drives many more visits to the catalog URL by the participating audience—which translates into 5-10 times more brand “hits” per month for the sponsoring company. “Adding such an extensive catalog with ease of navigation increases the value of any rewards program,” said Michael Ruege, Executive Vice President of USMotivation, headquartered in Atlanta, GA. “Participants are visiting their program sites much more often because they have such a wide variety of reward options and choices. Rewards range from books and CDs all the way up to individual travel and high-end electronics. Choice is the catalog’s biggest attraction and our program sites create a customer experience that is personalized-there’s something for everyone.”

“Adding such an extensive catalog with ease of navigation increases the value of any rewards program.” —Michael Ruege, Executive Vice President,USMotivation

T

he engagement of the participant in a point rewards program directly corresponds to the reaching of business goals wrapped by the program. Additionally, in the last year alone, we’ve fulfilled over 40,000 different SKU’s proving that participants truly are individual and desire very different rewards. The capability to offer this kind of selection only comes with the latest of technology advancements, after all, offering more than 6 million items doesn’t mean walking into a huge warehouse filled to the top with merchandise with no labels or signage! Technology is enabling us to offer vast selection in an easy to navigate, searchable interface that mirrors leading online retail experiences. The last couple of years have had the equivalent impact on the rewards marketplace as the previous 10 had on the same market. Rewards selection and redemption have now caught up with the earnings and reporting technology of consumer loyalty, employee recognition and sales incentive programs. There is no more need to espouse “awards neutrality” when millions of award choices may now be presented in easy to navigate online catalogs for all types of programs. The customer-participants have let us know that this is a different world—they want to earn points, they want to burn points and most of all they want rewards that make sense to them, whether a redemption is for a cappuccino machine, a 10mp camera, tickets to a theater production, an iPod, zip-lining in Costa Rica, a flight



to Montreal, green appliances, or 20 DVD’s—let them make the decision and select their personal choice of rewards priced in the earnings medium of the program. In summary, the rewards revolution is here—enabling sponsoring companies to embrace more attractive choices for today’s target audiences. Considering the latest global economic environment, it is more important than ever to attract and retain customers with the assistance of offering valid, enticing, timely rewards for points earned, while making the selection process entertaining, and desired items simple to locate and quickly delivered. If the point earners are redeeming more, then they will in turn want to earn more in the sponsoring company’s program. So, in the last part of the first decade of the third millennium—technology and creativity are in sync for point earning and point redemption activities—creating excellent opportunities to maximize the effectiveness of rewards programs. Not too long ago, many of us were predicting that the TV remote would become what the mobile phone has become—the access technology of the real world to the online world. Today, and in the near future, technology will take revolutionary jumps in the U.S. and abroad and as biometric and mobile devices edge out the plastic card market for identification, information and payments—I guarantee that rewards programs will evolve accordingly. My TV remote told me so … where the heck is it anyway? L

January 2009

| Loyalty Management

31

TRENDS & REWARDS

Fuel Rewards Marketing and Loyalty: Gaining a Better Understanding by John Cullen – Pointe Advantage

In recent years, a number of misconceptions have grown up around the use of fuel rewards marketing programs in the retail industry. Driven by ignorance or competitive zeal, some have questioned the usefulness and profitability of fuel incentives. The simple fact is that fuel rewards are working right now for a wide range of retailers including grocery and convenience stores, automobile dealerships and on-line retailers, among others. They have used this program to attract new customers, build consumer loyalty and drive incremental sales and higher profits. And the program is broadly applicable to all retailers and service providers of every type and size. From the local dry cleaner and the hair salon to your favorite restaurant, your accountant and all of the larger category killer retail chains. These diverse businesses can leverage innovative fuel-based rewards programs to remodel their retail marketing and customer loyalty schemes and to drive same-store sales and increase profits. And over time, fuel-based rewards will evolve from a closed network, retailer-centric model, to a broad based community reward market where consumers will no longer decide “what” they buy, but “where” they buy it. And with community fuel-based rewards consumers will cross over retail channels and retail brands to accumulate rewards, using free gas as the common currency. As a result, market share will shift away from retailers who do not offer fuel rewards to those that do. To understand how we can get from here to there, let’s take a closer look at how this increasingly popular form of retail promotion is being used today.

