thinking like a customer

thinking like a customer

Loyalty Programs are Changing

By on June 10, 2009

Last week, I attended the Loyalty Expo, a showcase of the prominent suppliers using incentive rewards programs to drive their business growth. The good news is that some of the companies that are using these points programs are looking at new ways to drive loyalty by becoming more relevant and customer-centered.

The old models are programmatic and have settled into complacency. Many of them have lost their freshness and the system protects underperformers who basically choose to "me-too" other programs. Differentiation is done at the edges, rather than the heart and soul of customer recognition. Barry Kirk from Maritz Loyalty Marketing referred to the traditional incentive programs as "a little tired" and he is absolutely accurate. Today, success depends on the constant gathering of new information about your customers. But this is difficult when your view of the world is narrowly focused on point redemption.

In order to overcome this malaise, the industry is waking up to new opportunities. Obvious at the conference was a direction toward the use of social media. Teresa Caro of Razorfish, among others, talked about how social media has redefined how to measure customer value. In addition to scrambling to identify a social strategy for using Facebook, Twitter and other platforms, suppliers realize that they must have two-way conversations with their customers.

Kudos are also in order for Maritz for challenging the rewards programs to be fun rather than boring. Maritz also did a great job in defining "high-definition" loyalty, a term to bring clarity to future efforts to move vendors away from a push strategy to a fuller understanding of the subtle factors that can influence customer advocacy.

I believe that the key to the future will be recognition of the customer as an individual. This involves instilling into your organization the ability to think about the needs of your elite customers and to engage them at a personal level. Not only does this eliminate the one-size-fits-all technique, it goes beyond to customizing the personal contact that your workforce has with these best customers. As one speaker said, "engagement of customers will shorten their buying cycle," and this is even more true for your top 5-10% customers, who have already proven their loyalty to you.

Strategic thinkers are also realizing that these rewards programs can no longer prosper by operating as a silo within their corporate structure. If the goal is to increase spend and to switch customers to higher-end loyalty, this must be done at an organizational, not programmatic level. It must use the fantastic data that the programs currently have available to take customer loyalty to the next level.

Chris Matthews, host of the MSNBC show Hardball, referred to this as a "journey of rediscovery" in his book American. This is what occurs when you commit to looking at your organization through the eyes of your customers. You still have the same products and services, but framed around the customer instead of the internalized way of looking at them. Matthews gives us a great example, using the American Revolution pamphlet "Common Sense" by Thomas Paine. He makes an important point--that this treatise not only called for independence from England, but, more fundamentally, for separation from the past. This is what thinking like a customer also represents--a new direction in decision-making. The future is not programmatic, but rather, is centered on your customers and their status in your elite group.

The traditional approach of the incentive rewards industry is shifting by separating itself from the past. It is beginning to focus on changing behaviors (rather than reinforcing them through points) by adding value at every touch-point of the customer experience. The new model uses every employee by adopting what Rudy Giuliani, former mayor of New York City, termed "getting every brain in the game." Loyalty programs are changing, but there is a lot more to do in order for them to reach their goal of becoming more customer-centered.

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