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The Keys to a Successful Loyalty Program

by Erika Blanchard

Loyalty programs have been around for quite some time. One of the first real loyalty programs was S&H Green Stamps which emerged in the 1930’s. Customers would receive stamps at the checkout counter of supermarkets, department stores, and gas stations among other retailers, which could be redeemed for products in their catalog. In 1981 American Airlines launched one of the first modern day loyalty programs which was quickly replicated by competing airlines, hotels, rental car companies, credit card companies and retailers.

Despite the fact that there are over 1.8 billion loyalty program memberships in the US (according COLLOQUY, 2009), more than half (56%) of those memberships were inactive for a year or more.

There are many reasons why loyalty programs are often abandoned – but first, I think it’s important for companies to realize that loyalty is not just about points or rewards; it is about nurturing existing relationships, initiating new ones and converting first time customers into long-term customers. If done right, companies can reap the rewards of their loyalty programs.

Loyalty programs allow companies to gather and mine an abundance of relevant customer data. But if that data is not used properly – or at all – there is no point in launching or maintaining a customer loyalty program.

The use of that data needs to be used effectively to improve the customer experience and to create a customer-focused strategy. It should be used to identify customer segments, in addition to measuring and understanding customer behaviors. Only then can you effectively communicate with your customers by providing highly targeted offers, communications and rewards based on their interests and past history.

Many of the leading loyalty programs focus on increasing the frequency or amount of purchases over a specified period of time. This gives customers a reason to spend more and to keep coming back.

Developing Your Program

Simplicity – The program that you create needs to be simple and easy to understand. Customers should know immediately what is expected of them and how they can benefit from the program. Additionally, every employee should be educated on the program and should be able to easily explain the process and benefits.

Tangible Rewards – It is important to offer rewards that are obtainable. People are smarter than they appear and will know if your program is too good to be true.

Provide True Value – The rewards you offer must have a perceived value where customers truly feel like they are being rewarded. This includes the intangible benefits, in addition to the monetary rewards and discounts. Customers want to feel appreciated and many times simply recognizing them and keeping them engaged will help them to feel valued and emotionally invested in the program – and with your company.

Customer Data and Preferences – It is important to keep your customers’ information and preferences up-to-date – as this information is sure to change over time. It is critical to keep up with this information to ensure that you are targeting your communications based on this data. To do this, you can send out surveys, or ask them at the point of purchase. Ask them what matters the most or what offers are the most appealing to them. Based on the feedback you receive, you can target your promotions or adjust your program accordingly.

Original document from VIP Desk Blog.

Men stick to one loyalty card, women shop around

When it comes to the choices they make about loyalty programme memberships, women are much more likely than men to engage with multiple loyalty schemes, according to a survey by Air Miles Canada.

The survey found that more than 80% of Canadian women belong to more than one loyalty programme, compared to only 69% of men. In fact, one in four women (25%) said they carry at least five loyalty cards in their purse.

According to Patrick Sojka, founder of Rewards Canada, “Women may want to make the most out of every purchase, signing up for a variety of loyalty programmes, but men tend to have more credit cards. In both cases, consumers will eventually re-assess all the cards they carry to get the most out of them.”

While both men and women acknowledged the need to reduce the amount of plastic in their wallets, their approach to spending and the cards they use are very different.

When it comes to credit cards, men are more likely to have more than one credit card (61% of men, compared to 53% of women), and one in every four men (25%) say they have too many credit cards in their wallet.

Men also appear to be more ‘hands on’ about managing their credit cards, as 42% agreed that they need to reassess the credit cards they have, compared with only 35% of women.

While two out of five men and women (40% each) say they frequently join loyalty programmes to ensure they are getting the best value out of every purchase, more than one quarter (27%) of those polled say they have too many loyalty cards in their wallet and agree that earning more points with fewer programmes would be more beneficial than earning fewer points in more programmes (82%).

Nearly two out of every five Canadians attested to having credit or department store debt, with women being more likely than men to say it affects their spending habits (74% compared to 63%). Despite this, 39% of Canadians said they don’t actually use the loyalty cards in their wallet.

Original document from The Wise Marketer.

Customers Want More From Their Loyalty Programs

Before I left for Loyalty Expo in Orlando I ran across an article talking about the statistics from an ACI Worldwide study regarding loyalty programs.  By the time I returned from the show these statistics were popping up everywhere along with a number of articles and blog posts dissecting these numbers and discussing what they mean.  Below is a sampling of the statistics I have seen floating around the internet.

  • Three out of four Americans are members of at least one retail loyalty card program.
  • The majority of American consumers (62 percent) join retail loyalty programs so they can get discounts on the things they buy most, yet only about one third of Americans (36 percent) received a reward or promotion that made them come back to the store again, and 1 in 4 (27 percent) of consumers complain they have received a reward or promotion for something they would never buy.
  • A mere 27 percent of Americans have received a loyalty program reward or promotion that made them feel valued as a customer.
  • Eighty one percent of American loyalty program members are enrolled in a program that they don’t completely understand. They don’t even know the basics, such as “What benefits do I get and when do I get them?”
  • Like a disappointing date, many loyalty programs leave consumers feeling underappreciated; 85 percent of members report that they haven’t heard a single word from a loyalty program since the day they signed up.
  • Whether it was a reward they didn’t want (27 percent) or a reward that was too small to take seriously (22 percent), more than 2 in 5 (44 percent) consumers have had a negative experience from a loyalty program.

 
These statistics undermine the benefits customer loyalty can provide for your business; particularly the statistic regarding lack of communication from the loyalty program since enrollment.  If your loyal customers give you their information why would you not use it?  Maybe it is just because I work in the loyalty marketing industry, but I see a message of opportunity below this disappointment.  I see customers who are expecting communication when they join a loyalty program.  I see customers who want rewards and discounts that are relevant to them.  Most importantly I see customers who are asking for more from the businesses and loyalty programs they belong to.  I often write and talk to prospects and others in the loyalty industry about the importance of communication to customers along with the constant evolution of existing loyalty programs.  Communication needs to be as basic as explaining the loyalty program and as in depth as soliciting your members feedback.

