The Key to a Successful Loyalty Program

Introduction
The loyalty market has reached a state of maturity in a variety of sectors. The majority of loyalty programs have lost their unique selling proposition. Simply operating a loyalty program is no longer a differentiator.

We certainly see many similarities in financial loyalty programs in the US, especially with credit cards, where it seems as though every bank makes the same offer for signing up for their credit card.

ICLP has a strong view point on loyalty. It’s not just about giving your customers discounts or initial bonus points. These customers are likely to do business with you anyway, and this action may not change behavior and may not make them loyal to you.

At ICLP, we define loyalty as combining transactional data with attitudinal insight to achieve a desired, sustained behavior change that results in incremental revenue. We also believe that a one-size-fits-all loyalty program does not fit all!
 
Successful loyalty programs are those that:

• meet or exceed the organization’s commercial objectives and KPIs
• make a return on investment
• communicate one-to-one and not one-to-many
• deliver relevant, timely messages
• are frequently and consistently updated
• recognize customer needs

In addition, loyalty marketers have to treat their programs as a long-term investment. New strategies and tactics, as well as innovative loyalty technology platforms backed up by sound program design, are essential for a program to meet the changing consumer landscape.

Today’s customers are smarter, better informed and more intolerant than ever of “being sold to.” Their expectations have heightened over the years; they now require a hassle-free and gratifying experience. When they experience good service elsewhere, they bring an “if-they-can-do-it-why-can’t-you?” attitude to their next transaction.

When evaluating your loyalty program, the following questions should regularly be asked:

• Have the benchmark programs in your industry continued to innovate and promote, while your own program has stalled?
• Have you recognized emerging customer trends and adapted your program accordingly?
• Have you measured the performance of those customers engaged with your program vs. a control group of non-participating customers?

Differentiation is a strategic decision
It is imperative that loyalty programs differentiate themselves from the competition. Defining what role the program will play in the market and how to ensure continued differentiation is a strategic decision. 

Increased loyalty program differentiation can be achieved by focusing on:

• partnerships
• channels
• efficiency and a stress-free experience
• reward and recognition portfolio
• technological innovations/delivery platform
• soft benefits (“special” treatment through all touch points)

Opportunities for differentiation
Traditionally, the following criteria marked how you differentiated your program:

• to be the most generous program in the market place
• to be perceived as the most innovative program
• to offer the most rewarding program to elite-level members
• to be one of the top 5 programs in terms of accrual and redemption rates
• to have a fast track for members to become Elite or Gold members

Characteristics of real differentiators
However, programs now need to exhibit new thinking and flexibility in order to keep the customer interested and engaged not just for the short- and mid-term, but for the long-term, too.

Real differentiators are a combination of several components:

• Client view―exceed expectations and anticipate emerging needs

Differentiating is about giving compelling and consistent value to the customer, thus positively surprising the member’s expectation.

The best opportunity is in anticipating customers’ needs and responding to them accordingly and at the right time.

• Program view―achieve technological/functional enhancements

Competitive program matching is more difficult when a more complex product, such as innovative technology and software, is introduced; copying would require considerable human and financial resources. In general, structural program changes with a mid- to long-term impact take more time to develop and are often too complex to copy; as a result, differentiation is more pronounced.

• Competition view―time to market and visibility

The time it takes to bring an offer to market is a determining factor. The first program to implement a successful new technology will gain first-mover advantage and all the benefits associated with it.

• Membership/customer service view―dashboard effectiveness

Keeping your dashboard intuitive and fresh will enable sales and marketing to post, manage and analyze campaigns and customer segments. In addition, keep your dashboard optimized for your contact center and membership center to maximize usage.

Finding/detecting differentiators
It is imperative to understand that opportunities to differentiate and competitive advantage can only exist if they are built around the customer’s needs and interests (the buyer’s perspective) and not on what the company can make and sell.

Determining and detecting the best opportunities and tactical approaches relies on the flow of information:

• creative use of database analysis
• customer feedback
• benchmarking with the competition and other companies outside the industry
• dialogue with loyalty experts
• advice and preferences of employees in the parent company
• lifestyle research
• good intuition and the ability to recognize trends

Remember―the opportunities of today are the loyalty drivers of tomorrow!

Examples of loyalty differentiators
Some examples of programs/tactics leading the way:

• InterContinental Hotels Group’s (IHG) Priority Club Yahoo! Toolbar:

A co-branded Yahoo! Toolbar developed exclusively for Priority Club Rewards members. Once downloaded, the Yahoo! Toolbar offers a direct link to the loyalty program member information, including account activity, current reservations and special offers.

• British Airways Executive Club’s Household account:

Members collect BA Miles in a so-called household account. Travelers and up to six family members can earn and redeem BA Miles together.

