A M ERI CA N E X PRES S
LOYALT Y PROGR AMS
THAT TR ANSFORM
CUSTOMERS
INTO BR AND
AMBASSADORS
A M ERI CA N E X PRES S
LOYALTY PROGRAMS
THAT TRANSFORM
CUSTOMERS INTO
BRAND AMBASSADORS
Customer loyalty can be any company’s best competitive
strength — or its greatest weakness. Excellent products,
services, and customer support are necessary to
generate that loyalty. Further, research and
interviews with program specialists also suggest
companies must find a way to reward customer
loyalty, as well, or watch their customers go
CUSTOMER LOYALTY:
somewhere that will. For example, the average
an emotional feeling of
U.S. household belongs to 29 different loyalty
gained through
support or allegiance
programs, but are active in only 12 1 . Moreover,
satisfaction with an
58 percent of loyalty program members are
enhanced by consistently
inactive (i.e., they haven’t interacted with the
ongoing relationship and
rewarding preferred
behaviors.
program in a year) .
1
Designing a program that succeeds against such odds doesn’t
have to be hard, but it does require forethought, careful planning, and
1
The 2015 Colloquy Loyalty Census, © 2015 Colloquy
2
attention to detail. Effective programs share notable characteristics,
starting with a clear understanding of desired outcomes and related
behaviors to reward, and ending with the ability to use learning from
customer-program interactions to make products and services even
more relevant.
You can tilt the odds in favor of your loyalty program by:
•
•
•
•
•
Aligning program goals with the best drivers of desired behaviors;
Choosing the right rewards;
Designing clear program structure and parameters;
Communicating regularly to build loyalty via ongoing engagements;
Using interaction data to continuously improve the program.
Aligning Program Goals
and Behaviors
You reward loyalty, of course, to increase revenue and profit through
repeat sales. The goals of any particular program, however, must be more
specific, and aligned with explicit behaviors. For instance, you might wish
to move your competitor’s loyalty program members to your program by
redeeming their points in your program. Or perhaps your goal is to grow a
database of contactable customers, so you offer bonus points to
members who opt in to being contacted about future offers. Every loyalty
program should have business-growth goals and ways to influence
specific behaviors that help achieve those goals.
You reward loyalty,
of course, to
increase revenue
and profit through
repeat sales. The
goals of any
particular
program, however,
must be more
specific, and
aligned with
explicit behaviors.
To do that, you’ll need to understand the emotional drivers that connect
customers to your brand and products, and design loyalty program
experiences to enhance those emotions. The economic drivers (points for
cash or other rewards) may get consumers to sign up, but keeping them
engaged requires an emotional relationship. Ultimately, the emotional
goal is trust. Feelings of exclusivity or status might contribute to ongoing
emotional engagement, but the customer experience at every touchpoint
in the program needs to reaffirm emotional responses so that, over time,
trust grows into the key emotional driver.
3
When you’re set on the goals and know the best levers to pull for
achieving desired outcomes, take a look at your competition. Is your
program differentiated? Will it outperform competing programs? Is the
program aligned with your brand or will customers be confused about
why it’s part of your marketing mix? Your loyalty program could actually
become a key differentiator, especially in absence of other differentiators.
“If your product is pretty similar to your competitors’ products, you can
move people from their loyalty program to yours fairly easily,” says John
Ebann, Executive Vice President at Meridian Enterprises, a technologybased customer loyalty program services provider that specializes in
distribution channels, media, and financial services.
Determining Program Structure
and Parameters
Successful loyalty programs are typically tiered, with multiple reward
levels. Tiered programs build engagement over time, with ongoing levels of
achievement that feed into a customer’s emotional feeling of loyalty to help
make it last. Some programs add choice via modularity, allowing
customers to mix and match program qualifications to their own
preferences. Some offer alternative reward levels to different customer
groups based on their value to the business. Lower-value customers could
be encouraged to increase their value by upgrading to higher service levels,
while higher-value customers might be offered additional redemption
options or free perks.
“If your product is
pretty similar to your
competitors’
products, you can
move people from
their loyalty program
to yours fairly easily.”
—John Ebann
Executive VP
Meridian Enterprises
Key to loyalty programs and deeper customer insights in today’s digital
world is engaging with program members beyond purchase transactions,
according to a 2015 report from Capgemini Consulting, which interviewed
160 companies and analyzed more than 40,000 social media conversations
to develop the report. Yet 75% of responding companies reward transactions
alone, with only 25% rewarding further engagement, such as writing reviews,
taking surveys, downloading mobile apps, engaging in social media, etc.2 As
the accompanying figure shows, adoption of this approach varies
significantly by industry.
2
Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age, Capgemini Consulting, © 2015
Capgemini.
4
Whatever you offer, keep it simple. Make sure that the program is easily
explained and understood, and how to achieve reward levels is clear. Make
the registration process as painless as possible; you probably are inclined
to collect rich customer information at the outset, but you’re better off
accumulating it incrementally, over time. Otherwise, you
risk alienating customers who would have responded better to more
gradual assimilation.
Make it equally painless to claim
and receive a reward. If you don’t
deliver reliably, you undermine
trust in your brand. Programs fail
when they become too
complicated for customers to
participate in and manage. Make
the rewards hassle-free and
attainable.
In addition to a web site for
promotion, status tracking and
updates, include a mobile
component making it easy for
customers to engage on the
device of their choice. Consider
using social networks to drive
program usage and collect
valuable feedback.
