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What Does a Loyal Customer Really Look Like? (Podcast)

Have you ever wondered how banks and credit card companies can attract new customers and grow their purchasing relationship? To attract, engage, and retain those best customers, we have spent decades helping banks and financial institutions grow customer loyalty and create strong relationships with their customers. VP of Loyalty Strategy, Barry Kirk shares his experience and expertise on the Payments Journal podcast, hosted by Editor-in-chief, Ryan McEndarfer. The podcast covers different loyalty topics and how they specifically apply to the banking and credit card space.

Listen to the full podcast on Payments Journal or access the full transcript here. By listening, you will hear about: 

  • The correlation between brand loyalty and reward spending habits 
  • Insights about customers point saving and spending habits 
  • Which incentives customers actually prefer 
  • Tips for financial institutions and card companies that want to better connect with their loyalty program customers 
  • How companies can work to change customers from mercenary loyalty to cult loyalty 

To listen to the podcast on Payments Journal, click here. 

The Multi-Loyalty Framework

PODCAST: How to Build Brand Loyalty Today and Tomorrow

Consumers are human beings first. This is important to keep in mind when you think about building customer loyalty.

On the surface, that can be easy to remember, but you’d be surprised how easy it is for people to forget that. So many businesses today are in this downward spiral of reducing customers to a statistic or entries in a database. As marketers, we often think of consumers in segments and there are good reasons for doing that, however – it’s critical to remember at the end of the day, you are dealing with human beings – and you have to understand what makes them tick in order to influence them. And that’s what marketing is all about.

The shift over the last year or two to the focus of AI over big data has been very helpful in solving the problem of dehumanizing consumers. Big data was sort of a useless term – it didn’t really tell us anything. Artificial intelligence is essentially a way to move beyond thinking of consumers in terms of numbers and humanize it into the experience.

Maritz Loyalty’s VP of Loyalty Strategy, Barry Kirk, was recently featured on the On Brand Podcast: How to Build Brand Loyalty Today and Tomorrow with host Nick Westergaard. In this episode, Barry expands on the recent shift to Artificial intelligence, as well as:

  • How loyalty is today
  • The modern forms of brand loyalty
  • The impact of neuroscience on marketing
  • Tips on how to focus your own customer loyalty program

Click here to listen to the full podcast!

The State of Global Loyalty: A Conversation About South Africa (Series)

What does customer loyalty look like outside of the U.S.? How are companies around the world addressing the evolving challenges of customer retention? And what can U.S. loyalty marketers learn from their global counterparts? 

Welcome to our Global Loyalty Series! Seeking to find those answers, I recently posed questions to loyalty experts in our Maritz Global Partner Network, challenging them to offer insights  unique to their regions around the world. 

This week, I connect with Barry Coltham, Managing Director for Achievement Awards Group, with input from Richard Cramer, Director of Loyalty.

Over the past 26 years, Barry has been instrumental in building the company’s deep expertise in automotive, banking, healthcare, and retail verticals and leading major research-based initiatives. Barry has a Master’s degree in Business Leadership and is a Certified Human Performance Technologist through the International Society for Performance Improvement.

 

As the Director of Loyalty, Richard leads a team of passionate loyalty marketers and analytics experts to deliver sophisticated, creative loyalty solutions. He is a veteran advertising executive with deep understanding of big brands, consumer psychology and relationship marketing. Maritz has been a shareholder in Achievement Awards since 2000.

1. What are some of the biggest challenge companies in South Africa are facing when it comes to retaining loyalty program members? What opportunities do you see for these brands/marketers? 

The major challenge is ongoing member engagement once programs have launched. We now have over 130 loyalty programs in South Africa, many that offer the same type of rewards. The value propositions have been watered down due to the on-going cost of running the programs which has resulted in member disinterest. Research by Truth Loyalty in 2017 found a decrease in the number of programs that women participate in, from 6.1 programs down to 5.6, as well as a slight decrease in the number of programs men belong to. If brands want consumers to stay involved with their program and frequently engage with it, something needs to change. The opportunity in South Africa is to go beyond rewards and to engender emotional connection and customer experience.

