Tag Archives: loyalty

Loyalty Programs vs Tech Ecosystems

Two topics covered lately that have caught passion of savvy Seneca students: 1. Ecosystems; and 2. Loyalty Programs.

How many Ecosystem partners does a typical consumer need?

Just ONE! imo it’s critical for Ecosystem players to be present in ALL ‘related’ categories of use, or risk being abandoned for a truly full-service tech partner.

Amazon, fb, Google & Apple all ‘play in’ several of these: file storage & sharing, photo storage & sharing, social media sharing, home security & home device monitoring, interactive voice recognition queries & trivia, home audio speakers, mobile shopping, customer reviews, personal banking, mobile payments, chat apps, mobile phone, film viewing, amateur video production & sharing, facilitating communities for ‘sharing’ resources, skills & time, etc, etc, etc…

Also catching students’ interest: Macro (multi-channel) loyalty programs: eg Aeroplan, AirMiles, PC Optimum. Loyalty players, in contrast to Ecosystem players, need not be present in every category, but typically tether to 2 anchors:

  • a partner providing ‘dreamer you’  an aspirational, indulgent big incentive (a vacation); and
  • a low value (frequent-use) anchor motivating ‘rational you’ to keep that loyalty tag/card on hand day to day.

Case in Point: Aeroplan lost both its Dreamer anchor – Air Canada- and its Rational anchor- Esso- but quickly regrouped, securing an Amazon partnership to fill both roles! (ie use Amazon for daily shopping, or buy yourself a holiday!).

However, the ‘anchor principles’ of critical relevance, don’t constitute the full list of success criteria for Ecosystem players, or for Loyalty programs.

What made this more evident lately? Evidence of their need to AVOID something- Leaks. And evidence they need to SHOW something- Respect.

iCloud leaks, fb leaks, Equifax leaks, etc make some consumers leery of ever joining a loyalty program. And undoubtedly cause others, to drop out.

Loblaws’ ‘transitioning’ of  trusting SDM Optimum & PC Plus loyalty members to a newly consolidated [ ahem- more efficient(!)] program has been awkward for the very customers they should respect & value.  A few years ago, AirMiles not only accelerated point expiry; they also imposed a needlessly complex, restrictive new 2-tier- award redemption structure. The 407 de-certifies members who spend ‘merely’ $3,000/year on their service via a rude letter (“You no longer qualify….”).  I received such a letter; its inept wording prompted a few laughs (a ‘Hall Of  Shame’ candidate, says a nearby CRM expert).

Loblaws, AirMiles and the 407 violate a basic principle of Loyalty programs: treat longstanding customers with some respect.

If you soon encounter press releases or Investor explanations about how tough the Loyalty industry has it, or how consumers are being more difficult, etc, feel free to join me in a laugh or two at their deserved expense.

Of course I could be wrong.

I’d welcome any comments!

Steven

 

Loyalty and Data – decisions galore!

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.

http://business.financialpost.com/news/retail-marketing/nordstrom-launches-canadian-credit-card-with-loyalty-rewards

Why not start their own loyalty program, on their own? Because that would be costly in terms of resource and risk, especially…

  1. Infrastructure complexity & costs
  2. 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:

  1. you don’t own the data – for modeling, or other analysis (you’re always requesting the data)
  2. you probably won’t get ‘full picture’ data (how they shop/behave across categories, payment methods, channels)
  3. 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:

http://business.financialpost.com/news/retail-marketing/canadians-just-cant-seem-to-quit-loyalty-cards-despite-all-of-the-data-breaches-and-pr-headaches

Steven Litt