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I just spent a couple days at Loyalty Expo at the lovely and capacious Rosen Shingle Creek Hotel in Orlando. It was a very good conference, and there was a lot of good thinking around the nature and direction of loyalty, and it was led off by some surprising findings for a show about how to do loyalty.
The first session was a panel presentation/discussion with Emily Murphy, Researcher – Forrester Research, Pamela Prentice, Chief Researcher – SAS, and Tim Suther, Chief Marketing Officer and Senior Vice President – Acxiom.
They had conducted a group of studies along with Loyalty 360 around the state of loyalty; primarily from a loyalty manager’s point of view and their findings could be seen as less than encouraging for the Loyalty business, to wit:
- Loyalty members were 35% of the customer base of polled companies, and only 1/3 of those customers actually redeem.
- 83% of active customers in loyalty programs are interested in discounts and 51% of responding companies use discount based rewards
- Consumer attitudes toward loyalty programs are declining, as is the perceived value of programs from a customer point of view.
- Only one in four companies said that their loyalty programs were “very effective”
- Only 36% of companies surveyed integrate loyalty data with CRM.
Not pretty, but there was optimism that things could improve, and the solution is data, which was a major theme of the conference.
There was an undercurrent of change in the industry, as speakers commented on the problems and opportunities being created by the collision of old programs and processes, new technology and changing customer expectations.
Here are a couple examples that caught my attention:
1) Loyalty without a loyalty program – There were a couple of very good examples of organizations that were creating high levels of participation and engagement without using a traditional points based loyalty program.
Golfsmith – Chris Miller, Director of Marketing and Strategic Planning was the source of the quote used in the headline “It’s the data stupid”. He and Mu Hu, their director of CRM gave a great presentation on the way they’ve used database marketing to create a differentiated, valuable program for their customers. They have identified five high value segments that provide an easily visualized picture of their different customer types that they can then apply separate KPIs and goals and deliver against preferred channels for the segments. The way that they simplified the exercise to identify the most critical segments and channels helped them to stay focused on what really mattered for results. Another great quote from Chris, “Database marketing IS loyalty marketing.”
Green Mountain Coffee Roasters – Brian Galloway, marketing manager and Marybeth Longo, Loyalty Specialist told the story of Green Mountain, from their brilliant acquisition of Keurig to their current delivery of over 200 varieties of coffee to 225,000 Caffee Express Coffee Club members (85% of their customer base!). The program is bonehead simple, join for free and get 15% off all deliveries. Make 10 purchases and get 18%. That’s it. They created a coffee consumption calculator that helps customer figure out how much coffee they consume so they can arrange deliveries to make sure they never run out. They’ve had promotions that have caused issues with their club members because if the promotions have as much or more value than the club then the value of the club goes down. It’s a great model, the Gillette razor model with automatic delivery of product.
2) Point Fungibility – As points become a smaller component of the overall loyalty mix, there’s a lot of thinking going on about how to increase both the perceived value and the utility of points. Kula Causes is working with RewardStream to deliver the ability to use points to contribute to virtually any charitable organization that a customer might be interested. It’s an interesting tool to increase customer choice in point utilization while at the same time improving the brand value of the points issuer and doing good at the same time. Expect other alternative point usage entities to become more visible in the next year, there’s a lot of work going on in this space.
Cool product of the conference: Companies are using technology in a lot of different ways to improve the customer experience and enhance the value of rewards and incentives. The coolest thing that I saw was an app developed by Bridge 2 Solutions for Citi Thank You that was presented by Andy Althauser, EVP of Bridge 2 Solutions, and Sina Venus, SVP at Citi. The app allows customers to use their Citi Thank You points as currency to make physical world purchases, and they gave an example using Best Buy. The customer can scan the product bar code in store, and if they have the points and want to buy it, they push a button and the transaction is complete. They can walk out of the store with the product. There’s a video of the app on YouTube.
It was a good show and the biggest takeaway that I had was that there’s a whole lot going on in the space, and that the collision between the old and new, technology and customer expectations is going to yield some very interesting and valuable changes in the space, and all of them will be about the data.
Thad Peterson is Managing Director of Market Platform Dynamics. He has relevant expertise in loyalty and the application of customer behavior to the payments ecosystem in both corporate and entrepreneurial environments. Click here for more on Thad Peterson.