As one of the oddballs who worked in both the ‘product’ and ‘service’ sectors on both sides of the USA-Canada border, I’ve seen many loyalty programs arrive, and others go bust. Researching what consumers want from their loyalty programs may seem easy (compelling savings rate, relevant incentives to redeem, VIP treatment, respect, easy visible point status, instantly redeemable, few ‘conditions’ or delays to redeem, etc).
Believe it or not- loyalty program design is actually fun! What’s not ‘fun’? Running one! ie if you think running a loyalty program is easy, think again!
These are LOYALTY programs- every move you make is visible to your most valuable players (MVP’s); a misstep is costly- a lesson that some Loyalty ‘experts’ seem reluctant to accept (Air Miles?). In fact, running a loyalty program is so daunting that Canada’s largest grocer, Loblaws resisted implementing one (decades after Metro, Sobeys and Safeway all had one), until their I.T. system had been upgraded and they had access to lessons learned on recently acquired (and admirably run) SDM Optimum program. Better to not launch at all, than launch badly and ruin the brand’s relationship with MVP’s. Props for the patience and maturity to take that path on that timeline!
And now Nordstrom’s is launching a Visa-based loyalty card.
Why not start their own loyalty program, on their own? Because that would be costly in terms of resource and risk, especially…
- Infrastructure complexity & costs
- Data security responsibilities/ liability
Well, okay, so now it seems obvious that every firm should just partner up with AirMiles, or Visa or Mastercard or Amex, right? Right?
Well now consider what the downsides of a ‘private label’ loyalty arrangement might be:
- you don’t own the data – for modeling, or other analysis (you’re always requesting the data)
- you probably won’t get ‘full picture’ data (how they shop/behave across categories, payment methods, channels)
- you don’t control ways to access consumers
That’s a sobering list of drawbacks to going the Private Label route, as Nordstrom’s seems to have done.
Can’t really have it all, can you? But then again, decades of experience with loyalty programs teaches us that ‘easy’ doesn’t describe loyalty management, nor the decisions that accompany loyalty management programs. Tread with care!
-and a Financial Post follow up on Loyalty Cards just a day later: