special report: the future of brand … · 14 /strategy report: surprise party a...

T H E A R T A N D S C I E N C E O F B U I L D I N G C U S T O M E R V A L U E W W W . C O L L O Q U Y . C O M

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Analytics: Points or Discounts? Designing the Perfect Offer Mix

S P E C I A L R E P O R T: T H E F U T U R E O F B R A N D - C U S T O M E R R E L AT I O N S H I P S

I N T H I S I S S U E :

Strategy Report: The How and Why of Surprise and Delight

B2B Report: Leveraging the Power of Peer Referrals

The I-Network: Loyalty Within the Consumer Bubble

Information overload is over-

whelming consumers, who are

withdrawing into the refuge of

a protective I-Network of

friends, resources and helpful

brands. If you think this retreat

presents challenges today,

imagine the more-intense future:

As consumers increasingly

erect the shields that limit their

brand interactions and control

their communication channels,

today’s marketers must solve

tomorrow’s marketing challenges

now. Join COLLOQUY as we

open the door: What inspires

consumers to invite you inside

their I-Network bubble?

14 / Strategy Report: Surprise Party

A surprise-and-delight reward strategy works best when layered ontop of a comprehensive loyalty program. Relying primarily on surpriseand delight leaves customers confused about what behavior you’rerewarding, and what exactly they must do to earn the payoff. But whenpart of a clearly-defined value proposition that includes hard benefits,surprise and delight can engage customers on a deeper level. Here’sthe how and why of surprise and delight engagement strategies.

1

C ON T E N T S

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Information-overloaded consumers are withdrawing into the refuge of aprotective I-Network of friends, resources and helpful brands. As consumersincreasingly erect the shields that limit their brand interactions and controltheir communication channels, today’s marketers must solve tomorrow’smarketing challenges now. Join COLLOQUY as we open the door: Whatinspires consumers to invite you inside their I-Network bubble?

18 / Analytics Report: Balancing Act

Designing the optimal mix of rewardpoints and discounts to create irre-sistible offers.

22 / B2B Report: Peer Power

Teradata’s B2B loyalty program againproves the adage that your best salesforce may be your existing customers.

24 / Marketing at Warp Speed

Real-time marketing depends onpurpose-built technology. Here’s howto deploy both the tech and thepurpose.

2 / Loyalty Landscape: The Name of the Game

Or, more accurately, the namification of thegamification.

4 / Touch Points: The Streamlined Future

Less is more—though, on the otherhand, more is more, too.

28 / The Practitioner’s Perspective:Co-Creativity

Is loyalty ready for the dawning era of co-creation?

COLLOQUY means

“conversation or dialogue.”

Providing loyalty thought

leadership since 1990, the

COLLOQUY media enter-

prise is your reliable

resource for innovative

strategies that drive prof-

itable customer behavior.

Innovative Loyalty Marketing: News and Opinion From COLLOQUYwww.colloquy.com/twitter www.colloquy.com/facebook www.colloquy.com/linkedin

6 / The I-Network: Loyalty Within the Consumer BubbleSPECIAL REPORT

L O YA LT Y L A N D S C A P E

COLLOQUY / Volume 20, Issue 3, 20122

Where Is COLLOQUY Now? This issue, the traveling COLLOQUY is roaming North America,relaxing with Emiliano Zapata in Mexico, being read by a memberof the Genius of Waters’ entourage on Fountain Square inCincinnati, and measuring up to the CN Tower in Toronto (hint:the Tower is the taller one).

Where do you read your COLLOQUY? We want your photos—just post towww.colloquy.com/facebook. And to see an onlinegallery of COLLOQUY on the road, scan this QR codeor visit www.colloquy.com/colloquy-bonus-miles.

What’s Up, Doc?Sometimes it’s all in the name—clear, clever andmemorable. That’s the case of the currency used in theEB World loyalty program: “the carrot,” and we all knowwhat cliché that brings to mind when it comes toincentives. In EB World, you earn one carrot per dollarof spend, with bonuses for such activities as buying a

pre-owned product or completing your memberprofile. The carrot is even in line with Buck, therabbit mascot of EB World and the retailer thatruns the program. Oh, and did we mentionthat the retailer in question is Australia’svideo-game store EB Games? So, let’s recastthat incentive cliché we were thinking about as“the carrot and the joystick.”

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Congratulations to the Winners of the 2012 COLLOQUY Loyalty Awards

• Caesars Entertainment:Master of Enterprise Loyalty (Global)• American Express: Loyalty Innovation in Financial Services (North America)• BDO: Loyalty Innovation in Financial Services (International)• Kimpton Hotel Group: Loyalty Innovation in Travel/Hospitality (North America)• Qantas Group: Loyalty Innovation in Travel/Hospitality (International)• SCENE: Innovation in Loyalty Marketing (North America)• Indigo Books & Music Inc.: Loyalty Innovation in Retail (North America)• Subway: Loyalty Innovation in Retail (International)• Hero MotoCorp: Innovation in Loyalty Marketing (International)• SCENE: Loyalty Innovation in Other Industries (North America)• Samsung India Electronics Private Limited: Loyalty Innovation in Other Industries (International)

Loyalty WebscapeCOLLOQUY’s guide to recent online features andresources. For a full list of COLLOQUY onlinecontent scan the QR code or visit

www.colloquy.com/online-exclusives

One for the BookingsInterContinental San Francisco of course participates in IHG’sPriority Club loyalty program, but the hotel has taken an extrastep to recognize its most-frequent guests. Its “Milestone Stay”program offers a number of perks of increasing value at the10th, 25th, 50th, 75th and 100th stay. The nicely personaltouches of the rewards range from a picture frame holding afavorite photograph in the room, to monogrammed slippersand bathrobes, to a personalized iPod. And then there’s the big250th Milestone Stay—the hotel will name a suite after you. Thissort of reward is not without precedent. Witness United Airlinesnaming one of its fleet after Thomas Stuker, a 10-million-mileflyer. Or whiskey manufacturer Maker’s Mark labeling oak agingbarrels after members of its Ambassador’s Club (one to a barrel).

However, the case of InterContinental San Francisco does raisean important question, one that Thomas Stuker is unlikely toencounter: What if the suite with your name on it is alreadybooked?

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Applying a creative timing element makesloyalty engagement irresistible

Channeling Flow

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Consumers are seeing less value in return forsharing their information. Here are 5 ways toregain customer trust.

Trust or Bust

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Business Speak From Me to You : Principles of B2B loyalty marketing and other topics inthe second issue of COLLOQUY India

COLLOQUY India

For a PDF recapping the 2012 winners, and for information on entering the 2013 COLLOQUY Loyalty Awards, visit www.colloquy.com/Loyalty-Awards-1. There you will also find links to recaps of the 2010 and 2011 winners. Also turn to page 22 of this issue for a profile of one of this year’s finalists, Teradata.

For a video of the Awards ceremonyheld at the 2012 COLLOQUY LoyaltySummit, scan the QR code or visitwww.colloquy.com/Awards-2012-1

3www.colloquy.com

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program bundled within a coali-tion wrapper. Many coalitionmembers also run successful pro-prietary programs. Through thecoalition, however, they gainaccess to a deeper, richer set ofdata to analyze.

