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LOYALTY

Volume 1 Number 2

April 2009 MANAGEMENT


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Sneak Preview:
LOYALTY
EXPO
2009

DataCo EMPLOYEE
The Retention INCENTIVES
Imperative Do They Work?

Are You Ready for the


Next Generation of Loyalty?
Comarch Loyalty Management

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This Month in LOYALTY MANAGEMENT

APRIL 2009 VOLUME 1 NUMBER 2 W W W. L O YA LT Y 3 6 0 . O R G

DEPARTMENTS FEATURES
6 Letter from the Editor
8,10 Contributors 20 Your Customer — Version 2009:
Understanding the New Consumer Mindset
Sandra Gudat – Customer Communications Group, Inc.
LOYALTY FORUM 22 Upside and Challenges of a National Coalition
Roger L. Brooks – ValueCentric Marketing Group, Inc.
12 Your Voice
What Creates True Loyalty?
24 Do Student Discounts Build Loyalty?
Bjorn Larsen – Edhance
14 Q&A: Ask the Experts
A small hotelier asks,
“What Creates Loyal Customers?” 26 Is the “Customer Insight Gap”
Limiting Your Loyalty Program ROI?
Andy Cutler – Mercury
16 Behind the Brand/People
Interview with Rich Phillips, President –
Maritz Loyalty Marketing 28 What Consumers Really Want
Justin Barrie – Perkler
18 Behind the Brand/People
Interview with Jill Noblett, SVP – 30 The Retention Imperative
Wyndham Hotel Group John Dawson & Tom Salutz – DataCo

(continued on page 5)

LOYALT Y EXPO 2009 PREVIEW Page 61

Featuring topics from:


n brandMIND
n Gallup Consulting
n Pluris
n MetroSplash
n Affinion
n rDialogue
n Loylogic
n Carlson Marketing
n Loyalty Lab
n Working Solutions
n Arvato
n Hanifin Loyalty
n Epsilon
n Maritz

April 2009 | Loyalty Management 3


Michael, age 36

Combined his points for a


well-deserved golf experience

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

Cbsi provides more ways to build rewarding relationships.


www.consumerbenefit.com | 800.657.8167 | pr@consumerbenefit.com

4 April 2009 | Loyalty Management


This Month in LOYALTY MANAGEMENT
(continued)
APRIL 2009 VOLUME 1 NUMBER 2 W W W. L O YA LT Y 3 6 0 . O R G

TRENDS & REWARDS BEST BUSINESS PRACTICES


36 The Five Forces of Social Strategy 48 Satisfaction Does Not Equal Loyalty
Karen L. Webster – Market Platform Dynamics Tom Cates – Brookside

38 Mobile Loyalty & Rewards 50 Payment Strategies are Critical to


Drew Dahms – Mobile Marketing Consultant Successful Loyalty Programs
Julie Bohn and Stuart Kiefer – First Data
40 An Integrated Approach
Constance Baker – edōInteractive 52 Eight Things You Really Should Know
Before Launching a New Loyalty or
42 Breaking Through the Clutter: Incentive Program
Building Loyalty in a Digital World Judith Rinearson – Bryan Cave, LLP
Mike Reynolds – Parago
54 Creating a Successful
44 Driver’s License—The Many Uses Today— Employee Incentive Program
Tomorrow Loyalty Dan Paulson – InVision Business Development
Brent Harms – IDLoyalty, LLC
55 Employee Incentive Program Profile:
46 One Time Incentives Do Drive Engagement “The Pyramid of Prizes”
Dennis Propp – Propco Marketing Bob Branson – Tack-USA

56 Your Voice #2
Loyalty Management
Do Employee Incentive Programs Really Work?
Editorial & Production Team:
58 Loyalty Program Profile:
Erin Raese – Editor in Chief Southwest Airlines Rapid Rewards
Caitlin Schar – Editorial Director
Victor Wilcox, Graphics Plus Inc. – Layout & Design
Jet Lithocolor – Print Production

Loyalty 360 team:


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

Contacts:
Article Submissions: Erin Raese (630) 235-8251
PR and News: Laura Rusche (513) 545-5612
Advertising: Toni Dore (513) 226-0925

To subscribe to Loyalty Management visit Loyalty360.org.

Loyalty 360 and Loyalty Management want to know:


Do you have a program that is in need of repair?
Are you looking at new technologies? Do you have a
question for our panel of experts? We want to hear from you.
Write us at: Mailbag@LoyaltyManagement.com

April 2009 | Loyalty Management 5


FROM THE EDITOR

In this issue, we explore changes ahead


for loyalty marketing, asking:
“Are You Ready for the
Next Generation of Loyalty?”
A generation who grew up with mobile phones, social networks and
a lifestyle accustomed to quick connections and instant gratification
is moving into the marketplace. We’ve included articles that
highlight new technologies and trends with information on: Mobile
Marketing, Social Networks and Student Discount Programs.

We are only a month away from the 2009 Loyalty Expo! This issue previews the conference,
giving you an introduction to many of the fabulous speakers and their exciting topics. Sandra
Gudat, from Customer Communications Group, introduces you to the “New Customer”, Karen
Webster of Marketing Platform Dynamics guides us through the jungle of social networking, and
Brent Harms, of ID Loyalty, shares a great new way to track loyalty programs without the need
for additional plastic in your wallet.

In Your Voice, we share your many opinions on the topic of employee incentives. We’ve posed
many questions to you over the last year, but none have received the amount of feedback and
insights we received from this question. You’re very passionate about this subject! We’ll be delving
deeper into this topic in future issues and at the 2009 Loyalty Expo.

Thank you for your continued feedback and sharing your voice, keep it coming!

We look forward to seeing you in Florida.

Sincerely,

Erin Raese
Editor-in-Chief
Loyalty Management
erinraese@loyaltymanagement.com

6 April 2009 | Loyalty Management


April 2009 | Loyalty Management 7
LOYALTY
Contributors

MANAGEMENT

Constance Baker Andy Cutler


Constance Baker, Director of As Chief Strategy Officer at Mercury,
Marketing for edō Interactive. Andy works closely with prospects
Constance has a long history of and clients to create insight-driven
marketing within the financial marketing solutions that deliver
industry including American Express breakthrough results. Andy has
and Wachovia Bank. over twenty five years of experience
in direct/database marketing and
Julie Bohn
Justin Barrie is particularly skilled at helping
companies evolve from a product-
Justin Barrie is co-founder and CMO focused to a customer-focused
of Perkler. Justin is one of Australia’s marketing and sales approach.
leading customer-led designers and a
high-level strategic marketer.
Andy Cutler John Dawson
Julie Bohn John Dawson - SVP Sales at DataCo
Solutions. John has been monetizing
Julie Bohn, Vice President of FI Loyalty the Internet since 1995 in the senior
Programs at First Data, has more than sales management teams of such
18 years of experience in the card pioneering companies as Excite,
processing industry. For the past AltaVista, LookSmart, E!Online,
Bob Branson two years, she’s focused on working and Webloyalty. The last six years
with financial institutions to develop have been spent primarily working
enterprise loyalty and merchant- with commerce companies to
funded loyalty programs. generate rapid sales growth, strong
customer bases and loyal customer
John Dawson
Bob Branson relationships.
Bob Branson has extensive expertise
in the training and professional Drew Dahms
services industry having worked in Drew Dahms is a mobile marketing
that sector for the entire length of consultant based in Minneapolis. His
his 30 year professional career. Bob background is marketing, advertising,
Roger L. Brooks is President of TACK-USA. TACK-USA communications and has worked in
is part of the TACK International retail, food & beverage, consumer
consortium that has been providing electronics, and technology.
sales and leadership training for 60
years.
Sandra Gudat
Sandra Gudat Roger L. Brooks Sandra Gudat is President and
CEO of Customer Communications
Roger brings more than 16 years Group, a loyalty initiative strategic
of customer loyalty experience to design company and publisher of
ValueCentric Marketing Group as Vice customer.com. Sandra’s broad-based
President, Business Development. In experience has provided her with the
his role he implements new processes marketing experience and database
Tom Cates for clients needing to build or expertise to strategically design and
enhance customer loyalty programs. successfully implement relationship
marketing programs for clients in the
Tom Cates retail, healthcare, telecommunications
Tom Cates, Founder and President of and financial services arenas.
The Brookside Group, Inc., helps his
Brent Harms clients develop growth strategies and Brent Harms
improved business performance. Brent Harms, CEO, President and
Tom takes a customer-based founder of ID Loyalty, has over 18
approach to assisting his clients years experience in loyalty programs
with issues such as measuring and and in managing companies. He
managing customer satisfaction, previously founded and managed two
retention and Loyalty; key account marketing companies, Mall Marketing
planning; sales force effectiveness; Media Inc. and Tecmark, Inc.
and leadership development.

8 April 2009 | Loyalty Management


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April 2009 | Loyalty Management 9
LOYALTY
Contributors (continued)

MANAGEMENT

Stuart Kiefer Mike Reynolds


Stuart Kiefer, Division Manager of As Executive Vice President of Market
merchant loyalty at First Data, has Development & Strategy, Reynolds
more than 10 years of experience is responsible for leading Parago’s
creating, launching and managing strategic direction, expansion
loyalty marketing programs. In into new market sectors, product
his current role, he works with marketing and acquisitions. Reynolds
merchants of all sizes to design and has more than 23 years of experience
Stuart Kiefer
implement programs specific to their in sales, marketing and product
individual needs. development of technology-based
solutions.
Bjorn Larsen
Founder and Executive Vice President Judith Rinearson
Mike Reynolds for Edhance. Bjorn has helped build Judith Rinearson is an attorney who
some of the most successful student is a recognized authority in the laws
discount businesses in the world. of prepaid cards and stored value
He served as Director of Business payment products. As a Partner at the
Development for StudentUniverse, global law firm Bryan Cave LLP, Judie
the largest online student travel advises a range of clients (including
Bjorn Larsen agency in the United States. Bjorn is banks, program managers, non-banks,
also a board member for Mecenat, retailers and processors) in all legal
an organization offering thousands aspects of launching and managing a
of discounts to more than a range of prepaid products.
million Swedish students through
a partnership with the Swedish Tom Salutz
Judith Rinearson government.
Managing Partner of DataCo LLC—
a company he co-founded in 1993
Dan Paulson broadly dedicated to providing usable
Daniel W. Paulson, President/CEO— data analytics for marketers. Over
InVision Business Development. For the last two decades, Tom has built
the past 16 years, Dan’s focus has a wide variety of models, analytical
Dan Paulson been on organizational development tools, and data-driven solutions for
and strategy. He achieved record sales direct-response agencies, financial
for all types of businesses ranging marketers, and technology industries
from small companies to multi-billion which have helped them strategically
corporations. In addition to being manage their businesses more
one of the top sellers, Dan has trained intelligently.
Tom Salutz scores of people into leadership
positions. Karen L. Webster
Karen Webster is the President of
Dennis Propp Market Platform Dynamics and is
Dennis is President of Propco, a a frequent industry speaker and
leading provider of proven tested the author of numerous published
Dennis Propp incentives to the financial and loyalty articles and whitepapers on loyalty,
industry. social strategies, mobile and new
media. Her client work spans
diverse industries and is typically
focused on how to monetize new
channels, corporate assets and client
Karen L. Webster relationships.

10 April 2009 | Loyalty Management


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April 2009 | Loyalty Management 11
LOYALTY FORUM: Your Voice

What Creates True Loyalty?


We asked readers: Who, what, where are you loyal to
without program incentives?

I love the question because it gets at what is


intrinsic loyalty, versus the mercenary variety many
of us more often deal with as loyalty professionals
“I am loyal to
and consumers. I find myself being loyal without any
programmatic incentive when either 1) the product is
companies that
exceedingly cool and makes me feel like an “insider” for
owning it or 2) the brand provides me with exceptional
service that makes me feel personally appreciated. For me,
provide excellent,
Apple is the best example of the first type—I own two
different iPods and an iMac and will never go back to a
personalized,
PC, even with the disparity in price point, simply because
I love the product and because I’ve bought into The Cult customer service
and good value
of Mac. A good example of the second is a restaurant I
frequent in St. Louis where I’m greeted like a friend and
the bartender always remembers what I like without me
having to ask for it. I’m a believer in points programs,
especially in situations where competitive differentiation for money.”
is difficult, but they’ll never replace the power of great
product and great service. Cynthia O’Connell Luxury Boutique Hotelier
Barry Kirk Director of Strategic Consulting at Maritz
Loyalty Marketing part of the business. People like UPS, who have an amazing
staff volunteer program, connect with everyone they do
business with and with every community they effect with

L et’s take it back to the company that had the


most loyal customer base that had nothing to do with
getting a financial or product benefit. People purchased
their business and their staff retention rate is 94% including
people who retire. They were also voted the best brand in the
USA in 2006 and not because of any loyalty program. 

from The Body Shop in the 1990’s because they believed in
Anita Roddick’s vision and promise to help the people that People become loyal because of great and personal customer
she was making money from. If you asked the customer service and when your vision and values are aligned with
what the Body Shop stood for they all new it was “Against the those of the customer. This may include ensuring that
Animal Testing” and “Trade not Aid” assistance to people you offer your products at the best price for the market
like the Amazonian Indian in the Rain Forest. It felt good conditions and having a loyalty points program, but make it
to wash with Brazil Nut Oil shampoo because it was a possible for the customer to join your social program as well
natural product that was harvested in a sustainable way. 
 by donating some points to the community activities that
you run. It’s the combination of giving and receiving that
Of course, now a lot of companies have what they call a CSR makes people believe in your company and products.
program but unless it is the passion of the company leaders
Tavis Stewart General Manager at Landmark Group
the staff and customers will not feel the emotion that is

12 April 2009 | Loyalty Management


“I am always loyal to excellent customer service.
No loyalty program in the world is rich enough to
compensate for bad customer service.”
John Racine Managing Principal, Altamont Partners Fund I

G reat question, since the concept of loyalty has become so watered down by ubiquitous
rewards programs that are great for incenting desired behavior, but do little to generate true loyalty or
devotion to a particular business.
To earn customers’ loyalty companies must do two things:
1) Be excellent. 2) Be consistent. Only one of the two will not suffice. Occasional excellence will not generate
devoted customers, nor will consistent mediocrity.
Excellence, of course, is in the eye of the beholder. To me, Trader Joe’s fits the
bill for its unique products, great value and friendly shopping experience.
In the research I’ve conducted on mass merchandisers, I often hear
Wal-Mart (customers trust they are getting the best price possible) and Target (for affordable fashions in
apparel and home).
Adam Fox Experienced Strategist and Consumer Marketing Executive

B usiness with knowledgeable personnel. Most of the time I am apt to be most loyal to
the Mom and Pop stores (like my seed store or neighbor’s produce stand).
At my local garden store they know me by name, have all the right answers and seldom do they have a sale.
Yet, I return to buy all my seeds, plants and supplies. I recommend them not for prices but for quality,
friendliness, and because they care and educate me about my garden.
Caroline Cooper Owner/Artist at Grapes Galore L

April 2009 | Loyalty Management 13


Q&A
LOYALTY FORUM: Q&A

Ask the Experts

Q: “Do incentives we introduce just scratch the surface


or is loyalty about personal acknowledgement?
What creates loyal customers?”
—Something of great interest to a small group of hotels vs. global companies

A: We all want loyal customers. They spend more, stay longer (churn less), engage in insightful dialog that
can help us to make smarter decisions, and they tell others great things about our brand. There’s plenty of value
being added in every one of these outcomes. So what should you do to make more of your customers loyal?

It should come as no surprise to learn that offering an incentive alone—e.g. a discount, a rebate, a better
customer experience, points, prizes and rewards—is not enough to create loyalty. In simple (and universal)
terms, to create loyal customers, you need to build
relationships with them.

“This is why you have your loyalty program— Assuming you have repeat transactions/interactions
it is your customer insight machine.” with your customers, the resulting relationship is
complex. Different industries, brands, and even
different customers each have different relationship
drivers. In service-based industries for example,
the customer experience plays a significant role in building the relationship. The foundation of creating loyal
customers is knowing how to build stronger relationships with them.

This is why you have your loyalty program—it is your customer insight machine. The data
your program generates helps you to understand: what motivates your customers; what
elements of your brand, product or service they most value; how they prefer to engage
with you; what their past behavior reveals in terms of their interests and needs; what
their future value is likely to be; what incentives will encourage them to change their
behavior. Once you have these insights, you can deliver a more relevant value exchange
(customer experiences, offers, content, etc) through a 1to1 dialogue that creates
reciprocity, and ultimately, more loyal customers.

—Luc Bondar, VP, Global Loyalty, Carlson Marketing

Q: Do you have a question for our panel of experts?


Write us at: Mailbag@LoyaltyManagement.com

14 April 2009 | Loyalty Management


A: Loyalty is about much more than incentives and often, it has little or nothing
to do with them. Loyalty is earned and can’t be bought, at least not beyond the
short term (and then it’s still not “loyalty”).

There are a lot of ways to think about loyalty, particularly for a small group of hotels. One
is to recognize that while there’s no way that a small group of hotels can compete on the
same level as a large chain like Marriott or Hilton, there’s no reason you should. Being
small means your organization is more manageable and nimble. That alone means that
there are things that your group can do to connect with customers and build a level of
trust and intimacy that simply can’t be replicated by larger competitors.

Beyond customers, loyalty starts with employees, especially in a business like hospitality, —Phil Rubin
where there is so much direct contact between employees and guests. So the first thing CEO & President
you have to do is make sure your employees are taken care of. Do this and they will take rDialogue
care of the customers.

A: Hotels typical value proposition: “ Spend money and stay with us, and get free lodging in exotic
locales, or free merchandise, or gift certificates, etc.”

Key Attributes: as deliver customized service delivery based on the


n Leverages the gap between perceived value and members value (e.g. upgrades)
true cost n Information collected as part of the rewards
n Breakage runs 40% plus program is employed to create profile and
preferences on each member which drives
n Elite tiers offer differentiated services for highest customized service delivery for all members (e.g.
value customers room preference, e-check-in, e-notification)
n Usually funded by a tax on each property n A smart loyalty program uses a
n Have become a defensive play, rather than a point permission based relationship
of difference marketing platform which is
employed to deliver targeted
What Matters: offers and content as well
n Develop a premium version of the product for your as create a means to deliver
best customers designed to speed the reservation/ partner offers
check-in/checkout process n Rewards can be the foundation
n Become best of breed at maintaining a customer of the loyalty program, but they
history and employing that customer history to should establish a “proposition”
tailor your offerings as well as tailor the on-line, for customers to opt-in to a
concierge and call center experiences Employ relationship and to continue to —Michael F. Hemsey
a customer’s history and profile to deliver identify themselves with every President
recommendations as well as to create customer- transaction Kobie Marketing, Inc.
specific services
More important than rewards, in
n Use the concept of “clientelling” (ie Nordstrom) designing a program you have to
which you employ to deliver 1 to 1 service, advise ask:
your best customers of sales, invite them to special
n What are the economics of customer loyalty?
events, deliver personalized thank-yous.
n What are the drivers of purchase behavior?
n Smaller, niche players should have a higher-end
sense of service than global brands n How can we identify customers and their
transactions?
Considerations:
n What does the brand stand for?
n Niche hotels offer elite tiers which allow the
n What are competitors doing? L
program to confer recognition and status, as well

April 2009 | Loyalty Management 15


LOYALTY FORUM: Behind the Brand/People

Rich Phillips
Loyalty Management looks
“Behind the Brand” at Rich Phillips,
President, Maritz Loyalty Marketing.