• Real Madrid’s co-branded credit card

Launched in March 2005, this co-branded card is the first with a football (soccer) team. The card joins hard benefits, such as cash back, with emotional benefits and meaningful passion for a football team. The card offers money for each goal scored by Real Madrid in the Spanish Professional Football League. Each month, up to ₤2.00 per goal is possible, depending on card usage.

Differentiating unique experience rewards
Most loyalty experts agree that rewards (hard benefits) are an important element of every loyalty program. But rewards, like the programs themselves, often are too similar and don’t differentiate the program.

Unique experience awards can help successfully differentiate a program in terms of reward redemption. Unique experience awards embrace the idea of redeeming miles/points for:

• once-in-a-lifetime experiences
• premium or high-perceived-value merchandise and service
• lifestyle or lifecycle-related themes (aspirations members can only dream about)

For some members, these experimental and inspirational awards are not just rewards. They become opportunities of a lifetime. The consumer will aspire to redeem, which means growth spending, increased share of wallet, or reduced attrition from the loyalty sponsor.

Unique experience awards will increasingly leverage the effectiveness of loyalty programs and help overcome ubiquity.

A few examples of unique experience awards:

• Aeroplan: Your Style Rewards

Aeroplan offers one-of-a-kind adventures like concerts, dinners and spa packages.

• TAP Victoria: A vida ẻ bela

A wealth of experiences, such as a hot air balloon ride followed by a romantic outdoor brunch with champagne, or a spa weekend on the beach.

• Virgin Flying Club: Virgin Galactic

A trip to space in 2008 for 2,000,000 miles.

In order to create such differentiating rewards, there are a few rules to follow:

• Use customer insight―look at buying patterns, lifestyles, etc. Know your members, or at least know what they find exciting
• Combine this insight with soft benefit recognition elements
• Be creative. Don’t be afraid of doing something completely different
• Know the true value of the reward (including distribution costs)

Future trends and challenges
Next to unique experience rewards, innovative products and services certainly will make the difference in the future.

A taste of what we expect to see more of in the future:

• Fun and entertainment on the web

More and more programs will add online games to their suite of loyalty products, using them as action-packed “edutainment” for their program members.

• Self-service loyalty kiosks

Customers will enroll and receive their membership card printed directly from a kiosk within seconds. Existing program members will use the kiosk for printing account statements or retrieving other program information and offers, including e-vouchers to be redeemed on the spot.

• New communication technologies (mobile and blogs)

Using mobile communication, customers can check program balances and get easy access to rewards such as mobile tickets for theme parks, or links to download selected content. In terms of blogs, what a great way to get cheaper and faster customer feedback vs. focus groups or surveys.

• Collector clubs and Special Interest Programs (SIP)

Sub-clubs built around earning and burning patterns, special interests and geographic regions. The creativity comes with the way programs allow members to “customize” their experience. Members aren’t stuck with a one-size-fits-all program; instead, they can choose various “packages” of benefits.

• Auctioning―let the market decide the price

Loyalty points/miles auctions to bid for awards will become increasingly more important to airlines, hotels and other operators aiming to burn off points/miles liability on an offer-and-demand basis. And auctions are a fun way to drive participation.

• Better use of technologies

RFID (Radio Frequency Identity Device) chips in loyalty or credit cards can identify a program member and recognize their program status and preferences, which means personalized benefits such as the printing of a relevant bonus offer as the member walks past a shelf in a supermarket.

• Simplify, simplify, simplify

Make sure your program is streamlined, simplified and easier for the customer to use.

Programs delivering these trends early enough should succeed in delivering an effective differentiation in a crowded marketplace.

Conclusion
Consumers do take note of what stands out from the crowd. Sharp positioning and innovative techniques certainly will best contribute to sustainable differentiation and keep your customers engaged and your program fresh.

About ICLP
ICLP is the world’s leading specialist loyalty marketing agency. We manage and profitably influence millions of customers for hundreds of clients. We specialize in developing, deploying and managing loyalty programs across a variety of sectors.

We deliver world-class loyalty marketing solutions via our three core competencies:

• consulting
• creative
• client services

What separates ICLP from other agencies is the fact that we are a true loyalty agency, with a strong focus on loyalty strategy. ICLP employs many of the world’s leading loyalty specialists and has designed, implemented and managed loyalty and recognition programs for a variety of clients around the world. The programs we design enable our clients to track, understand, measure and modify the behaviors and attitudes of their customers.

ICLP has 12 wholly owned offices around the globe, and is a part of The Collinson Group, a privately owned company whose group interests include a global portfolio of complementary specialized agencies and marketing services businesses.

To discuss an audit or health check of your loyalty, CRM or relationship marketing programs, please contact Dan Blanchard at (415) 503-3975.