As I was sifting through my Google Alerts this morning I read an article posted on CBS Money Watch discussing the statistics from a customer standpoint.  The article from CBS Money Watch is actually titled “Loyalty Programs: A Pain in the Neck?”  Any business that has a loyalty program knows that this is not the result you are anticipating when you start your customer loyalty program.  A quick Google search on the statistics will lead you to a number of articles and blogs highlighting similar sentiments.  The articles and blogs written in response to these statistics need to be read by businesses and marketers alike.  We need to listen to what consumers are saying and find a way to create value in our loyalty efforts instead of confusing or failing to deliver the communications and rewards they are expecting and deserve. These statistics should push businesses to evaluate not only their loyalty programs but how they are treating their loyal customers.

Original document from Loyalty Marketing Blog.

Generating the right feeling in people and engaging emotions is the key

Excerpt from The Wise Marketer’s Top 20 attitudes of today’s best loyalty marketers by Peter Clark

It’s easy to get so involved in the intricacies and technicalities of loyalty programmes that the most important part – the human aspect – gets neglected. The technology involved is a marvellous tool – without it, loyalty programmes as we know them would not be possible. But we must remember that loyalty (and its opposite, the desire to simply walk away) are both intensely human emotions. And, unless the programme generates the right feeling in people, it won’t work.

We must also remember that humans aren’t as predictable as technology. Actions that might make one person loyal could well turn off someone else. It gets even more complicated: something that could engender loyalty in someone on one day might do the opposite on another day.

Customers are human, and loyalty is a strong emotional link…
Who is more qualified than customers to tell us what customers want, and what they don’t want? For this reason, much of the research presented here looks at the customer/supplier relationship from their side.

One thing is certain: the building of loyalty will not get any easier. While advances in technology have made loyalty programmes more effective, accurate and appealing to customers, these same advances have made it much easier for customers to switch suppliers. Comparisons of stock, prices, trading policies and delivery times and costs are now only a mouse click away from many customers. And if the item is to be sent to them, need they care from where it comes? Many suppliers are apparently equally trustworthy and reputable. It is important to have some unique property that makes you stand out from the crowd. All other things being equal, a good loyalty programme can do just that.

Original document from The Wise Marketer.

Brands must embrace digital to remain relevant

by Tim Peterson

To maintain their relevance, brands must adapt to the unprecedented rate at which consumers are using technology, said Bonin Bough, global director of digital and social media at PepsiCo, on March 23.

Bough, delivering the keynote address at The Social Consumer: Case Studies and Roundtables 2011 event in New York, said marketers must recognize the importance of technologies such as mobile and social media in consumers’ lives and reflect that with their brands.

“Digital is at the heart of our consumers, and it needs to be at the heart of our brand,” he said. “Organizations have failed to adapt to change, and what we’re facing is a gap between where society is digitally and where organizations are.”

Bough added that marketers must close that gap by not being afraid to experiment  with digital channels for consumer engagement.

“When you look at the companies that are winning, the ones that are winning have an iterative mindset,” he said, adding that PepsiCo’s senior leadership has recognized the need for this transformation.

For example, Bough said that the Pepsi Loot app, gave the company an understanding of consumer foot traffic while rewarding consumers who checked in at participating locations. The company relayed that information to participating outlets, and offered deals on days when there was slow foot traffic, he said.

“I think digital fitness means the ability to adapt to changes in the digital environment, and the way you get digitally fit is the same way you get physically fit,” said Bough. “It takes training. It takes rigor. It takes commitment. It takes pushing yourself past the point of where you want to say no.”

Original document from Direct Marketing News.

The future of hotel loyalty programs

Airlines, Hotels, and Retailers take notice:  the popularity of loyalty programs is growing; but so is the dissatisfaction over program benefits and rewards when it comes to the high number of points or miles necessary for redemption, and rewards that consumers recognize to be valuable.

Brands must understand this new evolution of loyalty consumer demand, and a new whitepaper from the first club™Loyalty: Looking Forward: The State of the Loyalty Industry and its Digitized, Instant Future” provides insight into the next generation of loyalty programs. “Loyalty: Looking Forward” focuses on the challenges of low motivation at the lower spectrum of loyalty program customers.  What can brands do to prevent flight of customers who maintain low accumulations of points?  The broad answer:  provide incremental rewards that are relevant to the consumer, easily attainable, and instantly available through digital content.

68% of consumers feel that a loyalty program can strengthen their relationship with a brand, and successful rewards programs will cater to this demand for relevant offerings by providing a wide array of instantly-available digital content. “Loyalty: Looking Forward” provides specific industry data for airlines, hotels, and retailers: information that is essential to the loyalty program manager striving to prepare for the digital reward evolution.

A look inside “Loyalty: Looking Forward”:

Digital Content

48% of consumers spend more with a company whose loyalty program offers content that is relevant to them personally.  65% have purchased digital content online.  It is imperative, therefore, that brands implement programs that offer a wide array of content that is available digitally and easily.

Airlines

The modernization of airline FFPs to include digital rewards will substantially decrease airlines’ exposure to financial liability (by encouraging the incremental redemption of miles), and will resonate with consumers who clearly desire more value from their airline loyalty program.

Hotels

In today’s online deal-shopping atmosphere, consumers are less responsive to in-hotel premium services.  The days of offering elite “status” or premium service for customer loyalty are eroding.  The new day requires an offer or promise of tangible added value: 47% of consumers are motivated to join programs that provide instant gratification.

Retailers

Offering direct discounts for loyalty program members gives retailers the ability to immediately impact consumer decisions; these discount incentives, however, are easily duplicated by competitors.  The result: price wars within the segment.  Instead, companies have market expansion opportunities via loyalty programs or promotions that engage consumers.

Loyalty: Looking Forward” provides:

  • A look at what digital content consumers are demanding.
  • Explains how digital rewards provide hotels a cost effective opportunity to match these consumer demands.
  • Explains how cross-promoting across brands through digital rewards will expand a retailer’s market and increase margins.