2. What do you believe makes a loyalty program in South Africa successful? 

A great value proposition and simplicity, the ease of use of a program, and surprise and delight rewards that are personalized and make members feel special. Another important element is the integration of programs with partnerships that are relevant and add value to the members’ lives. We can see in South Africa that the top programs are the ones that are easy to use.

3. What cultural changes are you seeing in South Africa that are affecting customer loyalty? 

There is a big transition over to mobile, and more people using internet on mobile phones than laptops and more mobile phones than the overall population. There is a fragmented, costly media landscape that does not reach rural poorer communities – mobile phones are the only way to access these members.

4. What’s the biggest piece of advice you have for loyalty marketers? 

There should be an understanding that you will have to increase sales by 6% to pay for the loyalty program. Most programs in South Africa reduced their value propositions because they did not factor in the cost of running the program. Employ a Specialist Implementation Agency and SAAS platform with experience in running the programs. The loyalty program is an integral part of the company’s DNA.

5. What is the impact, if any, of government regulations on loyalty programs in South Africa? 

There are two major legal acts that impact loyalty programs in South Africa: The Consumer Protection Act (CPA) and the Protection of Personal Information Act (POPI).

First, the CPA states that loyalty credits or awards are a legal medium of exchange (like cash) when suppliers offer it as consideration for any goods or services offered.  Because the loyalty benefits are legal forms of exchange, the goods given in return will also be subject to the CPA. This means that consumers are fully protected against defective, unsafe and hazardous products in the same way as a consumer who purchased goods and services with cash or on credit. Under the CPA, suppliers have a duty to ensure that the goods offered to consumers in loyalty programmes are in stock. In most advertisements you will hear the “while stocks lasts”, “subject to availability” or “terms and conditions apply” at the end, which suppliers believe cover them if they are not able to satisfy the promises made. The other major legal act, The Protection of Personal Information, refers to how loyalty programs process a lot of personal information and the processing of this information must be done lawfully.

About Our Global Partners:

Maritz partners with top loyalty practitioners worldwide as part of the Global Strategic Partner Network.  Carefully vetted, trained in Maritz’ solutions and in regular communication with our solution leaders, Strategic Partners bring geographic market-specific expertise to our global clients. 

The State of Global Loyalty: A Conversation about Europe (Series)

What does customer loyalty look like outside of the United States? How are companies around the world addressing the evolving challenges of customer retention? And what can US loyalty marketers learn from their global counterparts?

Welcome to our Global Loyalty Series! Seeking to find those answers, I recently posed questions to loyalty experts in our Maritz Global Partner Network, challenging them to offer insights unique to their regions around the world.

First up, I connect with Michael Lausenmeyer, Managing Director of Boost Loyalty Europe.

Michael is experienced in CRM & loyalty consulting, OMNI-Channel Marketing, and international project management and offers significant experience from the worlds of  retail, manufacturing, media, pharmaceutical, travel, finance, energy industries.

Michael, what are some of the key challenges and opportunities companies in Europe are facing when it comes to retaining loyalty program members?

One challenge is how to make members redeem their points and  how to keep them active in the programs. It is not so much that people quit the program, they even collect points, but they do not get involved enough to redeem points. There’s also the question of what to entice the members with. There is a tendency to focus on the short-term effect of monetary rewards, which only fuels the need for additional and higher discount measures and is therefore hardly sustainable.

We see great opportunity in digital solutions. Seamless collecting and redeeming of points via a personal device for one, but also engaging customers in new and different ways with new communication technology. Customers are much more inclined in sharing data when they get something in return.  Also, rewarding engagement has to be much more part of loyalty in the future. This personalized yet automated communication and attention to the individual customer is the key to activating them profitably.

What cultural changes are you seeing in Europe that are affecting customer loyalty?

In many European Countries there will be a further shift towards the use of individual handheld devices and even better coverage and faster connections. Brand and loyalty programs will be competing even more intensely for a place on the first screen of smartphones. There will be a shift in demographic with the Boomers retiring and a new generation of shoppers moving up. For them, monetary rewards are still relevant, but that is simply not enough to get close to the consumer of the future. New technologies and new loyalty concepts will be influenced by and will in return influence shopping and loyalty behavior.

How are European government regulations influencing loyalty strategies?