Financial pressure: Every execu-tive and manager is under pressurein today’s economy to generateshort-term profits. On one hand,the differentiated value proposi-tion of a coalition model providesan avenue to that goal. But on theother hand, a loyalty program takestime to develop. It does, however,deliver a proven result. To realizethe significant financial benefits,there must be a balance betweenlong-term strategy and short-termresults.

The advantages to brands that partic-ipate in a coalition are hard to ignore,and the tradeoffs have proven to beworth it.

• A coalition produces a compelling,hard-to-duplicate customer valueproposition—who doesn’t want toearn faster?

• It offers a far deeper level of cus-tomer data to leverage, improvingrelevancy, response rates and ROI.

• It enables a customer-centricapproach to pricing and storemerchandising.

• Most importantly, it has provenaround the world to deliver sus-tained, measurable, cost-effectivebusiness growth and results.

In today’s marketplace, organiza-tions can’t ignore such results.Piloting a coalition is a pragmaticapproach to validating results, whiledelivering on a value propositionthat consumers are ready for.

Committing to something newrequires something old: belief—belief that the time is right for achange.

Bruce Kerr is a COLLOQUY Contributing Editor,

and is President of LoyaltyOne US.


T O U C H P O I N T S : C O A L I T I O N P R O G R AMS

Everything Old Is New Again

common currency when they do busi-ness with any participating coalitioncompany. They do this across an arrayof “everyday” purchasing categories,like gas, grocery, clothing and bank-ing. A third-party company runs theprogram, issues the currency, andhandles redemption. It also managesthe database and provides reports thatdeliver consumer insights to enablebrands to create relevant customercommunications and offers.

We’re seeing a movement in thisdirection with the creation of part-nership-based programs betweenairlines and hotels, or merchant-funded networks, but nobody has puttogether an everyday-shoppingcoalition like the ones that have beensuccessful in other global markets,including AIR MILES and Aeroplanin Canada, Nectar in the U.K. andPAYBACK in Germany.

The coalition model gives customersa clear value proposition—a farbroader range of reward options whilesignificantly increasing the rate atwhich they earn those rewards. Giventhe business concerns expressed byloyalty executives and the frustrationsexpressed by consumers, the timefor this new approach might be now.

In discussing this idea with loyaltyexecutives, however, I hear two mainconcerns:

Giving up control: Executives areconcerned about participating in acoalition in which they don’t nec-essarily have the final say on brand-ing and database principles. Theyalso want exclusivity within theprogram to give them an advantageover their competitors.

For a coalition model to achieve themost value, participants must worktogether. The coalition programmanager ensures that all entitiesrealize significant returns from thistype of partnership.

Program executives should look at acoalition model as their stand-alone

IN THE BOARDROOMS I VISIT throughoutAmerica, I’m hearing talk about theneed for something new. Somethingthat differentiates programs fromthe competition and sets brandsapart. A program that truly engagesits members.

Finding that “something new” is asignificant challenge in a loyalty mar-ket often characterized as “mature”and “fatigued.” And executives aretrying a variety of approaches fromexperiential rewards to gamificationto check-in marketing. But, accord-ing to the 2011 COLLOQUY LoyaltyCensus, U.S. consumers have signedup for an average of 18 programs perhousehold. Therefore, they’re toughto engage with offers that are some-times indistinguishable from othersalready available. Simply tweakingreward options and earn rates won’tdeliver the differentiation thatcustomers want.

Consumers are still interested inloyalty programs, but they want onein which the value proposition isrelevant and significant enough tomake shifting their purchase habitsand loyalty worthwhile.

What I’m hearing strongly suggeststhat the “something new” is a coali-tion model. In a coalition, multiplecompanies offer customers a sharedvalue proposition.Customers earn

The tested coalition program model may bethe “something new” loyalty marketers need

B Y B R U C E K E R R

primary pain points and determineif whether or not your loyalty pro-gram is properly addressing them.If not, then you have an opportu-nity to close the gap and increasecustomer loyalty.

Should you decide to streamline yourprogram, consider these guidelinesfor establishing benefit limits: 1. Focus on addressing your mem-bers’ pain points. Satisfy thepoints that relate to the entiregroup first, then look at yourhigh-potential/high-value cus-tomer needs.

2. Strive for quality, not quantity(and cost) of benefits. Sometimesall it takes is one—if it’s the rightbenefit—to substantially improvemember satisfaction.

3. Offer a mix of both hard and softbenefits. These appeal to twoequally important customer needs:economic reward and recognition.Hard benefits usually are offeredin the form of such currency aspoints, and are the most impor-tant part of the value equation.

4. Announce all new features andbenefits at one time, and takeyour praise and criticism quickly.Just remember to have a strongexplanation in your messagingfor why you are making changesor additions.

5. Your loyalty program should alwaysbe an amplifier of your corpo-rate strategy and brand. Whencrafting any new program bene-fits, ensure that they align withthe overall mission of the firm.

When it comes to benefits, less ismore—those rewards can have biggerimpact, and even cost less money.And that boils down to the stream-lined list of benefits that marketersseek: margin, lift and profits.

Fred Thompson is a COLLOQUY Contributing

Editor and partner at LoyaltyOne Consulting.

T O U C H P O I N T S : R EWA R D S S T R AT E G Y

When Less Is More

were able to name a few. But when weasked, for example, “Did you knowyou get free valet parking?”, they hadno idea. The same with other specificbenefits (and these were not cheapperks for the retailer to be offering).The results were so intriguing thatwe are rolling out a larger study ofthis issue, with results to be analyzedin a future article.

Our top-line finding: There’s apropensity to load programs withbenefits and features, assuming thatcustomers will remember and valuea broader offering. But this is not themost effective approach.

Pinpoint accuracyIf you’re going to limit the numberof benefits, choosing the right onesis obviously critical. Begin by pin-pointing and understanding theneeds of allmembers. Then you canlook for across-the-board issuesthat affect everyone and set a base-line for program benefits.

For example, let’s look at the typicalquick-service restaurant, where mostif not all orders are taken and deliv-ered at the counter. Points and dis-counts are great, but the most obviouscustomer pain point is waiting in line,especially during peak times. So it’snot surprising that this industry’shottest perk is the ability for cus-tomers to use their phones to placean order, charge it to their account,and then bypass the line to pick upthe order and go. That single benefitis a game-changer for all customers.

Next, channel resources toward high-potential/high-value customers.For example, Phil is a high-valueclothing customer, but he’s true tosize and doesn’t need any tailoring.If Phil’s retailer offers free tailoringto all customers, that’s a benefitloaded into the program that the storeis paying for but that Phil willnever use or even care about.

In determining what new benefitswould be most appropriate for yourpriority members, uncover their

LET’S PLAY A GAME. Ask your fellowexecutives to name (without looking)the top five benefits your customersvalue in your loyalty program. Next,have them list the rest of the bene-fits your program offers. Could theyrecite the entire list? If they’re liketypical senior team members I speakto, they probably nailed the tophandful, but faltered further down.

Now I ask you, if they can’t remem-ber them all, how many do you thinkyour customers will remember? Theanswer is even fewer. In fact, cus-tomers tend to remember the topthree to five benefits that programsoffer, and that’s about it. It’s time torealize that sometimes less is more.

Take a typical hotel program, forexample, which usually offers morethan 20 benefits. But customerssimply want three key offerings: freerooms, amenities that improve theguest experience, and upgradedrooms. Members may be aware theyalso have gift shop discounts or thatthey can donate points to charity,but nothing is as important as thetop three. The more effectively hotelsmeet these key needs, the moreloyalty they will earn.