 
Featuring latest statistics and defining characteristics of various industry loyalty programs presented by the first club™, “Loyalty: Looking Forward” will help program managers grasp emerging loyalty trends and their digitized, instant future.

Original document from Exebit.

The Next Wave of Legislation Affecting the Loyalty Industry?

by Kelly Hlavinka

For months now, the FTC has been calling for a “do not track” list. Similar to the past efforts to roll out the popular “do not call” list, the FTC had been urging businesses to self-regulate their monitoring of consumer activities on the web.

But, the legislative tone on this issue just heated up. Yesterday, Senator Kerry called for governmental legislation and indicated that he is working with Senator McCain on possible wording of a Senate “privacy bill of rights”. Add that to a bill that was proposed in the House of Representatives last month and you can see that there could very well be legislation on the way that affects the broad spectrum of web commerce, direct marketing and loyalty initiatives.

I shudder to think about federal legislation or the launch of a “do not track” opt-out list for consumers. Surely, direct marketers have learned that proactive self-regulation and sound practices offering choice to our best customers is a much better path. Sadly, it could already be too late as a “privacy bill of rights” is an easy, populist banner for politicians to wave.

Whether the legislation gains steam or not, loyalty marketers should take stock now of their privacy policies to get them in shape. Here are 3 activities that you should undertake immediately to get started:

  • Do you have a published privacy promise for your customers? If not, draft one immediately and make easily accessible. Clear disclosure of what data you are collecting on your customers is a must-have and the most basic of table stakes. As customers enroll in your loyalty program or CRM initiative, make sure customers have access to that policy as part of your standard terms and conditions.
  • Add an opt-out – specific to tracking on-line behavior – to your existing opt-outs on receiving mail, email or call/text communications. Allowing customers the choice to decide how and when they want you to collect information and communicate with them is the customer-friendly approach that today’s business environment demands. Just be sure to explain the benefits of tracking information in an easy-to-understand manner. It is easy for customers to say “yes, protect my privacy!” when the media hypes the debate points. But, they are just as demanding in their calls for more relevance from the companies they do business with.
  • Emphasize the win-win. Remember the “3 R’s” that COLLOQUY talks about regularly: Rewards, Recognition and Relevance. For loyalty marketers, that’s our ace in the hole. When customers see a meaningful value proposition, they are willing to exchange information with the companies they do business with. For 30 years, customers have opted-in to identify themselves and have their purchase transactions be tracked in exchange for tangible rewards, perks and benefits that show their loyalty is valued and communications that are tailored to their needs and preferences.

 

Original document from Customer Think.

Time for Hotels to Rethink Their Loyalty Programs

by Denis Huré and Jill Goldworn

For many years now, hotels have offered their loyalty reward program members the most logical rewards: recognition and appreciation through premium service. This is no longer a competitive option. Consider the rise of OTA loyalty programs: by leveraging their strength and reach across a multitude of brands, OTAs are developing universal programs that offer customers real savings through free stays and deep discounts. The thought of a single brand competing with this concept is a tall order. It’s time for hotels to rethink their approach to loyalty.

Backing up the OTA concept, a recent Chief Marketing Officer Council study found that 66% of top loyalty program members said that “discount and savings” were among top priority across all segments. The two attributes that most hotel programs primarily rely upon, “more individualized attention” and “recognition and appreciation,” represented only 30% combined. Clearly, discounts and savings are today’s trend in loyalty programs.

Of course, if hotels want to discount, they can simply discount their rate to loyalty program customers; however, a better way is to charge normal rate and offer the loyal customer a tangible incentive that captures their attention while representing true savings, or relevance, to them. This incentive should be a low-cost solution in order to provide an ROI that exceeds the amount of a comparable rate discount to the customer. There’s just one problem: most tangible incentives have a high cost of redemption/fulfillment — thus, ROI is harder to maintain.

So how can hotels provide loyalty program members with a more tangible incentive? According to a recent Mintel study, 61% of the respondents suggested that an important attribute of a rewards program would be redemption for merchandise they would buy anyway. Call it a relevant reward: something the loyalty member will probably buy, regardless of their interaction or involvement with your hotel.

The challenge here is to offer a large variety of products, throughout a variety of categories, to capture the relevant reward interest of each loyalty program member. In addition, relevant rewards have a timeframe: they are usually relatively inexpensive items that will be purchased within days. Only digital content can provide such a large variety of content (music, books, games, and more) instantly. In this way, instant digital content is a tangible incentive, seen as a real discount, or savings: a relevant reward.

In addition to offering loyalty members relevant rewards, digital content provides an adaptable solution to combat OTA programs. One example: in order to steer customers away from commission-based sites, hotels can offer instantly downloadable content as an added incentive for booking direct. The opportunities for promotion are endless and cost effective. Furthermore, the digital download platform gives hotels the ability to immediately track message effectiveness and add customer information to existing CRM programs.

So think about rethinking your loyalty program. It’s doubtful that individual properties can compete with the trend in OTA programs, so it’s time to attack it from a different angle.

If Point Redemption is a good thing, then why don’t more loyalty programs promote it?

by Aline Ostrowski

I have recently spent a significant amount of time developing a redemption optimization plan for a client. In the plan, we examined the target redemption rates versus the actual, the primary factors causing the lower-than-target redemption, and a plan against each factor. I have been living redemption! Although my client is “pro-redemption,” the exercise led me to think about redemption in a broader context, and about the approaches that various programs take.

First, let’s quickly level set on a few redemption fundamentals. Redemption is the key driver in sustaining loyalty program participation and brand engagement. Members who redeem their points and get a reward are more likely to increase program participation, churn at a lower rate, increase spend/frequency, and stay engaged with the program and brand longer. We’ve seen that time and again in the analysis we’ve done – and COLLOQUY has written about the Relationship Chain effect extensively. After 3-5 years, most loyalty programs show that 50-65% of members have received a reward. The result should be a positive net-financial impact.

Although the fundamentals are familiar to most in the loyalty industry, it’s interesting to me why more programs do not do more to promote redemption. I know that one reason redemption is not promoted is a financial concern; if too many points are redeemed, then the point-liability breakage benefit will decline. I argue, however, that if a program is structured properly and the highest-value members are earning the largest portion of the points, and if receiving a reward after a redemption has a positive financial impact, the program should be actively promoting point redemption.