32

January 2009

| Loyalty Management

Understanding Fuel Rewards Understanding fuel-based rewards means understanding the consumers’ attitude toward their fuel purchases. Buying gas isn’t gratifying and no matter what the price, consumers always feel like they are paying too much for a gallon of gas. Fuel-based reward programs exploit this sentiment and the high perceived value of gasoline. In fact, today’s shopper would rather get a dollar of free gas than an actual dollar, because they perceive more value in the gasoline than in the currency. Fuel-based rewards put this powerful consumer perception to work for retailers, manufacturers and fuel redemption locations. Most fuel rewards programs are relatively simple: consumers shop at a given retail outlet, where point of sale tags and other marketing and advertising vehicles are used to identify participating products or qualifying purchase requirements. Shoppers receive a Free Gas voucher or electronically issued fuel reward at checkout when they meet pre-established purchase requirements, then redeem the reward at a participating fuel station. From the consumers perspective this program more than exceeds the test for program understanding and ease of use by providing instant gratification with instantly issued rewards that are available in real-time for immediate redemption.

There’s nothing to mail, nothing to track and no waiting weeks for the reward to be activated. This program is as simple as 1-2-3; shop, earn, redeem, 1-2-3. By communicating a free gas offer at the shelf, where 70% of all brand purchase decisions are made, fuel-based rewards can be used to shape and drive consumer buying behaviors. Recently, however, several crucial misunderstandings have arisen about the efficiency and cost effectiveness of fuel incentive programs.

Tackling the Common Misunderstandings How can fuel-based rewards be used to drive profit? Some compare fuel rewards programs to loss leaders which are not profitable. But in fact, real world experience shows that when fuel rewards programs are expertly planned and run in an efficient and optimized way, they generate new sales and higher profits. Here’s a real-world example of precisely how a fuel rewards program can work. Imagine, for example, that a retailer sells 100 units of product at a full price of $1.99 generating $199 in revenue and $70 in gross profit. When that product goes on promotion, discounted 20% to reach a new retail price of $1.59, a 130% increase in unit sales must be minimally

achieved to break even at gross profit. What if I told you that through a fuel rewards program the retailer that repurposes the margin dollars from the temporary price reduction could achieve incremental profit ranging from 160% to 324%, the difference being whether or not the fuel center is owned and operated by the grocer or if it is a partnered fuel redemption center. So let’s take a closer look at the fuel rewards offer, repurposing the margin dollars from the example above: With fuel-based rewards, the retail price remains at full retail, $1.99. The fuel offer, using cents-off-pergallon methodology would be .04 or 60 cents maximum redeemable face value (.04 x 15 gallons). Assuming 50% redemption the effective cost of the promotion comes in at 2 cents-off-per-gallon or 30 cents in total (.02 x 15). Typically this single unit promotion would yield a minimum increase in units sales of 40% driving product revenue to $279. Since the product was sold at full margin, margin dollars would have increase to $112. But what happened at the pump? With fuel rewards unlike temporary price reductions where these margin dollars walk out the door with your customer, these same dollars are redeemed at the pump driving 1050 incremental gallons of gas from a planned consumer redemption event. In turn, $2,824 in fuel revenue is derived (15 gallons at $2.79) and $115 gross margin dollars from fuel reward redemption. (continued on next page)



January 2009

| Loyalty Management

33

Fuel Rewards Marketing (continued) The comparison overall looks like this: Full Retail

TPR

Fuel Rewards

Product Rev

$199

$366

$279

Gross Profit

$70

$70

$112

Fuel Revenue

--

--

$2,824

Fuel Gross Profit

--

--

$115

Overall Revenue

$199

$366

$3,103

Overall GP

$70

$70

$227

Powerful results but this example doesn’t consider the additional value when product multiples and product combinations are used in creating qualifying reward purchase requirements or the impact of new customer acquisition and increased shopping from existing customers. Fuel reward customers by definition are your best customers; buying more per visit, shopping more frequently, sharing their stories about the size of the fuel rewards they’ve earned with friends and driving good will for your brand and store. Have the technological hurdles been eliminated to allow for scale and program stability? Yes. In fact, the technologies needed to implement and operate a successful fuel rewards program—the hardware, software and integration strategies—are affordable, proven, stable and readily available from a number of reputable vendors. The real problem is that very few retailers have the specific marketing experience and expertise needed to run a successful fuel rewards program. All too often, retailers acquire the hardware and software needed to deploy a fuel rewards solution, but their technology vendor simply does not offer or cannot deliver the marketing expertise needed to make the program meet it’s potential. And retailers seldom have the expertise, or invest in the needed in-house staff required to implement and manage a successful fuel incentive effort. In most instances a retailer operating a fuel reward program isn’t even aware that their program isn’t reaching it’s fullest potential because they are seeing positive results driven by the power of the free gas incentive. The problem is they never knew what increases to expect or what offers to use to generate even greater results. It’s a bit like buying a jet airplane, but without the expert knowledge and flight experience of a seasoned pilot, that aircraft will never get off the ground or truly soar.

