Competition among loyalty programs is more intense that ever, but are consumers cooling to them?
Competition among loyalty programs has never been fiercer. In 2010, more than 2.1 billion loyalty memberships existed in the U.S., according to Colloquy's 2011 "Forecast of U.S. Consumer Loyalty Program Points Value." The report revealed that the average U.S. household signs up for 18.4 such programs.
Despite obvious consumer enthusiasm at the point of registration, however, consumers seem to be ambivalent when it comes to actually using these services. A March ACI Worldwide study revealed that 81% of consumers don't know the benefits of the programs for which they've registered or how and when they will receive rewards. The same study found that 40% of loyalty program members had a negative experience when interacting with a program.
Even after they get their rewards points, consumers tend to shrug. Americans accumulate approximately $48 billion in rewards points and air travel miles annually, according to Colloquy. But of that, roughly $16 billion goes unredeemed. That amounts to about $205 per household each year.
The paradox, says Mark Johnson, president and CEO of loyalty marketing think tank Loyalty 360, is that consumers are more engaged with and more demanding of brands than ever. "Loyalty is no longer about points for a purchase," he explains. "Consumers are looking for ways to engage with brands who listen to them. Loyalty is about timeliness and relevancy. You have to understand each individual and how often they want to be engaged. Your offer must be unique and tailored to each person and delivered through the channel they want it delivered through."
Rewarding your true-blue customers
In 2008, JetBlue Airways assembled a panel of more than 15,000 customers to discuss ways to improve its TrueBlue loyalty program. The public had become "fatigued" with traditional rewards programs, says David Canty, TrueBlue's director of loyalty partnership marketing. The airline wanted to rebuild its program from scratch, based on its panel's suggestions.
"Traditional programs don't work because most of the programs disenfranchise the majority of customers," says Canty. "In most cases, consumers are not flying enough, or they're hampered by restrictions on the back end. We needed a program to be designed through the lens of the customer."
Based on the panel's recommendations, JetBlue introduced a revenue-based program featuring no blackout dates, "last-seat availability" (if there's an open seat and a consumer has enough points, he gets the seat) and one-way awards. The company has continually tweaked the program to offer more flexibility and engagement, says Canty, including implementing a lower threshold for long-haul flight rewards, launching an online TrueBlue community, and partnering with Hilton Worldwide and Marriott International.
Since the relaunch of its loyalty program, the company has witnessed a 50% bump in enrollment, while engagement has improved by nearly 30%.
"We took the time to listen to what our customers wanted, and we tried to execute the program in a more relevant way," says Canty.
Other brands are waking up to JetBlue's realization that consumer need drives the direction of loyalty programs. By listening and responding to customers, these programs can drive brand affinity and higher engagement. However, in order to succeed, they must offer personalized experiences and services, as well as product redemptions and discounts in order to generate return customers. Programs that exclusively offer free airline miles, hotel stays or products will eventually be overshadowed by more dynamic programs that track consumer preferences, purchase data and social media conversations on a one-to-one level, experts say.
Members enrolled in National Car Rental's Emerald Club are not experiencing the "new shiny penny," says Rob Connors, assistant VP of National Car Rental. "People want control and choice and they want things fast. We have to deliver on that instead of trying to be first to market with everything."
In its twenty-fifth year, the Emerald Club offers a healthy blend of customer service and program benefits that are designed, Connors says, to "drive satisfaction amongst the corporate customer," who he calls "our bread and butter."
Emerald Club Executive members are able to bypass the counter at any retail location, choose any car they want at the lot, select an upgrade, return cars faster by opting for electronic receipts and "Drop & Go" service, and secure a reservation for a full-size vehicle with 24-hour's notice.
Emerald Club Executive members can also opt in to receive an alert via text message confirming a reservation and directing them to the nearest National Car Rental location when they land at the airport. National Car Rental has worked with OgilvyOne Worldwide's The Lacek Group since 1993 to develop and refine Emerald Club services.
"It's so easy for a competitor to match a reward," says Dan Knudsen, managing director of client services at The Lacek Group. "If a credit card gives you a point for every dollar, then the program turns into a commodity product. As a business, you have to go broke to try and match that."