What are the qualities you most admire in a person?


Mr. Phillips possesses I had the honor of knowing Bill Maritz, former chairman of Maritz
an impressive combination Inc., and the driving force behind its success for nearly 50 years. He
of business and technology was known for a number of qualities, all of which became part of
the fabric of the Maritz culture: intellect, intensity, dedication and
management experience, decency. I would also add the trait of integrity which I feel is vital in
achieved through corporate any leadership position.
and entrepreneurial enterprise.
Responsible for the successful What’s your personal motto?
launch of two companies, While I have never specifically contemplated a motto, I am such a
he has spearheaded business believer in honoring the gifts of time and life by using every day to
its fullest.
strategy, sales, marketing,
product development, and What do you consider your greatest achievement?
operations management While I am personally proud of some of the companies I have
activities in several industries. helped to grow and prosper, there is no question that my greatest
Phillips holds a Bachelor pride is my family and the 3 incredible kids I have. I could not
of Science in Electrical be more proud of the people they have become. The values they
possess, their perseverance and confidence are due, in large part, to
Engineering, a Master of my wife. She is one of the most intelligent, giving people I know
Information Management, and has dedicated her life to the development of our children.
and a Master of Business Even in the face of daunting health challenges, her dedication to
Administration; he has also our family is unwavering.
served as Adjunct Professor Which books are you currently recommending?
of Management in the
I am a pretty voracious reader. Unfortunately, my schedule of late
Washington University Olin has trumped my ability for recreational reading. Groundswell
School of Business. by Li and Bernoff captures the essence of a fundamental shift I
believe in – that of the power of the consumer.

16 April 2009 | Loyalty Management


Which historical figure do you
most admire?
Probably Abraham Lincoln. The strength of his
conviction in the face of enormous adversity,
coupled with his vision for “what could be” and “There is no question
that my greatest
what was fundamentally right, changed history
for generations to come. This clearly captures the
essence of leadership.
pride is my family
If you were not doing what you do
today, how would you be spending and the three
your time?
My uncle is a missionary serving in villages in
incredible kids I
Bangladesh. He has spent over 40 years building
trade schools and teaching trades to the people
have. I could not be
there. I would love to serve along side him in more proud of the
people they have
his work. Although, in addition to witnessing
incredible hardship, I must say, one of my biggest
challenges, in this situation, would be my fear of
giant insects and snakes. become.”
How can loyalty marketing companies
make a difference in today’s economy?
We see many firms shifting more strategic focus
to retention rather than acquisition. Smart What can we expect from Maritz
companies should be taking advantage of this in 2009?
opportunity to identify and appeal to customers
in order to grow their business. Loyalty programs I am so proud of the accomplishments of our
are a great way to attract customers, engage teams in building leapfrog capabilities and finding
customers, and grow your best customers. new applications for loyalty practices. Over the
Additionally, loyalty companies have a unique past 18 months Maritz has been in a significant
ability to help clients focus on measurable results innovation cycle and we have made incredible
– loyalty marketing is measurable marketing. progress in reframing what loyalty can and should
be. We will spend much of 2009 launching
these capabilities into the market with vigor. As
we bring our new capabilities to life, we will be
“Think like a consumer. extremely purposeful in the alignment of our
Be aware as you walk loyalty and engagement strategies with the goals of
our clients regarding channel partners, employees,
in your own shoes—as and consumers.

you live your daily Word of advice for a novice


life—and the needs of loyalty marketer:

the marketplace will be Think like a consumer. Be aware as you walk in your
own shoes—as you live your daily life—and the needs
self-evident.” of the marketplace will be self-evident. L

April 2009 | Loyalty Management 17


LOYALTY FORUM: Behind the Brand/People

Jill Noblett
Getting to know
Jill Noblett, SVP at
Wyndham Hotel Group
Join us at the Loyalty Expo and hear Jill share
how Wyndham—the worlds’ largest hotel What is your favorite vacation destination?
company—is continually innovating its’ I have a tendency to pick a different destination each time
versus going back to the same place again. I guess it’s a sense of
customer loyalty strategies.
adventure driving that, and also a strong desire to experience a
variety of places and cultures. There are certain countries I have
visited several times that I can site among my favorites—I love
Jill is responsible for the the west coast of Mexico for the relaxation and the weather,
strategic development and management of I love Italy for the diversity it provides in terms of places to
the Wyndham Rewards loyalty program, see—Venice, Florence, Rome, the Amalfi coast—all such
customer loyalty initiatives, the Hotel beautiful locations and all so different in terms of experiences.
I would describe France in that same way—you can go back
Group’s customer database, direct-
several times to locations that are very different—one of my
marketing programs, strategic marketing favorite trips was the Route du Vin in Alsace Lorraine. The
alliances and promotional initiatives sheer physical beauty of Switzerland always takes my breath
across WHG brands. She spearheaded away and in the past several years, I have really rediscovered the
the design, development and 2004 joy of traveling right here in the wonderful US.
launch of TripRewards, the company’s
first system-wide, multi-brand customer When traveling for fun, what is your packing
loyalty program, its 2008 rebranding into secret? I wish I could say packing light, but that is not my
forte!! I like to be prepared, so I tend to pack on the heavier
Wyndham Rewards and the program’s side depending on how accessible things are where I am going.
global expansion. The Wyndham Rewards But, I am usually glad for what I have brought. Since I carry
loyalty program is the largest in the liquids, I typically check baggage now but have learned to
lodging industry based on the number of always pack at least for one night in my carry on just in case of
lost luggage (which has happened to me more than a few times
participating hotels, which include the
unfortunately). And, I will bring a bag for dirty clothes so that
Wyndham®, Ramada®, Days Inn®, Super when I come home, I can just dump it all in the wash.
8®, Wingate® by Wyndham, Baymont Inn
& Suites®, Hawthorn Suites®, Howard Which books and magazines would we find in
Johnson®, Travelodge®, Knights Inn® and your luggage? I use long flights as an opportunity to catch
Microtel® brands. Prior to her current up on work reading. So often, it will be industry publications,
role, Noblett held marketing positions but I make sure to bring along a few entertainment pubs
(People!) for some light reading. I have recently become a fan
with Bertelsmann Corporation, Columbia
of historical fiction—Philippa Gregory is one of my favorite
House, Prudential Direct Inc. and Rapp authors in that genre. She wrote, “The Other Boleyn Girl” and
Collins Worldwide. several others in that series.

18 April 2009 | Loyalty Management


Which talent would you most like to have? Tell us about “Wishes by Wyndham” As one
Songwriting. Music evokes such emotion and creates of the core values of Wyndham Worldwide, we feel
connections between people. Songs are engrained strongly that it’s our responsibility to do what we can to
in the fabric of our lives and the memories we have. improve the world around us. It’s because of this value
It would be a cool feeling to be the originator of to support our communities that Wishes by Wyndham
something that powerful. was created. We have teams of volunteers who work
together to identify and support charities that reflect
our interests in women and children. We have four
If you could invite anyone to dinner, past or
signature charities: Starlight Children’s Foundation,
present, who would it be? I would have to say
Beyond the Moon, The Christel House and Hole in the
Mother Theresa of Calcutta. She was such a symbol of
Wall Camps. We are actually using our loyalty program
compassion to the world. I read a description of her
Wyndham Rewards as a mechanism to provide these
once that called her a ‘luminous messenger of God’s
organizations with philanthropic support. The website
love.” What an incredible honor it would have been to
is www.wishesbywyndham.com
have met her.

“I guess I am fortunate in that I love what I do;


marketing within the travel and hospitality
industry is very exciting and dynamic.”
Which person has made the most impact in
What’s your outlook for customer loyalty for
your life? My mom. Hands down. Her name was
2009 and beyond? I believe that loyalty initiatives,
Joyce and it fit her perfectly because she was so joyful.
strategies and programs are increasingly critical in this
She was mom, best friend and sister to me—we were
economic climate. There is a limited spend available so
inseparable. My mom was such an amazing woman
we must prevent the defection of our best customers
and role model. She raised three kids on her own after
and find ways to increase our share of wallet. The key
my dad died, was a great daughter to her own mother,
is obviously landing on those efforts that provide the
and dealt with terrible illness and grueling treatments
greatest return on investment. I think right now it’s
with courage, dignity and grace. She never lost her
about marrying the concept of loyalty with providing
lust for life and her sheer joy in being alive. The room
true customer value—so we may not want to discount
lit up when she entered it and everyone loved being
product, but if we can add more reasons for the
around her. I miss her every single day.
customer to believe they are getting value for their
spend, that’s a winning strategy.
If you were not doing what you do today,
how would you be spending your time?
Your advice for up and coming customer
I guess I am fortunate in that I love what I do—
focused executives: I think the best advice I
marketing within the travel and hospitality industry is
can give is to be open to testing and learning. Not
very exciting and dynamic. I am especially passionate
everything you try will be a success but even small wins
about the whole loyalty effect as there are so many
(and yes, the failures) can result in great learning. It’s
dimensions to it. I had the good fortune to be able to
also important to realize that what worked yesterday
design and build a program from scratch and it has
might not work today because we see how customer
grown to be a very important part of our business.
behavior and expectations continually evolve. We are
Not everyone has the opportunity to do that. It has
also all in a mode now where we have to do more with
been a challenging yet very rewarding (pardon the
less. But don’t give up! Sometimes relatively minor
pun) experience. I don’t do it alone though. I have
tweaks in strategy can move the needle and open up the
an incredible team of people who are equally as
appetite to do more. And I have found that managing
passionate about the program and our business.
through tough economic times can make us smarter,
more effective and more efficient. L

April 2009 | Loyalty Management 19


FEATURES

Your Customer—Version 2009:


Understanding the New Consumer Mindset
by Sandra Gudat – Customer Communications Group, Inc. (CCG)

Understanding how the consumer mindset has shifted over the


past year is the first step to keeping up —and getting ahead.
In case you haven’t noticed, there’s a brand new consumer mindset at play today. The
conspicuous consumption of the past couple decades has given way to penny-pinching
financial conservatism. Consumers are more fickle than ever— they’re hunting for the
deepest discounts, thinking longer before buying and tightening up their credit usage.
Businesses in all sectors are feeling the impact. Since there’s no better way to begin
overcoming a challenge like this than to understand it, we’ve compiled an overview of
four key traits of the customer—version 2009.

Frugality Gets Chic to interact easily via online, mobile and kiosk self-service
Layoffs, pay cuts, battered investment portfolios and a channels versus a retailer that does not.3
general worry over the state of the union and “what may n They’ll appreciate new technology that enhances their
be” has caused vast numbers of consumers to cut back shopping experience. For instance, IBM’s Virtual Mirror
on spending and redirect their budgets around the near- Kiosk lets consumers “try on” makeup using a digital
forgotten art of saving. photo, then share the results with friends via e-mail and
n More than 50 percent of consumers say they have less social networks.
discretionary funds than in 2007.1 n F orty-six percent of U.S. multi-channel shoppers want
n Two-thirds are buying fewer items or delaying to receive price comparisons, product reviews, coupons,
purchases.2 promotions and store sales information online or via
e-mail.3
n 60 percent are shopping for sale items and using more
coupons.2
Indulgence and Escapism Won’t Be Forgotten
Trust and Value Are the New Hot Buttons Embattled and anxious they may be, but consumers will
still want to indulge and escape momentarily from the stress
With retailers discounting merchandise up to 90 percent
of day-to-day life.
over the holidays, some customers have grown distrustful
that merchant pricing is a true reflection of product value. n They’ll look for small, affordable luxuries (i.e., premium
chocolates and coffees).
n Nearly 50 percent of consumers are switching between
n They’ll seek out light-hearted experiences, entertainment
retailers to get better values.3
and products that promise to enhance their mood.
n And they want real value, whether from value pricing n They’ll bring more experiences into the home, such as
or value-added services, such as free consultations or a pre-packaged gourmet meals and home spa products.
knowledgeable staff that can answer their questions.
Adjust Now for a Stronger Future
Convenience and Service Rival Price
In a tough economy, customers rule more than ever.
From faster checkouts to seamless multi-channel Understanding their current mindset and making
integration to more customization options, customers want a appropriate adjustments to your business and marketing
faster, easier, more personal shopping experience. And, they strategies can help you maintain your customer base. Play
may be willing to soften their focus on price if they get it. it right, and you could even emerge from this downswing
nN
 early three-fourths of consumers say they are more with customer relationships that are stronger — and more
likely to shop with a retailer that gives them the flexibility profitable — than ever.

20 April 2009 | Loyalty Management


Bring your
customer loyalty
and retention
initiatives to a
new level!
CCG’s Sandra Gudat will
be presenting at Loyalty
Expo 2009. Join her session
as she discusses focusing
scarce resources, finding
and mining for opportunity
within your customer base
and developing stronger
loyalty value propositions.

Survival in the “New World Order”


of Consumer Marketing:
Three Things Retailers Can Do Right Now
Loyalty Management asked CCG retail experts Sandra Gudat and Lane Ware to offer
three actions you can take now to put your business in a better position.
1. M
 ake sure your 3. U
 nderstand your customers
value proposition is strong. better than you ever have.
Differentiation is essential when the amount of consumer A business should be collecting data on its customers —
dollars available is shrinking, Gudat says. on their buying habits, preferences, discount responses
— to drive their decisions, Ware says.
“Revisit your value proposition. How does it differentiate
your business? Is it still valid in the new economy? Is your “There is no time or money for trial-and-error business
messaging on target? Does your customer experience operations today,” Gudat says. “Businesses can’t afford to
live up to your promises? These are the questions that will guess anymore. They need deeper customer intelligence
drive a retailer’s bottom line,” Ware says. to direct decisions — from marketing and merchandising
to product development.”
2. Focus your resources.
Bottom Line: Opportunities Exist
The value of knowing where to place your marketing
dollars and effort can’t be overstated, according to Gudat. Both Gudat and Ware agree that opportunities are out
there for strong retailers who can take advantage of them.
“You have to not only know who your best customers are, “It’s all about watching for trends, and then being quick to
but also which customers are likely to become your best act,” Gudat says.
customers,” Ware says.
Plus, remember that history has been kind to retailers who
Every retailer is looking for the right thing to build traffic, maintain an aggressive presence in the marketplace, Ware
Gudat adds. “But it’s more than driving all shoppers. It’s says. “A recent Nielsen Company report reminds us that in
about bringing in the profitable customer.” the 1980s, companies that stayed the course enjoyed a 275
One tactic to consider is loyalty scoring of your customer percent growth rate in the first five years after the recession,
database. “That score should include a profitability factor compared to companies who cut their marketing budgets
to guide your discounting moves,” Ware says. and saw less than 20 percent growth.” L

1. “Shopper advocacy: Building consumer trust in the new economic environment,” IBM Institute for Business Value survey, http://www-935.ibm.com/services/us/gbs/bus/pdf/qr_gbe03143-
uwen_nrf08.pdf, released Dec. 2008, accessed Jan. 22, 2009. 2. “IBM Helps Retailers Respond to Changing Consumer Behavior,” IBM Press Room, http://www-03.ibm.com/press/us/en/
pressreleases/recent.wss, posted Jan. 12, 2009, accessed Jan. 22, 2009. 3. “Consumers are shopping on price and want more self-service help, study says,” Internet Retailer, http://www.
internetretailer.com/dailyNews.asp?id=29126, posted Jan. 20, 2009, accessed Jan. 21, 2009. © Customer Communications Group, Inc. (CCG); first published in The Profitable Customer, Spring 2009

April 2009 | Loyalty Management 21


FEATURES

Upside and
Challenges of a
National Coalition
by Roger L. Brooks – ValueCentric Marketing Group, Inc.

How can loyalty marketers in the US learn from


their neighbors when it comes to coalition-loyalty?
Let me count the ways.

I ’m referring specifically to our neighbor to


the north who has slightly more square miles of land, yet
is ten-times our junior in population. The US capitalistic
ideals have typically adopted a generalized philosophy toward our
So, just what is it about coalition programs in Canada and AIR
MILES in particular that has the stars aligned perfectly? It comes
down to one word – will.

friendly neighbors; “Anything You Can Do, I Can Do Better” AIR MILES had the will to:
(lyrics from the song “Anything You Can Do” from the 1946 n Issue a non-payment loyalty card which they call the “Blue”
Broadway musical, Annie Get Your Gun.) Canadians would argue card.
however, that this egotistical philosophy falls short when it comes
to their fancies like hockey, maple syrup and loyalty. Yes, I said n Open negotiations and partner with national merchants.
“LOYALTY”. n Overcome point-of-sale and technical challenges.

Loyalty programs and coalition programs in particular n Offer category exclusivity.


have thrived in Canada. By coalition I’m referring to national n Defy the odds of issuing a common loyalty currency.
retail partners (called sponsors) who have teamed up to issue a
n Partner with two competing card issuers (American Express
common loyalty program currency.
and Bank of Montreal).
The coalition-revolution began in
Canada less than twenty years ago n Make coalition-loyalty happen!
when AIR MILES opened their
doors and launched a coalition Loyalty marketers in the US should continue to learn from AIR
program with anchor partners in MILES’ success, which has since expanded to the Netherlands,
virtually all major spending verticals. Spain and the Middle East. Now, more than ever, the US is in
Today, more than half of Canadian prime position to offer a common loyalty currency. Reason #1
households are active AIR MILES is the current state of the US economy. Merchants are in need
“collectors”. In addition, other long-standing loyalty programs of any competitive advantage they can get. They are in need of
such as Aeroplan have evolved and followed suit by developing new business opportunities which are compelling, proven and
coalition programs of their own. profitable to their bottom line. Although a majority of leading
national consumer giants offer stand-alone loyalty programs,

22 April 2009 | Loyalty Management


“It’s not a matter of if, rather, it’s a matter of
when. When will coalition-loyalty launch
in the US and what will it look like?”
the potential for coalition-loyalty in the US is enormous. That being said, there are still enough compelling reasons why
The coalition model provides a platform for impactful cross- coalition-loyalty will work. The sure fact that several category
promotion opportunities, as well as tremendous benefits such as leaders have existing loyalty programs in place today is a big
analyzing consumer data. The shared data that comes along with advantage. Currently, there are several companies testing the
coalition-loyalty is powerful, and if marketed correctly has a direct waters with coalition-loyalty in various pockets around the
impact on motivating customer behavior. If the incentive is great country. There are formal Requests for Information & Proposals
enough, consumers will change their buying habits. circulating around the industry. There are executive-level meetings
taking place every day on the subject. There is strategic planning
The beauty of the US marketplace is that there’s room happening in many boardrooms.
for more than one coalition provider. Being first to market
is always a key factor, but the reality is the dynamics of the It’s not a matter of if, rather, it’s a matter of when. When will
US marketplace is vastly more complex than in Canada. For coalition-loyalty launch in the US and what will it look like? It
example, in the US, large providers in certain categories such as may not look exactly the same in the US as it does elsewhere,
fuel and grocery tend to be more regionalized. There are many but coalition-loyalty can breed success for both sponsors and
franchise locations in the US which can create complexities. collectors. But in the end, and like our Canadian neighbors, this
In addition, payment processing systems and point-of-sale gigantic opportunity will most likely come down to that one
variations can complicate the effort. small word – the will to get it done! L

Roger L. Brooks had a chance to catch up with Bruce Kerr, President of LoyaltyOne US
(the parent company of AIR MILES) to provide his view on coalition-loyalty in the US.