34

January 2009

| Loyalty Management

To generate new sales and higher profits from fuel rewards, retailers must understand a number of economic and behavioral variables specific to fuel-based incentive programs, including: how consumers respond to centsoff-per-gallon or dollar off offers, where to set fuel rewards to achieve specific business goals, how to successfully promote singles, true multiples and combinations, how to handle variable weight items, and how to manage coordinated basket value and threshold value programs to modify consumer purchase behavior and to optimize unit movement, incrementality and gross margin performance. Consider all of these factors and then ask the question, “What happens when gas prices fluctuate during the year, how should I adjust my reward to retain consumer relevance and maximize program revenue and profit?” To gain this expertise, without building a massive internal infrastructure, astute retailers can now call on the services of experienced fuel rewards partners. Those specialized companies offer comprehensive support for fuel rewards programs, including sales and marketing, data collection, management and analysis, sales coordination, offer management, billing, collection, offer clearing and redemption processing. The bottom line is retailers can leverage a well-planned and coordinated fuel reward program to attract more and better customers and to encourage those customers to visit more often, spend more per visit and purchase more fuel rewards products at a higher sales price, thus generating greater revenue and a higher gross profit per transaction. The issued fuel rewards can then be redeemed at the retailer’s fuel location, or at an allied fuel retailer, driving incremental revenue and profit and establishing a 360-degree marketing circle between grocery and fuel locations. That is why leading grocery retailers—companies like Safeway, Kroger, Meijer, Giant Eagle, Nash Finch and others are using fuel-based rewards and over 560 well known retailers use fuel rewards as a part of their on-line strategies to improve sales, customer satisfaction … and their bottom line. By getting the facts, and improving their understanding of fuel reward programs, all retailers can deploy this effective promotional strategy as part of their loyalty and reward initiatives. L

• 20 Years of Winning Campaigns • Customized Reward Collections • Single Source Program Management • Best Practices and Strategic Solutions • Proprietary Dashboard Platform Delivering an Unmatched Customer Dialogue • Totally Results Driven Team...due to our CEO having been In Your Seat as CMO

!"#$%&%$'()*+,)$-./#0,1 Contact us for a demo of our web based Loyalty Dashboard at 800-416-2090x12 or e-mail us at [email protected]

399 Knollwood Road White Plains, NY 10603



January 2009 | Loyalty Management 35 www.incentivegroup.com

BEST BUSINESS PRACTICES

Successful Hires Can Executive Search Firms, Recruiters & Headhunters Really Help? by Amy DeBerg-Ferwerda – R&P Group

According to a recent survey, heads of Human Resources of Global 100 companies stated that their companies mis-hired people 80% of the time.1 Statistics like this challenge us to evaluate our hiring practices and to look at our department and company statistics to determine how we compare. With an economic mandate to accomplish more with fewer resources, how can we ensure that we spend our resources efficiently and prevent costly mis-hires. The cost of a mis-hire for a $100,000 employee is quoted anywhere from $50,000 to $1 million.

The question for today is “Can Executive Search Firms really help increase the percentage of successful hires?” It certainly seems the loyalty industry believes that recruiters have value. Indeed the largest firms in our industry retain executive search firms for every job above a certain level. But do we track the success of our hires? Can recruiters help? Let’s first define a successful hire.  uccessful Hire = Person hired quickly meshes into S the company culture and achieves all first year business goals at or above standard So how would an executive recruiter help ensure successful hires? What are recruiters? To begin to answer this question let’s first look all the types of recruiters. Personally, I am okay with being called anything from headhunter to executive search professional. This is because no matter what you call me or any of my peers, there is one bottom-line fact—the mission of an executive recruiter is to help our clients realize successful hires. That is what you pay us to do—to help you do. The most successful hires are based on partnership that allows the recruiter to be excited about the opportunity and to offer a chance to interview for such opportunity to only the very best people.