Emerald Club members can choose how and when they're contacted. "We can tailor communications," says Connors. "We can contact them quarterly, monthly or weekly. We can also sort them into the right bucket to send them the right messages. Business travelers probably don't want to receive email deals and offers as much as they want information on getting places quicker and getting to the right location."
Like the Emerald Club, the T.G.I. Friday's loyalty program "Give Me More Stripes" was designed to give members a convenient, flexible and speedy redemption experience. The program, which the company redesigned in collaboration with CRM agency Merkle and relaunched in March of this year, offers consumers the ability to create accounts via text message and interactive touchscreens at restaurant locations. Each member receives a "Jump the Line Pass" after three visits, giving them immediate seating.
T.G.I. Friday's segments communications according to consumer preference, so "those who like steak get steak communications and those who like burgers get burger communications," explains the company's SVP and CMO Trey Hall.
The restaurant chain is currently developing technology that will allow consumers to redeem points through mobile devices while at a restaurant location. Hall says that feature will be unveiled in October.
"Human beings are impatient," he says. "We've implemented quick response codes in some of our direct mail so that you can take a picture and see a video. It's that instant. You don't even have to type things anymore. That www.com stuff is out the window. Humans are so fast-paced these days; we don't have the patience to type anymore."
CARLSON CUSTOMIZES LOYALTY PROGRAMS
Hospitality and travel company Carlson relaunched its Goldpoints Plus hotel loyalty program on March 31. The revamped Club Carlson loyalty program featured free in-room Wi-Fi, no blackout dates, rollover nights and complimentary room upgrades, among other benefits.
Launched in October of last year in collaboration with agency Brierley & Partners, GameStop's PowerUp Rewards program has already enrolled more than 12.5 million customers, many of whom are paying members. Like the revamped "Give Me More Stripes" program, PowerUp is still in its infancy, but the two programs share the goal of providing consumers with recommendations and services while simultaneously gathering data so the brands can offer better recommendations and services.
"Based on your preferences, the games you bought and the consoles you own, we can give better recommendations, make better offers and invite you to events," says GameStop CMO Mike Hogan. "If you're a PlayStation owner, we don't want to invite you to a Nintendo event."
Hogan says he wants PowerUp to be more experiential than a traditional points-redemption program. "We're trying to use information to customize an experience that's more beneficial to the consumer than just cash back," he says.
The more interesting features in the PowerUp program are driven by the latest technology. These include an online videogame library, enabling consumers to post, track and share the games they own and the games their friends own. Users can also post games they used to own and games they wish they had. Consumers can send lists of the games they want to their friends and family members. Hogan says consumers will soon be able to post their entire videogame libraries on Facebook, which he hopes will promote the membership program and videogame sales. (He would not say when that feature will be launched.)
PowerUp also leverages Kongregate, GameStop's online gaming site, to award loyalty program members. "You can get points just for playing games. You don't even have to buy anything," says Hogan.
As consumers use Kongregate to earn rewards and enjoy free games, GameStop tracks which games consumers find the most fun to learn more about its customer base. What's more, PowerUp has its own homepage where consumers can take part in interactive polls, discussions and provide game recommendations to other members, all serving to offer even greater insight into the GameStop consumer.
"We use the program to help us understand consumers more deeply, but they like it because they get what they want," Hogan says.
Loyalty programs take flight
Similar to GameStop's linkage with Kongregate, United Airlines leverages its partnership with Cartera Commerce to enable loyalty program members to earn rewards points without even purchasing a plane ticket. With the MileagePlus program, members can shop through United's website and earn 30 award miles per dollar spent on all purchases. In its program, United partners with hundreds of retailers as well as more than 10,000 restaurants.
"We want to make earning miles part of our customers' everyday lives," says Mark Sullivan, managing director of MileagePlus Partner Programs at United Airlines. "Some people don't travel that much, and we wanted to provide an option for those who do to earn points on top. We can't just offer one thing and have our customers be satisfied."
"Technology has enabled much more flexibility for loyalty programs," says Marc Caltabiano, VP of marketing and products at Cartera Commerce. "The ability for brands to roll out new ways of doing things is driven by technology."