Can loyalty-marketing in the US replicate what is being Coalitions are notoriously difficult to
done in Canada? orchestrate, but once they launch and
achieve critical mass with consumers,
[Bruce Kerr] “Yes it can, the overall household penetration they demonstrate formidable longevity
may not be as high, but the avidity of the customer base and are difficult for competitors to
will be equal if not greater. The ramp up of penetration will replicate. And with coalitions now
outpace that of Canada, due to the high embedded base of operating from Brazil to Malaysia
loyal customers across the partners. and points between, the case studies Bruce Kerr
suggest that most markets eventually
What makes the coalition model so strong is its ability to evolve toward coalition loyalty. The US is
leverage consumers’ everyday spend in high-frequency poised to be next.”
categories to offer them attainable rewards and benefits they
can’t earn as easily in a proprietary program. The everyday Are things different today, and if so, how?
spending component is key. Proprietary programs tend to
focus on a subset of consumers, like road warriors or the [Bruce Kerr] “The current recession may ironically open a
affluent. But the high-frequency categories really open your launch window that finally allows a U.S. coalition program
reach into middle-class consumers, which allows a coalition to take flight. Lack of liquidity and low consumer confidence
to naturally build a much bigger customer database from may lead to a short-term weakening in company investment
which to generate results for sponsors.” in proprietary loyalty strategies. Conversely, the same
environment will fuel a need for U.S. Companies to share
What are the obstacles that have stood in the way in marketing costs and control program liability, which will
the past? drive demand for partner and coalition loyalty models.

[Bruce Kerr] “Obstacles of the past were the unwillingness Companies are now prepared to evolve or integrate current
of US companies to work together cooperatively — sharing strategies with coalition opportunities. Consumers craving
marketing costs and issuing a shared currency. Plus the sheer differentiated programs allow them to quickly earn great
size and diversity of the US marketplace is challenging. rewards for their everyday spending.”

April 2009 | Loyalty Management 23


FEATURES

Do student discounts build loyalty?


by Bjorn Larsen – Edhance

When you see a young college student standing at the sidelines of a football game with his face
painted in school colors and three letters proudly written in permanent marker on his chest, screaming
from the top of his lungs something that might resemble his school chant, it’s hard to argue that
students aren’t loyal. The question is, how do you make them loyal to your brand?

A
s freshmen students haul their parents from Manhattan’s Fifth Avenue is a common strategy to acquire
up and down the aisles at Target every fall, something customers who are less willing and able to pay full price. By
unique is happening. The dependent kids are turning offering discounts to affinity groups who are more price sensitive
into independent consumers, and over the next four years they than the general public, merchants can achieve the same effect.
begin shaping their brand loyalty for decades to come. While In fact, if they could charge a different price to every customer
parents often get the honor funding the spending, students take in a socially acceptable manner, merchants would ultimately
more and more control of what is being bought and why as increase overall revenue. A perfect example of this is demonstrated
they progress through college. This is the defining time when by colleges and universities themselves. These organizations
they decide which bank to trust, what apparel brands represent typically offer need-based and merit-based tuition discounts to
them, and which beer to enjoy on a warm afternoon in their own their customers through financial aid. Through this strategy, they
backyard 40 years later. are able to dynamically set a price students and their families
are able to pay, while maximizing the future income from that
Another benefit to marketing to young adults is that they customer. Students with better grades tend to get higher-paying
are excellent brand ambassadors. How many students have jobs, and are more able to donate more to the university in the
convinced their parents to purchase an iPhone, versus the other years to come. Schools have found a socially acceptable way to
way around? Who put Facebook on the map, now the hottest charge a different price to every customer, and by offering student
thing amongst stay-at-home moms? Students are demanding discounts, merchants can follow their example.
consumers, and by giving them special treatment, companies
can get on their good side. It’s hard to build an effective college program

But how can we build lifetime brand loyalty when today’s The college market is extremely scattered: in the United States
young adults have amongst the lowest participation in loyalty alone, there are more than 6,500 higher education institutions,
programs across the board? Research tells us that young adults each with different trends, audiences, and policies. It’s hard to
filter out traditional push marketing more than any other group, find a common denominator that resonates well with everybody.
both online and offline. It’s also a known fact that students Students at some of these institutions like to dress professionally,
have less disposable income than the general population and are some wear alternative clothing, and some don’t seem to wear
constantly trying to save a buck. So, even if merchants are able to anything at all. While competitive college athletes spend every
get students interested in their products, students might simply extra hour of the day in the gymnasium, others spend all night
not be able to afford to spend the money. building their own virtual world in Second Life. Sure, most of
them are on Facebook, but what they do in social networks varies
Student discounting does not discount the brand enormously from person to person. In fact, that is why it’s so
appealing to them—it’s personal.
A common misconception among marketers is that price
differentiation towards students is considered discounting, How do we, as corporations trying to sell products and services
which is just not something they should associate their brand to this demographic, get their attention? An old adage offers some
with. However, several well-established brands with solid great advice: Everybody likes a good deal.
student offerings, including Apple, Microsoft, Dell, Jetblue,
Amtrak, J.Crew, and Club Monaco, have proven this wrong. For If a merchant decides to offer discounts to students, they are
companies like Apple, in fact, student discounts are perceived as still facing some very real challenges. It’s important that the offer
corporate contributions to making education affordable, which is is only available to a closed audience, meaning currently enrolled
certainly a positive association for the brand. students. Coupons or special online links can be easily shared
with non-student friends and family. Secondly, the discount has
A far more familiar practice for marketers is geographical price to be operationally convenient. Training a sales force of thousands
differentiation. Lowering prices for consumers who live in a lower of employees to evaluate 6,500+ different kinds of student ID
income area or choose to drive to an outlet mall area far away cards, many of which never expire, isn’t very scalable. But perhaps

24 April 2009 | Loyalty Management


‘‘ When I bought
my laptop, Apple
not only gave me
a student discount,
but threw in an
iPod too…Love it!
Maya
Age: 20
’’
Student at
Arizona State
University

On STUDENT DISCOUNTS:
Top Uses:
Movies & The Apple Store

most important of all, it must be measurable. If a merchant can’t track the Thoughts:
success of the program, they will never know if they are offering the right “I love student discounts…
discount at the right locations at the right time. The key is to get into the
transaction. wish there were more of them.
The next generation of student discounts
It’s always a nice surprise when
I am out and see someone
At Edhance, we are building a no-fuzz merchant-funded rewards program
for college students by seamlessly processing discounts behind the scenes.
is offering a special price
Edhance is free to join for students and completely pay-for-performance for because I am a student. Makes
merchants. All members are actually students and all participating merchants
deliver real value. me feel better about what I
am spending to know they are
We have direct relationships with universities and colleges that allow us
to verify enrollment and market to students on-campus. Students register thinking of me.”
their credit or debit cards with us, and through integration with payment
processors, we get visibility into their transactions with our partners. From What Loyalty Marketers
there, we calculate the discount, charge it to the merchants and credit
it back to the students. Our partners get online access to a multitude of Need to Know or Better
reports, detailing which schools their customers are from, their average time Understand About Your
to graduation, which locations are most popular, and so on. Limited time
promotions can be customized and targeted towards specific store locations, Generation:
transaction amounts, or universities. No staff training is necessary, since
everything happens magically on the back end.
“We want everything to be
fast and easy. We don’t want
While many of us perhaps try to forget many of the things that happened
in college, the reality is that these few years are some of the most influential
to have to fill out forms or wait
times of our lives. Let’s learn from the best, the universities, and build lifetime for regular mail. We want…
brand loyalty through price differentiation. It’s a proven strategy that still gives
us a warm and fuzzy feeling every time we spot a rusty old car with our old or I want anyway, ‘Instant
school name in the window, decades after we graduate. That’s brand loyalty. L Gratification.’”

April 2009 | Loyalty Management 25


FEATURES

Is the “Customer
Insight Gap” Limiting
Your Loyalty Program ROI?
by Andy Cutler – Mercury

Most companies spend a lot of time and money figuring out how they want to configure their loyalty program. Should
it be points-based? Do we offer redemptions through partners? When should accrued-value expire? These are all critical
drivers of success when designing your program—and most companies do a good job in this area.

B ut once the program is up and running,


most companies miss a major opportunity to increase
program ROI. The problem is this: too much focus on program
who use up a lot of your marketing budget but don’t spend a lot
in return. And your poorest customers actually have a negative
ROI.
results and not enough on customer results.
While these customer truths are less severe within a loyalty
All loyalty programs track metrics such as total members, program (which naturally draws in your better customers), it is
number of active members, total liability, point redemption still the case that program ROI can be improved dramatically
rate, recruitment program performance, etc.—and these are by shifting your member recruitment focus from “getting the
critically important to understanding the health of the program. most customers” to “getting the best customers”. Remember:
However, they provide little insight into how to change the when your goal is to maximize the number of customers you
customer dynamics of the program to improve program ROI. bring in, you are inevitably going to bring in a large number of
customers who turn out to be unprofitable—and that will be
We call this the “Customer Insight Gap.” And it can only harmful to the ROI of your program.
be bridged by asking different questions from the ones you are
currently asking—and then using the answers to change how The first step towards making this shift is to fill the insight
you manage your loyalty marketing program. For example: gap on customer profitability within your loyalty program. A
bit of advice: don’t over complicate this. You are just trying to
differentiate between customers, not create a new accounting
Instead of Just Asking: Ask This:
process. Here’s the basic process:
How many customers are we Are we enrolling the right
enrolling? customers? 1. Estimate customer profitability by subtracting total
marketing costs from total revenue for each customer
What does customer migration
How many customers are active? (for the past 1 or 2 years, depending on purchase cycle)
look like?
Are we over-discounting to some 2. Pull out the most profitable customers (top 20%)
What is our current liability?
customers? 3. Perform a demographic profiling exercise (the off-the-
shelf cluster profiles like Prizm or PersonicX are good for
There are many more customer-centric questions we could this) to understand what your most profitable customers
ask, but let’s explore how just asking these three questions can look like and where they are coming from
help lead to better ROI for your loyalty program.
4. Modify your program recruitment targeting to focus on
Are We Enrolling the Right Customers? bringing in members who look like your most profitable
members
With apologies to Thomas Jefferson and the Declaration of
Independence, the truth is: not all customers are created equal. If you need to convince yourself (or management) that this
will be worth it, here’s a tip: once you have your customers
Most companies are aware of the 80/20 rule (80% of your ranked by profitability (Step 1), calculate the change in ROI
revenue is generated by 20% of your customers). But did you you will achieve by increasing the number of most profitable
know that the top 20% of your customers typically generate customers by 10% and decreasing the number of least profitable
more than 100% of your profits? This means that your best customers by 10%. It will surprise you.
customers actually subsidize your weakest customers—the ones

26 April 2009 | Loyalty Management


“Did you know that the top 20% of your customers typically
generate more than 100% of your profits? This means that your
best customers actually subsidize your weakest customers.”

What Does Customer Migration Look Like? Are We Over-Discounting


to Some Customers?
Loyalty programs are primarily designed to concentrate
spending (share of wallet) and lengthen the customer In an effort to keep loyalty program customers coming back,
relationship (retention). On average, most of them are many companies use discount offers and coupons in all (or
successful at achieving these goals to some degree. nearly all) customer communications. On average (there it is
again!) it is an effective strategy that drives traffic and purchases.
Then again, on average most loyalty program results are, well,
average. But what else would you expect when objectives are set But there is a price to be paid even beyond the cost of
and results are measured to the average? the discount itself, because by constantly discounting you
are training your customers to look for and wait for deals—
This is what we call the Mercury Law of Averages: if you reducing the likelihood that they will buy at full price. What
define success in terms of average performance targets—“on is even more painful is that companies almost always have the
average, we want to bring in XX,XXX members per month and feeling that they are over-discounting, but they don’t know how
have them spend $YYY per year” for Z years”– you are very to break the cycle.
likely to achieve average performance.
There is a way out of the discount trap. First, we need to
Breaking out of this “Average” trap requires the same basic recognize that not all customers are equal when it comes to
strategy (discussed above) in enrolling better customers: sensitivity to discount offers. Some are impulse buyers willing
understand the differences between customers and then use that to pay full price; some are “coupon clippers” who won’t buy
insight to develop customer strategies based on where they are anything at full price but will buy something they don’t need
in the lifecycle and their potential value. Once you have done if it’s on sale (great target audience for clearing merchandise);
this segmentation, you can begin to track how customers are some are in between. The key is to understand the differences
moving from one segment to another over time. between customers (sound familiar?) and then use that insight
to vary to offers based on how sensitive they are to discounts.
For example, here is a simple customer migration report that
shows how customers are shifting from segment to segment A simple way to differentiate is to look at the percentage of
over time: total items purchased at a discount for each customer. Another

Here’s how to read this chart: of those customers who way is to evaluate responsiveness to communications with a
were in the Very High value group in 2007, 50% stayed in discount vs. those without. Once you have done this, you can
the Very High group in 2008, 23% slipped to High, 13% experiment with replacing discount offers with more relevant
fell to Medium, etc. Conversely, 15% moved from High to product (full price) offers for those customers who appear to be
Very High. less sensitive to discounts. Over time you will find out the right
mix of discount and non-discount oriented communications—
The percentages provide focus as to where the largest shifts and your ROI will be the better for it.
are in terms of the number of customers, but overlaying revenue
onto this chart (average annual revenue by segment) will reveal Realizing the untapped potential of your loyalty program
where the large ROI opportunities lie. starts with asking questions that go beyond the traditional
measures—questions that lead to increased customer insight
For this client, the most obvious place to start was with once you have answered them. These insights will enable you
customers who lapsed in 2008. In total, this group represented to make key changes to your program that in turn drive your
over $130 million in potential revenue that was not realized. ROI higher. L
This information could possibly lead to the development of a
new retention strategy or a lapse/recapture program.

April 2009 | Loyalty Management 27


FEATURES

What Consumers Really Want


Learning Lessons from
Turning Loyalty into Community
by Justin Barrie – Perkler

The loyalty industry is engaged in a constant discussion about how


to improve and get increased benefit from programs. About two years ago,
Perkler took a different track and embarked on analyzing and rebuilding the
loyalty program dynamic from a consumer experience perspective.

T he hypothesis was (and is) that consumers are


disengaged from their loyalty memberships because they
are overwhelmed by the enormous number of relationships they
being part of an inclusive loyalty market. It has happened
with books and music and it’s time for loyalty to get all of the
programs, offers and communication points in one consumer
must support in order to be aware of what they are entitled to. focused place. Make this place a research tool for learning
about programs, brands and perks, and you can then interact
So what have we found by taking a consumer experience with the consumer when they are actually looking to find
perspective? out about you—not when you think they should be sent a
communication.
The reality of loyalty is that THEY own the
This is confronting as different programs worry that their
relationship—be inclusive not reclusive
offer isn’t as good—but no one ever improved by staying away
from a market. Brands need to jump in and play.
More and more the consumer owns the relationship with
the brand rather than the other way around. In reality this is
what has been happening in loyalty (and shopping) for years. Changing from ‘loyalty’ to
Households hold multiple memberships, utilise different ‘Entitlement Shopping’
programs at different times and happily engage with their entire
Loyalty Portfolio. The term loyalty has taken a beating in recent history.
Rightly or wrongly, from Frequent Flyer programs to small
Deep down, even program owners with a wealth of data on retail offerings, the perceived value of the loyalty program
what their members do within their program long to know the currency has reduced significantly as consumers question both
truth about that member’s activity OUTSIDE of their program. the economics and availability of the perks they have been
working hard to earn.
Brands may be top of mind in a particular segment, but they
never completely own the heart and mind of the consumer— The risk is that in order to re-engage with consumers, brands
particularly at the point of sale. This is particularly true in the feel the need to drastically increase the offer—getting caught in
current economic environment. essentially a price slashing exercise via their loyalty program.

While the current focus is on the need to have tools and Instead of being caught in this cycle brands have another
campaigns that differentiate one program from another, a option. Turn loyalty into entitlement shopping. At a time when
culture of ‘winning the consumer and bringing them home’ consumers are universally looking for any advantage to making
seems to have developed. This is played out by dragging the their purchasing more economic, why isn’t the loyalty industry
consumer to a brand’s own collateral only, interacting with positioning it’s perks as a standard and immediate entitlement
specific offers and messages direct to the consumer. In short that enables the consumer to have greater purchasing
attempting to silo them into a direct relationship. power. Imagine a time when retail prices are attached to an
Entitlement Price! Linking the outcomes of the loyalty program
If loyalty is to evolve, at least some of the energy put into deeply with the purchasing process is a great way of describing
communicating directly with consumers should be put into the inherent value of a program.

28 April 2009 | Loyalty Management


“You can interact
with the consumer
when they are actually
looking to find out
about you.”

Allow the consumer to ‘pull’ On a mobile level, pull technology is essential. People make
significant purchasing decisions on the spot. By enlisting a tool
Everything we have seen and heard from consumers tells us like a Smartphone application, you can allow consumers to search
that they are overwhelmed by the loyalty industry. Multiple offers, their entitlements right at the point of purchase. Capturing them
non-stop communication from tens of retailers and programs, but allowing them to dictate when and how they were contacted.
different styles of websites and other channels can lead to a The Perkler iPhone application customizes the consumer
disengaged and passive audience. experience across hundreds of loyalty programs to facilitate this
right now.
Certainly the industry research on active memberships as
opposed to actual memberships in US households seems to Engaging with social media is the last plank in the information,
support this. mobility, engagement cycle that we have identified as crucial.
Taking part in Twitter conversations, monitoring blogs and
Rather than trying harder to ‘get the message through’ to linking into niche communities such as Perkler and other
consumers, we’ve learned that allowing them to seek answers shopping and flight communities isn’t a necessary evil, it is
when they want it is essential to building trust in the sector. It just necessary. By engaging with the community a range of
also allows for a lower cost if programs have data available and the quantitative data can be accessed and true brand and program
consumers choose when to interact with it. value gauged.