As Terry Petra has been know to say, “It’s not the what we do, it’s the how.” What do they do? Recruiters have “helped” companies achieve successful hires by simply sending a resume of someone with whom they have never spoken. On the other end of the spectrum, search firms interview hundreds of potential candidates to present a select few top candidates. Your recruiter may help create your Job Description, Candidate Scorecard, Interview Questions both oral and written, and may even be with you for the Face-toFace Interviews. There are long lists of services the most successful firms provide. How do they do it? Do you need a quick fix, someone ASAP? If so, a recruiter can still help in several ways. A recruiting firm can assign a full-time, dedicated team to call Industry people everyday, all day, until they have people who meet your requirements. The level of work on the recruiter’s part can be anything from a brief scan of the person’s resume to see that it matches your Job Description to hours of conversations to find the potential candidates who are interested in and excited about your company and the opportunity. They may even require that the candidates achieve at least a certain score on the candidate scorecard and that the candidates complete written interviews and provide references and specific salary information.

Brad Smart, President of Smart & Associates, Inc. and author of Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People.

1

36

January 2009

| Loyalty Management

On the other extreme, if you plan your year to include adding 3 Regional Sales Managers, 2 more Call Center Supervisors, a Financial Analyst, and a new in-house CMO—a recruiting partner can again really help. The recruiting firm can help you define your expansion roles. They can help recreate and rewrite roles in which people have failed or left to make the jobs more interesting with specific measureable accountabilities and a more involved definition of your culture. Once your recruiting partner understands your future (and current) hiring plans and the profile of employees who fit well within your culture, they work for you every day. Even when they are searching for candidates for other companies, when they find someone who may be a skill and culture fit, the firm can build—for your company—an inventory of people who want to hear about jobs within your company. As your jobs are approved or come open, the recruiting firm more quickly produces a selection of candidates. Over time, the more people an industry recruiter knows at your company, the better they become at helping you hire more successful “A” employees. What goes wrong? Some companies spend hundreds of thousands of dollars with the best retained firms in the world to hire their top managers. But, they do not allow those same managers the opportunity to retain excellent recruiters to fill their jobs with the type of A players who will ensure that the new manager is able to accomplish corporate goals. Since A players tend to hire and promote As, both time and money are saved by engaging industry help to locate, screen, and present top talent quickly and consistently. What to do? Train all managers in professional hiring methods. There are books, DVDs, and other tools available so that managers don’t have to “wing it.” Find an industry recruiting partner. Meet with them in-house regularly. Treat your need to locate and recruit exceptional talent like you treat your need to stay out of jail by retaining an external tax and accounting firm and a quality law firm. Shop for your recruiting partner like you would shop for a heart surgeon—the best versus the cheapest. Allow all your managers the opportunity to work with your company recruiting partner for all levels of jobs. Your internal Human Resources team is very valuable in the recruiting process also. They should be involved in the interviews to explain your benefits and they will most likely provide your Offer Letter templates. Remember that even the best recruiter—if they work in-house—is only believable to a certain point when they speak with



a prospective candidate about how great your company is. Yet most A employees who are ready for their next career step will talk with a trusted industry recruiter about opportunities. They will be more likely to believe the glorious benefits about working for your company from an unbiased third party. I’ll bet almost everyone reading this article appreciates when the “right” recruiter calls to “let them know about an opportunity.” Candidates who allow a recruiting firm to present them for a job opportunity understand that they are one of 3 to maybe 5 people the firm is presenting. This means that the candidates are much more open about both their excitement in and concerns about the job and their ability to do the job. Companies need no longer tolerate underperforming employees, or 80% mis-hires. As Brad Smart says, “There is absolutely no reason for such massive waste and human pain.” When your Board and your Management team view the candidates presented for their open jobs like looking at the menu at their favorite restaurant, things are on the right track. All of the candidates look good—they just offer a different way to fulfill your hunger, your need. Yes, the right executive search firm can really help you benefit from more successful hires! L

January 2009

| Loyalty Management

37

EXPO in REVIEW

By Susan Payton, Egg Marketing & Public Relations

With 475 attendees from seven countries, our first Loyalty Expo certainly exceeded even our expectations!

