Loyalty programs under attack

A colleague sent me a Wall Street Journal article, Loyalty Program May Not Reward AmEx and then I came across this travel study released by IBM. The WSJ.com article highlights that as consumers budgets tighten redemption could become as issue for the likes of American Express with large rewards programs and subsequently this could hit their earnings in coming quarters. The Travel study then highlights that Airlines need to overhaul their rewards programs. This quote sums it up:

“Travel providers must keep their finger on the pulse of consumers and be able to respond to their changing needs and demands, while balancing the associated business economics…” “Loyalty cannot be bought — it has to be earned. That will only be done if travel providers can serve up a consistent, differentiated experience that is more valuable and relevant for individual customers.” -Bruce Speechley, Partner, Hospitality and Leisure Practice Leader, IBM Global Business Services

I personally feel that these points-based loyalty programs are too rampant and in many cases outdated. They start with one company in an industry trying to differentiate themselves and then morph into “me too” programs from the competition.

At CMG Partners, I worked on a program concept for a media company that was points-based, but focused on giving once-in-a-lifetime experiences. These experiences would be made possible due to the incredible assets the company had. The goal of this program was to create increased customer engagement to the company’s products/services. Now you are probably asking, what makes this any different? The focus on very high-end exclusive rewards and the fact that this could differentiate them for a very long time because the company “owned” these assets.

A few tips or learning’s on loyalty programs:

  • Set a clear goal for your loyalty program and how you will measure it
  • Design in sustainable differentiation because the “me too” crowd is waiting to pounce on your idea
  • Make these programs core to your business not just another marketing program which could be short-lived

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