Colloquy’s Ferguson: Networks, Data, Convergence Are The Keys to Transforming Loyalty Strategy

NEW YORK — The power of networks, of data and of convergence are key evolutionary trends that will transform your loyalty strategy.

That was the top takeaway from yesterday’s keynote address given by Rick Ferguson, editorial director, Colloquy, at the final day of the 2006 DM Days New York Conference & Expo here.

When discussing networks, Mr. Ferguson spoke specifically about social networking systems that tend to be virtual.

“They have exploded in popularity,” he said. “And they have the power to build advocacy.”

Mr. Ferguson said social networks are important for loyalty programs because they “attract advocates, or people who are champions of your brand.”

Mr. Ferguson said group-forming networks are growing and becoming powerful. For example, he said, currently there are 70 million registered users and 4.8 million Flickr users — which is a 346 percent increase over last year.

“When we are talking about the value of these networks, we are not talking about their economic value, but the value they offer to their users, and they are very, very valuable to their users,” he said. “That’s why they are growing.”

He also offered examples of companies that have group-forming networks that build customer advocacy, such as Hewlett-Packard and its “HP Software Customer Connection,” which has 10,000 registered enterprise software users with 50 to 100 new signups per week.

“These users share information with each other and share troubleshooting tips,” he said. “It’s very, very valuable to HP software users. And the system is creating real advocacy to HP.”

Another example is Huggies and its “Huggies Baby Network,” which has 17,000 registered expectant/new moms and 450,000 posts on its message board.

Mr. Ferguson then discussed the power of data and how the data can be used to build profit.

“Companies are finally really understanding what kind of insight they need to get out of their customer data to really build sustainable growth,” he said.

And a lot of data are being collected. Mr. Ferguson said that currently, 100 million consumers worldwide earn promotional currency. In addition, loyalty points are the second-largest currency in issue, 58 percent of consumers worldwide own a credit card and 70 percent of grocery shoppers use a loyalty card.

Mr. Ferguson also offered examples of companies that use data to create profitability. They include UK’s Tesco, Harrah’s and Canada’s Shoppers Drug Mart.

As for convergence, Mr. Ferguson discussed how companies converge to build critical mass, which is important for loyalty programs. He said there is a trend toward convergence through mergers and acquisitions, through companies being able to use next-generation CRM software that enables all of their data in a company to work together, and the evolution of next-generation point-of-sales systems and technologies.

Together, these factors will enable the growth of coalition loyalty programs, or large, wide-ranging programs run by third parties such as the ClubMom and Upromise programs in the United States.

Mr. Ferguson said that while these programs are successful here — and achieve critical mass and have millions of happy customers — they are not as large and as all-encompassing as the coalition programs overseas, where these types of programs are the dominant model.

“But we think, because of convergence factors, that is about to change,” said Mr. Ferguson.

Mr. Ferguson also spoke of the difference between a revolutionary and an evolutionary. As a longtime Beatles fan, he said that John Lennon was a revolutionary while Paul McCartney is an evolutionary.

“Paul McCartney was not a revolutionary, but he was constantly seeking to perfect [his] craft, make himself better and make the band better,” he said. “I think it was the combination of the revolutionary in John Lennon and the evolutionary in Paul McCartney that made the Beatles a force that transformed popular music.”

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