We recently tested my theory with amajor fashion retailer. We asked loy-alty members if they could describethe benefits of their program. They

Minimizing your benefit offerings canmaximize customer engagement

B Y F R E D T H O M P S O N

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7www.colloquy.com

BY PHAEDRA HISE

Special Report: The Future of Brand-Customer Relationships

Marketers realize that consumers facing information overload are

shutting down and taking refuge within a protective I-Network of

friends, resources and helpful brands. If you think this retreat is

problematic today, imagine the future: As consumers increasingly

limit their brand interactions and control their communication

channels, marketers must figure out today how to solve tomorrow’s

marketing challenges. Join COLLOQUY as we open the door: What

inspires consumers to invite you inside their I-Network bubble?

Remember the Bubble Boy? His weakened immune system forced him tolive inside a sanitized plastic bubble, limiting entry to only thoroughlydisinfected items. You may not have noticed it yet, but your customers arefast becoming Bubble People—shielded and defensive, connecting onlywith others they trust. Are you part of their safe, clean and carefully-guarded network of support? Or are you on the outside of their bubbles,trying to talk your way in?

The first method of approaching customers and trying to penetrate theircomfortably guarded bubble is to cavalierly keep throwing yourself at thenetwork that forms it. That sort of siege may eventually get you in, thoughit conjures images of George Costanza pushing his way into the Bubble Boy’sroom on a classic Seinfeld episode: Not surprisingly, there is an argument,the bubble is breached, and George is unceremoniously dumped at thecurbside. Hilarity ensues.

The I-Network: Loyalty Within the Consumer Bubble

demographic shift will dramatically change deploymentof resources to shape education, economics, socialissues and politics.

Also, middle-class growth is in hyperdrive at themoment, especially in the BRICS countries (Brazil,Russia, India, China and South Africa). This runawaygrowth will continue—The World Bank estimates thatthe global middle-class population will hit 1.3 billionby 2030. That growth, coupled with a widening gapbetween the “haves” and “have-nots,” will continueto stress natural resources, and refocus consumptionin boom countries.

We’re already seeing more economic uncertainty inthe world’s highly interdependent global markets, andseveral economic factors will create increasingly frequentboom-and-bust cycles. Growing U.S. debt and the non-appreciation of overseas currencies will add to theglobal financial turbulence, according to Global Trends2025. Economic uncertainty will become the norm intomorrow’s world.

And of course all of this change is moving at warp speed,enabled by technology. Companies will face increasingdifficulty keeping up with consumers, who will adoptnew technology platforms quickly and use them tofurther control their social experience, informationflow and shopping interactions.

How will all these factors play out for loyalty marketersand consumers? We will explore today’s challenges andtomorrow’s threats by spending time with a typicalconsumer: our friend, Lily. She’s very much today’syoung woman, but she’s also tomorrow’s Bubble Girl,as we’ll see as we follow her through a typical day fullof marketing interactions. We explore which brandsmake it into her I-Network, which don’t, and in bothcases, why. And in “Q&A for the I-Network” on page 11,we pose questions to help your team think through yourbrand engagement

6:00 a.m.—rise and shine Two-thirds of today’s Americanssleep with their mobile phone (90%of those aged 18-29), according to a2010 study from Pew Internet &

American Life Project, and Lily is noexception. Her mobile is an increasingly mission-critical communication device, personal assistant,research tool, and lifestyle manager. It wakes her, andengages her in a day-long chat full of reminders,information searches, shopping, and communicationwith key members of her personal network.

The intimacy of this relationship is displacing personalcomputers—currently half of all web searches are

In real life, customers aren’t laughing at the bumblingattempts of marketers to break into their personalprotective networks. Today’s consumers face an ever-swelling flood of information that threatens to drownthem in generic communications and irrelevant offers.To help control the flow, consumers connect theirbubbles to others, creating a supportive web of friends,family and information sources. This network filtersout the waves of impersonal communications, afford-ing each Bubble Boy and Girl a steady stream of per-sonalized and relevant information.

Who gets in and becomes part of the consumer’s net-work? Marketers and brands who have figured out thesecond approach: Work with the bubble, and ask to beinvited in on the customer’s terms. Wash your hands,put on the protective suit, and don’t sneeze. Polite guestsget asked back, and because the Bubble Boy lets in sofew visitors, those with access have the opportunity totake a meaningful and influential place in his life.

Marketers certainly recognize this accessibility prob-lem today. Some are successfully addressing it. Still,few realize that this serious challenge has a life-changing,long-term prognosis. Five, ten, twenty years from now,consumers will be even more difficult to reach. Do youknow how to get invited inside the bubble?

The I-Network expands COLLOQUY coined the term I-Network in 2010 todescribe this trend toward personal network-buildingand information-screening. We pointed out that con-sumers were increasingly controlling brand engagementby opting out, restricting the influx of brand commu-nications, and turning to their social networks insteadof brand messages for recommendations.

If anything, this trend has accelerated faster than wepredicted—consumers are already using their I-Networksto manage the overwhelming demands on their timeand resources, and the trend will only intensify as theseconsumers face a rising sea of messaging, informationand responsibilities.

For example, today’s “sandwich generation” is busyraising children while also caring for aging parents. Butby 2030, much of the world will be grappling with asizeable 60+ age group, which will range from 30-44%of the population in most developed nations, accordingto research from the United Nations. Obviously this


You may not have noticed it yet, but your customers are fast becoming

Bubble People—shielded and defensive, connecting only with others

they trust. Are you part of their safe, clean and carefully-guarded

network of support? Or are you on the outside of their bubbles, trying

to talk your way in?

1. Individualized: If Lily feels lost and faceless in your crowd, she won’tinvite you into hers. If you don’t take the time or care to understand andlisten to Lily enough to personalize her conversation and experiencewith you as a friend rather than as a brand, she will tend to reject youand keep you outside of her world. Deep customer understanding hasbeen the age-old promise of CRM and it still isn’t close to being realized.After all, who befriends anyone who seemingly doesn’t careabout them as individuals?

2. Integrated: Goals and problems are rarelyaddressed using single tools. P&Gleveraged this concept when theyworked to understand their cus-tomer’s entire “need cluster”to mop a floor. For instance,what Lily wants is reas-surance that her home is tidy and germ-free.An integrated productlike Swiffer encom-passes brooms, mops,cleansers and disinfec-tants to handle theproblem—whereasoffering only a jug of Mr. Clean handles only apart of it. Old marketing metthe marketers’ narrow need to confine their concern to thecompetitive boundaries of a “prod-uct.” New marketing meets Lily’s multi-ple needs with broader solutions and relatedproducts. In such cases, would a friend offer only apart of what was needed to help? Integration meets her needs.

3. Immediate: If you’re not relevant in the moment when Lily wants orneeds to accept your product or services, any available entries intoher network will quickly close. She doesn’t have time to wait for yourmessage or your help, and she doesn’t care about your good intentionsto be there when you weren’t. Late? Rejected. She’s busy—and friendsdon’t dawdle when needed.

4. Immersive: Friends “are there for each other” by whatever meansneeded: a compassionate phone call, a helpful email exchange, a visit inperson. Be available on every medium Lily uses, prepared with interesting

and relevant content that she can engage with. Worse than beingrejected, you will go unnoticed if you don’t. Multi-channel marketing is table stakes in a fragmented media environment. When she wantsyou, be easy to reach.