Below are a few examples of loyalty programs that are getting it right and promoting redemption:

  • ThankYou Rewards, Delta SkyMiles, and My FedEx Rewards: Regular communications are sent to members announcing new reward options available. This program has also started promoting redemption specials to motivate members; for example, in March ThankYou members can redeem for a Lowe’s gift card for 1,000 points less than usual.
  • MyCoke Rewards, United Airlines Mileage Plus, and Disney Rewards: Emails are sent to members informing that their points are going to expire. The member is prompted to perform an activity, redeem the points or earn more points, to prevent loosing the points.

 
These are examples of how loyalty programs are working to maintain or rejuvenate member interest in the program and the brand. Not only is it a good practice to update members on reward options, it is considerate (and motivating, at least for me in the aforementioned programs) to let members know when their points are about to expire.

Original document from Colloquy.

How to engage loyalty scheme members for life

Following their first redemption, loyalty programme members’ earn rates can increase by up to eight times compared to their previous point accrual patterns, according to Ben Ashwell, sales and marketing manager for loyalty platform provider Loylogic.

As a result, Ashwell suggests, loyalty programme operators must find ways to ensure that each customer’s first redemption can happen as early as possible in the customer lifecycle.

The day a customer makes their first redemption with their loyalty programme is the day they truly register their engagement. The consumer will have browsed through all the redemption options, sought out the best value, or found something that their own money either could not or would not normally be able to buy.
They will have either channelled their business to their favourite loyalty programme to earn points and reach their target, or checked their catalogue to be pleasantly surprised that their balance has already achieved a reward they desire.

LoyLogic has dubbed the experience of that first redemption ‘The Golden Moment’, and that best part is that, once a customer has had their first Golden Moment, they’re much more likely to come back for many more.
Customers who have made a redemption are on average 8 times as valuable as those who don’t. This can be measured in many ways: with the spend uplift in financial and retail programmes; or the number of flight bookings or room reservations with air and hotel programmes; or the reduction in the period until the subsequent redemption and the positive word of mouth and consumer advertising that takes place to name just a few.

In fact, consumers who have experienced a Golden Moment increase their programme accrual rate on average by 30%: a figure that is even higher among consumers redeeming 10,000 points or less. These figures represent a significant increase in engagement, accrual and consequently programme profit by a segment of consumers that have already taken the time to enrol into a programme: a highly attractive and lucrative segment in itself.

The Golden Moment is more than just redemption: it is the true point of engagement by the top tier customers who represent the most lucrative segment of some of the best yielding industries in the consumer marketplace. These are the consumers that will offer the greatest contribution to a successful loyalty programme. They will drive the profits to the company shareholders and can ensure a loyalty programme directly contributes to, rather than drains, the company revenue.

The goal of every loyalty programme should be to encourage the Golden Moment and to ensure every customer redeems as early in their lifecycle as possible. LoyLogic suggests the following four steps to help make this happen:

  1. Maximize Redemption Options
    Redemption options should be diverse both in terms of their categorization and their cost. Merchandise redemptions offer the most effective way to create a catalogue relevant to customers with fewer points: which increases the number of your members that can achieve a Golden Moment, but also the number of Golden Moments they can reach and how soon they can be reached. Merchandise offers an excellent complement to core programme rewards (such as flights to an airline programme or room nights to a hotel programme) and open the doors of engagement to a much broader customer segment.
  2. Every Customer Counts
    It is easy for programmes to focus on their largest geographic segments, but as ecommerce increases its stronghold on consumer spending and cross-border trading restrictions decrease, customers reside everywhere across the globe. For travel programmes, those customers outside of ‘hub’ zones will often travel further and therefore offer higher value transactions; and in the financial segment, reaching customers in developing markets are often the customers with greater wealth. A successful loyalty programme can not afford to miss any customers: so a consistent global offering is essential to make every customer count.
  3. Allow Flexible Targets
    Your customers will have different levels of spend available to invest in their loyalty, and consequently into your programme. To ensure their Golden Moment is made with your programme, make their targets exciting, but achievable. Use the broad reward selection that is available to all your global customers and provide points-plus-cash tools that allow their points to contribute to the value of a product, or to give them a discount from the total price. The Golden Moment is the point of redemption, where value is sustained from their investment: so contributions toward an aspirational item will ensure they enter the realms of the engaged customer.
  4. Ensure Optimal Value
    There is always temptation to increase the cost of the rewards to the customer to increase the revenue to a programme. Loyalty programme customers are value-savvy. As the programme owner you must strive for the best value for customers. Failing to do this can jeopardize that your customer will ever see the value in reaching their Golden Moment, and if they do get there, they are much less likely to repeat it. The benefits from investing in a loyalty programme are clear: but compromising the value to the member you are trying to incentivise is a cannibalisation of your own investment. Be confident that optimal value and investment will pay dividends to your programme success.

 
Those loyalty programmes which recognise that effective member engagement drives profitability – and therefore give their customers every opportunity to redeem – are the ones that most quickly deliver that prized Golden Moment. Once they have reached this milestone, their members will be 8 times more likely to aspire to achieve it again, which means they are 8 times more likely to be an loyal and engaged customer; leading to a lifetime of engagement and satisfied ‘customer happiness’.

Original document from The Wise Marketer.

Zynga Unveils Rewards Program

by Antony Bruno

Social game powerhouse Zynga officially debuted its rewards program for all games on its platform today, allowing users to earn credits that can be spent on virtual goods.

Called RewardVille (sticking with the naming convention behind such hits as CityVille and FarmVille), the platform lets players earn zCoins and zPoints for playing the company’s various games. The more users play, the more they earn. The zCoins can them be redeemed in RewardsVille for exclusive items that can be applied to any Zynga game. So users could earn the points playing FrontierVille but spend them in Mafia Wars.

Earning more zPoints unlocks new types of virtual content to buy. The whole program is designed to encourage users to play more games longer.