Changes in data regulations might have impact on the way personal data must be handled in the near future. There will be an optimization in Europe starting end of May. I cannot imagine there being less transparency in the future, but I would guess there will be many more security regulations that need to be met when handling customers’ data.

What’s your best piece of advice for loyalty marketers?

Stop doing loyalty like it was done ten years ago and don’t be led by personal preference. Adapt your programs and measures to your customer of the future not the current one.

Who do you see doing a great job at driving loyalty or consumer engagement?

I am member of several programs, but mainly trade or airlines. I really like the mechanism of Cookie Clicker though, because in my opinion, in its simple way this website applies pointers from behavioral science very effectively.

Finally, what is your wish-list for an ideal loyalty program for European consumers? What would this program look like for participants?

  • Relevant Service and information
  • Seamless applicability
  • Transparency in data use
  • Rewards for my time and contribution not just money spent
  • Impeccable technical set up and design
  • This program would put the participant first, giving them a reason to be part of the program.

About Our Maritz Global Partners

Maritz partners with top loyalty practitioners worldwide as part of our Global Strategic Partner Network.  Carefully vetted, trained in Maritz’ solutions and in regular communication with our solution leaders, our Strategic Partners bring geographic market-specific expertise to our global clients.

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

(This is the third in a three-part series on shifts that occurred in 2017 that will have long-term impact on the loyalty industry. Part 1: Liquid Currency covered the adoption of pay-with-points solutions and Part 2: Loyalty Program Fraud covered the increasing awareness of program hacking risks.)

Shift #3: Coalition Loyalty Programs Stumbled

If you were one of the many loyalty experts predicting the likely failure of any coalition loyalty model in the US, you might have ended the year enjoying a bit of schadenfreude.

2017 was simply a tough year for coalition loyalty to catch a break.

While the dominant form of loyalty program outside of the US — one wherein members can earn and redeem points freely across a defined network of complimentary brands (the coalition) — a large-scale coalition loyalty initiative has never succeeded in the US. That seemed about to change when American Express announced the launch of Plenti almost three years ago. But since then we’ve witness not just the multiple stumbles experienced by Plenti, but challenges with both of its Canadian-based counterparts:

  • Plenti – While boasting more than 30 million members and the support of Amex, Plenti has struggled to attract and retain key partners to maintain a strong coalition. And it ends the year seeing the exodus of more partners and declining support from their parent entity. 
  • Air Miles – the Canadian-based coalition program owned and operated by LoyaltyOne suffered a significant PR hit starting late in 2016, when Canadian media began to cover the upcoming first-time expiration of Air Miles points. Due to overwhelmingly negative public reaction that continued into this year, Air Miles reversed their decision and agreed to reimburse members who had already dumped their points. That decision resulted in a multi-million dollar loss, much of that in unrealized breakage. The incident pushed some Canadian legislators to pursue legal restrictions on loyalty point expiration policies. AirMiles subsequently announced other changes to their program in an effort to gain back some of the member good will lost over their point expiration issue.
  • Aeroplan – the Canadian-based coalition program, owned by Aimia, was jolted earlier this year when its key partner, Air Canada, announced it was leaving the relationship by June 2020 to establish its own proprietary loyalty program, a move that could potentially cost Aimia millions of dollars in lost revenue and leaves their coalition program without an airline anchor brand.

So, as I noted — a tough year for North America coalition loyalty schemes.

Its the Consumer, Stupid

When I first wrote about Plenti back in March of 2015 I asked, “Is Plenti the holy grail of loyalty?” I outlined my rationale for being skeptical that a coalition could succeed in the US, while expressing optimism that if any entity could pull it off, it was Amex. My main concern was whether US consumers would actuality understand and embrace a coalition loyalty program.

New data from a Maritz 2017 consumer study only reinforced my concerns:

  • 50% of surveyed consumers said they were not familiar with Plenti at all (although of those who were, a majority had a positive or neutral view of the program). 
  • Less than half of self-identified Plenti members said they have ever redeemed for a reward through the program.
  • The majority of members said they only purchase from one or two coalition members (defeating the main value prop of the coalition model)

Amex might still put it out, but its just as likely that the stumbles experience by Plenti and the significant challenges with Aeorplan and Air Miles portend an inevitable decline of the coalition model the US.

