Trends to Follow in Building Loyalty

Predicting the future is always risky, but two things are certain: What does not work now will not work any better, and even some tactics that work today will not work nearly as well a year from now. The following are three Internet marketing trends to watch for.

The death of discounts.

As a loyalty program benefit, discounts always have been a lame excuse for compelling added value. Sure, there are exceptions, such as The GM Card’s 5 percent rebate toward the purchase of a new GM car. But when you get down to it, 10 percent off this and that, now and then, is a no-brainer and close to brainless when it is applied indiscriminately. Until now, however, it has been easy to do, and customer research shows that customers like it.

Enter eBay and its countless clones. Say goodbye to list price. On the Internet, it just might cease to exist. And if there is no list price, how will you define a discount? It cannot be done. That means marketers will have to focus on something other than price. How about real rewards? Points, anyone?

From “trash and trinkets” to moments and memories.

Once upon a time, the promotional world turned on toasters and fishing rods, golf clubs and stereos, dinnerware and jewelry — in short, to use a crass term of the trade, “trash and trinkets.” Then came frequent-flier miles. Then came Wal-Mart, a decade of declining unemployment, countless other Internet shopping engines and more frequent-flier miles. Have you noticed how seldom any loyalty program relies on branded merchandise for its primary reward offering these days? Have you noticed how many ways you can earn frequent-flier miles?

The simple truth is that most people have mountains of material objects in their lives. These objects, both necessary and discretionary, were not so easy to come by in your parents’ day. Stuff is not nearly so precious anymore. What captivates everyone now is special stuff that only a few can get. And more compelling than stuff are experiences — events, trips, places, sights, sounds and tastes that are out of the ordinary, memorable in their own right, precious in their uniqueness and fulfilling in a way that seems to make people more than they were. Frequent-flier miles plowed that ground originally as those miles turned into trips, destinations, moments and memories.

Some describe this phenomenon as “the experience economy.” That sounds right. It sounds like American Express’ By Invitation Only events, such as the backstage cocktail reception with the cast of a Broadway show for Platinum Cardmembers. It sounds like Saturn’s Homecoming, which welcomed thousands of Saturn owners to a long weekend in Nashville, TN. It sounds like CBS Sportsline’s rewards program, where members can use points to buy or bid on special opportunities to chat with or even dine with sports celebrities. Memories are made of this. Loyalty is made of this. Bet on it.

Communities of customers.

Years ago, a genuine marketing visionary, Stan Rapp, described loyalty programs as having the potential to become “relationship brands.” He said this because the programs created a special relationship between the customer and the brand, repositioning the customer in his own mind from the role of an outsider to the status of an insider. This transformation created an atmosphere of collaboration. And, ultimately, collaboration might evolve to genuine advocacy.

Indeed, at least one early loyalty program consisted entirely of collaboration and advocacy. Ten years ago, MCI’s Friends & Family succeeded brilliantly by inviting customers to enroll and volunteer the names of friends and family to whom MCI would offer preferential discounts on long-distance calls within the members’ referral networks. But, since the primary benefit of the program was a discount (and discounts make lousy rewards), Friends & Family lacked staying power.

What might have happened if MCI had been able to take advantage of the Internet to turn those calling circles into ever-widening communities of customers? In Friends & Family, MCI’s customers offered lists of names and permission for MCI to refer to the member in its direct solicitations.

In today’s Internet-enabled world, recruitment could be far more effective and personal, and far broader in its reach. It would be as easy as forwarding e-mail. And consider the opportunity for Friends & Family to have operated as an online community, with family chat rooms, photo albums, bulletin boards and streaming audio and video. MCI would have had a shot at becoming a durable part of its customers’ lives.

The implication for the future is significant.

The Internet’s power to create, sustain and leverage such communities of customers — both online and offline — will become an increasingly powerful marketing tool. The ability to e-mail referrals and shared-benefit offers to dozens, even hundreds of acquaintances with a few keystrokes makes such viral marketing schemes potentially explosive.

Each customer relationship realistically becomes the fulcrum that can leverage dozens more. Spontaneous “neighborhoods” can form within each program community — members with shared interests, common acquaintances or temporary needs. Such interaction among members adds relationship content to the program, fueling new dimensions of collaboration and advocacy and creating new loyalty “hooks.”

In the real-time world of the Internet, loyalty programs can become more than just relationship brands. They can evolve, without boundaries, into a context of interactivity in which the members themselves become part of the relationship’s content.

• Rick Barlow is chairman/CEO of Frequency Marketing Inc., Milford, OH. Reach him at [email protected]

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