Virtual goods have become a big business. Snoop Dogg, for instance, earned $200,000 selling branded virtual goods like t-shirts and jewelry in games like WeeWorld, Gaia Online, Zwinky and others. Dr. Dre in December partnered with Zynga to provide branded headphones, weapons and cars in Mafia Wars, in which he also allowed users to stream his new single “Kush.”

Collectively, Zynga’s games attract 200 million users.

Original document from Billboard.

Why digital rewards could save traditional loyalty programmes

by Denis Huré, CEO and Jill Goldworn
Why digital rewards could save traditional loyalty programmes

There is no doubt that loyalty programmes are on the rise today.  In the US alone, there are 1.8 billion individual memberships in loyalty programmes (source: Colloquy.com), everything from airlines to convenience stores to cinemas.  In light of this huge number, the general perception is that consumers are happy to join loyalty programmes – eager to enjoy the added rewards that come with loyalty programmes.  The reality, however, is that they are not.  Confirming this expectation gap, a recent survey by the Chief Marketing Officer Council found that some 32% of consumers surveyed felt that participation in loyalty programmes holds “little to no value.”  Ouch.

What has emerged as a result of this disconnect is a new direction in loyalty programmes: instant reward redemptions.  In the past, instant rewards have been limited to cash or discounts at the register; maybe a free item of very low value. Technology, thankfully, has given rise to this new breed of instantly redeemable rewards – the digital, downloadable kind. These instant rewards promise to finally eliminate some of the traditional problems associated with loyalty programmes, like engagement and delivering value.

Problems with traditional programmes

According The Journal of Retailing, “the rewards associated with loyalty programmes provide a means to establish reciprocity between the customer and the company.” But the problems that have plagued this interaction, or reciprocity, throughout the years and usually stem from the delay between collection and redemption by loyalty programme members.  Whether a programme’s threshold for redemption is too high, or the redemption process is too cumbersome (which often the case, ask any FFP member), traditional loyalty programmes suffer from inefficiency. And here’s where instant redemption provides instant relief, specifically in two areas:

Low-threshold consumers

In the past, a big problem has been the loss of “low-threshold” consumers.  For these consumers, who maintain a low accumulation of points (or programme currency equivalent), the traditional loyalty programme concept fails:  if the point threshold is too high, the programme has become irrelevant because the consumer feels the reward is not obtainable (source: Harvard Business Review).  In such cases, the loyalty programme is actually hurting the brand.  It suffers because the consumer disengages from the brand before they have received an added “reward” for membership.
Instant reward redemptions provide companies a very affordable alternative to offer these low-threshold consumers an easy way to burn low point accumulations.  Loyalty programme managers also benefit, as studies have shown that these “light buyers” represent a large increase in spending and purchase frequency post-redemption (source: Journal of Marketing). In other words, they are not a segment to be ignored.

Delayed Redemption

Another area of concern with loyalty programmes is cumbersome redemption processes.  Regardless of the delivery method, timing is of the essence in loyalty programmes. In fact, the timing is (almost) everything. The longer the delay in collecting a reward, the less powerful the loyalty creation (Sloan Management Review).  Here, instant rewards reduce the delay between collection and redemption and, therefore, a larger chance for loyalty engagement success.

Digital Content: The ultimate instant reward redemption

Digital content, offering loyalty members downloadable content (such as the latest selection in music, movies, software, books, games, magazines), is emerging as the premiere medium for the delivery of instant reward redemption.  The sheer selection of digital content that is available, along with its monetisation potential, makes it an excellent vehicle for instant reward redemption programmes.  Consumers want instant rewards, and digital content is the next logical step.  Research from Mintel confirms this fact: 47% of consumers surveyed said their choice of loyalty programme would be influenced by instant redemption options, such as cash or discounts.  Jackpot.

So with this information acquired from recent surveys and obvious positive consumer sentiment, the next question seems to be: is digital content a good substitution for cash or discounts?

In a word, yes.  According to Mintel’s study, 61% of respondents said that lower overall cost for merchandise they would have purchased anyway is an important attribute of a loyalty or reward programme.  It is feasible to assume then, that relevant content – content that the consumer is likely to purchase regardless – is a good substitute for cash or discounts.  And considering that 65% of internet users have paid for intangible digital content, there is a huge market for relevant and engaging digital content waiting to be developed (source: Pew Internet).  In the UK, a recent YouGov survey showed that among those aged 18-34 years old who had engaged in digital activities, 22% spent more than £5 on digital books, the digital content category receiving the highest spend (source KPMG).

Digital content presents a win-win strategy

Digital content gives businesses the chance to burn points off their balance sheet, while offering the entire spectrum of loyalty programme participants the opportunity to redeem points for merchandise in which they are interested or already purchasing on a regular basis.

In essence, instant digital rewards have bridged the gap between reality and perception.  By making rewards instantly redeemable, businesses can give their customers the value that they seek:  relevant rewards instantly and anywhere, loaded onto the devices they use in their everyday lives.  Instant digital rewards, it seems, have created a new trend in loyalty programmes: programmes that work – for everyone.

Original document from Ulta Marketing.

Future of Loyalty Programs

Excerpt from the CRM Trends Loyalty Programs definition.

As loyalty programs become ubiquitous, we believe some interesting dynamics will evolve in the loyalty marketplace:

  1. Companies will continue to look for ways to differentiate their loyalty programs, while balancing program revenue and costs to achieve favorable economics.
  2. Newer loyalty programs will be more segmented e.g. targeting life stages, lifestyles and interests
  3. Existing loyalty programs will become more tiered i.e. concentrating resources on high potential and high value customers.
  4. Loyalty programs will begin to take a more holistic view of customers – focusing on broadening customer relationships (i.e. “relationship rewards”) – offering awards and recognition for broadened existing relationships – resulting in a strengthened hold on their customers. This takes on increased importance for program administrators as the customer’s sense of entitlement rises.
  5. Instant point redemption at merchant partners. Making it easier to redeem your points, program sponsors will begin to develop merchant relationships whereby loyalty program members will be able to convert their loyalty points on-site at the merchant partner for discounts, merchandise and/or services.
  6. Coalition Programs. We never thought we’d see the day in the United States. While Coaltion programs have proved to be very successful around the world (e.g. Air Miles in Canada), this model has had considerable difficulty making head way here in the U.S. given the fragmented market and the resources required to get such a program up and running. That is about to change. As compelling value propositions become harder to come by, the importance of coaliton programs increase.