The potential tools to enable this are varied and exciting. In lots of ways we haven’t learned anything new. Consumers
Perkler has done this in a web platform by building an ability to move about between brands, they define themselves by a brand
build and search across a virtual wallet. This enables consumers but purchase at others, and they are passive within the loyalty
to search their entire portfolio when they want to based on program market. What is new are the tools and approaches that
likes, purchases and location. For programs, they get to see what will allow programs to engage within the purchasing process
members are searching inside and outside of their own program so that loyalty drives the purchasing decision and isn’t a passive
(the great missing link from the inclusive/reclusive debate). bystander. L

April 2009 | Loyalty Management 29


FEATURES

The
Retention
Imperative
by Tom J. Salutz & John Dawson – DataCo

*Abridged Version. To read the complete article with detailed


study analysis visit Loyalty360.org

EXPO WORKSHOP PART 1: PREPRATORY READING!


Sign up now for Loyalty Expo Workshop Sessions held Sunday, May 31st.
Join Tom and John from DataCo for phase two of “The Retention Imperative”
as they workshop an in depth conversation on Pre-emptive Retention.

Acquisition programs perform better when teamed with


pre-emptive retention programs because stabilizing your
customer base is absolutely required in order to grow it.

C
hurn has become the major issue for many The key to maintaining margin and successfully addressing
businesses in today’s economy, and it may threaten their churn is pre-emptive retention. Most retention programs do not
existence if they panic and lose sight of some key drivers address the person who is about to leave, and most acquisition
to address it. Unfortunately, as budgets get stretched, shortcuts programs are structurally too inefficient to economically deliver
get taken, and desperation takes residence in the Marketing the new customers the business needs to survive. When you
Department, the chance of a miscalculation increases dramatically address both the need for more new customers and can slow
down attrition rates without destroying your margin, we have
Recent work on the relative efficiencies of using pre-emptive found that you have the elements required to stabilize and grow
retention programs versus acquisition programs to stabilize your customer base.
customer populations has led us to a counter-intuitive conclusion.
It is not just: the convergence of growing recession forces, general The analogy we like to use is a bucket. Probably because when
consumer dissatisfaction, and the failure of programs designed to I was a lad, my father told me that one of the ‘truths of life’ was
hold on to customers, which forces marketers to measure, test, that no matter how small a hole in a bucket is, the water would
and evaluate their acquisition techniques before they commit still eventually run out. By the same token, most people realize
shrinking budgets to them. It is the need to avoid miscalculations that if you are losing customers—even at a very slow rate—you
that can destroy a business. Our current modeling makes it clear will eventually be out of business if they aren’t replaced. But in
that acquisition programs alone are not the best or even most a highly competitive world; in a world of commodity products
efficient way to stabilize your customer base. In fact, they must and pricing; in a world of fluid consumers with almost no barrier
be teamed with pre-emptive retention efforts to offset the costly to movement; and in a world which is increasingly uncertain
inefficiencies of most acquisition programs. By the same token, economically; the problem that most marketers face is that, the
ill-conceived or margin-destroying retention programs, applied hole in the bucket is actually quite large. Facing double digit
preemptively, can start a tail spin that is hard to pull out of. churn rates, the task of maintaining or growing your business by

30 April 2009 | Loyalty Management


simply filling the bucket through acquisition alone will
prove nearly impossible. So it is time to take a deep
breath and begin to work smarter.

Our goal for analytics in this situation is to try to


determine the most efficient way to handle this churn.
Do you focus on putting more water in the bucket or
fixing the hole? In other words, how do each of the
tactics—acquiring more customers or retaining the
ones you have—compare on effectiveness. Can any
one technique—in and of itself—solve the problem?
Can moving budgets around help? If not, what is the
best approach to take?

Analytics can provide the guidance you need to


evaluate the consequences before you execute your
plan. Just as testing usually provides unexpected
insights into the best solution for a particular problem you
To set the stage,
are investigating, trying to determine the efficiencies of
our Base Case company:
various approaches to the problem of ‘churn’ has once again
A continuity-model company ended last year with 1.5
led us to a surprising conclusion. Going in to this project, we
million paying members. In 2009, they are going to lose
fundamentally felt that acquisition, attrition and retention
271,283 of those subscribers in spite of their best efforts. By
were all related in a functional way. It just was not clear how,
spending $50 million the company will be able to add 201,449
until now.
new customers in 2009, but it will end the year with a net loss
of 69,949 customers. Five years later—when 2013 comes to
Our Base Case an end—they will be losing another 273,932 customers a year.
And in spite of their spending growing to $83 million to add
248,261 new customers in that year, they will finish 2013 with
In order to analyze the effect of one approach or another on
a little over 1.262 million customers. The cumulative loss of
the churn problem, we had to build a Base Case model that
those customers over five years means that the annual revenue
simulates the situation these companies find themselves in. The
for our Base Case company will have fallen by $120 million.
model is actually a composite of any number of similar clients
we have worked with over the years, and will realistically reflect
changes in the variables we are testing.

In our Base Case, as in many continuity businesses, the “Acquisition programs alone
length of time that the customer has been with the company
is a critical indicator of likelihood to churn, and, that value are not the best or even most
changes over time. Consequently, to make the model sensitive
to a significant predictor like ‘years as a customer,’ we actually efficient way to stabilize your
age the entire 1.5 million hypothetical customers in our Base
Case to reflect a typical customer mix. customer base.”
Consequently, the model is going to act upon attrition
patterns and performance in the same way we would see it
Given their own dismal projections, we can imagine that
with a client.
the Base Case company’s Marketing Department would be
actively pursuing a better way to handle their residual attrition.
We have set the Base Case, and the scenarios we will test,
So here is what they are going to look at through the following
to run over a five year period. This will demonstrate the affect
scenarios to better handle their churn. First, they will compare
the scenarios make on the model dynamically, and allow us to
two diametrically opposed scenarios, in an effort to answer the
create a more realistic idea of what is happening over time.
burning questions of:
Creating any model relies on making assumptions. In order
“Am I better off by continuing to focus on acquisition and
not to be overly distracted by that caveat, we have included a
pouring even more money into that tactic/program,
graph titled ‘Annual Attrition Rate by Year a Customer,’ which
is our decay curve. That curve affects the performance of the
or
scenarios we are running against our Base Case. Consequently,
the model is predictive against the real world companies that
Am I better served by starting a pre-emptive retention
this curve reflects, and is derived from actual experience, not a
program to retain customers who are getting ready to bolt?”
Ouija board.

(continued on next page)

April 2009 | Loyalty Management 31


The Retention Imperative (continued)

Summary of findings
Let’s take a look at how the two scenarios affect
the Base Case model, and then try to see if there
is way to improve the performance by combining
the different tactics.
Scenario 1 Scenario 2
Rely solely on Implement a Pre-emptive Retention
increased acquisition spending Program on top of the Base model

R amping up acquisition spending is probably


the one strategy that most Marketing Departments
would attempt without even bothering to model it. And we
J ust as turning up the acquisition efforts in
Scenario 1 intuitively seems like the best approach to grow
your customer base, any kind of retention effort – especially
confess that we thought we could get the growth we wanted one put against existing customers—might just as casually be
by just throwing everything we had at the problem. However, dismissed. Intuitively you know that a retention program isn’t
if you increase the acquisition effort significantly, the first a very effective way to build up a customer base. However, this
problem you will face is the decreasing acquisition efficiency. approach is actually extremely efficient and outperforms the
Consequently, you will end up spending more money and acquisition program in a couple of important ways once you
getting relatively fewer customers! If your product is regulated scrutinize it with predictive analytics.
or if your market is small or finite the problem can become
insurmountable. You will eventually run out of prospective new By retention efforts we are not talking about pre-emptively
customers at any price cutting your prices, ramping up your existing loyalty program’s
benefit structure, or dumping more money into the win-back
Since the highest attrition rates in your customer base come or re-capture effort. None of which would significantly address
with the newest customers you add, you are ultimately diluting the immediate attrition problem. Rather, we would recommend
your customer base by putting these expensive, uncommitted, that you build value with the customers who have the highest
and churn-prone customers in to the mix. If you are being likelihood of leaving. Consequently, you are spending your
measured on ‘bodies in,’ then the results may look good in the marketing dollars directly against the attrition problem, rather
short run. If you are being measured on the ability to develop a than casting a wider and wider net with the hope of finding a
sustainable revenue stream out of them, the results should not better prospect!
be surprising. The good news is that these customers eventually
become longer-tenured customers, and hence more stable. The There are two reasons why this approach performs better
question is whether you can afford the cost and time. than you might expect. First, part of the effort is being directed
against longer tenured customers. So by adding value to the
customer relationship and increasing their inertia to stay put –
you get better gains from a statistically more stable customer.

“We would recommend Second, slowing down the attrition of the newer customers
you have acquired has a significant effect on their lifetime

that you build value value in the model. Consequently, reducing the attrition rate
of this customer can have significant revenue impact even if

with the customers your overall churn rate reduction appears to be modest. Saving
a more stable customer for several dollars a month, instead of

who have the highest acquiring an unstable one for hundreds per individual turns out
to be a more efficient tactic. Think of it as the process by which

likelihood of leaving.” you transition churn-prone customers in to longer-tenure


customers and you will understand why this scenario drives
healthy revenue growth.

32 April 2009 | Loyalty Management


Scenario 3
Move some money from the Acquisition The Retention
Program to the Retention Program
Imperative
T o make it a little more interesting, the proposition we
decided to test was two-fold. First, decrease the marketing
budget in the Base Case by 10%; figuring that many Marketing L ike any business, the Base Case company can wait
and see if the model becomes reality in 5 years, or if they
Departments could be seeing those reductions or more, and can do something about it now. Clearly their present marketing
then we wanted to re-allocate the budget—without relying on effort will not get the job done, and so they have decided to
the model—to test and gauge any performance issues we might model several different strategies to fix the problem—aggressive
illuminate. acquisition marketing; aggressive pre-emptive retention
marketing; or a combination of the two.
Convinced that any pre-emptive retention effort funded
by existing acquisition budgets would improve the company’s When the scenarios were run out over the five year period, this
performance; the results surprised us! For what had seemed chart shows the summary of how each of them performed against
like a reasonably good idea – more retention requiring less the Base Case model. Most people would be surprised to find out
acquisition—we found that combining the two programs in that—from a revenue point of view—it is substantially better to
this way gave us the worst of both worlds rather than the best. retain customers [Scenario 2] than to add them [Scenario 1]:

Almost every indicator went south except the fact that the
model remained positive on net revenue. So while it actually Scenario Results Scenario 1 Scenario 2 Scenario 4
made some money we had to consider this approach to be a Comparison
failure.
Net Revenue after
Many people think that they can ‘prune’ their way out of $3,958,028,656 $4,124,482,644 $4,163,598,839
Marketing
this market, by surgically cutting back. However, in the light
of this scenario, we remain convinced that cutting expenses
Increase in Ending
for acquisition and retention in the current market will come 614,149 496,897 759,046
Customers
with significant consequences. Many that will turn up in the
out years. It is just as important to realize that indecision—and
compromise based on cutting-the-baby-in-half—is not a Increase in New 419,341 -1,250 160,382
strategy that will serve your company well. Marketers who Customers
want to do more than weather the times and challenges we face
will need to test, analyze, make an informed directional choice Increase in Attrition 241,405 -151,667 -67,296
and then fund the strategy to the level it needs to be effective.
Anything less is a prescription for failure. Half-way measures Increase in Revenue $335,746,844 $267,958,735 $410,415,977
may be worse than none at all
Increase in $280,875,149 $46,633,052 $149,974,100
Marketing Cost
“Cutting expenses for acquisition and
retention in the current market will Increase in New
Customer Cost $280,731,708 $599,400 $102,498,312
come with significant consequences.”
Increase in Net $54,871,695 $221,325,683 $260,441,878
Revenue
Scenario 4
Match Pre-Emptive Retention With ROI of Incremental
Net Revenue as
New Customer Increases a Percent of 20% 475% 174%
Incremental

S ince analytics does work, we were able to Marketing


combine the programs to produce the best results we
had seen against the model. Remember, this time we let the
model help us determine the right mixture of the programs to While there are many factors, the main reason for these results
optimize our goals. Could it be tweaked further? Of course! But is that it is less expensive to incentivize a current ‘at risk’ customer
the improvement over the three earlier scenarios is significant in to stay—than it is to add a new customer to replace them, which
almost every way that we measure it! is why we call pre-emptive retention an imperative.

(continued on next page)

April 2009 | Loyalty Management 33


The Retention Imperative (continued)

I n the fourth scenario, with a combination of both aggressive acquisition and aggressive retention, the company will end 2013
with a customer base of a little over 1.491 MM customers, which has actually begun to grow. You can see that growth as a rise in the
top line of the graph [Scenario 4] comparing the ending customer numbers.

Acquisition efforts and costs were helped substantially by the lower cost retention program which also increased the lifetime value of
the customers, and required fewer new customers be added to the base. In effect you can have your cake and eat it too—with an approach
that has low costs, high revenue, and still ends with more new customers. Significantly, the same approach without regard to the model
[Scenario 3] turns in the worst performance of the four scenarios and provides only a negligible improvement to the Base Case.

In Conclusion…

As we said earlier, the particulars of any business can be quite different, but the universal lesson that this exercise demonstrates is
that prudence requires marketers to always model and test their assumptions about customer growth and the interplay of acquisition,
attrition, and retention dynamics. It is far too easy to make decisions based on faulty intuition and assumptions that could prove to be
tragically wrong.

The most important conclusion you can draw from this analysis is that a pro-active retention program is an imperative. If you could
only pursue one tactic, then retention is clearly it. Contrary to your intuition, the models demonstrate that retaining your existing
customers performs almost as well—from a revenue point of view—as aggressively acquiring new ones. The difference is that with a
retention approach your risk is lowered, your costs are lowered, and consequently you keep substantially more of what you make.

Our message for the bold leaders who actually want their companies to grow in this environment is: a tactical strategy is available to
you. Integrate a pro-active retention program with an effective acquisition strategy. Use analytics to help you achieve the balance you
need between those efforts, and you will keep more customers longer, and grow a larger customer base by adding fewer new ones. It has
never been more important to analyze, understand, reward, and retain. You will benefit from the efficiencies you will be able to achieve.

Growing your business with lower costs and higher margins is a strategy that works in any economic climate.

Footnotes:
[1]Teleconference: The Science of Churn, Sally M. Cohen, Analyst, Forrester Research PowerPoint, March 4, 2009
http://www.forrester.com/rb/teleconference/science_of_churn/q/id/5474/t/1
[2]T-Mobile Aims To Keep Subscribers with a $50 Plan, by Frederick Lane, http://www.newsfactor.com, February 19, 2009 3:09PM
[3]Deep Discounts During the Recession Can Damage Brands, New Yankelovich Study Finds, PRNewswire, Chapel Hill,
NC, March 11, 2009 http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/03-11-
2009/0004986557&EDATE=

34 April 2009 | Loyalty Management


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Contact us for a demo of our web based Loyalty Dashboard at 800-416-2090x12
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399 Knollwood Road White Plains, NY 10603 April 2009 | Loyalty Management 35
www.incentivegroup.com
TRENDS & REWARDS

The Five Forces of


Social Strategy
by Karen L. Webster – Market Platform Dynamics

The concept of social networking as a platform for engaging


a community is clearly not new. In fact, it’s been a staple
of interaction for as long as there have been more than two
people on earth. What is new is the role of technology in
facilitating the development of virtual social platforms that
extend the reach, power and potential of community.
Me-driven

T
his article provides a new way of evaluating
the critical components of a successful social strategy
and offers a “five forces” framework for turning these
networks into net revenue. These five major forces—me-driven,
peer-driven, trust-driven, time-driven and cause-driven—will Cause-driven Peer-driven
shape the development of social strategy for years to come.
Understanding and then managing these five interdependent
influences will help to anchor the development of an effective
social strategy.

Me-Driven
Time-driven Trust-driven
People often use social networks for voyeuristic reasons. Once a
presence is established, they often find sub-groups of people who
work in the same place, went to the same school, like the same
F igure 1
causes, follow the same music, read the same books, among many
other things. But, no matter what the age nor the reason they join MPD’s Five Forces of Social Strategytm
and then visit, users are in control of who they are friends with,
who they interact with, what conversations they want to join, and
what information they want displayed. Creating a community on friends, friends of friends, co-workers, old classmates or whether
the user’s terms. they are simply there to make new connections, it is one’s peers
that drive users to stay connected within their social networks.
Building communities, therefore, is about the community, first, It is also those peer-driven interactions that increasingly drive
and not about the advertiser. Advertisers have to be invited in; decisions about everything from movies to merchants. Peer-to-
and will only be invited if their offer strengthens the relationships peer word of mouth has always been a highly valued source of
among the friends in that network. Pull, not push, is the name of credible, dependable information, and social networks make those
the game. interactions more efficient and more visible.

Peer-Driven For marketers, it is critical to understand that connections


with peers—even those with several degrees of separation—are
People join social networks because they want to be part of stronger than connections with advertisers. Knowing who has
a connected community. If enough people (or enough relevant the influence in a social network (not always the person with
people to the member) are not part of the community, users the most friends, but with the most relevant friends and valued
won’t join. Whether social network members mainly interact with interaction) is also important.

36 April 2009 | Loyalty Management


“Peer-to-peer word of mouth has
always been a highly valued
source of credible, dependable
information, and social networks
make those interactions more
efficient and more visible. ”
Trust-Driven Cause-Driven
Social networks blur the line between what is public and Social networks have become platforms for advancing social
what is private. Members quite willingly disclose quite a bit of change—formally and informally.
information about their careers, education, interests, hobbies, and
even their political and religious preferences. Trust is obviously The definition of cause, however, has extended beyond the
essential in garnering an audience on a social platform because charitable. A cause is now increasingly defined as a “passion”
users who don’t trust the viability of their network or its members for a particular idea, concept, political party, or current event
will not frequent the sites or find value in it. that mobilizes people to take action. One recent example is
how quickly the “cause” launched to show appreciation for
Social networks are viewed as an efficient way to reduce Captain Sully Sullenberger, the US Air pilot who safely landed
customer acquisition costs and to create a loyal group of in the Hudson River in January of 2009 appeared and garnered
evangelists. Brands must earn the trust of the network before thousands of members.
they can earn a sale from its members. One of the most powerful
ways that some brands have earned trust is by inviting comments For marketers, the trick to making cause-driven work is
and then acting in good faith upon the suggestions that the to engage fans and not just attract them to your fan page or
network provides. Others earn trust by introducing offers that application. It is costless to become a fan, download a badge
strengthen the relationships that already exist on the network. or send the little green patch to your friends. But, getting the
Commercial intrusions won’t get you very far, but forging a community to really engage is much more difficult. The interest
trusted relationship with each member can. from the brands must be viewed by the community as genuine
and credible and aligned with existing behaviors of both the
brand and the community. And, it has to clearly add value to the
community at large and the individuals who comprise it.
“One of the most powerful ways that some brands
have earned trust is by inviting comments and Making the Five Forces Work
then acting in good faith upon the suggestions for Your Brand
that the network provides.” Good marketing has always been about building a relationship
with the customer. In many ways, social networks as marketing
channels is the opportunity that marketers have been dreaming of
for decades: an opportunity to access a ready-made community
Time-Driven of people who are open about who they are and what they like,
and who—unprompted—share those likes and dislikes with the
Online, the typical Internet user belongs to at least two social members of their network.
networks. The time trade-offs that people make between different
social networks is a function of the types of interactions they But it’s precisely this aspect of social networks that give it a
wish to have, their needs at specific times, and their interests. very sharp edge. As marketers, social networks aren’t yours to
For example, an individual who may manage his social life and control. And neither is your message. The network will decide
related interactions on Facebook every day, maybe used to log in how they view you and what they say about you. Ceding
to LinkedIn about once a month but now does so daily due to the control is necessary to building the credibility and proving the
current economic crisis and heightened interest in professional authenticity that are so critical to being “friended” by these strong
networking. communities.