5. Influential—mutually so. The I-Network is powered by conversation.In the right circumstances, Lily wants to benefit from your influence—

the assistance and guidance you provide. But she also wantsto share her influence, as well. From the time of her

youth, Lily has become accustomed to influencingher parent’s brand choices in a range of

product categories, including houses,appliances, furniture, electronics, andautomobiles. So she’s used to influ-encing others in her network, soyou’d better give her a say inyour relationship—about howshe’s treated, about how theproduct or service evolves,about how you can improveyour value—or she’ll be talk-ing to someone else. Thinkabout it: friends who want tochange you but who ignoreyour good advice aren’t friends

for long. And if you can deliverbetter products or services or

information that Lily can in turn passon to influence others in her I-Network,

that’s even better.

6. Imperfect: Lily is discerning, and usually isn’t quick to forgive mistakes made by those who

haven’t earned their place within her I-Network by provingtheir friendship. Still, she does understand that mistakes happen. Ideally,you will make few mistakes. But when you do make one, admit it, apol-ogize, and be “flawsome” in the recovery, just as a friend would, andat the same level of sincerity.

If marketers come across as arrogantly perfect, as so many antisepticbrands seem to try to be, their equally arrogant imperfections will forcethem to remain outside the I-Network. For those with the right trackrecord and the properly humble, make-good response to mistakes, Lilywill likely forgive and forget. For the others, she’ll just forget.

The I-Network is built around the first person—the “I, me, we, us” view that defines consumers and the people, goals and dreams that they care

about. But the I-Network embraces another integral group of I’s—six qualities that, when exhibited by brands, will inspire consumers like Lily to invite

those brands into their personal I-Network. Think of it in terms of the sage adage: “To make a friend, be a friend first.” These days, to make any sort of

connection with your customers, be a friend always. This attitude becomes increasingly important with consumers so strongly strapped for time and

believing they’re not receiving enough value from the companies they deal with. Brands must be the friend that delivers relevance and assistance

quickly, and on target. Or else they will be set aside.

In other words, in tomorrow’s environment, Lily must clearly recognize that her favorite brands have a new set of consumer-relationship principles—

The 6 I’s—each incorporating an important power to connect with Lily on her terms. What are the 6 I’s that your company must start embracing now?

They include:

Network PortalsSix brand entry points into the consumer I-Network

Im

mediate: She’s time-starved. Be there when she needs you.

Inte

gra

ted: She’s o

verwhelmed. Deliver complete solutions to her. Partial solutions are part of her problem.

Individualized: If i

t’s not about her and those around her, it’s irrelevant. As in “not needed.”

Imm

ersive: She’s mobile, multi-channel and multi-linke

d. Be w

here

she

is.

Influential: Stand for something she wants to share. Be open to her input. B

e willi

ng a

nd a

ble

to a

dapt

.

Imperfect: W

ho can relate to perfection? She wants authenticity. Be human

.


10:30 a.m.—online banking update Lily’s father passed away severalyears ago, leaving her with an invest-ment fund linked to her mother’sfinances. This morning, Lily down-

loads banking data to her mobilephone, and checks the balance on her retirement fund inthe wake of yet another stock market shakeout.

Lily is concerned that the recent economic turmoil inthe U.S. may be becoming the norm rather than theexception, and she’s right to worry. The past few decadeshave witnessed an increase in the debt ratios of indus-trialized nations as a percentage of their Gross DomesticProduct (GDP). Financial analysts predict that suchincreases will result in more-frequent and sharpereconomic cycles, with an investment emphasis inoverseas economies.

Because of her investments, her property ownership,her father’s trust fund, and managing her mother’sfinances, Lily will be fretting over her increasinglytricky financial service needs—particularly as shecares for her mother and she herself approachesretirement (even though advances in health caremean that Lily likely won’t retire until about age 75).In coming years, Lily and her children will look forinstitutions that understand the total package of theirinter-related finances, ones that not only reward herfor her business, but also offer expertise and supportin helping her manage it.

1:00 p.m.—advice for friends At work, Lily runs a global team withworkers in various time zones.Technology makes her colleaguesfeel “local,” even though they are

scattered around the globe. Withinboth her work and personal network, Lily passes alonginformation with the added value of her recommen-dation—for example, today Lily sends her friendMarta a link to an article with tips on choosing beachhotels. Marta’s family is planning a vacation in thearea, and Lily knows the information is timely andrelevant. Lily’s recommendations have the power tomove the three key levers of lift, shift and retentionfor the brands she prefers.

According to a 2012 Microsoft Tag study, 91% of mobileinternet use is to socialize, and this is where word-of-mouth (WOM) referrals are happening. But to reachLily and connect to her network, marketers must tossthe traditional idea of demographics out the window.For example, Lily will recommend products or servicesto her peers only if they work for them in their loca-tions in India, Mexico and so on. Lily herself is first-generation American, born in the U.S. to middle-class

performed on mobile devices, according to a 2012 studyby Microsoft Tag. Globally, 81% of women surveyedby VuClip in 2012 said that their mobile viewing timeis increasing. Most of these women were under age 35,which indicates that marketers aiming at a youngerversion of Lily must have this nailed down today.

And what about tomorrow? Mobile internet access willovertake desktop access by 2014, according to theMicrosoft Tag study, which means mobile not only isthe most personal way to reach consumers, but is alsodestined to become the only way. This device—be it asmartphone, tablet, wall screen or something we’ve notimagined yet—literally whispers into the ears of yourcustomers, who will therefore accept only messagesthat are relevant, personal and helpful.

The mobile solutions of the future must offer Lily evenmore personal-management options to streamlineher busy life—services and technology to help speedher through check-out, track and record her regularpurchases, and trigger automatic discounts or per-sonalized pricing.

8:00 a.m.—work is personal Lily is the CFO for GreenwaysMotion, a company that conductsenergy audits for manufacturersand helps them implement other

environmental best practices. Lilyexpresses her values through supporting her socialcauses, and automatically integrates them into all aspectsof her daily life. Her dedication led to her choice ofthis particular job, and it drives her purchasing deci-sions, as well.

According to a 2011 Nielsen report, two-thirds of surveyrespondents believe that the brands they buy fromshould support environmental causes. In fact, environ-mental sustainability is the leading social cause acrossall demographics in the study. And socially-consciousconsumers generally are more trusting of brand adver-tising and peer recommendations than the averageconsumer, according to the same report. Today, millen-nials are more likely to buy cause-related products thanthe average shopper (37% versus 30%), according toa 2012 study from Boston Consulting Group.

In the future, this trend will explode, as indicated bythe fact that 65% of the socially conscious consumerssurveyed were under 40. As the protective consumerbubble swells, one of the critical filters in a consumer’sI-Network will be evaluating how companies andbrands match customers’ individual values and per-sonalities. This commitment will be measured by acompany’s sincere commitment to relevant socialcauses.

Q&A for the I-NetworkTips for integrating into tomorrow’s I-Network

1. What critical issues concern your high-value and high-potential customers? Do you know the causes that matter to them the most? TheI–Network future demands that companies shift from the idea of “valueproposition” to their brand’s authentic “compelling cause.” Is yourleadership team aligned on what that should be for your brand?

