Check out the latest trends in the loyalty industry.

Key Takeaways from the LoyaltyLive Blockchain Conference

LoyaltyLive 2018 was a recent conference supporting the convergence of loyalty and blockchain, bringing together thought leaders from both worlds for knowledge exchange and education. I attended the conference as an “optimistic skeptic,” hoping to uncover the ways that blockchain will disrupt the loyalty industry.

The world’s brightest are moving fast in this space, and I wanted to share my biggest takeaways from the event.

1. Bitcoin is now ten years old!

The birth of bitcoin is considered to be October 31st, 2008, when bitcoin’s mysterious founder Satoshi Nakamoto published a nine-page academic-style paper called “Bitcoin: A Peer-to-Peer Electronic Cash System.”  On May 22, 2010 the purchase of the two Papa John’s pizzas by Laszlo Hanyecz from another bitcoin enthusiast marked what is believed to be the first “real-world” bitcoin transaction. Hanyecz traded 10,000 bitcoins for two large Papa John’s pizzas.  That transaction is estimated to now be worth around $63 million!

And believe it or not, Bitcoin is not something only used by questionable characters on the dark web to carry out nefarious activities. The value of a single Bitcoin reached nearly $20,000 USD in late 2017 and is now considered mainstream.  But some of the boom has already worn off and Bitcoin is currently trading at just over $6,000 USD per coin.

But Bitcoin is not the only game in town.  In early 2018, over 1,600 unique cryptocurrencies were being actively traded. And even though we’ve reached the 10-year anniversary of the invention, many still state we are still in the equivalent of 1992 for the internet.  There’s much more to come. 

2. Blockchain is not bitcoin. 

Bitcoin is a cryptocurrency enabled by a blockchain technology. Blockchain is the fundamental method of distributing the database records across thousands of computers where all have a simultaneous copy of all the records. No single record change can be made without complete consensus of the blockchain. This is called a “Distributed Ledger” which is essentially unhackable. 

3. Electricity is a big deal! 

Bitcoin itself is estimated to consume as much electricity as the entire country of Nigeria on a daily basis. Many blockchain farms are strategically located close to power plants.

4. Ethereum is a company you should learn about. 

They have created the world’s most prominent platform for implementing blockchain solutions. Ethereum invented “smart contracts” which allow business rules and logic to exist on the blockchain. The previous generation Bitcoin type model was only a mathematical computation using cryptology, which resulted in the creation of a token.

5. If you’ve never heard of ICOs, don’t worry, the craze is over. 

8 months ago, Initial Coin Offerings were popping up everywhere and were funding start-up money as a type of enterprise crowdsourcing. But the market has already experienced there is no current demand for the cryptocurrencies purchased through these ICOs and therefore no value to gain. In addition, governments are beginning to make it more clear that these could be considered financial securities and may fall under the regulation of the SEC.

6. The future of the world is now “trustlessness.” 

A term that means you can do business on a blockchain without having to trust another individual business or entity. Trust is created by the chain itself.

7. No one has figured this out yet. 

No prevailing loyalty business cases were presented in this recent and first-of-its kind conference. The general consensus seems to land on the idea that solutions we may end up seeing utilizing blockchain will likely be back-office applications. In fact, they may not have any visible user experience impact to a customer in a loyalty program.

8. Due to computational complexity, today’s blockchains can only handle less than ten transactions per second. 

Compare this to Visa who alone can process 24,000 transactions per second! Slow transaction time is a core issue yet to be completely solved.

9. The fundamental underpinning technology model is already shifting. 

Engineers are looking for a way to gain quicker consensus on authorizing a transaction. Consensus is the key to creating authenticity and the core value-prop of blockchain. To speed this up requires short-cuts, however the inside engineering secret is that Ethereum 2.0’s “Proof of Stake” model may create vulnerability to security issues due to these shortcuts.

10. Cryptokitties are a thing!

And someone actually paid over $100,000 for a digitally created electronic pet kitten.

Are you looking for additional information on blockchain and loyalty? Here are a few recommended readings:

Blockchain Loyalty by Philip Schelper 

Blockchain Loyalty Blog

Blockchain’s Broader Application & Movements Across Multiple Industries

BitRewards WordPress and Shopify Plugins

How Joseph Lubin’s Power Moves Will Further Stir The Blockchain Controversy Pot 

Behavioral Science and the Loyalty Experience

The lack of understanding that brands have in terms of the human mind, and how it applies to their ongoing loyalty efforts, is concerning in today’s market.

Evan Snively, Loyalty Strategist, sat down with Loyalty360 to discuss behavioral science, and its impact on customer loyalty. For the full interview, click here.

At a basic level the human brain is wired to take shortcuts. Those shortcuts help us navigate the various situations daily life presents. In the loyalty industry, one of the most common consumer shortcuts we encounter is a decision-making tendency known as confirmation bias. This occurs when a person actively seeks out information that confirms his/her existing beliefs instead of undergoing a neutral search for facts.

