Four Differences Between Loyalty, DM

When I told my colleagues I was leaving direct marketing for loyalty marketing, they had one question. It's the same question you may have right now: What's loyalty marketing?

The best description may be an example. The first and largest loyalty marketing program in the United States is the American Airlines Aadvantage program. Yet that only hints at just how different loyalty marketing is from direct and how it can generate response rates that would make the heads of most veteran DMers' spin.

If you work in direct marketing, you're already aware that DM is usually split into two silos — customer acquisition and customer retention. In loyalty marketing, we're squarely on the customer retention side. Note that while a good loyalty program obviously aims to retain customers, it also should also offer the added benefit of customer growth.

Here are the four key differences between loyalty marketing and direct marketing.

1. Direct creative is often a one-shot. Loyalty is about a long-term relationship.

In direct marketing, most projects are one-offs. In most cases, you develop a strategy, create a piece of communication and await a response. Later, you repeat the process with a new strategy and a new piece of communication — one that usually has little relationship or connection to the piece you previously sent.

In loyalty, we take a more strategic, long-term approach. It's not uncommon for us to map out communications for a 12-month period, with four, five, eight or more touches a year. These communications will center around a single core strategy — communicating a value proposition. That's the mix of hard and soft benefits that reward and recognize customers for taking part in our loyalty programs.

Hard benefits are rewards that are real or tangible. This would include air mileage and merchandise rewards, gift certificates and rebate checks. Soft benefits recognize program members as special customers and include automatic upgrades (cars and hotels), special toll-free numbers for faster service and priority access to seating and events (backstage passes).

Each communication pushes an aspect of the value proposition forward, increasing the value of the program in a customer's eyes one piece of mail at a time. This slowly but surely develops customer trust and, in time, customer loyalty.

2. In direct, it's about talking to market segments. We like to engage in one-to-one conversations.

In direct, there's frequently not enough data to truly personalize communications. You often aim mailings at target groups as opposed to individuals. That may be positioned as one-to-one, but it's really one-to-many.

In loyalty, we have access to much more customer data, often in real time. So, through “lasered” messaging, we can create versions of mailings based on factors such as the geographic area you live in to the number of points in your loyalty rewards account, and your personal product or service preferences. It's about as close as anyone comes today to offering true one-to-one communications.

The result? Our communications are more involving because they're more personal and relevant. And the fact that they're more involving makes them much more effective in generating customer response and participation.

3. In direct, it's about selling something. We want a dialogue.

E-mailing does not constitute a dialogue. Dialogue is about the give and take of information. It is a two-way flow in which you receive information a customer or member has given you and respond with relevant information in return.

The aim of dialogue is simple. By having an ongoing conversation with a customer, you can build a relationship. If you build a relationship, you can gain the customer's trust. And if you gain that trust, you can increase retention and generate additional sales.

We attempt to begin, or continue, a dialogue with each piece of communication we send. It's easy to get started. Simply include a short survey in your next e-mail to customers. The valuable information that is returned to you is the start of a dialogue.

Just be sure to use the information you receive wisely. If a loyalty program member tells you she prefers dining rewards, for example, your next communication should highlight restaurants in that member's area. This shows you value your member's input and will encourage continued dialogue.

4. In DM, a good response might be 4 percent. We frequently hit 20 percent.

People want this stuff. Instead of trying to sell something, we're essentially offering a customized package of rewards and special benefits. All customers have to do is continue what they've already done in the past — keep using our client's products and services.

For a large telecommunications client, we recently had a 23 percent participation rate among active members over a given quarter, including phone calls, Web site visits and business reply returns. While I would like to take the credit on the creative end, the truth is the program is a strong one with a rich value proposition. The result is a participation rate that exceeded even our own expectations.

Many of the principles mentioned above can be achieved in direct marketing as well as loyalty. They represent good ways to offer your clients' customers more relevant, meaningful and effective communications. You can start by looking at each new assignment as a chance to begin a dialogue with customers, and as an opportunity to leverage data you may already have access to. You'll not only be able to offer a creative product that is unique and truly sets you apart from competitors, you'll offer one that can more effectively change customer behavior and increase the profitability of your clients' brands.

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