 
While all of the above are somewhat inter-related, all six items above can really be filtered down into two: a) program differentiation and b) broadening existing relationships.

With regard to program differentiation – we’ve already seen loyalty programs adding experiential awards to their reward catalog – trying to inject the “wow” factor. American Express has been doing this for years with their Membership Rewards program. Canada’s CIBC’s answer is the Aventura Gold Visa – offering over 200 lifestyle rewards built around the concept of adventure and unique, life-changing experiences. Other’s like the Bank of Montreal have focused on developing a product that allows the customer to customize/configure their credit card – choosing the reward program, special features, and interest rate plan that best suits them. While conceptually it is an interesting loyalty platform, the product may be too much for the consumer to digest – hence why they pared down the number of feature “buckets” from which consumers can choose.

With regard to broadening relationships, the Bank of Montreal again (in partnership with Air Miles) has really taken the lead in awarding customers for each new relationship they add with the bank – every new relationship from deposit accounts to credit cards to mortgages to loans are awarded. Even Air Miles, the thousand pound loyalty gorilla has attempted to broaden its relationship with its members — expanding beyond just its retail partners to include B2B, travel, books, flowers and online.

How will all this evolve? It has been slow. But with that said, future economic, demographic and legal landscapes could accelerate company attention to customer retention and the concept of coaltion and “relationship rewards.”

Original document from CRM Trends.

Your Burn and Earn Program Starts Right Here, with the first club™

Welcome to Digital Rewards 3.0, with our new site enhancements that offer more download solutions, more choice to engage customers with our growing catalogue of instant, digital content, and more opportunities to burn points and earn revenues and rewards.

We’ve recently added new features to the first club™ site, to give your customers the very best rewards redemptions that can enhance engagement with your brand, and create more opportunities to maximize promotional incentives for little cost through instant, branded rewards.

Some of enhancements you’ll find when visiting www.thefirstclub.com include:

CURRENCY: Club Coins, our digital currency (or use your brand’s points or miles), are displayed by category and level, making rewards more attainable and redeemable.

CONTENT: more than 40 million titles including music, games, software, mobile apps, eBooks and audio books in 12 languages to date, are available for instant download to any digital or personal device.

DESIGN: easier-to-view and navigate pages offer more content, more categories at a glance.

CUSTOMIZATION: Users can personalize their home page and select only the content they want displayed. Content can be organized or archived.

SEARCH: Improved search capabilities means users can now browse through digital content easily and quickly.

WISH LIST: a brand new function, the wish list lets users save their favourite content for download at a later time.

Our global digital delivery platform integrates directly into any existing rewards or loyalty program, so take a tour of the first club today and see how our instant branded rewards can drive revenues and increase customer satisfaction.

To receive your complimentary Club Coins to redeem from our growing catalogue of instant digital rewards, please contact us at clubhouse@thefirstclub.com or call +44.203.318.3103 (UK) or + 1 (805) 688-0344 (US).

Instant. Rewards. Branded.

Why Choose Instant, Branded Rewards?

At the first club™ we present a better and more effective way to offer rewards and build loyalty with your customers.

We do that by delivering relevant, digital content that is instantly gratifying to today’s consumers.

Our digital solutions can enhance loyalty, promotions, incentives and any type of rewards programs to engage consumers worldwide through attainable low-level rewards.

Our solutions are easily integrated into existing loyalty and reward programs, are cost-efficient and scalable to encourage low level reward redemption, increase customer loyalty and create additional revenues for brands.

If you would like to learn more about our range of digital rewards solutions, and how brands are successfully using the first club™, please contact us at clubhouse@thefirstclub.com.

Borders Bankruptcy: Is Loyalty Too Late?

by Phaedra Hise

Borders has released its plan for reorganization under Chapter 11 protection, and it singles out the company’s loyalty program as a key factor to success. But although we love loyalty, at this point it’s probably smarter for the company to focus on other business operations – the plan submitted by CFO Scott Henry includes store shutdowns of 30% and an infusion of $505 million from GE Capital for the unprofitable company.

On one hand, props to Borders for focusing on their loyal customers, who they need now more than ever. The Borders Rewards Plus program was redesigned and relaunched in the fall of 2010 after extensive customer research, and it incorporated both free and paid enrollment options. Borders hoped that choice would differentiate it from competing bookstore programs. As bankruptcy neared employees reported that they were encouraged to sign up increasing numbers of customers for the program.

On the other, strengthening Borders Rewards Plus didn’t resuscitate the company then, and it isn’t likely to now. There are two marketplace situations in which a loyalty program doesn’t really help – when you offer a superior product or service advantage, or when your company is in a dying industry. As a bookseller, Borders could fall into the second category unless it transitions successfully into the digital age. Once they’ve managed that, loyalty is a sensible next step.

Original document from Customer Think.

InterContinental Hotels Group Pushes for younger loyalty members with Online Trivia Game

by Brian Quinton

On the heels of launching a pilot program with a platform that lets users win rewards for checking in to its hotels via location-based services, InterContinental Hotels Group has enhanced its Priority Club rewards program with a travel trivia game that lets registered members win extra points in daily and weekly contests. The introduction of game play into loyalty programs is a growing strategy with marketers spending more time thinking like gamers when developing or updating their programs.

Priority Club members can enter their account number and PIN to play “Win It in a Minute”. Once logged in, they will be asked five questions related to travel destinations and be given 12 seconds to answer each one. The top 50 scores each weekday—determined by both the correctness and speed of the answers—will win 5,000 Priority Club points.

The top 100 scores each week, calculated from each player’s daily performance, will earn 15,000 Priority reward points. The contest launched on January 24, 2011 and will run until April 15.

IHG said the game is the first online daily contest to offer reward points to loyalty club members. The game is open only to Priority Club members located in the U.S., U.K. and Canada.