Breaking through the clutter and into the community requires Marketers must keep in mind that these communities are
that you demonstrate how your offer strengthens and efficiently already vibrant ecosystems who haven’t invited you in and who
enables the interactions with those within the community. will ignore you—or worse - if you barge in uninvited. Earning
Competing for time and attention means that relevance is now their trust and building relationships must come before the sales
the name of the game. Users need a return on the investment pitch. Heed that advice, and you’ll find that in the end that both
of the time they spend on these networks in the same way that your company and your bottom line will be “friended” by them
marketers need ROI on their marketing dollars. even more. L

April 2009 | Loyalty Management 37


TRENDS & REWARDS

Mobile Loyalty & Rewards


Keep it simple. Get in now.
by Drew Dahms – Mobile Marketing Consultant

Everyone leaves the house in the morning with their cars keys, wallet/
purse and cell phone or mobile device. Leave any one of those behind
and you’re off balance the entire day.

T he fact is, the mobile phone has become the most


immediate and personal way to connect with people, no
matter where they roam.
WHY MOBILE?
It’s Permission Based. Like other rewards programs, you
invite customers to join and become a member of your mobile
Text messaging, also known as SMS (short message service) VIP Club. And it’s FREE to them (standard text rates do apply
is imbued with a sense of immediacy. Mobile phones are with depending on what their mobile plan). They opt-in once and
most people almost 24 hours a day. This gives it a sense of that’s it. Nothing complicated here. And they can opt-out
intimate, personalized communication—“the message is right anytime. But why would they if you are creating value and
there in my pocket”. And people actually read all of their text giving them what they want?
messages.
It’s Personal. Mobile provides marketers the opportunity to
The cost of mobile marketing is shrinking. For one thing, build a more personal relationship with their core customers.
turnkey platforms absorb many of the costs associated with Text messaging communication is 1-to-1 is ubiquitous and
certain aspects of SMS marketing. Secondly, SMS costs about directly engages the customer more than other channels.
$0.07 per message, down from$0.15 just a few years ago, with
even bigger discounts being applied for bulk purchases. It Engages. Read rates for text messages are upwards of
95%. When you get a text message, you read it and are therefore
Marketers now have the opportunity to tap build a new kind engage yourself in whatever that message is. Mobile can also
of relationship with their customers thru mobile. That time is provide a more fun, interactive experience for your customer
now. Looks at these statistics: with contests, voting polls and links to mobile sites.

n Within the next four years, over half of the top 50 brands Creates Dialogue. Send regular and time sensitive alerts
in North America (52%) expect to spend between 5-25% about events, special offers, coupons, discounts to their mobile
of their overall budgets on mobile marketing efforts. Of phones. Your customers want to hear from you about special
these brands, more than 40% have already invested in text offerings. This makes them feel valued and rewarded.
messaging campaigns, still the most popular mobile service
to date. Creates Loyalty. And when your customer feels valued and
rewarded, they become loyal. You have now developed a unique
n According to research firm eMarketer, the U.S. mobile- bond with them through their mobile phone. It may sound
advertising industry is expected to balloon from $421 corny, but isn’t this what you trying to already do through other
million in 2006 to $4.7 billion—and to $11.3 billion channels?
worldwide—by 2011.
Low-cost. Today all small businesses can easily afford to get
n By 2010, mobile phone subscribers will climb to 75% of into mobile campaigns and compete with the big dogs. Like I
the US population or approximately 236 million users, mentioned earlier, turnkey platforms absorb many of the costs
according to The Diffusion Group. associated with certain aspects of SMS marketing. SMS costs
about $0.07 per message, down from$0.15 just a few years ago,
n About 63% of Americans from age’s 18 to 27 text message, with even bigger discounts being applied for bulk purchases.
according to a Pew Internet & American Life Project survey
out in March. Those teens are bringing texting to their It’s Brand Building. Mobile Loyalty will build your brand
parents - or are moving into the workforce and texting with in the eyes of the customer and portray your business as being
older colleagues. Now 31% of cell phone owners ages 28 at the forefront using technology for their benefit and reward.
to 39 use text, and 18% of those 40 to 49 do, Pew reports. It also offers a bit of the “cool” factor which isn’t a bad thing,
Any of your customers in here? especially to customers under the age of 35.

38 April 2009 | Loyalty Management


“Read rates
for text
messages
are upwards
of 95%.”

GET STARTED
The key message here is to keep is simple. Run a simple text messaging (SMS) campaign the first time. Almost every mobile
device can send/receive texts and everybody understands how it works.

Customers like deals. Offer something of value to get customers to opt-in and join your VIP Club. Make them feel they are getting something
special and unique that no one else is getting. That’s why we can them VIP Clubs! You know best what sort of special offers will appeal to your
audience. Many customers spend more at your business because they are a part of a loyalty program vs. customers who are not.

SET REALISTIC GOALS


Have modest expectations on your first few mobile campaigns. Run a test campaign. Remember it will be a new experience for
both you and your customers. But trust me, they will notice. Offer a great reward for opting in the first time, a coupon, discount,
special offer. The goal here is to build and grow your opt-in for future promotions. Get everybody talking about it and cross promote
with your other media (if you’re running them). Pump it up at the store level with your employees.

Results can be easily measured and tracked. At the end of the campaign, you will have a valuable list of loyal customers you can stay
connected with and who want to hear from you. That’s why they opted-in.

YOUR CUSTOMERS ARE READY!


Don’t underestimate your customers’ readiness to join a Mobile Loyalty Program. They are more tech savvy than you may
think. You may know people who don’t text or believe it’s evil.

Some people still think e-mail is evil but that didn’t’ stop marketers from building email clubs, newsletters and e-coupons. Don’t let
the nay-sayers or over analyzers stop you.

This year big brands, agencies, marketers and business owners will be dipping their toes into new waters of mobile SMS campaigns to build
loyalty. They already are researching the possibilities, compiling data, determining metrics and figuring ROIs. That’s good. They should.

But as with all things new, the early adopters are the ones that will win. At some point, they realize the time to jump in is now
before the other guy does. Others will sit on the sidelines and wait see what happens with the industry. They call that research.
Unfortunately, we live in a “speed is life” sort of world and if you wait too long, then it’s too late. Assume your competitors are days
away from launching their own mobile campaign. And when that happens, they are going to capture your customers first and never
let them go! You can be like Nike and “just do it” or you wait until everybody else is in and you are fighting for the scraps. L

April 2009 | Loyalty Management 39


TRENDS & REWARDS

An Integrated Approach
As marketers seek to incorporate new technologies,
economic factors require tactics that build loyalty,
guarantee ROI and motivates purchases
by Constance Baker – edōInteractive

As the economy continues to take unanticipated turns, consumers are looking for new
ways to economize. Studies show that, more than ever, consumers are not embarrassed
to use coupons as they have been in the past and are seeking such incentives. In October
2008 the fastest growing website category was online coupon sites beating out other
retail sites such as apparel and jewelry. This emerging trend is providing many businesses
an excellent opportunity to market smartly under these conditions.

I n recent polls, 54 percent of adults will reduce


discretionary spending, and 63 percent said they would not
make a purchase if a “deal” were not offered. At a time when
as training store employees and installing software can make this
option costly and time consuming as well.

consumers are looking for these deals, marketers are finding One newcomer, that feels they are integrating many of these
innovative ways to reach targeted consumers and motivate their approaches (integrating the parts that work while streamlining
purchases. the more tedious parts), is a Nashville based start-up called edō
Interactive. In 2007, edō launched the edō Marketing Platform
However, the traditional coupon process can be lengthy and (EMP) which is a marketing channel that provides the ability to
expensive, inhibiting ROI for both manufactures and retailers. load electronic coupons, called Prewards®, directly onto selected
While consumers are most accustomed to using paper coupons prepaid debit cards while utilizing email, text, and behavioral
there are limitations for the consumer - cutting, carrying and marketing to give advertisers an integrated way to reach targeted
expiration of coupons—as well as for the retailer—inability to audiences and motivate purchases.
target specific deals and gain valuable behavioral information
about the customer. According to the company and several restaurants and
retailers that have utilized the EMP, it guarantees advertisers
ROI which can be monitored online in real time—not exactly
since it is not self-service. By using the EMP, advertisers are
edōInteractive will be speaking at the Loyalty able to use valuable data allowing them to further refine future
“campaigns” as well as other ongoing marketing efforts they
Expo 2009. Join their session and learn more plan to undertake.
about the edōInteractive Marketing Platform!
Simply put, the EMP can be used to drive incentive purchases
and loyalty in a number of ways. The most common campaign
utilizes Prewards. When an advertiser conducts a Preward
Online and promotional codes are proving popular with campaign, they begin by setting the demographic parameters
consumers because of the relative ease to enter the code at point of the customers they are seeking to reach (i.e. males and
of sale. Coupon or promotional codes also present their own set females between the ages of 25 and 34 in the ten zip codes
of limitations including the potential for fraud and unintended near a business location). Next, the advertiser will determine
viral spreading of the codes, which can limit the targeting the incentive amount that will be offered to customers. The
capabilities. offer can be a specific dollar amount, a dollar off amount or a
percentage off amount. The advertiser also selects the duration
Additionally, mobile coupons are gaining traction and are of the offer and which locations or websites in which the offer
interesting to some marketers, but technological restraints such can be redeemed.

40 April 2009 | Loyalty Management


“Initial campaigns
using the EMP yielded
impressive results.”

“...thrilled to see a 15 percent


return rate when we carried out
a Preward campaign.”
O nce the advertiser has finalized these details,
customers in the demographic pool, who use the selected
prepaid debit card, will receive a notification of their Preward.
This notification takes place through an opt-in email or text
one percent return rate and other marketing tactics provide
alert. When customers accept the Preward, it is automatically
similar results. I was impressed when I conducted a Prewards
stored in a Prewards “purse” on their card. When the customer
campaign targeting high school seniors with an astonishing 17
makes a purchase, they use their card as they would when making
percent return rate. The edō Marketing Platform was easy to use
any other purchase. The Preward is automatically deducted from
with measurable results,” said Dan McDonald, owner of nine
their “purse” with any remaining balance deducted from their
Jersey Mike’s Subs.
card balance. The customer does not have to indicate they are
using a Preward, nor is the vendor required to take any special
Echoing the sentiment, Hothorn said he was “thrilled to
action. The process is the same as any other purchase using a
see a 15 percent return rate when we carried out a Preward
prepaid debit card.
campaign.”
“I found a seamless strategy that fit perfectly into my ongoing
Will the EMP be the integrated answer to many marketers
marketing efforts when I tried the edō Marketing Platform,”
growing demands? Time will tell as more partners in varying
said Colt Hothorn, owner of Which ‘Wich Superior Sandwich
sectors sign up to conduct Prewards campaigns including H&R
shop franchises in Nashville
Block, Baskin Robbins, Cloudveil.com and Moe’s Southwest
Grill to name a few.
Throughout the campaign, advertisers are able to obtain
valuable demographic and behavioral information such as
“Advertisers are utilizing the edō Marketing Platform and it’s
acceptance rate, redemption rate, dollar amount spent over
changing the way they view marketing campaigns forever,” said
redemption, how quickly a Preward is redeemed, whether the
Ed Braswell, edō interactive Chairman and CEO. “Businesses,
customer was targeted via email or text and many other data
especially in this economy, are scrutinizing and demanding more
points. Advertisers are able to use this information to tailor
from their advertising budgets. The edō Marketing Platform is
future Preward campaigns or use the data in other ongoing
a ground-breaking approach to measuring return on investment
marketing efforts.
which allows advertisers to see their money at work.” L
Initial campaigns using the EMP yielded impressive results.
“High school and college students are the most difficult
customers to reach in my business. Coupons yield less than a

April 2009 | Loyalty Management 41


TRENDS & REWARDS

Breaking
Through
the Clutter:
Building Loyalty
in a Digital World
by Mike Reynolds – Parago

O ver the years marketing has evolved from the four


Ps, (product, price, place and promotion,) into a broader
discussion of the benefits of retention and loyalty—amongst
customer comments) help to elevate Amazon in the consumer
consciousness.

customers, employees and channel partners. We are living in an Staples’ groundbreaking approach to paperless rebates
era of “everywhere advertising,” infinite choice and rapid-fire shows us how technological advancements can lead to positive
access to information. The convergence of capitalism and social post-purchase experiences, too. Years ago, who would have
dynamics has created the need to develop deeper connections in guessed that rebates could drive loyalty? Yet today, an innovative
order to achieve the new measurement of loyalty: brand affinity. paperless rebate solution directly supports the corporate brand
position and delivers brand affinity. Through technology
integration, fast rebate validation, enhanced fraud prevention
and efficient rebate delivery, customer surveys have shown an
Hear more at the Expo! Mike Reynolds will lead a discussion increase in brand affinity and stated intention for re-purchase.
about the need for innovation, choice of incentives and reward
mix to drive better ROI and long term participant loyalty. Technology integration has increased brand affinity in
the sales channel as well. Sales associates can now get fast,
automatic recognition of their efforts and rewards can be
Brand affinity refers to connecting with your constituents received in as little as 24 hours through electronic cash
in a way that turns them into brand ambassadors. They root disbursement on a reloadable prepaid debit card. Ongoing
for you, promote you and fiercely defend you. With every brand engagement happens through branding on the payment
communication they become deeper entrenched in their card, communication of rewards received, online and automated
commandment and affinity for your organization. Creating card balance information and visits to the incentive website.
this connection is critical to drive a consistently good customer As a result the sales associate can focus on selling and, because
experience and the strongest brand affinity. of a great experience, has a brand affinity that governs which
products or services get greater share of mind.
But with constituents overwhelmed with loyalty point
banks, key chain loyalty cards and coupons, how do you gain As technology continues to advance, so do the opportunities
brand affinity beyond a good product or service? One very for connecting with customers, employees and partners, and
powerful way is to create a technology-based reward system rewarding them in ways that are meaningful to them personally.
that recognizes and acknowledges loyal behaviors, simply and A new generation of employees and consumers has grown up
efficiently, without breaking the bank. during the “connected” age. Providing customized rewards is no
longer a blue sky idea due to advancements in technology and
Amazon.com’s approach to exceeding customer expectations communication mediums. Re-examining your audiences and
through its technology platform provides a good example. approaches, and maximizing technology-based loyalty initiatives
A great customer purchase experience with product to reach them is a cost-effective and powerful way to increase
recommendations and ease of use drives customer loyalty, your brand affinity. L
and the social media aspects of the site (product scoring and

42 April 2009 | Loyalty Management


April 2009 | Loyalty Management 43
TRENDS & REWARDS

Driver’s License—
The Many Uses Today—
Tomorrow Loyalty
by Brent Harms – IDLoyalty, LLC

Loyalty programs tied to plastic cards have existed for years. Some have their own
uniquely branded cards, others use credit cards. Both have challenges with participation.
The branded cards have to be carried and there is only so much room in a wallet.
The credit cards require that you qualify for credit and want to charge items instead
of paying cash. A new alternative eliminates both of these issues and makes loyalty
programs easier for members—use the card they already carry—the driver’s license.

Loyalty Applications Begin to Surface one of its loyalty partners, Tecmark, Inc.. Tecmark provides
the loyalty points engine for the program and another partner,
With this new customer identifier and the emerging group Posatech will be managing the program.
of companies that provide hardware and software tools that can
read the state licenses, new uses are surfacing for the license as the The use of the license in other existing and new loyalty
accurate, cost effective customer identifier for loyalty programs. programs is expected to grow rapidly over the next few years as
this new marketing technology approach can save businesses
Many casinos nationwide including MGM and Harrah’s up to 25% in the cost to run their program, and will increase
are using new technology to scan the license and use the data participation of the members by up to 25% or more since it
to enroll customers in their loyalty programs. The scanning will be easier to participate. They can use the card they already
captures the customer’s name, birth date and address information, carry – their driver’s license as an alternative ID for the marketing
eliminating the need for the customer to manually fill out a form program. Specific marketing analysis will be presented at the 2009
and/or the clerk to manually enter the information in the system. Loyalty Expo in May.
This has reduced errors, significantly shortened the process to
enroll in programs, and is saving the casinos a large amount
The Technology
of money in the operation of their customer management and
marketing programs. There are new emerging companies that provide the
technology, both software and hardware to scan and track the
license information. These firms provide the software to parse the
More to come! IDLoyalty will be presenting necessary data from the license into a usable format. They also
provide the hardware to scan and read the mag stripe and bar
relevant market research that addresses this codes; frequently one device that can read either.
opportunity at the Loyalty Expo 2009.
The bar code and magnetic stripe contain several data elements.
In most cases, the customer’s name, license number, address, city
Other companies are also introducing these new capabilities state and zip, and birth date are available after the data is scanned
such as the new convenience store loyalty marketing program and parsed. Each company pulls the information necessary for
launching in New York this year. Noco Express will use driver’s their solution such as birth date for age verification.
licenses to enroll new members in their Friends and Family
Program. In addition, the license can be used as an option instead Most state laws are evolving to limit the use of the scanned
of the loyalty card to redeem rewards and track store purchases. data to the specific purpose such as age verification or check
This capability and service is being launched by IDLoyalty and verification tracking. In many states, this information cannot be

44 April 2009 | Loyalty Management


HISTORY and USES
of the Driver’s License
The driver’s license is not new. They have been around since
1888 when the first driver’s license was issued to Karl Benz. On
August 1, 1910, New York had the first driver’s license law in the
US for chauffeurs only. In July of 1913, the state of New Jersey
became the first state to require all driver’s to pass a mandatory
examination before receiving a license.

After 9/11, there was significant government consideration given


toward the use of a national ID, with the final decision to enhance
and move the state driver’s license closer to a national ID. With
this, new standards were set and states began to add
more information, enable authorized tracking (by
decoding information stored in the bar code
or magnetic stripe) and enhancing security
features.