Implications for Loyalty:

When Plenti debuted it was considered a potentially serious threat to proprietary loyalty approaches. Coalitions offer brands the allure of participating in a loyalty scheme without the up-front costs and commitment that can come with launching their own program. But the last year has shown the weaknesses of the coalition model, particularly in its inability to engage US consumers. And when you take into account the challenges with Canadian coalition schemes, it seems that many companies are making the calculation that they are better served by owning their own program where their brand rules supreme. Moving into 2018, its a safe bet that proprietary loyalty will continue to have strong hold over the US loyalty market.

Thanks for following along with our 3-part series – Maritz Loyalty wishes you a Happy New Year!

3 Trends That Rewrote the Rules of Loyalty Marketing In 2017 (Part 2)

(This is the second in a three part series on shifts that occurred in 2017 that will have long term impact on the loyalty industry. Part 1: Liquid Currency covered the adoption of pay-with-points solutions.)

Shift #2: Loyalty Program Fraud Comes Out of the Shadow

Every sizable loyalty program was a victim of attempted fraud or hacking in 2017. Those who believe they weren’t, simply haven’t paid attention.

The fact that loyalty programs are at significant risk for hacking shouldn’t be a shock. Customer data breaches are predicted to cost business some $8 trillion over the next five years. In the ecommerce space specifically, fraud already exhausts 8% of the average merchant’s revenue stream, while fraud management accounts for 21% of operational costs.

Fraud and hacking are a daily reality in an increasingly connected consumer world. The loyalty industry, which manages vast amounts of consumer data and tens of billions of dollars in point value, is not immune. And innovations like point pooling, gifting and liquid currency, while bringing new choices for consumers, have also added new access points for fraud.

The overall loyalty industry’s risk of exposure on this topic is significant, as I explained in an interview with Kiplinger earlier this year:

“Loyalty managers have kept a low profile with regard to breaches that have occurred, but it’s just a matter of time until there’s a well-publicized breach of a large program—most likely in airline or hotel rewards because members accrue significant value in those programs.”

Thankfully, a major high-profile breach has yet to occur. But loyalty program fraud still became an unavoidable topic in 2017.

The Weak Link

This year, the loyalty space began to address the topic of fraud. Until very recently, program fraud was only discussed in hushed tones or dismissed as a non-issue. Now all major loyalty agencies proudly promote their fraud protection tools and process. Increased awareness has also inspired the launch of several new industry events dedicated solely to addressing fraud detection and prevention. The topic is also a frequent subject of mainstream media coverage.

Companies with programs now recognize that hackers and organized criminal networks have identified loyalty currencies as potentially easy targets for one simply reason: low consumer awareness. Unlike their bank and credit card accounts, few consumers closely monitor their earned point balances or update account passwords on a frequent basis.

However, consumer awareness may be shifting. According to new consumer research from a 2017 Maritz study:

  • 56% of consumers now indicate they are concerned about loyalty program fraud
  • While only 7% of consumers identify themselves as having been a victim of program fraud, of those who have experienced fraud, 58% say the event made them less trusting of the brand overall, and 45% said they are less likely to purchase from that brand in the future. *A previous version of this blog said that 17% of consumers reported fraud within a points-based loyalty program. The correct figure is 7%. 

What does this change mean for loyalty marketing?

As consumer awareness of loyalty point fraud rises, the risk to brands will be three-fold:

  • Breaches of member accounts pose a major PR risk, both to your program and to your brand, since more attention is likely to be paid when a breach does occur.
  • Breaches pose a financial risk as brands are responsible for reimbursing lost points or fraudulent redemptions.
  • Most importantly, a defrauded loyalty program member may become a lost program member.

But, there is an upside.  While the potential consequences are serious and could be costly, the sunlight now shining on the possibility of program fraud should reduce the risk of fraud occurring. Heightened awareness by brands should bring increased attention to fraud/hacking prevention best practices, with increased expectations that loyalty partners provide advance fraud detection tools. Similarly, consumers who realize their points could be attractive to criminals will likely monitor their accounts more closely and recognize the real dollar value of those points. Increased vigilance by both groups will be major win for loyalty marketing in 2018.

 

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.