2. How will your content capture customer attention in a future where information is accessed anywhere,on demand? Intrusive brand messages and semi-relevant “calls-to-action” are fast becoming passé.Instead, make the content “remarkable” enough tobe shared (and remarked about) among family andfriends. Keep episodes relevant, short, fast-hittingand entertaining. Begin working now to develop con-tent and stories that inspire short-term action and long-term relationships.

3. What technology and processes can you put in place today to enableyou to hear customers effectively? A quick first step is to get the rightbaseline metrics in place. Instead of thinking about “views” and “hits,”the new core metric should be “connections.” Plan now for whateverorganizational re-alignments will be necessary to act in real time onwhat customers tell you. Think about how your organization can evaluateplatforms that put the customer in control. As the customer’s commu-nication device of choice becomes more intimate and personal, it’s

increasingly imperative that messages become part of an ongoingdialogue between your brand and your customers.

4. Are you able—or willing—to customize your customer’s experienceat a local level? Over the last generation, mobile Americans have

increasingly congregated in local communities that reflect theirindividual values, and this will accelerate in the next gener-ation. As your customers build their I-Networks around thelocal issues critical to them, outdated mass product,pricing and promotion offerings will fall flat. Start toestablish the infrastructure and processes to push controldown to store level. Tomorrow, national chains will needto customize products offerings at a community level to

compete with local retailers, and to accommodate theneeds of high-priority customers in their various communities.

5. What kind of partnerships or alliances will improve yourchances of being invited into your customers’ I-Network? It’s time toredefine the terms of cross-company partnerships. For example, withtoday’s merchant-funded network partnerships, customers can obtainthe same offers through virtually every channel—so now it’s time tothink about how to make meaningful, sustainable and exclusive part-nerships work. Explore and test partnerships today to ensure you arepositioned to address customer needs with holistic solutions—createdfrom a network of corporate partners—to connect in new ways.

professional parents from Brazil and India. As time goeson, ethnic and geographic lines like the ones that Lilystraddles will become increasingly blurred, and mean-ingless, in demographic profiles and segmentation.

Currently, 81% of U.S. consumers said that they shareoffers with friends and family, in a 2012 study from theUK Direct Marketing Association. And 71% said thatthey prefer those promotional offers to be personalizedenough to take into account their likes and dislikes.

In the future, the influence of your brand’s most activepromoters will continue to expand as consumersincreasingly rely on the advice of friends and family—and the good news is that 39% of those in your loyaltyprogram are already your best WOM Champions,according to the 2011 COLLOQUY Word-of-Mouth Study.

5:00 p.m.—quick shopping trip Before she leaves the office, Lilytakes advantage of her work com-puter’s large screen (and a quiet

moment without children) to browseher favorite retailer’s website. After trying a few blouseson her personal avatar, Lily sends a few images to Martato ask advice on which to buy. Lily orders three blouses,planning to send one or two back using her retailer’sfree shipping perk.

Lily’s shopping experience has changed markedly in a single generation, and it’s only going to get morehigh-tech and customer-driven. Social media, location-based marketing and mobile are coalescing into SoLoMomarketing that enhances Lily’s shopping experience.For example, as Lily passes by stores in her downtown

The long-term forces creating the I-Network forecast a future full of speed, turbulence and increased competition for consumer attention and share of wallet. Marketers must step up to keep up. To cope with long-term demographic and political shifts, technology fragmentation, and rising consumerpower, marketers must make significant changes today to be well positioned for the world of business tomorrow.

To navigate (or even stay afloat) in the rising tide of consumer I-Network issues on tomorrow’s horizon, start exploring these five key questions now:

In summary, is your company strategy aimed at building a lasting relationship with a social, mobile, local, and globally-connected consumer? The old mar-keting model of the 4 P’s—Product, Price, Promotion, and Placement—is rapidly giving way to a new paradigm, the 6 I’s (read more about those in thesidebar “Network Portals” on page 9). This new vision requires seeing the customer as an individual, with a broad range of needs that you may (ormay not) be invited to fill.

The days of creating programs for customers are already vanishing. Tomorrow’s reality will be centered on the experience marketers createwith cus-tomers to make sure their needs are anticipated, understood and met—in their time frame, in the way they want to be reached. In this new age of damp-ened demand and global supply, your marketing team’s ability to connect with customers will be the primary determinant of future strategic success.

Five key questions marketers must start exploring

now.


that consumers watch, and advertisers will offset pro-gramming costs and Lily’s cable bill as a result. Con -sumers will be rewarded for their attention to brandedmessages, and aggregators of interest will pool Lily andher husband’s interest in vacation trips, for example,with other potential travelers and “bid” for their timeand attention.

Evening down time will soon be addressing the alienationinherent in online gaming, by specifically involvingfamilies or other groups to set themselves up as char-acters within a virtual reality game scenario. The teamwill physically move through exciting adventures together(via a fitness app embedded in the game), pitted againstother teams elsewhere in the world. Families will beable to come together to learn, compete and grow.

As the day draws to a close…Lily uses the I-Network as a defense mechanism to dealwith turbulence and a cacophony of competing demands—yet still connect with the people who are meaningful toher. As this protective bubble further insulates individualconsumer networks, marketers need to adapt. One keystrategy will be learning how to contribute to the ongoingconversation of consumers in their social networks—what COLLOQUY calls Trialogue. These new conver-sations demand new skills in developing compellingcontent, helpful services, useful tools and word-of-mouth-based rewards.

Ultimately, the I-Network is really a “we” network. Lilyis the nucleus of her own chosen group, managing theinformation flow for friends and family and decidingwhat they really need, just as they do for her. If you canreach Lily in the right way, you can reach everyone inher network.

To be invited into Lily’s I-Network, first examine yourprogram’s value proposition. Is your brand good atentertaining and telling stories that will get passedalong, like the Old Spice Man? Or is it better at stream-lining consumer lifestyle problems, like offeringonline banking and photo-check deposits? Perhapsit’s tied into the compelling social causes of prioritycustomers, and offers rewards for recycling or com-munity volunteering.

Whatever your strengths, now is the time to furtherdevelop them—and the tools needed to deliver themto your priority customers. Bubble Boys and Girls willwelcome in only those they trust, and who have exist-ing relationships. Start the work today so that you canstay inside the bubble. Mr. Costanza, don’t even thinkabout it…

Phaedra Hise is COLLOQUY’s Senior Editor. She thinks it would be

cool to walk across water in a protective plastic bubble.

shopping area, a few of the window displays activateoffers on her phone (but only for those stores forwhich she has opted in).

In-store shopping may involve simply a phone-scanapp and a mobile wallet, nearly eliminating any contactwith a sales associate. Obviously, this type of transac-tion will shift opportunities for upsell, information-gathering and instant rewards away from the front linesand to the mobile device.

Lily is increasingly able to dictate her shopping terms.The brands that will get Lily’s attention are those thatrecognize her value and offer her value in return, includ-ing special pricing and services. Some will even offer herco-creation opportunities, like inviting her to providefeedback on product development or packaging design.In the future, Lily will consolidate her shopping withbrands that offer her a personalized experience and greatvalue at a competitive price. Those that can’t do that willend up in a price-based battle as commodities, not truebrands. Lily will essentially be able to tell marketers whatshe wants and what she’s willing to pay for it (probablyshe will even help design the product), and an algo-rithm will instantly decide if that transaction makesgood business sense based on calculations like herKlout score (a measure of personal influence), her pur-chase history, and her social-media conversion rates.