Many opportunities are emerging to utilize the


standardized data, enhanced security and ability
to extract data off of the state driver’s license. The
following are some of the many examples of how the
license is being used by private businesses to securely
identify and track consumers:

Check Verification: With the new ability to scan the license,


retailers such as Target have streamlined this process by simply
scanning the license with a bar code or magnetic stripe reader,
eliminating the need to manually copy the number. This eliminates
used for marketing unless the consumer has given permission the potential for errors as well as reducing time at the POS.
to participate with their license. Permission-based or “opt-in”
programs such as consumer loyalty marketing programs are Age Verification: Several states are now requiring proof of age
a great example of where the use of the license is secure and verification for all age-restricted purchases. This ability to scan
preferred by the member. and save the data for state reporting has helped businesses,
economically, stay in compliance.
What Next?
Airline Check-In: Many airlines, including Delta, offer the option
For loyalty marketing programs, the opportunity is huge to for the consumer to use a kiosk at the airport to check into their
make existing programs more effective from a cost and ROI flight. At the kiosk, they can scan their license to identify and pull
perspective; as well as increase program participation since up their flight information, eliminating the need for the consumer
members already carry their license. The speed of enrollment to carry their frequent flyer card.
enables companies to quickly connect with new members to
encourage the next visit. Another terrific opportunity is using Cold Medicine Purchases: Effective September 30, 2006, a federal
the driver’s license for new and existing coalition programs law was introduced stating that every single product containing
where several different businesses work together in one loyalty pseudoephedrine (PSE) cannot be purchased without capturing
program. Finally, the driver’s license may be the solution to driver’s license information. Many pharmacies are swiping or
make loyalty programs work for quick service restaurants scanning the license to accurately log the information they are
like Subway and McDonalds. The speed and accuracy of the
required to report to ensure accurate and effective compliance.
transaction will enable more businesses to establish effective
loyalty programs. Return Merchandise: Over 10,000 retail locations nationwide
are now using a service from Return Equation that allows them
The driver’s license will simplify and enhance participation
in loyalty programs. According to Colloquy “Sizing up the US
to track return merchandise to reduce fraud and abuse. If a
Loyalty Marketing Industry” April 2007, the average American consumer paid for an item with cash or does not have the receipt,
belongs to 12 loyalty programs, but is only active in 4 – 5 the retailer scans the customer’s license to identify and track the
programs. Would they be more active if they didn’t have to transaction. This gives them detailed history to identify excessive
remember their loyalty card? We believe that consumers will and fraudulent returns. They have recently added a loyalty element
appreciate the convenience. L to incent the cash returns to make a new purchase that same day.

April 2009 | Loyalty Management 45


TRENDS & REWARDS

One Time
Incentives
Do Drive
Engagement
by Dennis Propp – Propco Marketing

G rowth, in rewards-based cards, has


been substantial for years as issuers attract new customers
with even more flexible programs and promises of greater rewards
significantly improved the impact of the offering. For example,
one financial institution using bonus points to drive early
engagement tested their control of simply points by adding a
benefits. Growth is expected to continue and rewards programs bonus of a Companion Airline Ticket, (a two-free gift offer) and
are expected to be a mandatory part of any business. But, the for a third of their previous cost, saw a 45% lift in response (point
current economic and financial crisis may have a significant effect value was reduced). Similar results were shown with a client using
on the industry’s overall ability to grow as credit tightens and a control of 10,000 points after sign-up and first-purchase on a
charge-off rates increase. The pertinent questions are: can rewards rewards credit card. When they added the Companion Airline
programs continue to attract new customers and encourage Ticket as a bonus to the 10,000 points being rewarded, they saw a
spend, and will retention be the name of the game as businesses 50% lift on accounts both activated and making first purchase!
battle for wallet share?

“The bottom line is, we find that by using innovative instant


rewards, you can significantly impact the effectiveness of your
rewards programs and ultimately the customer experience.”
Innovative programs, compelling value propositions and new Customers expect more value than ever before. Currency has
strategies and tactics can help businesses to break thru barriers become the reward of choice, but the bottom line is, we find
of propagation. Industry leaders, and cutting-edge companies, that by using innovative instant rewards, you can significantly
recognize where they are in the life cycle and are moving to impact the effectiveness of your rewards programs and ultimately
reinvigorate their programs. By offering customers a wider range the customer experience. With traditional programs, customers
of compelling options, which fit their interests and deliver more accrue points monthly and redeem them later. Conversely, instant
robust rewards, these institutions are finding new ways to entice rewards give customers the ability to immediately redeem and
customers and keep them loyal, active and profitable. make use of the value proposition today. In addition to building
loyalty by putting money back in their customers’ pockets,
Companies are making it work, revitalizing their programs instant rewards benefit businesses by reducing their liability
with features and benefits that are simpler, more relevant, and, ultimately, increasing their profitability. Immediate “one-
immediate and personalized. Pioneers in new dimensions of time” incentives can help drive adoption of new products and
performance, their experience may offer insight for others seeking services by current customers, while strengthening and deepening
creative ways to reinvent programs which reward customers in a relationships.
challenging market that continues to mature.
Change is never easy. This process takes time. And the
The value proposition for most points-based rewards programs companies that get it right - seizing the right innovations and
is simple—the more accounts customers’ have, the more points taking the right steps to put them into action - will usher their
they can earn. Consumers’ desire to earn points swiftly translated rewards to the next level and lay the foundation for market
into a ripe opportunity for financial institutions to cross-sell their renewal and growth. We see in today’s climate that one up
products and services. These marketers have found that tying in incentives can drive immediate response, action and offer at much
a “one-time” incentive reward in conjunction with points has less cost that other alternatives. L

46 April 2009 | Loyalty Management


Loyalty. Reinvented.

Loyalty programs are a strategic asset.


To capitalize on them requires going
beyond rewards.
First Data provides intelligent, data-driven loyalty solutions that
provide insight to make your loyalty program more effective. Utilizing
state of the art analytics, First Data enables you to understand your
customers, predict purchasing behavior and maximize revenue.
First Data is uniquely skilled at providing our clients with more relevant
and valuable rewards for their customers, increasing customer
acquisition and retention and creating stronger relationships.

To learn more visit firstdata.com

April 2009 | Loyalty Management


©2009 First Data Corporation. All rights reserved. All trademarks, service marks and trade names referenced in this material are the property of their respective owners.
47
BEST BUSINESS PRACTICES

Satisfaction Does Not


Equal Loyalty
The simple things
you can do to improve retention
by Tom Cates – Brookside

Loyalty is an increasingly hot topic among managers, executives, and consultants. With client acquisition
costs rising and the competitive landscape becoming progressively more crowded, companies are realizing
that client retention has become the key to growing the bottom line. Yet despite increased interest in the
subject, there remains widespread confusion about what exactly loyalty is. In fact, much of what has been
branded as “loyalty” research relates primarily to “satisfaction.”

Satisfaction:
Necessary but not Sufficient
Simply put, client satisfaction is a prerequisite
to creating loyal business relationships, but by
itself is not enough. The implication is that while
client dissatisfaction will undoubtedly create
disloyal clients, merely satisfying clients is not
enough to make them loyal. One of the pitfalls
in understanding this dynamic is the fallacy of
equating retention with loyalty. Obviously a
client who defects is disloyal, but just because
a client is retained does not make them loyal—
they may simply be satisfied.

Consider the following simple scenario: you


are thirsty and I sell bottled water. You happen
to be near me so you give me a dollar and I give
you a bottle of water. It is cold, refreshing, and
quenches your thirst, leaving you thoroughly
satisfied. The next day you receive a phone call
from the consulting firm I have hired to build
client loyalty and they ask you how satisfied
you are, how likely you would be to repurchase
water from me, and how likely you would be to
recommend me to a friend.

48 April 2009 | Loyalty Management


“Obviously a client who
defects is disloyal, but
just because a client is
retained does not make
them loyal — they may
simply be satisfied.”

Satisfied with the water you received from me, you rate me all 1. Integrity: Can you be counted on to act in a predictable
10’s. Does this mean you’re loyal to me? Sure, if you’re nearby me manner? Do I believe what you say? Are you reliable,
next time you’re thirsty you will repurchase, but will you walk dependable? Are you trustworthy in your business dealings?
an extra block to buy from me? Would you feel guilty going to
that guy with the hot dog stand across the street if I had a line? 2. Competency: Can you actually deliver the product or
Probably not. service you have promised? Do you have the people, skills,
experience, systems, and processes needed to perform as
Contrast this to stories of Starbucks clients who routinely walk expected?
past one branch to go to another branch of the same chain. Why
walk further to buy a commodity item? In a word: Relationships. 3. Recognition: Is our relationship important to you or am
If you are going to walk a block further to buy a cup of coffee, it I just a number? What have you done to demonstrate and
is likely because you have a relationship with, and are loyal to, the reinforce the importance of our business relationship?
person serving it.
4. Proactivity: Do you only do what has been contracted for,
Now imagine the “If you only focus on or do you go above and beyond? Do you look out for me
same dynamic at and ensure that I don’t encounter any surprises?
work in a business to satisfaction in your client
business relationship service and sales efforts, 5. Savvy: Do you understand the bigger picture? Do you
rather than with know what my day is like, how my firm makes money,
consumers. The risk you’re missing most of how our business operates, how we succeed, and have you
of non-loyal behavior the puzzle pieces.” demonstrated how you can help me achieve my goals?
isn’t just a dollar, but
potentially millions. 6. Chemistry: Do I enjoy working with you? Do I look
The weight placed on personal relationships is also exponentially forward to our next meeting, or is each interaction a series of
higher in a B2B partnership, so while the downfall of client churn missed communications and disappointing appointments?
is larger, so too is the benefit of retention. If your clients are truly
loyal, they will go out of their way to call you first for new pieces If you only focus on satisfaction in your client service and sales
of business, refer you to their network of family and friends, give efforts, you’re missing most of the puzzle pieces. Many companies
you inside information about competing offers and pricing, spend get stuck focusing on Integrity and Competency, which in essence
a larger share of their book with you, and a whole host of other are satisfiers. If you don’t have those, your clients will not be
benefits. If they’re just satisfied they might stay with you if you’re satisfied, but if you only have those, chances are they aren’t loyal.
lucky; why not strive for loyalty? Recognition, Proactivity, Savvy, and Chemistry are what we call
motivators. These are the Dimensions that will put you ahead of
Six Degrees of LoyaltyTM the game, creating and fostering true loyalty.

Building upon research into human motivation and When I sat down and really thought about these Dimensions
Organizational Climate originally conducted at Harvard in regards to my own clients, it was truly eye opening. I challenge
University and The University of Michigan, my team at you to do the same. Once you recognize what is most important
Brookeside and I have captured the six Dimensions of Loyalty to your clients, not just about your service or product, but about
that translate into long-term, mutually beneficial business your relationship, doing something meaningful becomes much
relationships. Read through the descriptions and ask yourself how easier. What would be the impact on your revenue if you were
you think your clients would evaluate you on each one—because able to expand your best client relationships to their maximum
that is precisely what they are doing. potential? My guess is it would make a world of difference. L

April 2009 | Loyalty Management 49


BEST BUSINESS PRACTICES

Payment
Strategies
are Critical
to Successful
Loyalty
Programs
by Julie Bohn and Stuart Kiefer – First Data

P ayment strategies are integral to loyalty programs for retailers and financial institutions (FIs), although the program
objectives and the role of payments vary significantly by market, business, and payment type. Loyalty programs seek to
drive program relevance that result in increased consumer purchases, frequency or overall spend, making the payment
type and process critical to program participation. In addition, payment habits may be the consumer behavior change the
loyalty program works to drive. Successful loyalty programs must be relevant to consumers, easy to use and include meaningful
rewards, ultimately affecting how the consumer pays at the point of sale.

Following are payment strategies and best practices that retailers and FIs can use to build or enhance effective loyalty
programs to meet their marketing objectives.

Retailers: Loyalty as Part of a Broader Payment Strategy

Retail loyalty programs should be part of a larger payment strategy. Offering customers a mix of payment options makes it
easier for them to do business with the retailer, but some types of payment are clearly more profitable than others.

In general, consumers should be recognized and/or rewarded no matter what type of payment they choose, a strategy that
benefits both consumer and retailer. Recognition can be in the form of discounts, earning points, or a targeted communication.
According to First Data’s 2008 Consumer Loyalty Study, more than half of retail rewards members aren’t required to use a specific
form of payment to earn rewards, an indication that the majority of programs adhere to this philosophy. The ability to recognize
or reward every payment is critical to driving program relevance and helps engage the consumer in profitable behavior.

50 April 2009 | Loyalty Management


“71% of consumers said
rewards programs really Retailer and Financial Institutions:
The Power of Partnership

do affect which card they Retailers and FIs are under significant pressure to reduce

pull from their wallet at


program costs even as it becomes increasingly important
to produce more consumer-relevant loyalty programs. One
solution, is a partnership between FIs and retailers that
the point of sale.” rewards points, or cash back, for purchases consumers make
using the FI’s bankcard with a participating merchant. The
participating merchant helps support the cost of the points,
cash or discounts that consumers redeem, and gains valuable
and exclusive marketing opportunities with the FI’s bankcard
Incenting consumer behaviors such as specific customers.
merchandise purchases, spending thresholds and purchase
frequency continue to be among the most important These programs—if constructed correctly—can create
marketing objectives for retailers. The retailer can reward targeted, cost-effective results for retailers and FIs alike. The
consumers for these high-value activities through a loyalty programs, typically, can be easily integrated into retailer and
program. Rewarding or recognizing every purchase allows FI loyalty strategies. They can drive incremental consumer
retailers to accrue more accurate data about individual spend at the retailer, increase acquisition rates and card
customers through their buying patterns, contributing to a usage for FIs and create program relevance for the consumer.
better understanding of customers and their preferences.
The keys to mutually beneficial programs are consumer
Even as they reward or recognize all payment types, segmentation, a variety of merchant participation from both
retailers can utilize the same relevant, well-branded loyalty online and brick-and-mortar retailers, and supplemental
program to encourage customers to use more profitable targeted marketing opportunities for retailers beyond the
tenders. For instance, members could reach frequency base program. These FI-sponsored programs represent less
discount milestones more quickly by paying with gift cards risk to the retailer and greater reward then many registered
or receive an increased discount for using a retailer’s private card and coalition programs in the market today.
label credit card.
At the end of the day, successful partnerships are what
Financial Institutions: turn a loyalty program into a cost-effective, targeted way to
Fighting for Space at the Top of the Wallet improve long-term customer loyalty for retailers and FIs.

Today’s FI reward program is quickly becoming a Begin with the Customer in Mind
commodity in the marketplace, and FIs must continually
work to remain at the top of the consumer’s wallet. It may seem like an obvious notion, but it’s easy to
Consumers belong to an average of 2.1 credit card rewards forget the consumer experience amidst discussions about
programs, and 76 percent of consumers are enrolled in at increasing spending, rewarding frequency or establishing
least one credit card rewards program, according to the a place at the top of the wallet. Whether a loyalty program
First Data’s 2008 Consumer Loyalty Study. However, the encourages a customer to purchase at a retail location or pay
same research shows that the majority of consumers (71 with a specific card, rewards must be valuable to customers
percent) said rewards programs really do affect which card with a program that is easy to use.
they pull from their wallet at the point of sale, indicating
the importance of a relevant, well-branded program. The Consumers have choices about where to shop and how
pressure is on to differentiate oneself from the competition, to spend. It’s critical to consider the consumer’s payment
and loyalty programs continue to be an important aspect of choice at the point of sale and create meaningful, valuable
the competitive strategy. reasons for customers to choose you—or your card—over the
competition. L
Credit and debit cards encourage customers to choose
their card more frequently to earn rewards faster. Most credit
card programs are based on a traditional “point-per-dollar”
program, while debit programs typically accrue at a rate of Learn more about how retailers and financial
one point per $3 or $4 in purchases. FIs are continually looking institutions, of all sizes, can use analytics to make
at ways to increase consumers’ ability to earn points around smarter offers to the right customers without
the highest-value activities, which include greater transaction
amounts, increased transaction volumes, and spending across huge upfront technology costs. Join First Data at
more categories. In the case of debit, FIs also can use rewards Loyalty Expo 2009!
to encourage customers to make more profitable decisions
at the point of sale—for instance encouraging consumers to
select signature-based transactions.

April 2009 | Loyalty Management 51


BEST BUSINESS PRACTICES

Eight Things You Really Should


Know Before Launching a New
Loyalty or Incentive Program
by Judith Rinearson – Bryan Cave, LLP

There’s no question that loyalty programs are becoming more popular.


As the economy worsens, consumers become choosier and businesses look
for new ways to make sure their customers “stick”. However, implementing
a successful loyalty program takes more than just marketing skill. As a lawyer
who has advised on over a hundred different loyalty programs, I’ve learned
first hand how important it is to plan carefully, to anticipate potential
problems, to communicate clearly and to ensure legal compliance when
launching a loyalty program. Here are some key factors to consider:

1. Timing nC
 heck and double-check product names, model
numbers and phone numbers in the rules. Finding out
Is this a one-time incentive offer (such as a rebate or gift with
you’ve posted an incorrect phone number will not only
purchase), a short term loyalty plan (such as collecting points
hurt your promotional efforts, there may be claims or
over a 6 month period and redeeming them for prizes) or a long
damages payable to the person whose phone number was
term loyalty program (such as an airline frequent flyer or credit
accidentally referenced.
card rewards program that continues for years)? The longer the
program is, the greater the potential rewards, but also the higher n For longer term programs (such as frequent stayer, shopper,
the risk for disputes, claims, and problems. When it’s a one-time flyer programs going over many years) you’ll need more
“gift with purchase” program, regulators don’t scrutinize too than just a list of rules, but you’ll need indepth terms and
closely, consumers don’t often sue, and fraudsters don’t try to conditions to cover issues such as how to enroll, point
“game the system.” But when someone has spent years accruing value, transferring points, error resolution, choice of law,
500,000 frequent flyer miles, the stakes are higher as are the risks. limitations on liability, and conduct that may result in point
forfeiture (such as failure to pay).
2. Rules
The program rules are at the heart of most loyalty or incentive 3. Choosing and contracting with a program
programs. These lay out precisely what the consumer must do, or fulfillment partner
when and how it is to be done, in order to earn a stated reward. Having a good program or fulfillment partner is another key
Sounds simple, but these require incredible care in drafting. to a successful program. Choose your partner carefully. These
Unfortunately I’ve seen many well-meaning programs turn are your best customers, after all, and so while cost is of course a
disastrous because of unclear, incomplete or flawed rules. Here are factor, you don’t want to risk having your customers’ experience
a few lessons learned: be disappointing. Get references. See sample promotions. And
make sure you have a good contract that makes clear your and
n Include clear program dates—start AND completion—
their respective roles in a number of areas, such as: (a) who is
and don’t forget to include the YEAR of the program as well.
responsible for legal and regulatory compliance (keep in mind,
n Seriously consider some limits, such as “1 per customer,” many states have specific laws about rebates, gift cards, advertising
“no more than 5 redemptions per month,” etc. requirements, sweepstakes, etc); (b) who takes the risk of loss,
n Make sure you have the right (to be very judiciously used) including fraud or negligence; (c) are there “service level”
to make changes or to terminate the program. commitments which protect you if program doesn’t work or the
system goes down; (d) who holds customer data and how is it
protected, and (e) what happens to the customer data in the event
of termination.