The introduction of a game play promotion to its loyalty program holds the promise of attracting younger members to Priority Club, said Don Berg, vice president of loyalty programs at IHG, whose portfolio of properties includes InterContinental Hotels & Resorts, Holiday Inn Hotels and Resorts and Holiday Inn Express among other brands.

“We’ve been thinking about gaming for quite a while,” he said. “In the hotel industry, loyalty program members tend to be in the mid-40s range, and we are constantly seeking ways to establish engagement with newer, IHG-specific questions such as how many properties they younger members, who have a great affinity for online gaming in general. At the same time, the game also appeals to our bread-and-butter members’ love of travel.”

Original document from Highbeam Business.

Five key loyalty trends to watch for 2011

Customer loyalty is increasingly a critical tool for growing and maintaining market share, yet each year marketers are faced with new and evolving challenges that can affect their ability to attract new customers and maintain relationships with existing ones. So which of these trends should we all be watching most closely in 2011?

According to loyalty marketing firm Uber, one of the most significant challenges that businesses face today is optimising customer satisfaction and developing an effective, meaningful customer relationship management strategy.

With this in mind, the company has isolated five key trends that marketers will need to watch in the near term:

  1. Embracing Social Media
    Social networks such as Facebook and Twitter can provide businesses with specific information on how their target market thinks and acts. The informal, non-threatening environment is an ideal place to engage with customers about anything from buying preferences to promotions to customer feedback.

    Real-time sites such as Twitter and Openbook can also provide you with lead generation ideas; a quick search can help find people who are looking for a company just like you, actively seeking a product or service you provide, but aren’t aware of you.

  2. Engage Consumer Communities
    Almost goes without saying but customer service can always be improved, especially as customers become increasingly savvy and demanding, and quite rightly too.

    Consumer action and money-saving sites are there to help consumers get the best possible deals, but don’t treat this as a threat. Embrace it, get on board and interact with these sites for heightened exposure and positive reputation management.

  3. Tap Into Emotional Psyches
    Loyalty will continue to centre on emotional thought processes rather than rational, incentive-based initiatives.

    Psychological economists have often spoken of economic decision-making being 70% emotional and 30% rational which perfectly sums up why tactical incentive-based loyalty campaigns, that are based on rationality, do not always work so well. Tapping into the feelings behind customer decisions will ultimately create connected, passionate and engaged customers, which is essential.

  4. Relevant, Targeted Loyalty Programmes
    Customers of today are increasingly demanding which is a good thing for all involved. Listen to their needs and wants, and carve out loyalty programmes for customers who are always thinking about me.

    This will make them individual, relevant and most importantly, personal, which is the most frequently chosen reason for spending more with a company. Show customers you are listening, use data effectively to build on your targeted personalised loyalty programme.

  5. Think Differently
    Not everyone wants more “me too” points-based customer loyalty schemes. Challenge yourself and dare to be different. Non points-based loyalty programmes can be more cost effective, allow you to control spend, don’t have huge liability issues, and could also earn you a much faster ROI.

 
Original document from The Wise Marketer.

Making Hotel Loyalty Programs More Effective

by Jill Goldworn and Denis Huré

There is no doubt that loyalty programs are on the rise today. In the U.S. alone, there are 1.8 billion individual memberships in loyalty programs1, everything from airlines to convenience stores to movie theaters. In light of this huge number, the general perception is that consumers are happy to join loyalty programs, eager to enjoy the added rewards that come with loyalty programs. The reality, however, is that they’re not. Confirming this expectation gap, a recent survey by the Chief Marketing Officer Council found that some 32% of consumers surveyed felt that participation in loyalty programs holds “little to no value.” Ouch.

What has emerged as a result of this disconnect is a new direction in loyalty programs: instant reward redemptions. In the past, instant rewards have been limited to cash or discounts at the register; maybe a free item of very low value. Technology, thankfully, has given rise to this new breed of instantly redeemable rewards – the digital, downloadable kind. These instant rewards promise to finally eliminate some of the traditional problems associated with loyalty programs, like engagement and delivering value.

Problems with Traditional Programs

According The Journal of Retailing, “the rewards associated with loyalty programs provide a means to establish reciprocity between the customer and the company.2” But problems that have plagued this interaction, or reciprocity, throughout the years and usually stemming from the delay between collection and redemption by loyalty program members. Whether a program’s threshold for redemption is too high, or the redemption process is too cumbersome (which often the case; ask any FFP member), traditional loyalty programs suffer from program inefficiency. And here’s where instant redemption provides instant relief, specifically in two areas:

Low-Threshold Consumers

In the past, a big problem has been the loss of “low-threshold” consumers. For these consumers, who maintain a low accumulation of points (or whatever program currency), the traditional loyalty program concept fails: if the point threshold is too high, the program has become irrelevant because the consumer feels the reward is not obtainable3. In such cases, the loyalty program is actually hurting the brand. It suffers because the consumer disengages from the brand before they have received an added “reward” for membership.

Instant reward redemptions provide companies a very affordable alternative to offer these low-threshold consumers an easy way to burn low point accumulations. Loyalty program managers also benefit, as studies have shown that these “light buyers” represent a large increase in spending and purchase frequency post-redemption4. In other words, they’re not a segment to be ignored.

Delayed Redemption

Another area of concern with loyalty programs is cumbersome redemption processes. Regardless of the delivery method, timing is of the essence in loyalty programs. In fact, the timing is (almost) everything. The longer the delay in collecting a reward, the less powerful the loyalty creation5. Here, instant rewards reduce the delay between collection and redemption and, therefore, a larger chance for loyalty engagement success.

Digital Content: The Ultimate Instant Reward Redemption

Digital content, offering loyalty members downloadable content (such as the latest selection in music, movies, software, books, games, magazines), is emerging as the premier medium for the delivery of instant reward redemption. The sheer selection of digital content that is available, along with its monetization potential, makes it an excellent vehicle for instant reward redemption programs. Consumers want instant rewards, and digital content is the next logical step. Research from Mintel confirms this fact:

47% of consumers surveyed said their choice of loyalty program would be influenced by instant redemption options, such as cash or discounts.
Jackpot!