38

January 2009

| Loyalty Management

EXPO in REVIEW

“I felt like the size of this event provided more intimacy than others—which made the networking contacts more valuable.” —Loyalty Expo 2008 attendee

The Loyalty Expo 2008:

We’re Off to a Great Start! With 475 attendees from seven countries, our first Loyalty Expo certainly exceeded even our expectations. We were thrilled to get such positive feedback from attendees and speakers. The conversations we heard about retention, avoiding attrition and customer relationships were truly worthwhile, and we hope everyone left knowing more than they did when they came. As Mark Johnson, President and CEO of the Loyalty Expo, said, “This conference was and will continue to be about the voice of the customer.” Why They Came Many attendees were at the show to learn. The Loyalty Expo offered a tremendous amount of knowledge packed into a few short days. Mark Rubenstein, CEO of EZ Rewards, said he went to learn from others with more experience in the loyalty industry. His company develops loyalty programs for convenience stores, restaurants and car washes, and has learned about loyalty programs as it has gone along. Liliana Romo and Alma Hernandez traveled all the way from Mexico City



to learn more about loyalty marketing. Romo’s company, Ampersand, provides loyalty programs for companies like Ixe Financial Bank, who was represented by Hernandez. The ladies attended John Dawson’s presentation, “Analyze, Reward, Understand and Retain” on Sunday. They said they learned that they needed to focus not only on new clients but also on clients who are at a higher risk of leaving. The ladies also said as a result of the presentation, they would focus on segmenting their customer base to better understand varying needs.

John Dawson, of Dataco, made several good client contacts at the show. He said he learned just as much from vendors and clients outside of the sessions, and that “networking has been valuable.”

“This conference was and will continue to be about the voice of the customer.”

Other attendees came “shopping” to find service and technology providers. Angi Grisham of AMC recently stepped into the role of Technology Project Manager for the theater company. AMC, she said, does have a loyalty program, but it has not changed in nearly 10 years. She attended the Loyalty Expo to meet exhibitors who could offer services that could revamp the company’s loyalty program.

Vendors also found benefit in attending the conference. Jessica Rotoli of Hipcricket, who provided text messaging services during Steve Yastrow’s general session on Monday, was at the Expo to offer the company’s mobile marketing solutions to potential clients. “We have solutions to provide companies if they want loyalty programs.” Everyone at the conference was excited about our next Loyalty Expo, which will be May 31 to June 2 at the Westin Diplomat in Hollywood, Florida. L

January 2009

| Loyalty Management

39

EXPO in REVIEW

“Good info on the current issues, future trends, and different segments.” —Loyalty Expo 2008 attendee

The True Measure of Customer Loyalty Do your customers think of you in terms of “us and them” or “we?” Steve Yastrow, Founder and CEO of Yastrow & Company, and author of We: The Ideal Customer Relationship, gave a stellar presentation on creating true customer loyalty at the Loyalty Expo.

n Don’t interrupt all the time. Listen to what the client is saying.

Many companies think they need to create new customers, new products, and new geographic markets to find additional revenues, but the fact is, most businesses are only getting 15-20% of the potential business from their clients. Your existing customer base is where your company’s true potential lies.

n Every time you interact with a customer, strive to improve the relationship.

Yastrow explained to his audience, “You don’t drive sales. Your customers do.” He went on to say that strong customer beliefs are more likely to create customer action. If a customer likes what you offer, they will tell others, who will buy from you. You will see action through word of mouth. There is a connection between belief and loyalty, said Yastrow. You have to give your customers a reason to think “I can’t get this anywhere else.” This doesn’t necessarily mean your product, service or experience are unique, but rather the relationship you have with your customer. Relationships cannot be duplicated.

40

Yastrow told his audience how to create those “We” relationships with clients:

January 2009

| Loyalty Management

n Create building blocks of customer relationships one step at a time.

He differentiated between encounters and transactions, saying that a transaction was not memorable, and provided no real benefit to the customer. He gave the example of the cashier at the grocery store. Likely you do not have a relationship with this person, and you are not better off because of your interaction. In encounters, you are engaged, you participate in a conversation, and the experience is unique. Yastrow closed by explaining the difference between transactional loyalty (customer is loyal to offer, will likely leave if a competitor offers a better deal) and true loyalty (promotions lead to relationships, customer is loyal to company, relationship is long lasting). L

EXPO in REVIEW

“With so many good sessions, it was difficult to get into the exhibit hall!” —Loyalty Expo 2008 attendee

Engaging Your Customer The keyword these days when it comes to your customers is: Engagement.

important to them, can lead to a great opportunity to follow up with a strong product story.

