Listen here to audio interview with Loylogic CEO, Dominic Hofer
PYMNTS.com: What services does Loylogic provide?
DOMINIC HOFER: We help financial services and travel companies to engage more frequently with their most important customers by adding award-winning, truly global points earn and burn solutions to their existing loyalty programs. As a result, we ship millions of goods and services from over one thousand, globally contracted merchants to 234 countries via the Web, social networks and mobile channels.
PYMNTS.com: What is the biggest misperception that companies have regarding the concept of customer loyalty?
There are two misperceptions that I would like to highlight:
That a loyal customer will stay loyal
In advanced loyalty industries such financial services, airlines and hotels, loyalty programs are a marketing standard factor. In many cases, they have become THE most important attribute of the product or service that a company is offering.
If we look at the financial services industry in particular, we can probably agree that the loyalty program has a far bigger potential to substantially differentiate a credit card product in the market than, for example, account fees, interest rates, purchase protection policies or a credit card design. In addition, there is increased scrutiny in the media from specialized comparison websites. They will highlight the best card products in the marketplace, and cardholders will follow their recommendations and switch.
Today’s leading loyalty programs cannot rest but must ensure the means to earn points are always fresh, the redemption options exciting and the customer awareness at its peak.
That breakage is a smart way to clean the program’s member DB
Programs are built to engage with key customers. Breakage, so the number of expired points or miles in a program, is the ultimate proof on how important the program is to ‘its’ members. While the CFO might like the saved redemption cost, the CMO must hate the fact that he just lost an engagement opportunity with a customer.
At Loylogic, we help our program clients to better engage with their customers, leveraging our unique earn and burn platforms as well as our patented redemption technologies. In fact , we delivered success stories where we increased member engagement following redemption activity by an average of 83 percent across member segments.
PYMNTS.com: Some may argue that it seems everyone just offers slightly different versions of the same loyalty programs. How do you keep loyalty programs from becoming commoditized?
HOFER: I dare to say that this is not the case for Loylogic clients. Since Loylogic’s foundation five years ago, we have brought seven innovations to the market – some of them patented – that helped our clients and Loylogic win over 15 industry awards.
Our approach to innovation is pretty straightforward. On one hand side we have great talents that work very closely with our client programs. We actively pursue a strong partnership approach with our clients. On the other side, we continuously identify and define new processes around our three core competencies: Technology, Network and Engagement.
– On the Technology front, for example, we have built a single, fully integrated and feature-rich earn and burn IT platform that combines shop with portal technologies. No other loyalty provider can deliver that today.
– On the Network side, we have developed a proprietary portfolio of over 1,000 global merchants that deliver millions of latest, trendy and locally relevant goods and services to exactly 234 countries worldwide. In addition, we also provide industry-leading delivery success rates. Again, no other loyalty provider can deliver that today.
– Finally, on the Engagement front, we have developed a highly tuned system environment and analytical team that delivers unique earn and burn insight, marketing strategies, e-mail communication, as well as reporting via rich and easy-to-access dashboards – all very latest technology.
So again, innovation develops around client and Loylogic talents together with a strong focus on our core competencies.
PYMNTS.com: How do you respond to the criticism some have of loyalty programs in that they simply add a layer of cost to customers who would otherwise be loyal without a program that offers them expensive perks?
HOFER: The question, or at least my answer, is a bit related to your question 2 above. In the financial services industry, where loyalty has become a or even THE core differentiator of card products, one can say that the customers would for sure NOT be loyal to the company. Over 80 percent of credit card products come with some sort of loyalty scheme attached. My take is that credit card marketing is 80 percent about loyalty program design and management.
In the travel industry, the argument clearly doesn’t hold. Airlines have developed large communities of affluent consumers that they ‘sell’ to participating marketing partners via frequent flyer miles. This business has become the most valuable asset of any large airline in the world. Typically, those frequent flyers programs are worth more than the airline itself and the sole reason why many of these airlines still fly.
Ultimately, there is the power of data and insight. Above-average successful companies, such as Tesco, consequently derive business decisions from data and insight. The value that has been created for the shareholders largely exceeds the cost of the underlying loyalty programs.
Ultimately, it is the loyalty provider’s job to proof success of the initiated programs by defining KPIs and tracking status against them. We at Loylogic find great pleasure in working closely with our clients to deliver proof of success.
PYMNTS.com: Given the inevitable changes to the business models that are coming to the industry post-Durbin and other regulation, how do you see loyalty programs changing, if at all?
HOFER: I don’t expect loyalty programs to change. What happened is that card issuers see some of their revenue streams jeopardized.
For us, Loylogic, this represents an opportunity. We can help card issuers or banks create a new revenue stream by providing them with branded online shopping malls for their cardholders. Banks collect new revenues from merchant commissions, and cardholders get an online shopping opportunity that provides exclusive deals.
PYMNTS.com: What is your prediction for loyalty initiatives for 2011?
HOFER: Financial services
– We will see credit card issuers that develop stronger online and in-store merchant networks. It helps them differentiate, earn more and is attractive to cardholders.
Across industries
– Facebook and Groupon are community phenomenon, same as the traditional loyalty programs. I expect convergence in that sector.
– Mobile loyalty will take off, offering location-based deals.
Do Credit Cards ‘Take a Swipe’ at Low Income Households?
Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More