7:00 p.m.—family dinner and down time Tonight while cooking dinner, Lilyfollows a video from her favoritecooking app. The app links to her

grocery store, and lets her give verbalinstructions to add items that she’s using up to herdigital grocery list. Lily’s family is also participatingin a loyalty program project with a consumer-pack-aged goods company, so she’s tracking how she usesseveral food products in tonight’s dinner. She willreceive points for sharing her recipe with others onthe company website.

When the kids are in bed, Lily and her husband watcha few on-demand programs on their wall screen, andalthough they zip past most commercials, they stop onone for their preferred airline. Lily’s husband scans thescreen with his smartphone to register that he watchedthe commercial, earning bonus points in the airline’sfrequent-flyer program. When Lily tweets about a recenttrip on the airline, they earn additional points. In thenear future, marketing budgets will include economicincentives to gain attention from, access to, and inter-action with consumers.

Before long, the cable provider will create an app thatallows brands to be presented in the context of the shows

With tons of extras found only online, COLLOQUY.com is a key resource in learning effective

ways to target and reward your customers. No need to search and scan in multiple places—

everything you’re looking for including articles, research, white papers, breaking news, events

and more is right here.

COLLOQUY.com is everything you need to know about loyalty marketing.

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layered on top of a comprehensiveloyalty program. Why is that?

Relying primarily on surprise anddelight leaves customers confusedabout what behavior you are reward-ing, and what exactly they have to doto earn the payoff. But when partof a clearly-defined value propo -sition that includes hard benefits,surprise and delight can engagecustomers on a more emotionallevel.

Deciding who gets surprised andwhat delights to offer depends onthe goal. Objectives might include:• Generating some buzz • Re-engaging customers whohaven’t been in for a while

• De-fusing a problem• Gaining differentiation bycreating a memory

Of course, the deep connections thatdrive successful surprise-and-delightrewards begin with full understand-ing of individual customer shopping


S T R AT E G Y: S U R P R I S E R EWA R D S

Some programs are using thesecustomer-engagement devices tospice up more traditional points-based loyalty programs, while othersare building entire initiatives aroundthe element of surprise. It’s time toreconsider this fun program element,and examine how it works best.

Evaluating the power of surpriseBuilding a personal connection withhigh-value customers is one goalthat’s inspiring more large retailersto add surprise and delight to theirmore traditional loyalty programs.High-end stores such as NeimanMarcus and Saks Fifth Avenue havelong, successful track records ofsurprising top customers withinvitations to special events, such asan exclusive showing of the latestline in haute couture. And casinoshave made a fine art out of keepingmembers engaged with random offersof free nights, free shows, and evenfree money to gamble with.

The strategy works best when

IT HAD BEEN A BAD DAY.A sudden winterstorm had blown up, and I had aflight scheduled the next day out ofan airport three hours away. Theonly option for catching that planewas to drop everything, race thestorm down the mountain andspend the night at a nearby hotel.It was after dark by the time Ireached the off ramp to the hotel,and the pouring rain was startingto freeze. I was unfamiliar with thearea, and new construction hadrerouted traffic. I got lost. Twice.By the time I reached the check-incounter, I was, well, let’s just say“cranky.”

I didn’t smile until the managerescorted me over to a giant Wheelof Fortune knock-off. Members ofthe hotel chain’s loyalty programwere invited to spin the big wheel fora chance at prizes ranging from afree breakfast at the hotel restaurantto 10,000 bonus points. I laughedas the wheel spun and was thrilledto collect my 500 points. (That wasthe consolation prize, but what theheck. It was fun.)

Welcome to “surprise and delight.”The strategy has been around for aslong as marketers have been lookingfor new ways to woo customers. Thisold standard, though, is gaining freshlegs as more companies seek to dis-tinguish themselves in the increas-ingly crowded loyalty industry.

Surprise Party The how and why of surprise-and-delightengagement strategies

B Y R E B E C C A M c R E Y N O L D S

history, habits, goals, needs andwants. Only then can you designsurprises that truly delight ratherthan add to the increasing con-sumer marketing clutter.

Why does surprise itself sparksuch an outsized reaction? Thereis a marked emotional differencebetween receiving a desired giftafter requesting it, and receiving itas a complete surprise. The latterevokes stronger feelings of beingunderstood and appreciated.

Within a loyalty program relation-ship, surprise and delight can bean effective marketing tactic becauseit can provide a deeper connectionthat highlights the importance ofthe individual customer. An unex-pected treat—especially one that thecustomer wants—can make her feelparticularly valued.

Rewarding inter-nal customersHyatt Hotels Corp.introduced its“Random Acts ofGenerosity” initia-tive as part of the2009 re-launch ofits Gold Passport

loyalty program. During the launch,front-line staff at Hyatt propertieswere given a simple task—to dosomething unexpected for a trav-eler. Pick up the bar tab, pay theircab fare, or if a couple asks fordirections to the nearest movietheater, slip them $20 to covertheir tickets.

The ultimate goal of the initiative wastwo-fold: to create better connec-tions with the guests, and to get thestaff engaged with the loyalty pro-gram. “Our belief is that the loyaltyprogram has its structure, and thatstructure is very important,” saysJeff Zidell, Vice President of HyattGold Passport. “What is more impor-tant, though, is treating customerslike human beings and doing some-thing for them that you would dofor your best friend.”

Meeting those goals required design-ing a completely unstructured pro-gram, Zidell says. Staff needed totaldiscretion so that their random actswere truly “in the moment,” he says,which meant that they weren’t lim-ited to surprising only Gold Passportclients. Of course, that lack of struc-ture also meant that it would beimpossible to measure the efficacyof the program. “This type of pro-gram is not easy to track, but thatwas purposeful,” he says. “The moreyou track it, the less random itbecomes, and the less it feels likesurprise and delight.”

Gathering surprising data Casual diningchain Red Robin

Gourmet Burgers has also made sur-prise and delight a featured elementin its year-old loyalty initiative,Red Royalty. The program’s leadingoffer is a free hamburger everyyear during your birthday month,but members can also earn free foodwith the “Buy 9 Get 1 Free” offer.Or they can receive a $20 gift cer-tificate by eating at a Red Robinfive times in the first five weeks ofmembership. Accord ing to com-pany reports, though, the real fre-quency payoff comes from “exclu-sive surprises throughout theyear.” Program promotions prom-ise, “Special offers and deals, tai-lored to your taste buds, when youleast expect it.”

In an interview with Nation’sRestau rant News last year, RedRobin’s former chief marketingofficer Susan Lintonsmith said thatduring the chain’s pilot programwith 45 restaurants, locations sawa 2% increase in year-over-yearsales. “It’s not just about getting[guests] to come back more often,but also understanding their pref-erences so we can send them rele-vant messages,” she told the industrypublication. “Once we can segmentthis database, we can communicatewith customers based on their pastbehavior.”

In an earnings call earlier thisyear, Red Robin CEO Steve Carleyreported that the company hadnearly 1.7 million guests registeredin the Red Royalty program, “andwe are continuing to explore howwe can optimize engagement todrive profitable incremental visits and frequency with those guests.”

Focusing on the value proposition Although not

a traditional “surprise-and-delight” structure, some compa-nies are building entire programsaround random delights. PaneraBread made random rewards the

15www.colloquy.com

COLLOQUY has been discussing the how and why of

surprise and delight for a long time. And we’ve covered

the “don’t” of the strategy, as in this snippet from “When

Surprise and Delight Isn’t.”