52 April 2009 | Loyalty Management


“Is keeping ‘breakage’ or charging ‘service fees’
on gift cards or gift certificates an important
part of your economics? Be aware that,
depending on the product, some states restrict
fees or may assert their ‘abandoned property
laws’ with respect to breakage.”

4. Special Concerns About Prepaid Card 7. Fraud or Misuse


or Gift Card Programs There will ALWAYS be people out there trying to get
Many loyalty programs rely on prepaid cards or gift cards as something for nothing. I’ve seen many programs abused by a
a means of collecting, holding and distributing rewards. But few trouble-makers who make multiple reservations and then
prepaid cards can raise complex legal issues and merit special cancel, who purchase and return goods, who claim their reward
attention. If you are contracting for a prepaid card program, in was lost in the mail, or take other steps to “game” the system.
addition to the issues listed above, consider as well: These are not the customers you want, but they’re out there.
Monitor reward usage—if there unusual redemption patterns,
n Who is the “issuer” of the cards? A bank or financial
extraordinary point collections that don’t make sense with
institution? Will the cards be “open loop” and branded by
normal consumer behavior—take a closer look. Find out what’s
Visa, MasterCard, American Express or Discover? Or will
happening. And if it looks like a scam, be prepared to say “no”.
they be “closed loop”—usable solely at a single retailer,
website, hotel or restaurant?
8. Legal Compliance Obligations
n When will the cards be loaded and who is going to be
Even the simplest loyalty program may raise legal compliance
holding the funds until the cards are used?
issues. Are you holding customer data (name, address, and
n I f “open loop”—do they require licensing? And if so, is the transaction data) that might be subject to data security
card partner licensed? requirements? Do you have a privacy policy? Do you advertise
n What happens to any unused funds (often referred to as nationally or locally and know what advertising laws apply? Do
“breakage”?) What fees and/or expiration dates will apply? you screen customers against the federal sanction list issued by
the Office of Foreign Asset Control (OFAC)? Should you have
5. Consider your Program Economics an anti-money laundering compliance program in place? Do you
know which state laws apply and when? Have you adequately
Does your loyalty program business model rely certain trademarked or patented your intellectual property? And have
assumptions such as minimum spend, or minimum stays? you considered how to handle any potential abandoned property
Are those assumptions valid? Can they adequately support exposure?
the reward? Does your model assume that few if any rewards
will ever be redeemed? That approach has significant risks. Is
keeping “breakage” or charging “service fees” on gift cards or gift A good loyalty program can create lasting ties
certificates an important part of your economics? Be aware that, to your best customers. But to be effective, the
depending on the product, some states restrict fees or may assert program must done right. Careful planning,
their “abandoned property laws” with respect to breakage.
communications and contracting can help you
6. Tax issues achieve your program goals. L
Many reward programs have tax implications. Do you need to
file a 1099 for employee incentives? How are these disclosed to
program participants?

April 2009 | Loyalty Management 53


BEST BUSINESS PRACTICES

Creating a Successful
Employee Incentive
Program
by Dan Paulson – InVision Business Development

Employee incentive programs can work, and they need to be structured very
carefully for continued success. Clear measures have to be put in place, and it
is the responsibility of the leadership to follow these measures.

I
n the past I have seen companies take the “close is good enough” approach and give incentives even though the goals were
not achieved. This often leads to entitlement. The incentive is no longer a reward for accomplishing a stretch goal. It becomes an
expectation as a benefit. Incentives need to be balanced between realistic expectations and stretching beyond what’s expected out of
the job. If the goal is too easy, the incentive is achieved without extra effort (see entitlement). If the goal is too hard to reach, then the
people are set up to fail and quit working toward the goal. Below are elements I have seen in successful incentive programs.

Components of a successful incentive program:

The right people —Incentives work well when you have the right people doing the right things the right way for the right reasons. 


The right culture—A dysfunctional culture will often have difficulty with incentives in the long-term. Exceptions exist, and that is
usually when there is little or no competition, which leaves the consumer with few choices. Competitive environments require a strong
culture with the right people to perform at their best.

Clear measures —The employee must know exactly what they are working towards and have the ability to get it.

Realistic expectations —In most cases stretch goals are good,


and BHAG’s are not when it comes to incentives. Your entire staff
must have the belief that the goal is achievable in the timeline you “Reinforce a positive
give them.
outcome and get people
Make it manageable —Incentives that go on too long or
incorporate an “all or nothing” approach can set people up for excited about tackling
failure. If the time period is too long, people will forget or lose
interest. If the incentive is too rigid and your staff fails to meet the the next challenge.”
criteria early on, people will quit working toward it.

Communication —Regular communication, coaching and reinforcement is needed by the leadership team. Talking about the
incentive once a week is not enough. Incorporate it into regular daily communication.

Individual vs. Teamwork —Determine what incentive approach is right for you. Individual incentives allow each person to control
their destiny. Sales positions are often the best for this. Team or department incentives require all members working together and
leveraging their strengths to accomplish a goal. Strong leadership is needed here to make sure the work is evenly balanced and all staff
members pull their own weight.

Achievement is black and white —There is no quicker way to turn incentives into entitlement than allowing people to still win
when they fall short of their goal. Giving an incentive when goals are not reached just conditions the staff that goals do not have to be
met to be rewarded. Companies may feel the need to do this when some of the other steps listed above are missed.

Celebrate —Always celebrate your successes. Achieving stretch goals should be a big deal. Reinforce a positive outcome and get
people excited about tackling the next challenge. Adding these elements to your incentive program will increase the likelihood of success
and future growth. L

54 April 2009 | Loyalty Management


BEST BUSINESS PRACTICES

EMPLOYEE INCENTIVE PROGRAM PROFILE:


The Pyramid of Prizes
by Bob Branson – Tack-USA

When we asked readers to share their experience with


employee incentives we received a HUGE response. Bob Brason,
President at Tack-USA, was kind enough to share the details of
his program’s success…
During my 30 year professional career I have tried dozens [of programs].
Cash, points for something, gifts, stock options, profit sharing, trips,
rich ones, not so rich, bigger raises, you name it. The problem is, unless
the incentive is so lucrative that in the employees mind, not getting it
is unacceptable, most employees simply say “thanks” if they get it but
rarely change their behavior to do so. 

However, I will share one that
worked incredibly well and that I used scores of times. I will also explain
why it worked in case my example doesn’t work in your circumstances. 



[My program] is called, “The


“I had employees Pyramid of Prizes”. In each district
jokingly put stickers office, we built a pyramid of cool
gifts, valued high to low. First
on the top prize winner each quarter got first
like, ‘this is mine!’ pick, second place got second,
etc., all the way down to the
Competition would coffee mug and until everyone
set in…” has something.

The reason it worked was the visibility. Most incentives are out of
site and out of mind. People have stresses all day and trust me, when
they are taking actions they aren’t thinking of the stock option award
that may be available. With the pyramid, they see it all the time. I had
employees jokingly put stickers on the top prize like “this is mine!”
Competition would set in. Then, on the day they are awarded, everyone
gets together and recognition and applause occurs. It is a big event at
the normal employee meeting.

We achieved tens of millions of dollars in incremental revenue from these incentives. I would give you the
actual figure, but some people would think I was exaggerating. Visibility, top of mind and recognition. It
works. 

By the way, my rule of thumb for incentives… Find something that you don’t have but want. Then
provide incentives until you get it. Once behaviors are changed, find something else you want but don’t
have. Some may be repeatable. Just a rule of thumb. L

Emloyee incentive program intiatves have generated quite a bit of interest! Loyalty Management
is looking to highlight YOUR program as a feature in our next issue. If you run a B2B or Employee
Incentive program, we want to hear from you! What works? What doesn’t? How does your
program run? If you are interested in sharing your expertise…
Contact us at: mailbag@loyaltymanagment.com

April 2009 | Loyalty Management 55


BEST BUSINESS PRACTICES: Your Voice

We asked:
Do employee
incentive programs
really work?
Does the program motivate
your team to further excel?

I t concerns me when I see these sorts of


statements. As a business person, I don’t have to motivate
the people who work for me because they love what they
C arefully crafted and measured incentive
programs for employees and customers advance
businesses and drive deeper business relationships… A well
do. They are paid well and I ensure that they are the ‘right’ designed and delivered incentive program is an effective
people for the job in the first place. Having to motivate tool that pays for itself many times over in customer/
people to work for me seems to me to be an oxymoron and employee loyalty and increased revenues… The key to
perhaps organizations should spend a lot more time getting designing an effective program is first understanding the
the ‘right’ people in the first place and then ensure that objective, the culture and the audience; insuring that the
they have work that is interesting and relevant. behavior and criteria is measurable; communicating well
Merydith Willoughby Author and often with your audience; and delivering above and
beyond expectation. In economic times like this, businesses
need to utilize every tool at their disposal to maintain

M ost incentives fail because of unintended


consequences. For many years, top management
has commented on the struggle to meet Wall Street
and expand their customer base, retain top talent and
increase revenues. Targeted incentives are an effective and
measurable tool that achieve bottom line results.
expectations for short term revenue gains. This chasing of Mimi Almeida President , RA Performance Group
revenue has led to all sorts of unintended consequences. A
lot of those unintended consequences are headlines today.
For so long we’ve designed the plans to have employees
chase revenue. It would be interesting to see what would
happen if we decided to chase value creation instead… “Employees will love the
Denise Cooper Executive Coach company for the perks
they get. The example SAS
I ncentives are rewards for doing a great job.
The success of these programs depends on the ‘motive’ for
doing it. As a sales person, the greatest incentive I have ever
shows, even if you pay below
average, people will like to
had, beyond the dollars, was a once a year gathering of the work there for things like
top ten sellers, along with their spouses, and the CEO and
family, to go on a 
cruise. Those of us who experienced this
free drinks, a free gym, a
once, never failed to qualify. 
It was an honor, and a great kindergarten, etc…”
time. On board a ship, relationships and friendships are
born, and hobnobbing with the boss was a treat, as well. Hans Brueggemann
Director Product & Test Engineering at Qimonda
Shari Greer Professional Marketing and Sales

56 April 2009 | Loyalty Management


“I think they can work but
W hat doesn’t work? Employee of the
Month. What does work? Performance rewards
that are linked directly to the behaviors/actions that
we must first identify what drive a company’s business goals. Individual AND team

motivates EACH individual. benchmarks, and company-wide eligibility. Multiple


studies suggest that a company must spend 3-5X more in
People are motivated by cash incentives than on a travel or merchandise incentive
different things and if program. In this economy, that’s money in the bank.

we expect for a bonus to Kurt McDowell People Performance Specialist

motivate a person looking for


recognition...we might be left
scratching our heads...”
T hought of as “Reward and Recognition” it’s
often the latter that has more of an impact… The
key to a successful program is 1) fairness, i.e. lack of
disputes 2) ease of administration 3) most importantly,
Jason Jacobus Sales/Consulting at Champion
communication. These schemes only work when people
Education Resources
can influence the outcome and measure their performance
against others.

I believe a company needs to decide whether they


want long-term sustainable growth or short-term hit the
target to get my incentive growth. Employees that have the
Tom Warwick Business Leader

opportunity to work in an environment that they enjoy, “A s a reward for good work I bought my
develop as an individual, grow within the company, and lead developer a return trip from New
feel valued/recognized by their organization will more than Zealand to Malaysia to see her family
likely produce results year in year out. Those that turn up
and friends. But she never came back!
for work to achieve their incentive.... well, in an extreme
case, look at the financial markets in the US and Europe
These things don’t always work!”
for your answer. Incentives can work if they motivate Mark Thomas Business Owner
individuals and teams to go above and beyond but if they
are just a part of the job numerous problems will arise.
Jeff Peter Experienced Sales Management & Capability
Development Professional
I feel incentive programs do motivate not just
sales staff but support staff as well. It is always a good
thing when you reward individuals who are internally
motivated to go above and beyond. It gives them not just

S
a challenge, but also a sense of making a difference in the
ome managers get caught up thinking
bottom line of a business.
commissions are the best and only way to motivate
sales people. When we surveyed sales people worldwide we John De La Cruz Financial Professional
actually found many preferred unique “non-cash” programs
that gave them an opportunity to win a tangible items.
In many cases sales representatives also reported bonuses
and/or incentives got lost in the regular payout thus never I t is the recognition that is powerful, and leaders
who understand this are able to effectively integrate
incentive programs into their sales compensation strategy.
really giving them the feeling of achievement. By the
way, you can also include other departments (marketing, Unfortunately, many shortsighted leaders and companies
customer service etc.) in these programs creating a real use or allow incentive programs to replace recognition,
team approach Lastly, if you plan correctly and with which ultimately leads to failure in the program, wasted
proper coaching you can come up with some really creative money, and turnover. 
Nothing replaces a pat on the back
programs that will cost an organization less what you for a job well done—especially for salespeople. It is the
would spend for cash payouts… Want to motivate your combination of incentives and recognition of achievement
team? Think outside the box. that make a program compelling and successful.

Steven Duddy Pres./ CEO, Strategic Direction Inc. Jeb Blount Publisher, SalesGravy.com L

April 2009 | Loyalty Management 57


BEST BUSINESS PRACTICES

LOYALTY PROGRAM PROFILE:


Southwest Airlines
Rapid Rewards
Enrollment experience: Outside the program:
Online enrollment is simple and quick. However, I did not Reservations
receive a card with my number on it. You may want to print
You can book your flight online or via a toll free number. Their
the page and keep it in a safe place. You will also need to
call center staff is friendly, helpful and knowledgeable. They
keep your password safe because, this cannot be reset by
go above and beyond to get you what you need in the most
calling customer service.
affordable way and they don’t seem to be watching the clock,
which is great—you feel you can ask your questions without
feeling like a burden.
program BASICS:*
The online reservation experience is a breeze. You get
n After eight (8) roundtrips (in 24 consecutive months), you to choose what you want, when you want. Then when you
receive a free roundtrip “Standard Award”. Standard Awards purchase you have a variety of options. For example if you have
are not always available during peak periods or for last a ticket that you didn’t use, you can use that full ticket as a credit
minute travel. However, you can “cash in” two Standard to your new reservation (without a change fee!).
Awards for one “Freedom Award”. This award allows you a
seat on any flight where there’s availability (few blackout Check-in
dates may apply). Unlike other airlines, there is no first class nor are there seating
 omment: Being a first time user of these rewards, the process
C assignments. In recent years, Southwest has changed their check-in
was confusing. The website mentions the various awards, but structure. One major change is their Business Select product. For an
the ability (or how) to convert standard to freedom was not additional fee you can secure one of the first 25 seating reservations
clear. It took a good 20 minutes to figure it out. and additional “award” credits. This ensures that you get the seat of
your choice. For the rest of us, we need to set our alarms for check-
n In addition to receiving your Standard Award, you also
in exactly 24 hours prior to our flights to ensure that we get a “good”
receive 4 free drink coupons. This is a nice benefit for those
seating group / number. Be careful, being even an hour late on
long flights after a long day.
some flights can cost you a B seat assignment.
n Business Select ticket purchases do result in additional
Flight
Standard Award earnings. Bonus earnings vary by itinerary,
so check the website to know for sure. Once you get on the plane you’re greeted by happy, funny
and engaging staff. They go above and beyond to make you
n For you frequent flyers, after 32 flight segments during a
feel comfortable, even providing restaurant and attraction
12 month period (not calendar year— bonus, yeah!) you
information at your destination (just ask!).
earn an A-List membership. This membership allows you an
automatic seating assignment on all your flights for the next If you’d like a cocktail and haven’t yet earned your free
12 months (again, not calendar year!). drink coupons, you will need a credit card. Southwest is now a
cashless system. But the good news, you still get a good snack
n To accelerate your Award earnings, you can sign up for the
on every flight.
Southwest Airlines, Rapid Rewards Visa card. After your first
purchase you earn 8 flight credits. You’ll also earn additional Finally, Southwest is remarkably reliable! How wonderful it is
credits for balance transfers and for your card anniversary. to get to your destination on time.

Overall take:
While you need to be “trained” on the system, to learn how to make the most of the benefits and travel experience, the staff,
timeliness, ease of booking and making changes has made me a happy convert.

RECOMMENDATION: Give it a try!


Each issue we’ll be sending our secret shopper out to experience a particular brand first hand. Our shopper will sign up for the
loyalty program, if one is available, and interact with the company at least 3 times, then share their experience with all of us.
Your suggestions for the next brand review are welcomed: email your suggestions to mailbag@loyaltymanagement.com.

*Visit www.southwest.com/rapid_rewards for full program details. L

58 April 2009 | Loyalty Management


April 2009 | Loyalty Management 59
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

60 April 2009 | Loyalty Management


EXPO 2009
PREVIEW

April 2009 | Loyalty Management 61


LOYALTY EXPO 2009 PREVIEW

Inside-out Loyalty: From Price to Advice:


Understanding the Psyche of Driving Sustainable Advantage
Today’s Loyal Consumer in B2B Markets 

Presented by Dave Tambling, CEO, and Presented by Blaise James , Principal – Gallup Consulting
Connie Chesner, VP – brandMIND Group
How healthy are your customer relationships in this
A presentation filled with first-hand perspectives on turbulent economy? New Gallup research shows
loyalty in 2009, incorporating real voice of the customer only 13% of business-to-business customers are fully
clips (audio & video) including market thoughts on engaged — that is, rationally and emotionally loyal to
everything from current memberships, programs, and their suppliers, vendors or partners. That means a typical
affiliation to key drivers of participation, decisions, and B2B company has what would be considered an optimal
motivation. relationship with less than one in seven of its customers.