The result of confirmation bias is that consumers make irrational decisions because they weigh the information they want to see more heavily. In terms of acquisition, that can work in a company’s favor when new customers already hold a positive view and expectation of the brand.  Confirmation bias will influence those new customers to pay more attention to aspects of the brand experience that align to their preconceptions. It is also good news for brands that already have an established relationship with a consumer as customers will continue to look at the brand experience through a lens that reinforces their past behavior (no one like to admit they were wrong, right?). Of course, the flip side of this reveals why breaking existing consumer habits can be very difficult – all the more reason to focus significant marketing resources on your existing loyal customers.

On an individual basis, is lack of loyalty in some people based on their own behavior or is the brand at fault? Or is this a little bit of both?

It is a bit of both. Brands can definitely set themselves up for success by delivering on their core value prop and creating a great customer experience. But at the end of the day it’s the consumer who has the final say. Every consumer, whether purposefully or not, has a sense of their “personal brand”. When you’re talking with your co-workers and you say “Ah, that’s classic Joe” what you really mean is “Joe is acting on-brand for himself.” Loyalty is often a question of whether your brand maps to that individual consumer’s brand.

For some people their “personal brand” is a pragmatic, rational deal-seeker. For this persona, it would go against their own ideology to be brand loyal – they want the best deal, wherever they can find it. Luckily for loyalty marketers, only 3% of people self-identify as part of this “Not loyal to brands at all” segment. We call them “The Detached”. The other 97% of the population we split into two groups – “The Transients” (68%) and “The Resolutes” (29%).

Transients claim “I’m somewhat loyal, but could be convinced to buy a competitor’s brand”. This group is more likely to be driven by price and constantly re-evaluate their purchasing decisions through the Psychology of Relativity (comparing a choice to what else is around) and Social Proof (what is everyone else doing?). Resolutes, on the other hand, state “I’m very loyal and I only buy my favorite brands”. This segment is more likely to create an emotional bond with a brand by identifying with the company’s purpose and values.

A good loyalty strategy will create an environment which nurtures and empowers Resolutes, while also capturing meaningful attention and spend from the Transient Loyalists.

For the full interview and more information on where we believe loyalty is heading in the next 5-10 years, check it out here.

Four Reasons Why AI Will Change Loyalty Forever

At Maritz, we are making a commitment to AI. This is not a “here today, gone tomorrow” trend. It’s going to become an invaluable tool which transforms industries. Loyalty is one of those industries. In fact, loyalty presents some unique opportunities, which makes it ripe for AI functionality.

Just this week, we partnered with our client, HSBC, on a press release which talks about an AI model we recently piloted with their customers. We trained an AI to predict reward preferences for each cardholder, and then sent a promotional email to each cardholder based on that preference distribution. The results were incredible. Of the cardholders who made a redemption, 70% redeemed in the category that the AI promoted to them. That result tells me that the customers were delighted by this campaign. They received the perfect message which scratched an itch they weren’t even sure they had yet.

We predict it’s such a big part of this transformation, that we are partnering with the Incentive Research Foundation (IRF) in a study focusing on the impact and potential of artificial intelligence and machine learning on the rewards and recognition industry. IRF president Melissa Van Dyke says, “For over half a decade IRF has been discussing how big data and personalization are the next big frontier for the incentive and recognition industry.  We have also repeatedly discovered that many programs owners do not know the power of the data their incentives and loyalty programs offer them.  Artificial Intelligence and predictive analytics are the tools industry can now use to take these trends and turn them into actionable information that makes their programs more motivating.”

This is just the tip of the iceberg. There are countless applications for AI in the industry, and we are excited to be on this journey along with our incredible clients. Here are a few reasons why AI is so important to the future of loyalty:

  • The width and depth of loyalty data. Customer Loyalty has better data than just about any industry. Each touch point with a customer is a chance for you to collect data – every email, every visit, every purchase, every reward. This creates a data story for each customer, but the book is thousands of columns wide and millions of rows deep. A human simply can’t read it well. Only with our modern machine learning methodologies can we take that incredible scope of data and make use out if.
  • The need for personalization. The very fundamental aspect of loyalty programs is that your best customers want their experience with the brand to feel different than the average customer. There are monetary benefits, sure, but the non-monetary benefits can be just as important, if not more. Calling the customer by name, knowing their preferences, knowing their history with the brand are things that make that loyal customer feel that one-to-one connection. With AI, personalization becomes more feasible at scale than ever before.
  • Keeping points fraudsters at bay. The prevalence of fraud, to attack the customer’s account and his or her point balance is a threat that is unlikely to go away. AI will be a valuable ally in the prevention of fraud. Many current fraud prevention systems are based on rules – if this specific thing happens, raise a red flag. This is mostly effective, but all rule-based systems are a little bit like a levee. As soon as the fraudster finds the rule, they can break it wide open and exploit the system again and again. AI fraud prevention systems work a little differently. They adapt and learn, so that the holes in the levee are patched and can never be exploited in that way ever again.
  • The future interface: chat. One very tangible example of AI’s rise is the voice assistants – Google’s Assistant, Amazon’s Alexa, and Apple’s Siri. Customers are becoming incredibly comfortable chatting with an AI system daily. This trend will be felt in loyalty too. As this technology gains maturity, the interactions with AI chat systems will get better and be able to accomplish more for that customer. I predict that, in the near future, customers will prefer interacting with a brand over chat, even if a human is an option, because that chat bot will be able to service the customer faster and easier.