Some of the limitations of the surprise-and-delight

concept are:

· You pretend to care more than you really do. You

make an effort to impress me with your appreciation,

but only with a token gift, and usually only once or

twice in a year.

· Your offer lacks continuity. Despite the best intentions

when embarking on this approach, staff changes and

circumstance rarely provide more than an 18-month

lifespan for such initiatives.

· The recognition suffers from long dry spells. If the gift

arrives one day each year, you assume the halo will

shine for 364 more days (at least). This is an unrealistic

assumption given the barrage of competitive messages

and offers targeted at me every day.

The Danger of Unsurprise"Surprise" can set up expectations thatlead to "deflate"

To read the entire article visit www.colloquy.com/no-surprise

www.colloquy.com/no-surprise


cornerstone of its MyPanera loyaltyprogram, which was introduced in2010 and rolled out nationally in2011. Instead of earning pointsthrough transactions, card membersearn the promise of future delights.By tracking purchases, MyPanerabuilds a database of customer pref-erences and then “surprises” clubmembers on future visits withrewards that fit their buying patterns,such as free goodies, exclusive pre-views and tastings, or cooking andbaking tips.

With no set target to reach or pre-identified rewards to collect, cus-tomers don’t know when their nextdelight will come or what it will be,but Panera promises that the morea member comes in (and presumablythe more dollars they spend), themore-frequent and the bigger thesurprises. And for those who just

can’t stand the suspense, there is anonline option that allows membersto log in to find out what may (or maynot) be in store for their next visit.

According to Panera’s 2011 annualreport, more than 9.5 million cus-tomers signed up during its firstfull year of operation. And the loy-alty program is credited, in part,with a 4.9% growth in same-storesales between 2010 and 2011, and12.4% growth over the previoustwo years.

In its report, Panera said that it isdeveloping individual reward tracksfor all 9.5 million of its membersand expects to send out more than6.5 million unique emails eachmonth with dynamic content thatchanges based on each customer’sinterests and buying patterns.

Surprise tactics The risk of depending on surpriseand delight to build loyalty is that thepromise of future rewards can feelempty unless the customer alreadyhas a bond with the brand or the pro-gram is front-loaded with enoughearly rewards that your program isdelivering value very quickly. Forthis reason, it’s most effectivewhen served as a side dish to a fullmenu of recognition and reward—not as a main course.

Instant rewards seem custom-madefor quick-service restaurants likePanera because that industry has abuilt-in way to provide high-value,customized “surprises” (menu items)for very low additional overhead.Incentive of fers (like the couponsthat Red Robin offers) are alsoappealing because the potential pay-off in lift is clear—the offers could

drive a new incremental visit to cashin on the promised delight; and,after all, how many members aregoing to come in alone for thatfree birthday burger?

Of course, there are good surprisesand there are bad surprises—wouldyou rather receive an unexpected boxof chocolates, or encounter an unex-pected burglar in your house? Thesame is true with loyalty campaigntactics. There are three considera-tions with surprise and delight toensure that customers, and com-panies, smile rather than of wince:

• Rewards: The customer may lovethe special gift, but then is likelyto expect another, and feel dissedwhen she doesn’t get it. Or she maywonder what behavior earned thespecial treat. To address this

potential downside, Hyatt definedthe time frame for their program.Similarly, Panera offers an onlineguide where customers can trackpotential “random” rewards.

• Delivery: By delivering rewardsat the point of sale, the front-lineemployees become the big heroes.That creates a much more personalconnection than a coupon in themail. The risk with this more-personal approach, though, is thatthe effectiveness of the surpriseand delight lies with each staffer’sability to carry it off. Hyatt usedthis opportunity to make sure theyhad the right people, training andtechnology in place.

• Timing: Your point-of-sale system,like Panera’s, must be able tointegrate all of the right data pointsinto the ordering process anddeliver immediate results. Addingeven a few seconds to each trans-action will be more irritating thandelightful to both your pro grammembers and everyone else wait-ing for their coffee and crois santon a busy morning.

Of course, the long-term prof-itability of any loyalty programdepends on the consistency of regular visits from engaged clients.Random surprises alone aren’tgoing to build that steady foot traf-fic and create desired habits. Butincorporating surprise-and-delightelements can help augment thatestablished relationship by creatinga closer bond with the client.

Personally, I’m heading out of townagain next month. I plan to stay over -night at the same hotel because it’sconvenient, and because I’ll earn myrequisite points. But what I’m reallyhoping is to get another spin onthat wheel. I’m ready to go for the“Big Money.”

Rebecca McReynolds is a COLLOQUY

Contributing Writer who was surprised when

we used a Wheel of Fortune spin to determine

how much we’d pay for this article.

The long-term profitability of any loyalty program depends on the con-sistency of regular visits from engaged clients. Random surprises alonearen’t going to build that steady foot traffic and create desired habits.But incorporating surprise and delight elements can help augment thatestablished relationship by creating a closer bond with the client.

A variety of new tools from Swift Exchange now lets customers use rewards in places they’re already shopping - online or in stores. More importantly, our tools help reward providers manage costs and increase merchant collaboration through Swift’s automated system.

87% of reward providers we surveyed felt challenged to manage costs. 92% want more collaboration. We think 100% are really going to like us. Check out swiftexchange.com or call (305) 865-7000 x160.

NEW TOOLS ANYONE?

SWIFT EXCHANGE and the SWIFT EXCHANGE logo are trademarks of Signature Systems, LLC.

of available resources, customerneeds, buying patterns and mar-keting tools. And, yes, there’s theelement of the soft touch in offerdesign—soft benefits are also criticalto the offer mix. But for themoment, we’ll concentrate onpoint-based rewards and dis-counts, two staples of offer design,without allowing the crashingwaterfall below to distract us.

Stepping outSome marketers believe that initia-tives to fuel customer engagement andtraffic should be driven by direct-marketing pieces, mass-market offersand broad campaigns. And you haveto recognize their reasoning. Theynote that those mass tactics broughtcustomers into the online store orthe bricks-and-mortar location inthe first place. However, that kindof thinking will doom your loyaltyprogram. Keeping customers loyaland bringing them back to pur-chase from you over and over againdemands more of marketers. Itdemands a sort of athletic mastery.

Successfully marketing to peoplewho have already purchased fromyou requires that you make evenbetter use of your customer data, andthat you devise offers with greaterprecision. This sort of marketingrequires formulating offers down tothe item level to give customers aneveryday reason to shop your loca-tions. If that level of precision soundsproblematic, then you’re probablynot working with the help of a mar-keting framework that enables youto make sound business decisionsabout promotional offers.

One of the biggest problems mar-keters, merchandisers and theirorganizations face is how to craftloyalty offers that can be relevant tocustomers while reliably generatingstrong outcomes. The challenge ispartly driven by lack of historical data.What did the customer previouslypurchase—once, twice or multipletimes? And what were the purchasers’reactions?Most companies haven’t


ANA LY T I C S R E P O R T: O F F E R D E S I G N

and motivate trial and sales lift. Onthe other end, the long-term powerof point-based rewards and theirprospect of less-immediate butmore-fulfilling redemptions toencourage engagement.