FIGURE 1:
INDUSTRY-WISE ADOPTION OF ENGAGEMENT-BASED
REWARD MECHANISMS
% of companies that reward customers for at least one form of engagement
Airlines
57%
Hotel Chains
41%
Consumer Products
35%
Consumer Electronics
Retail
Telecom
Banking
15%
12%
7%
3%
Once your program’s structure
is in place, consider how it will
Source: Capgemini Consulting
be administered. Does your
organization have the skills,
resources and internal platform
required, or should you enlist a service partner? Does the loyalty program
need to be integrated with other facets of your CRM program or back-end
systems? A trusted partner can take on parts or all of these activities.
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Choosing the Right Rewards
To be successful, the value of your rewards have to be attractive enough to
influence people toward desired behaviors. “Some people will pick one
loyalty program over the other strictly based on available
redemption items,” says John Hornbogen, Director of Business
Development with RPG Card Services, a global provider of prepaid
card reward solutions to retail organizations. “Let’s just say I like
restaurant A and not restaurant B. If Airline X has restaurant A as
part of their program, I’ll switch over to Airline X.”
OPEN LOOP CARD:
Of note, this may be why more than half — 53 percent — of 500
business decision makers surveyed in recent American Express
research chose prepaid business reward cards as “a great gift idea” to
give customers or clients.3 Open loop cards offer customers ultimate
flexibility, and are therefore a safer bet for loyalty rewards (see sidebar,
Using Prepaid Reward Cards For Customer Loyalty Programs).
a prepaid card or
payment device that
may be used to purchase
goods or services at
multiple unaffiliated
merchants. Open loop
cards may come initially
in fixed amounts or may
be available in variable
Communication:
The Critical Success Factor
load amounts. They
may or may not have an
expiration date.
In the words of Brian Phillipy: “A good loyalty or rewards program is really
a good communications program in disguise.” Phillipy is President of
Afligo, a promotional marketing services provider business unit of Systemax Inc.,
and his words powerfully summed up the importance of communications that we
heard from every interviewee.
Of course that means doing a great job marketing the program to create
excitement and get customers to join — but registration is just the start and even
reward fulfillment is not the end. Since the goal is lasting loyalty, Phillipy insists
your program really only starts when a member claims a reward. Phillipy
describes a kind of loyalty program “circle of life,” where you launch, educate,
reward, and learn — and then do it all again but better, always providing customers
with additional reasons to keep coming back. He recommends a continual diet of
additional offers and promotions to keep members engaged, and a website that
3
2015 Ebiquity Survey Results, Sponsored by American Express: The Business of Incentive Programs
http://www4.ebiquity.com/Business-Incentives-2015-Amex-Survey
6
maintains excitement so they keep coming back to review new ways to earn points
toward future rewards. Ultimately, your best, most educated members become
brand ambassadors who bring others into the fold.
Further, customer communications alone are not enough. Internally, you must
ensure that employees feel excitement for the program, support it, and know how
to execute so they can delight every program member. “If you fall flat on execution
or delivering, you just ruined the positive PR or any warm feeling the customers
had about your organization,” says Phillipy. “It’s paramount to get the internal
teams working and get the communication done, so that you can educate on what
the front-end marketing piece is doing.”
Continuously Improving the Program
Carefully tracking your success metrics
enables you to see trends emerging from
customer interaction data, and to customize
your program accordingly. To accomplish
this, set and track achievable milestones and
build integrated reporting into your platform
(or with a third-party provider). Then,
continually collect feedback from your
members and test program variations
inspired by that feedback.
Further, says Phillipy, “A good program should
ask about a customer’s likes, so that you can
follow up and say ‘Hey! We understand that
you live in the Northeast and fishing is one of
your hobbies. Here’s something that could be
of interest to you.’” Again, your loyalty
program is also a communication
mechanism. Use the data generated from
your customers’ ongoing interactions to
reach out to them with additional offers
based on their behaviors and the profiles
you’ve been building.
Remember, loyalty is an emotion, susceptible
USING PREPAID REWARD CARDS
FOR CUSTOMER LOYALTY PROGRAMS
Interviewees tell us that open loop prepaid reward cards,
like those offered by American Express, are increasing in
popularity for use in customer loyalty programs because
they are a safer bet — flexible, and more universally
accepted. Such cards are the simple and safe way to fulfill
your rewards because from the customer’s standpoint
they provide instant spending power with ultimate flexibility and choice. “You want to make sure that you motivate the highest percentage of your audience,” says John
Ebann, Executive Vice President at Meridian Enterprises.
“With open-loop cards you will motivate pretty much 100
percent because they can get what they want, when they
want, where they want.” Of note, 82 percent of business
decision makers surveyed this year by American Express
agreed that “giving a gift card is a great way to keep your
business competitive”; 74 percent noted they are “a
trusted vehicle to give a monetary gift”; and 64 percent
noted their flexibility.4
4
2015 Ebiquity Survey Results, Sponsored by American Express:
The Business of Incentive Programs http://www4.ebiquity.com/BusinessIncentives-2015-Amex-Survey
7
to constant change and most influenced by a customer’s last interaction with
your brand. If you’re not constantly taking customers’ pulse, you could miss
opportunities or fail to correct missteps in time.
Conclusion:
Loyal Customers — Your Best
Brand Ambassadors
With forethought, careful planning, and attention to detail, any organization
can follow the outline in this paper to design a winning loyalty program. By
rewarding loyalty, your program will reinforce behaviors that increase the value
of customers. Along the way, you’ll learn more about how to increase customer
engagement and satisfaction. Customers will return again and again. Their
purchase levels will increase. They will refer others to your business.
They will become your best brand ambassadors. ■
Five Attributes
of an Effective
Customer Loyalty
Program:
1
2
Well defined goals
and a process to
measure success.
Rewards with strong
perceived value given
for clearly identified
customer behaviors.
3
4
Differentiated and
5
Hassel-free
brand aligned.
Simple rules and
requirements that are
broadly communicated.
redemption.
8