What is customer engagement? It’s about catching and keeping the attention of your customers. It’s about providing value to them. And with over 5,000 marketing messages coming at every person daily, it “is about being the one or two brands in a given day that a consumer actually chooses to spend time with,” says Ian Baer, Managing Partner and President of Big Fuel, an interactive marketing agency.

n Be Useful. You gain tremendous trust and credibility by providing useful content on a relevant topic -- and that trust can be quickly redeemed for product knowledge AFTER you’ve proven you care about what’s important to them.

Companies and advertisers have been telling stories of how amazing their products are for years, says Baer. Screaming the benefits of your product doesn’t work in an era where consumers can easily tune your message out. Consumers today want to hear how it relates to them, and why they should care. You may have heard of WIIFM, or “What’s in it for me?” Customers care only about how your product, with all its fancy bells and whistles, can help them improve their lives. Ignore that, and you’ll lose customers. Baer says there are “Three Be’s” when it comes to engaging consumers: n Be There. Consumers won’t stop whatever they were doing to come to you. Be where the consumers are, and be ready to participating in current discussions. n Be Relevant. The trust you gain by meeting your consumers’ needs where they are, and based on what’s



These days, it’s fairly easy to engage customers online using these “Three Be’s.” Consumers are flocking to places like Facebook, blogs and forums to discuss their problems and needs. This is the perfect opportunity for you to start and participate in conversations. Because the Internet is such an up-to-the-minute platform, it’s easy to be relevant to your customers’ changing needs, because you can see what’s relevant and what’s evolving as it happens. And blogs and emails are the perfect opportunity for you to provide useful information on your industry. Don’t make it a blatant sales pitch. Offer resources your audience can use, and the sales will follow. Let’s face it. How we send out our marketing message is changing. We can’t rely on the old broadcast methods anymore. The consumer is in command, and we must respect that in order to succeed in this changing marketplace. L

January 2009

| Loyalty Management

41

EXPO in REVIEW

Mobile Marketing and Loyalty: Is it Right for You? Mobile marketing is affordable, fast to implement, and gets an increased response. Go anywhere, the mall, school, work, and you’ll see a good amount of people using cell phones. They’ve become our security blankets. We don’t leave home without them. We use them to make calls, send messages, check email, surf the web…it only makes sense that loyalty programs would get the idea to use them sooner or later. Mobile couponing, while still relatively new in the U.S., has been huge in Asia for years. The concept is this: text a specific code to a number to receive text coupons and offers to your cell phone. It’s convenient and you never forget the coupons, like you do with their paper counterparts. At the 2008 Loyalty Expo, Kelly Passey of Access Development and Ola Ayeni of M-Dialog spoke about this up-and-coming tool for the loyalty industry. They stressed three key points: 1. It has to be easy for the customer 2. It should have the largest reach 3. It should be simple and cheap SMS text messages, which the majority of phones can receive, are the cheapest to send coupons through, at an

42

January 2009

| Loyalty Management

average of three cents per recipient. Studies show that 80% of recipients of mobile coupons respond within one hour of receiving the text. Passey and Ayeni also offered a variety of ideas to use in mobile marketing. Coupons are just one example. Companies can also offer suggestions (a la Amazon) of other products a subscriber would be interested in, inform subscribers of new store locations opening, and create advocates by offering a discount for each person a subscriber refers to the service. In their presentation, they gave Dunkin’ Donuts in Boston as a case study. The company sent out a text coupon for 99 cent lattes and saw a 90% response rate and 20% increase in sales as a result. While building awareness will be the biggest channel for mobile marketing in the next few years, the benefits greatly outweigh the challenges. Mobile marketing is affordable, fast to implement, and gets an increased response. As a last bit of advice, Passey and Ayeni urged attendees to add mobile marketing to their current marketing campaign rather than rely upon it solely. L

EXPO in REVIEW Tech Talk:

Better Serving Your Customers with Technology With millions of people using social networking sites like Facebook, LinkedIn and Twitter, it’s no wonder major brands are connecting with consumers on these sites. Times have changed in the customer service department. Where we might have started with a one-size-fits-all attitude, now it is possible (and necessary) to use technology to better understand our customers and keep them! More Targeting Think your blanket direct mail campaign is going to be effective? Think again. Technology has become so sophisticated over the years, it’s now possible for us to give customers exactly what they’re looking for. That’s what Cardlytics helps banks do for their customers. Customers of a client bank receive special targeted offers based on their actual spending. So if a customer spends $300 over the course of several months at Anne Taylor, (assuming Anne Taylor is a merchant with Cardlytics), the customer would then receive a special offer, like $25 off her next purchase, that would appear next to this transaction on her online banking page. The customer gets the savings she really wants, the merchant gets the sale, and the bank gets the revenue. Everyone’s happy. More Simplicity With an average of six loyalty programs in every American’s wallet, it’s clear that consumers also want simplicity. Technology is helping us reach that goal too. More loyalty programs are taking their customers online, and savings can be realized through online retail as well as brick and mortar stores. ID Loyalty is a company that understands this need for simplicity. Their platform transfers information for existing loyalty programs to a consumer’s driver’s license. This one card can be used for multiple programs, and saves space in the wallet!



More Access Technology, for better or worse, has made consumers even busier than they used to be. There’s no time for long, drawn out computer repairs in between work, life, dry cleaning pick up and soccer practice. That’s why PlumChoice developed its online PC and technology services. Computer problems can be troubleshot remotely, and customers don’t have to stop their busy lives to get the help they need. The company can also help set up MP3s, digital cameras and wireless networks virtually.

“Customers are getting smarter, more tech savvy, busier and more impatient.” Customers are getting smarter, more tech savvy, busier and more impatient. It’s the role of each company to find a way to combat this with appropriate techniques that best serve the changing needs of customers. More Communication Today’s consumers are talking to one another, for better or worse. And they use technology to do so. With millions of people using social networking sites like Facebook, LinkedIn and Twitter, it’s no wonder major brands like Crest Whitestrips, Victoria’s Secret and Jeep (just to name a few) are connecting with consumers on these sites. These are exciting times as far as technology goes. We look forward to seeing what’s in store that will help us offer even better, more targeted customer service! L

January 2009

| Loyalty Management

43

EXPO in REVIEW

“Including topics of interest to merchants and issuers added interesting value to the mix of participants…” —Loyalty Expo 2008 attendee

Attrition 101:

How to Keep the Customers You Have Today in the loyalty industry, we’re seeing a shift from trying to get new customers to working to keep the ones we’ve got. The economy is tight, and bringing new customers on board is tough. It is easier, however, to keep current customers. Studies show that securing a new customer can cost at least five times more than keeping a current customer happy, so why wouldn’t you want to keep your customers?

“Most marketing budgets dedicate only about 21% to customer retention—that number should be closer to 50%.” At the 2008 Loyalty Expo, John Dawson of DataCo spoke about attrition and keeping current customers. He honed in on the importance of studying your company’s demographics. What are your customers doing? When and why are they leaving? What can you do to prevent further attrition? Sometimes the reasons for attrition are simple. Customer service isn’t up to par. Prices aren’t competitive. Service isn’t quality. These are things that are pretty easy to fix. But what about loyalty to your brand? Are your clients ready to stick with you no matter what? Do you give them a reason to?

44

January 2009

| Loyalty Management

Dawson said that while most marketing budgets dedicate only about 21% to customer retention, that number should be closer to 50%. He recommends these steps to keeping a customer loyal to your brand: 1. Drive engagement. Encourage customers to want to be a part of your brand. 2. Watch for continued relevance. Don’t assume what you started doing to get your customers’ attention will work forever. 3. Maintain quality and frequency of communication. If you send emails or direct mail, give your customers a reason to want to read it. And don’t bombard them with mail. 4. Liven up your program. Add new offers, new rewards, and new business partners to keep your customers excited. So think about your current marketing strategy. Does it focus on attaining new customers? If so, you should consider shifting gears and refocusing on keeping the customers you have. Keeping your current customers will help you grow your business and increase sales in the long run. L

EXPO in REVIEW

“Loved the amount of time that was allowed for networking...” —Loyalty Expo 2008 attendee