The IRF study will be released later this year, but even now it’s a safe bet to predict AI will have enormous impact. Melissa believes AI will have 10 times the impact the discussion around millennials has had. “For many years it was easier to craft programs based on generations because it summarized the data in a way that seemed actionable.  But our research continuously finds there is an intersectionality that makes a loyalty program’s focus on generations suboptimal. AI offers the incentive and reward space the opportunity to harvest data in ways significantly more impactful on motivation than generational considerations,” according to the head of the IRF.

I’d love to hear how you’re using AI to make a difference and encourage you to share your thoughts in the comments below.


3 Trends that Rewrote the Rules of Loyalty Marketing in 2017 (Part 1)

If you don’t like change, 2017 was a bad year to be a loyalty marketer.

Change in the loyalty space is a good thing. Necessary even. Most of our legacy approaches were established when Max Headroom and Duran Duran were still a thing, and have evolved very little since. Stubbornly, loyalty marketing has remained static while the whole world has changed around it.

That’s why we embraced the crazy number of shifts we saw this year that bring the promise of upending our thinking about customer loyalty. From blockchain to conversational commerce, to the ascendancy of the Millennials, most of these changes are still nascent. But three — liquid currency, fraud and security, and the stumbles in coalition programs — have already fundamentally shifted the landscape.

Shift #1. Points Currency Gets Liquid

For most of the history of loyalty marketing, program currency has been locked inside of proprietary reward experiences. Consumers could belong to multiple programs, but the currencies for each lived within walled gardens that purposely limited their reward options. Points could only be redeemed within a catalog specific to each program, or currencies could only be transferred within a tightly managed partner network.

In 2017 an evolution in redemption options finally hit the tipping point, breaking down many of those those garden walls. “Liquid currency” (a term first heard at the Loyalty Academy Conference in 2016) refers to a pay-with-points approach that enables loyalty points to be redeemed out in the big wide world, just as if they were cash. Examples of programs now embracing liquid points include US Banks’s Real-Time Rewards solution, Citi’s Shop with Points and La Quinta Inns and Suites’ Redeem Away! program.

“Liquid” is the best descriptor for this shift because it illustrates the continuum of pay-with-points options. Each solution allows its own specific degree of flexibility or liquidity as to where and how points can be used.

Some solutions offer ultimate liquidity by enabling program currency to be used exactly like cash at any point of sale. Others are only moderately liquid, allowing points to be used only within specific retail settings (for example, Starbucks Rewards allows stars to be redeemed only for Starbucks products at the POS using their mobile app). A number of hotel brands now allow points to be used just like cash, but only during stays at their branded properties.

Despite these varying degrees of liquidity, what does appear clear is that brands embracing this change are looking to grab consumer attention by introducing as much flexibility as possible in the usage of points currency. And the programs offering the most liquidity believe they’ll have the upper hand.

What does this change mean for loyalty marketing?

For consumers, liquid currency opens the door to a significantly more frictionless redemption experience. According to new Maritz research, consumers cite rewards being too hard to earn or taking too long to earn as their primary reason for leaving a loyalty program. Liquid currency directly addresses that point of friction by enabling program members to redeem points much more frequently, for an almost infinite number of “reward” options, and at very small increments of value.

For example, I recently redeemed less than $5.00 worth of Amex Membership Rewards points to pay for a meal at the Midway Airport McDonald’s. That kind of redemption experience — a far cry from working a year or more earning points toward a high-value reward item — will become more the rule than the exception. And as members embrace points being increasingly more fungible, its likely they will no longer think of redeeming points at all, but rather of spending points.

For program managers, liquid currency will challenge your assumptions as to how programs have traditionally worked. Members will likely redeem more frequently, and at lower point thresholds. Paying with points also means redemption patterns shifting away from low CPP rewards like merchandise and in-kind options, which likely will drive up program costs. Spending points outside the brand experience — especially on pedestrian everyday purchases like groceries and gas that have little “memory halo” — also may well have a declining effect on brand loyalty, driving consumer attachment more toward the currencies than to the brand itself.

Its clear, though, that liquid currency will soon be table stakes for any competitive loyalty program. This means brands will need to be vigilant in measuring and evaluating the influence of this new form of redemption on both brand engagement and retention.

Stay tuned for Part 2 and 3 of this post to learn more about the impact of fraud and coalition loyalty.