So with this information acquired from recent surveys and obvious positive consumer sentiment, the next question seems to be: is digital content a good substitution for cash or discounts?

In a word, yes. According to Mintel’s study, 61% of respondents said that lower overall cost for merchandise they would have purchased anyway is an important attribute of a loyalty or rewards program. It’s feasible to assume then, that relevant content, content that the consumer is likely to purchase regardless, is a good substitute for cash or discounts. And considering that 65% of internet users have paid for intangible digital content, there is a huge market for relevant and engaging digital content waiting to be developed6. In the UK, a recent YouGov survey showed that among those aged 18-34 who had engaged in digital activities, 22% spent more than £5 on digital books, the digital content category receiving the highest spend7.

Digital content presents a win-win strategy

Digital content gives businesses the chance to burn points off their balance sheet, while offering the entire spectrum of loyalty program participants the opportunity to redeem points for merchandise in which they are interested or already purchasing on a regular basis.

In essence, instant digital rewards have bridged the gap between reality and perception. By making rewards instantly redeemable, businesses can give their customers the value that they seek: relevant rewards instantly and anywhere, loaded onto the devices they use in their everyday lives. Instant digital rewards, it seems, have created a new trend in loyalty programs:

Programs that work for everyone.


Loyalty: Looking Forward

Featuring latest statistics and defining characteristics of various industry loyalty programs presented by the first club™, “Loyalty: Looking Forward” can help program managers grasp emerging loyalty trends and their digitized, instant future.

Original document from EHotelier.

Sources/References:

  1. <http://www.colloquy.com/article_view.asp?xd=5889>
  2. Kumar, V., and Denish Shah. 2004. “Building and sustaining profitable customer loyalty for the 21st century.” Journal of Retailing 80, no. 4: 317-330.
  3. O’Brien, Louise, and Charles Jones. 1995. “Do Rewards Really Create Loyalty?.” Harvard Business Review 73, no. 3: 75-82.
  4. Liu, Yuping, and Rong Yang. 2009. “Competing Loyalty Programs: Impact of Market Saturation, Market Share, and Category Expandability.” Journal of Marketing 73, no. 1: 93-108.
  5. Dowling, Grahame R., and Mark Uncles. 1997. “Do Customer Loyalty Programs Really Work?.” Sloan Management Review 38, no. 4: 71-82.
  6. Jansen, J.. December 30, 2010. http://www.pewinternet.org/Reports/2010/Paying-for-Content.aspx (accessed February 13, 2011).
  7. <http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/SmartphonesandTabletsdriverevenuefordigitalcontent,saysKPMGreport.aspx>
  8. Mintel data provided in the PR Newswire piece Instant Redemption Opportunities Lure in Loyalty Program Customers, Reports Mintel
  9. -CMO (32% hold “little to no value”) taken from “Loyalty: Looking Forward.”

Power to the Program

How GameStop’s recently launched PowerUp Rewards powered up to 6 million members in just a few months
by Jenn McMillen and Mike Hogan

You’ve seen the media reports of the excitement generated when a sequel to a hot video game is released. Lines of avid players waiting for the newest Medal of Honor, the latest Halo, the introduction of Fallout New Vegas—some dressed in costumes inspired by the games themselves. At GameStop, we’re accustomed to this kind of behavior, but we were shocked by one fan lineup we encountered when we opened up one of our stores in September of last year. The avid fans weren’t there for the latest role-playing game, the hottest first-person shooter, or a long-awaited real-time strategy game.

They’d come for our-brand new loyalty program.

The size of the lines of customers waiting to be the first to sign up for our September launch of PowerUp Rewards (without any advance advertising) was astounding, and the continuing response has significantly exceeded our expectations—and our expectations were fairly aggressive. By the beginning of 2011, after the launch had rolled out to all our stores by mid-October, we exceeded six million members, many of whom have chosen a more benefits-packed $14.99 annual membership called PowerUp Rewards Pro. We’re also getting quite a bit of positive qualitative feedback from customers and our field teams, another key metric for evaluating our program’s success.

PowerUp Rewards in some senses employs the same game design principles as the games we sell. Player actions lead to a succession of rewards, perks, and bragging rights. Players track their progress, and work toward victory. It’s not a competition, per se, but it combines the passion of achievement with fun.

End game
Achieving this level of success, of course, is never as easy as it looks. GameStop has grown from a regional specialty player to the number-one national brand in our space. Like all companies, we have faced a number of challenges—and the new rewards program was a key element in our strategy for overcoming them. Among our goals:

  • Increase our share of wallet by increasing purchase frequency and by shifting purchase behavior to higher-margin products. In a nutshell, our goal was simple: If we could shift just one title per year away from our competition in just one of our consumer segments, we would add a big number to the top line. We also wanted to increase frequency of trade-ins. We’re fortunate to have a robust used-game model, in which we take games in trade for cash or for store credit that then can be spent on new games. We call it the “Circle of Life.”
  • Collect data on our customers and then use it effectively. Like many retailers, we hadn’t done enough to get to know our customers and offer relevant communications. Though our customers love coming to our stores, we lacked the systems to gather meaningful information about those customers—who they are and what games they like to play—so we could talk to them specifically about those elements in-store and through other channels.
  • Increase customer focus. We simply weren’t as customer-centric as we needed to be, which was particularly frustrating because our audience is very, very vocal. They want to be asked their opinion. In our space, if you don’t engage your customers—and engage them through a channel you maintain—they will post on other sites and blogs, and you may not like what you hear.

 

Original document from Colloquy.

Tesco adds online Clubcard services for its member

According to an article in Retail Week and according to the Tesco website, Tesco’s loyalty program, Clubcard soft launched online and customers are subscribing to receive regular marketing communication via email.

Tesco’s member website also states that by signing up between January 31 and February 28, 2011, members are entered into a prize drawing for jewelry and Clubcard points.

“A spokeswoman said the customer response “has been good so far and we’re seeing more customers making use of it”. She said My Clubcard would be added to later this year to give more services and increase shopping flexibility.”

Original document from Colloquy.