This primary research presentation uses one-to-one How can you ensure your customers stay loyal?
conversations with a diverse cross-section of consumers The conventional wisdom in B2B markets is to bolster
to dig into the current customer loyalty landscape from customer relationships through rational components
an “on the street” perspective, offering frank insights like price, speed and efficiency. While these are
and customer talk about programs and participation. important, Gallup has found emotional components
of the relationship are better indicators of loyalty. They
This data, presented for the first time ever at the also provide a more effective “early warning system” for
Loyalty Expo, offers attendees a unique opportunity to at-risk accounts than typical B2B measures like customer
stay ahead of the competition through deep insights satisfaction, revenue, or profitability alone.
into what customers are thinking right now in 2009.
Insights from interviews are presented and core themes B2B companies can secure customer engagement by
are revealed regarding trends every loyalty program instilling a sense of confidence, demonstrating integrity,
should watch and incorporate into their strategies for and creating pride and passion around their brands and
survival in a tough economy. product/service offerings. In B2B markets across every
industry, this is achieved by shifting the focus from price
to advice — from transactional selling to providing
value — to create client impact.
Dave Tambling: More than twenty
years of building relationships with After this presentation, you’ll understand:
consumers across a broad spectrum of
B:C and B:B brands serving categories nH
 ow customer engagement in B2B is driven by
from pet food to apparel and banking to client impact
healthcare. n The three key components that create client impact

Dave’s Customer Loyalty Philosophy: n How to create an “early warning” score for your
While loyalty is a two-way street, it is the responsibility customers
of the marketer to actively monitor and nurture the n The five intervention zones used to address your
relationship. “red-flag” accounts

Connie Chesner: Close to a decade


of experience transforming a deep Blaise James
Principal
understanding of market motivations
Gallup Consulting
and drivers to communication strategy,
study, and transformation in industries
Blaise James is a Principal at Gallup
spanning from national non-profits and
Consulting. He inspires audiences to
the US military to retail and financial
turn customer insights into actionable,
services.
measurable brand loyalty strategies.
Customer Loyalty Philosophy: Loyalty inspires Blaise has built successful customer loyalty platforms at
deeply, moves consistently and spans beyond logical multinational brands across most industries, including
associations. Driving loyalty therefore drives our overnight shipping, financial, technology, retail,
sustainable bottom line in more powerful ways than any Internet, food and beverage, telecommunications and
other persuit. non-profit.

62 April 2009 | Loyalty Management


LOYALTY EXPO 2009 PREVIEW

Optimizing What can we learn


Consumer Engagement from the Grocer about
with Your Brand Customer Loyalty?
Presented by Bob Fetter, Senior Vice President – Pluris What is the glue that makes the finicky
grocery shopper stick?

In today’s economy, it is important for marketers to
Presented by Steve Babick, President and CEO –
stimulate consumer purchase behavior and capture
a larger share of wallet than ever before. With most MetroSplash Systems Group, Inc.
companies suffering through precipitous sales drops,
marketing budgets are being slashed at a time when While it may disputed who was the first retailer to
it is more important than ever to continually market to offer a loyalty program no one can deny that grocery
consumers in a relevant and engaging way. merchants have been offering loyalty programs
for over a century. As one of the consumer’s most
frequent spends, the Grocer’s customer lifecycle
In this session, we will show how to:
moves quickly and frequently with heavy interference
from competition from all types of retailers. Grocers
n Leverage digital messaging and the latest have mastered the ability to attract new customers
technologies, embedded with data and analytics, and were among the first to promote loyalty through
to optimize every consumer touch, inbound or consumer programs, now they’ve found the secret
outbound to retention with a powerful incentive. Hear from the
country’s second largest grocery wholesaler, Nash Finch
n Stimulate greater consumer engagement with the Company, as they share the secret on why Fuel is an
brand with an optimized offer and/or message ideal incentive to not only attract new customers, but
to also retain that consumer’s loyalty. Steve Babick,
n Supplement an existing loyalty program and drive President and CEO of MetroSplash Systems Group, Inc.
participation in that program will also share his successes with FuelLinks, a powerful
loyalty solution within the grocery industry and more.
n Formulate key considerations in designing a new Gas is the glue that makes loyal consumers stick.
loyalty program to support maximum uptake of
that program, as well as consumer involvement
with the program

This advanced session with key statistical and


technological concepts is very detailed in the how-to
guidance that it provides to participants.

Bob Fetter
Senior Vice President
Pluris

An insightful industry veteran,


Bob Fetter is known for his
Steve Babick
innate ability to quickly identify
President and CEO
opportunities for brands to MetroSplash Systems Group, Inc.
better engage their audience
to improve their sales and Mr. Babick brings 20+ years of progressive, growth-
marketing results, Bob has oriented experience within the Enterprise Software
helped design more than industry. He is responsible for executing on the
150 multi-channel marketing company’s vision and go-to-market strategy, in addition
programs for major business-to-consumer and to all compliance and investor relations activities. He
business-to-business companies in catalog, retail, came to MetroSplash from i2 Technologies, where he
healthcare, media and financial services industries. was VP of Global Field Operations.

April 2009 | Loyalty Management 63


LOYALTY EXPO 2009 PREVIEW

The New 4 P’s of New-Era Customer Engagement Marketing


Presented by Marti Beller, President – Affinion Loyalty Group

ALG will offer nearly 30 years of unparalleled experience the most attractive segments of your customer base. Then,
on behavioral incentives and affinity marketing strategies capitalize upon that information to support optimized
to define and reinforce our view of customer engagement customer behavior(s).
and the role it should play during these difficult economic Path Identify your new direction. The luxury of endless
times. We will identity the new 4 P’s of this marketing era to competing marketing strategies is cast aside in this
help readers gain a foothold on what is necessary to truly new era of customer engagement marketing. In a sea
achieve the ever-elusive “customer engagement” goal. of uncontrollable variables, know the path you’re going
Perspective Use your data. Affinion will provide case to follow and understand the importance of measuring
studies to help illustrate the power of customer data , and against goals along the way. Set a clear bar by which to
how it can provide a new way of analyzing unseen truths measure success and develop marketing and product
within organizations. Pairing this data with today’s altered strategies that reinforce those areas of measurement.
perspectives can help generate new marketing strategies
Proliferation Test and learn. Yesterday’s overachieving
in an accelerated fashion.
results may become today’s control amidst a new demand
Purpose Know your brand. During times of extreme for more stringent metrics. Analyze results prudently and
uncertainty, it’s important to understand and promote continue to view your findings back through the lenses of
your brand to your most loyal customers. Start by customer understanding and optimization; delivery of your
understanding the brand promise resonating loudest with brand promise; and customer satisfaction and engagement.

Marti Beller, President – 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.

Introducing a Better Metric for Loyalty and


Relationship Marketing: Comp CustomersTM
Presented by Phil Rubin, CEO and President – rDialogue

Measuring customer loyalty and relationship marketing is With Comp CustomersTM, you’ll gain new insight
far more complex than counting revenue, especially the into customer loyalty and a new way of assessing
way so many companies do, using “comp sales” aka “same- loyalty marketing opportunities that fit well within
store” sales. your business strategy. You’ll also explore how to
acquire more business from your existing customer
Phil Rubin will introduce you to a better way to measure base—without high acquisition costs—by ensuring that
customer management and effectiveness of your loyalty your brand, messages and offers are relevant, engaging
and relationship marketing initiatives. More importantly, and, most importantly, effective. Join Phil as he takes
this approach not only measures performance, it will be an you through real-world examples and illustrations for
invaluable guide to achieving better results and organic companies with and without loyalty programs that are
growth. relevant to any industry.

Phil Rubin, CEO and President – 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.

64 April 2009 | Loyalty Management


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.

Visit us at www.affinionloyalty.com/loyalty or call 800.622.4863 to le n more about our loyalty


learn about
yalty our lo ar
marketing services and how we can help create loyalty between you and your customers.

April 2009 | Loyalty Management 65


LOYALTY EXPO 2009 PREVIEW

Reward Business Models— Why Guess


Should Program Sponsors When You Can Know?
Really Earn on Rewards? Creative ways to measure loyalty programs

Workshop to be led by Presented by Wayde Fleener, Director Decision
Dominic Hofer, Chief Executive Officer – Loylogic Sciences – Carlson Marketing

Hands-on workshop session! When determining your measurement plan for any type
of a relationship building effort, there are all kinds of
Sign up at LoyaltyExpo.com business challenges to drive how you will choose the
appropriate measurement treatment or approach. In
Topic: Reward Business Models this exciting session, you will hear about the traditional
ways to measure your relationship building effort
Detail: Loylogic is a reward services provider to airlines, and the obstacles that can get in the way. But most
hotels and credit card loyalty programs. Rewards are the important, we will highlight two innovative ways to
biggest cost factor of any loyalty program. Therefore measure your relationship marketing effort to help
deciding on the ‘right’ reward business model is critical inform the best way to build stronger relationships.
to success for the program. The Loylogic session at the
LoyaltyExpo2009 will provide an opportunity to learn Key takeaways:
about how reward fulfillment models have evolved from
nA
 review of the traditional ways to measure
traditional mail-order delivery to on-demand services
relationship building programs
in the digital age. It will also focus on how such models
drive member engagement and satisfaction. nA
 discussion of the obstacles that get in the way
nA
 n exploration of two innovative ways to measure
The discussion will address questions such as: your relationship building program
n How do traditional reward models compare to new,
digital models? Wayde Fleener
n Which model delivers the best value to program Director Decision Sciences
Carlson Marketing
sponsors and members?
n What are the underlying financial models that Wayde Fleener ensures the right
can be applied (service fee based, transaction fee measurement and analytics are
based)? in place for Carlson Marketing’s
n How can program sponsors control reward cost and clients, and then uses the data
steer their loyalty investments towards the most to design programs that will
valuable customers? drive maximum value.

Covering the various business models and their


financial implications, Loylogic will work with the
audience on the pros and cons of the discussed models,
and provide insight on reward success factors for any
loyalty program.

Dominic Hofer
Chief Executive Officer
Loylogic

Dominic is a seasoned loyalty


expert. Previous experience has
included EVP of Sales and Business
Development at Qualiflyer Loyalty
(now ICLP) in Zurich, Switzerland.
In this role he was instrumental in
the development of the Swiss TravelClub, SN Brussels
Privilege and TAP Victoria frequent flyer programs.
Dominic has also worked with Lufthansa Miles & More in
Frankfurt, Germany.

66 April 2009 | Loyalty Management


LOYALTY EXPO 2009 PREVIEW

Extending the Dialog— Leverage Your Contact


Loyalty for CPG
 Center to Improve Customer
Presented by David Rosen, Senior Vice President of Engagement and Loyalty

Strategy and Channel Development – Loyalty Lab Presented by Tim Houlne,Chief Executive Officer –
Working Solutions
Consumer packaged goods (CPG) companies are
aggressively implementing campaigns to collect
Forward-thinking executives are changing the way they
names of their consumers, but once the campaign is
look at the contact center. Although historically the
over, continuing the dialog with consumers requires
contact center has been viewed as nothing more than
a different value proposition, benefits, engagement
a necessary expense, today’s executives realize that it
frameworks and empowering technologies. Rather than
may be the only point of contact for some customers.
mourn the death of the one-off campaign, marketers
Tim Houlne discusses ways to take advantage of your
must look forward to how loyalty best practices
company’s contact center to help improve customer
and tools can lead them to a new level of consumer
engagement and loyalty.
engagement and profitability.

In this session, David Rosen , Loyalty Lab’s senior vice Key points that Tim will cover are:
president of Strategy and Channel Development will
moderate a panel of CPG marketers and social media, n Identifying the right agent for sales and support
loyalty, and interactive marketing experts to show how
loyalty concepts are changing the way CPGs develop nA
 ligning business objectives of the company
relationships with end customers. with the agent for seamless communication and
engagement
Attendees will learn:
nU
 sing contact center transactions as touch points to
n Strategies that enhance individual campaigns to improve customer engagement and loyalty
drive long term relationships
n Methods for collecting data and engaging n I mproving the customer experience by simplifying
customers in many channels the contact center process
n Ideas for incorporating social media in measurable
and meaningful ways

David Rosen Tim Houlne


Senior Vice President of Chief Executive Officer
Strategy and Channel Working Solutions
Development
Loyalty Lab As CEO, Tim’s primary focus is
driving brand strategy, top-line
David leads the company’s loyalty revenue and business growth
strategy and analytics teams, through back office call center
and has designed innovative sales, support and transaction
loyalty programs for more than processing, utilizing remote
three dozen top national brands home-based agents. Tim has
in the multi-channel retail, consumer goods and travel more than 20 years experience in call center services,
industries. technical support and warranty management industries.

April 2009 | Loyalty Management 67


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68 April 2009 | 6442
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Management
LOYALTY EXPO 2009 PREVIEW

Global Loyalty: Challenges of International Loyalty Programs 



Presented by Derk Möller, Managing Director – Rewards Arvato Services
and Scott Richardson, Global Key Account, Travel & Tourism – Arvato

More and more, global loyalty programs are becoming the Derk Möller
normality/standard rather than the exception in today’s Managing Director
loyalty market. Nowadays consumers — informed by Rewards Arvato Services
the internet and empowered by their mobile devices —
are actively engaged in the way their favorite brands or Derk Moller has more than 10 years
companies behave in the marketplace. This allows the experience in the marketing, services
and loyalty industries. Since 2004,
consumers, and with this, the world of loyalty to grow
he has been the Managing Director
together. Cross-country and even global loyalty programs of Europe’s largest rewards solutions
such as Miles & More and The Emirates High Street (present company and Vice President of
in 62 countries) are wide-spread. Arvato Services.

Research has shown that 80% of a rewards portfolio in Scott Richardson


such a global loyalty program can be designed to meet Global Key Account,
global wants and needs. However, 20% of the rewards still Travel & Tourism
cater to the very individual country-specific taste of the Arvato
consumer.
Scott Richardson is responsible for
This presentation will provide insights into how to the development, implementation
and management of global loyalty
manage and compile a global rewards portfolio, review
rewards solutions for clients in the
the opportunities and risks involved in setting-up and travel industry including airlines,
managing a global loyalty program and explain how to hotels and car rental companies. The primary focus is on
anticipate and fulfill the desires of your potential global international solutions covering multiple functional areas
customer today. from product sourcing and fulfillment through IT and
customer service.

Building Engagement with Millennials



Presented by Bill Hanifin, Managing Director – Hanifin Loyalty LLC with Bjorn Larson, Founder and Executive VP – Edhance

We know who they are and understand their general Bill Hanifin
make-up. The challenge remains to create and execute Managing Director
strategies to engage the Millennial generation in our Hanifin Loyalty LLC
Loyalty programs. Effective communication is a challenge,
as Generation Y spans an age range that deserves to be Bill Hanifin, a recognized leader in the
addressed in three or more distinct segments. The myriad areas of loyalty marketing, payment
of emerging social media tools remain unfamiliar to many systems, and technology with an
marketers and complicates the task. impressive history of developing and
implementing loyalty and customer
Join Bill Hanifin, Hanifin Loyalty LLC, and Bjorn Larsen, strategies for leading organizations
CEO Edhance, Inc. to share the experience of seasoned around the world.
marketers who are actively involved in engaging and
building loyalty across the three segments of Generation Bjorn Larson
Y – Teens, University age, and Career Starters. In addition Founder and Executive VP
Edhance
to other panelists, a leading Social Media expert will share
insight into how social networks and micro-blogging tools
Bjorn has helped build some of the
can be incorporated into communication plans to drive
most successful student discount
engagement and build loyalty.
businesses in the world. Bjorn is
also a board member for Mecenat,
Long term brand loyalty is dependent on a successful
an organization offering thousands
first step—engagement. Don’t miss this session if you want
of discounts to more than a million Swedish students
to be in touch with this increasingly powerful consumer
through a partnership with the Swedish government.
group of over 80 Million people.

April 2009 | Loyalty Management 69


LOYALTY EXPO 2009 PREVIEW
Sign up for Loyalty Expo
“Hands On” Workshop Sessions!
WORKSHOP PREVIEW Workshop: Sunday, May 31, 2009
www.loyaltyexpo.com

The Gamification of Loyalty: Economic Downturns:


Driving Deeper Customer Engagement Is Loyalty Dead?
Through the Power of Play

Workshop to be led by
Workshop to be led by Bary Kirk and Bob Konsewicz,
Todd Nelson, Senior Vice President – Loyalty
Maritz Loyalty Marketing
Marketing Services and John Bartold, Vice President –
To hear that 97% of teens are either casual or avid video Loyalty Solutions at Epsilon
game players is not a shocking statistic. But what’s going
on when 53% of adults also identify as active gamers, Consumers aren’t enrolling at the same rate and members
with 20% of them professing to play on a daily basis? are not transacting as much, revenue is down and
The gaming market has seen explosive growth in recent executives want to know if the loyalty effort is really worth
years as game designers have become experts at creating it. These metrics don’t signal that loyalty is dead. We need
experiences that drive deep and sustained consumer to accept we are in a very different period and the metrics
engagement. These experiences create tremendous we’ve traditionally used to validate our efforts are not the
consumer commitment because they effectively employ right set under the stress test of a recessionary period.
powerful “game mechanics” that are proven to feed our
psychological desire for fun and accomplishment. This session will provide:
nA
 n understanding of economic business cycles
What if our loyalty programs could capture even a
fraction of the level of engagement driven by these n What we have seen and learned from past economic
games? We play games because they promise a payoff downturns
for our effort—loyalty marketers have always known and n Why typical loyalty measures provide false information
employed this simple premise in their programs, but how on loyalty activity
many have ever looked at those programs as games?
How would your loyalty strategy change tomorrow if nH
 ow to define and position the right set of measures
you started to view your program as a “game” and your nH
 ow to act on those measures and continue to drive
members as “players”? your loyalty effort

This workshop will explore the idea of how adopting


a game-centric view of your loyalty initiative can bring
Todd Nelson
a whole new perspective to the most effective way to
engage consumers, with a particular focus on creating Senior Vice President
awareness and understanding of proven game mechanics Loyalty Marketing Services
and how to use them to drive better program design.
Over the past 12 years, Mr. Nelson has
Barry Kirk been a member of Epsilon’s Loyalty
Marketing Services. Todd brings a wealth
Director of Strategic Marketing
of experience in loyalty marketing systems,
Maritz Loyalty Marketing marketing tool and digital marketing
implementations in a variety of industries,
A self-described “geek marketer,” Barry including financial services, retail, fundraising, hospitality
brings his two passions—marketing and and travel.
technology—together in his work in the
loyalty space.
John Bartold
Vice President
Bob Konsewicz
Loyalty Solutions at Epsilon
Senior Marketing Consultant
Maritz Loyalty Marketing Mr. Bartold specializes in developing
marketing initiatives to build relationships
As a former database marketing analyst, and alter customer behavior for increased
Bob works with his clients to evaluate profitability and reduced churn. John is
the results of marketing campaigns, a frequently requested speaker on the
provide insights and make strategic subject of marketing and management at conferences
recommendations for future initiatives. throughout the US.

70 April 2009 | Loyalty Management


Build true loyalty
by building
better relationships.

A more strategic, data driven approach can help


you move to the next level of loyalty. With genuine
insights into the needs and expectations of your
customers, you can talk with, treat, and reward
different customers in unique ways. This is what
we call true loyalty.

Bring this approach to life with comprehensive


services from Maritz. It's our business to understand
what matters most to people. Enable them with
knowledge and tools. And motivate them to
change behaviors.

To start working on your relationships, stop by


booth #100 at the Loyalty Expo.

Ready to learn more now? Visit maritz.com or


call (877) 4 MARITZ.

April 2009 | Loyalty Management 71


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

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