United isn't the only airline engaged in a merchant partner program. Hawaiian Airlines has teamed up with more than 1,000 retailers on its eMarket program, which launched in January and enables members to earn HawaiianMiles for every dollar spent with local businesses and restaurants. The program, built in collaboration with Kobie Marketing and FreeCause, provides "information about customers and how they search and shop online," says Vicki Nakata, managing director of partnerships and new revenue at Hawaiian Airlines. "We can also marry that information with a lot of data aggregated from our Visa card to target additional partners to offer additional rewards."
While the information it has gleaned does not yet let Hawaiian Airlines make personalized offers to consumers, Nakata says, the eMarket technology does let consumers easily locate the airline's merchant partners online. Through the eMarket RewardsBar, members are automatically linked to the eMarket network and automatically alerted to deals on merchant partner websites when they complete product searches.
"Social technology enables brands to have a very engaged dialogue," says Johnson. "The real-time immediacy of customer interactions means the feedback loop is lessened. [You should consider your brand successful] if you can be one of the five brands who they'll engage with, who will ask them what they're looking for, and ask them about your service."
American Airlines has leveraged Facebook and Twitter to offer better customer service and more up-to-date flight information. It also has used social media to expand its membership and, more importantly, to reward and engage with its 67 million members in some interesting new ways. In February, the airline launched the AAdvantage "Mystery Miles" promotion to build up its Facebook presence. Consumers that "liked" the AAdvantage program on Facebook were able to earn between 100 and 100,000 miles.
In April, American Airlines and British Airways began promoting the "Miles Millionaire" loyalty contest on Facebook, Twitter and YouTube to acquire new program members. Loyalty members who registered for the promotion earned 20,000 AAdvantage or British Airways Executive Club bonus miles for every eligible trip booked in full-fare economy class or above. Once travel is completed, customers will receive a contest entry email where they can submit an essay answering the question, "If you were cured of the 'Wanderlust' with one million miles, where would you go and what would you do there?"
"Facebook and Twitter allows us to reach beyond email, direct mail and website marketing," says Suzanne Rubin, managing director of customer loyalty and insight at American Airlines. "Social networks expand our appeal to a different audience segment and allows us to interact in a different way with our customers."
Southwest Airlines Co. also launched a sweepstakes to promote its revamped Rapid Rewards program, which debuted March 1. In response to customer feedback the airline received about its former rewards program, Southwest removed blackout dates, seat restrictions and point expirations in order to lure business and long-haul travelers.
To promote the revamped program, Southwest gave away 100,000 "Rapid Rewards Points" to 100 members (nonmembers were urged to sign up for the loyalty program to become eligible to win). Southwest took out no advertising to promote the sweepstakes, with all outbound communications disseminated through Facebook, Twitter and the company's website.
"We promote all of our products and services on social media," says Chris Mainz, senior specialist in communications at Southwest. "Anytime we have a new product or special offer, we'll blast out across Twitter and Facebook. It's a wide audience and a great way for us to talk about our program."
Mainz says social media provides a great avenue for all types of communications because the audience has already expressed interest. "They're engaged and interested in what we have to say. The sweepstakes give them an opportunity to talk about us and in return we give them value."
Dacor, an appliance retailer, didn't reinvent the wheel to enhance its loyalty program. In April, the company launched an integrated direct mail, email and social media campaign to generate new members. Rather than blasting messages out to everyone whose address it could gather, the retailer worked with marketing technology company Lyris to segment likely consumers. Prior to its work with Lyris, Dacor launched a two-week direct mail campaign directed at 40,000 design professionals.
The company acquired only 112 registered members throughout the 14-day campaign. With Lyris' help, the company segmented 2,700 design professionals and sent emails asking them to register for the program.
"We got 128 sign-ups in the first day," says Sherry Chan, Dacor's e-marketing manager. The brand currently has more than 1,300 registered members.
Despite its modest size, the retailer's objective is no different than that of megabrands American Airlines and JetBlue. "Our intent," says Chan, "is to increase awareness for our company, but we also want to strengthen and nurture the community and make them loyal to Dacor."