Marketing to Millennials Recently Bill Hanfin, Managing Director of Customer Growth LLC spoke at the Loyalty Expo 2008 about marketing to Millennials. According to Hanfin, Millennials refers to the generation born between 1977 and 1996, and make up 77 to 80 million of the US’s population. They’re the most ethnically and racially diverse generation in US history, and are what Hanfin calls the super-sized “me” generation. As far as technology is concerned, Millennials are totally immersed in it. They own computers, cell phones, and portable music or video devices, and they use websites as their primary source for news. This generation is always plugged in, and heavily use text messaging, social networking and blogs to communicate. In order to market to this segment, said Hanfin, businesses have to understand that there is not just a shift in behavior with Millennials, but rather they are a wholly different consumer. According to studies, 62% of teens are apathetic to advertising. 42% make purchasing decisions based on recommendations of friends. Millennials are four times more likely to use online banking than download music, and 1.5 times more likely to use credit cards than Boomers. How, then, do you reach them? Most businesses recognize the need for change in the approach to a customer strategy for this generation, but have yet to embrace it.



Online rewards and loyalty programs are working with Millennials. Programs like AceBucks, the largest “underground” currency for Facebook, and urTurn Rewards are keeping Millennials loyal to brands.

“According to studies, 62% of teens are apathetic to advertising...” Hanfin ended the presentation with a few key suggestions: n Meet them where they are – Sell less, share more n Fulfill the promise of data – “1 to 1” marketing may finally be affordable – Social networking opens the door n Don’t try to rationalize the need – They think differently than we do…you don’t have to “get it” n Don’t forget everything you learned – Remain attentive to profitability & marketing ROI – Be attentive to traditional financial models

January 2009

L

| Loyalty Management

45

EXPO in REVIEW

“The presentations I attended were great... smart, good speakers, engaging.” —Loyalty Expo 2008 attendee

EXPO summary: Frequent Shopper Data Speaker Jeff Gale recently gave a presentation on collecting data about frequent shoppers at the 2008 Loyalty Expo in Orlando, Florida. He began the presentation with a brief history lesson on innovations in retail. One of the highlights was the world’s first grocery store scanner, which was installed in 1974 and led to better inventory management. From there, retailers began to ask, what else can we do with this? So began the trend of frequent shopper programs. According to Gale, retailers nowadays are utilizing new technologies in order to draw customers in. Key demographics can be targeted by: • Personalized direct mail campaigns • E-mail

EXPO summary: From Data to Information to Advantage In his presentation on Loyalty Marketing at the Loyalty Expo, Randall A. Fine of the Fine Point Group, remarked that “Relationship Marketing is like a wet towel and most companies haven’t started squeezing.” Fine illustrated the fact that most companies are not taking advantage of the many opportunities present in the marketing world today. He explained that there are two sides to Loyalty Marketing: rewards and offers. Rewards are controlled by the customer and reward past behavior, while offers are companycontrolled and act as incentives for future behavior. Fine demonstrated the Fine Point Group’s Proprietary Loyalty Circle, broken down into five main points:

• Recorded voice messages

1. Simplicity – understand how to earn/redeem rewards

• Text messages

2. Control – control how/when/where rewards are redeemed

Personalized direct mail with relevant content is likely to produce increased response rates; however, E-mail is less expensive and offers a much faster delivery time. With voice marketing, specific messages are recorded and sent to consumers’ home phones and/or cell phones with targeted precision. Voice marketing is also inexpensive and fast, but can also deliver time-sensitive messages. SMS (Short Message Service) texting is similar, but messages are sent directly to the users’ cell phones and digital devices. Each method has its own advantages and disadvantages, but Gale insists that mobile marketing through SMS texting best performs when it’s used alongside other channels of marketing. L

3. Aspiration – incents wallet-share consolidation through targeted rewards 4. Transferability – points travel to other company-owned facilities or external partners 5. Flexibility – reinvestments can be varied by customer segment (one size does not fit all) L

We hear you. We have had a fantastic response to Loyalty Expo. Your questions,

comments and suggestions are all very much appreciated and provide great value as we get ready for our spring show. We hope you will join us May 31st through June 2nd at the Westin Diplomat in Hollywood, Florida. Register for Loyalty Expo 2009! Visit www.loyaltyexpo.com for more information. Thanks for the feedback!

46

January 2009

| Loyalty Management

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



January 2009

| Loyalty Management

47

LOYALTY MANAGEMENT