It’s offer design, ladies and gentle-men: a captivating high-wire balanc-ing act that relies on the equilibrium

GREAT MARKETERS are as skilled asaerialist Nick Wallenda. With balanc-ing pole in hand, these marketersare poised safely on the high-wire,Niagara Falls crashing far below, asthey step carefully to their goal: solidprofit, efficient ROI and customerloyalty. On the one end of the mar-keters’ balancing poles are immedi-ate discounts to bring customers in

Balancing ActDesigning the optimal mix of reward points and discounts to create irresistible offers

B Y S H A W N S T E W A R T

19www.colloquy.com

optimal returns for a specific itemor category?

• How long should the offer beextended?

• How are items purchased andrelated to each other in the basket?

Customer• Has this customer purchased inthis category before?

• What items and offers does eachcustomer value?

• How does each customer respondto discounts?

• How does each customer respondto point-based rewards?

• How does the customer respond tooffers consisting of both discountsand point-based rewards?

• Do these patterns differ for best customers and infrequentcustomers?

Testing and Measurement• How should the offer’s effective -ness be measured?

• What is the expected versus actualincremental lift and ROI?

• Has the item or category beentested with different offer con-structs before?

• How are outcomes and learningdocumented and re-used forfuture offer design?

After assessing the answer to eachcategory of questions, what comesnext? It’s common for marketers toidentify an item or category of itemsfor discounting or for rewardingloyalty points to encourage purchase,and then test an array of discount orloyalty point options to determinewhich offer works best. This approachcertainly yields data that learningcan be derived from. However, itsmajor flaw—and it is a significantdefect—is that the data gleaned islargely one-dimensional. The dis-count, point-based reward, or offermix rated “best” in such a promotionmay have little-to-no real bearingon why the item sold well or did notsell at all.

Instead, the specific attributes ofan item and the item’s relevance to

the customer play a far greater rolein a promotion’s overall outcome,and should therefore drive the offer’smix. Applying a framework of fivedifferent filters to apply in five mar-keting situations helps you balanceoffer benefits for greatest impact.A series of 2x2 grids examines someof the attributes in these situations—types of products, timing, and soon—and their impact on offer mixdesign. Adapt the framework toyour particular marketing needsand goals.

The five filters we’ll examine:1. Utilizing the penetration of items

or categories into your group ofbest customers.

2. The role of category in offer mix(for example, core or destinationcategories).

3. Designing offers for items withcustomer price-sensitivity.

4. The approach to new or seasonalitems.

5. The approach to niche, fashion orhigh-end brand items.

1. The Items’ Loyalty Unit Sales Penetration

The first element we’ll examinecovers the items or categories pur-chased heavily by your loyal card-holders or best customers. Thesewill generally sell well in responseto point-based reward offers, andeach therefore has a wider audi-ence. If you haven’t already doneso, establish or enhance your abilityto track and measure loyalty card-holder penetration by item or cat-egory of item from point of sale.

thoroughly tested previous offers tounderstand what works and whatdoesn’t work. Also consider thatmany marketing and merchandisingteams simply don’t have the rules,processes and metrics in place todayto determine how their offers oughtto be constructed. And—just asimportant—how those offers mightbe tweaked, spiced up, and given adash of innovation depending ontiming, product mix and the tastesand needs of your best customers.

Of course, there’s no all-purposefool-proof formula for balancingoffers based on points with offersbased on discounts. Yet, a newframework designed specifically toaid in loyalty offer design is helpingmarketers bring precision and dis-cipline to the process, and can dra-matically improve the success andreturn on investment of loyaltypromotions.

Most important, though, you mustkeep in mind that this frameworkis intended as a starting point forrigorous testing—conditions vary,and so must designs used toaddress those conditions.

The tradeoffs in offer designIn loyalty as in customer acquisi-tion, offer design is a continuous,multi-step process of testing dis-counts and point-based rewards. Theprocess includes measuring results,determining effectiveness, anddocumenting and applying best prac-tices. Repeating the process eachtime a promotional appeal is pre-sented to customers helps to createdata points and metrics that canyield greater knowledge. Addressthese three categories of questionswhen designing a promotional offer:

Item• Should a category or item be promoted?

• Should the offer consist of a discount, a point-based reward,or both?

• What depth of discounts andpoint-based rewards will ensure

V.S.POINTSDISCOUNT

Taking the additional step of refining the offer mix—

whether the mix consists of point-based rewards or discounts

or a combination of both—enhances cost effectiveness,

improves return on investment, and increases customer value.

Balance SheetThe Right Mix, The Right ROI

High

Low

POINTSDISCOUNT

1

2


On the chart that follows, note theplacement of certain characteristicsand how you should respond to them:

If you see heavy sales penetra-tion among loyalty cardholders,use loyalty points to sustain andencourage more sales.

If you see lower sales penetra-tion among loyalty cardholders,reduce prices by using discounts,and offer loyalty points to gain trial.

For example, a grocery retailer mightfind that its best loyalty cardholdersare highly over-indexed in sales-volume percentage on such routineitems as canned goods, cereals andcheese, but significantly under-indexed in such impulse and dis-cretionary goods as cosmetics, firstaid and chewing gum. To rewardloyalty cardholders, this retailermight place strong point-basedmulti-buy offers on cereal.

The grocer might also use highlyover-indexed categories to identifythose customers who haven’tshopped an item or category, but arelikely to do so. Direct or targetedreward offers could stimulate trial.

2. The Category RoleNext, consider the role of categories—how does an item’s category servethe retailer’s overall goals. Are theydestination items? Impulse buys?And so on. The role of the productcategory as an offer attributeclosely mirrors a retailer’s productportfolio strategy:• Some products are your organiza-tion’s destination and core items

1

2

(customers will arrive at your web-site or store on a mission to shopand purchase these items).

• You carry or offer traffic-buildingproducts and services that yourclose competitors also carry oroffer. To keep a competitive edge,it’s important to apply heavierdiscounts and a more aggressivediscount to loyalty points mix todrive customers to the store.

• Items categorized as impulse aregrab-and-go.


For destination/core items,offer a mix of discounts and pointsbased on competition and brands.

For traffic items, because theseare basically commodities, applyheavier discounts in the mix.

For convenience/impulse items,which have low priority as promo-tional targets, offer few discounts, anduse loyalty points to stimulate trial.

For example, an electronics retailerwould ensure that such destinationand core items as computers andtelevisions would feature loyalty-point offers to reward customers onkey items. Discounts would increaseto promote certain models or brandsthat must be competitive.

In the case of a grocer, traffic itemslike toilet paper, soft drinks and milktend to respond better to discountand are often hot buys on the front-page circular. Creative use of loyaltypoints to reward multi-buy purchases(for example, “Buy 3 and get 50

1

2

3

extra points”) have proven success-ful for these types of items.

Convenience or impulse items likemagazines, books and chewing gumare generally unplanned purchases.With such items, point-basedrewards can be tested to stimulatetrial and repeat purchase. Market-basket analysis can be used to createtargeted reward offers. In the elec-tronics-dealer example, a customerthat purchased a television mayrespond better to a targeted rewardoffer on Blu-Ray players or service.

3. The Items’ Price-SensitivityPricing is of course a delicate mat-ter of balance. The questions mar-keters should ask themselvesinclude: How price-sensitive is theitem, as related to competition or toother items? If these items don’t sellquickly, do we stand to lose profit?Discounting less is advisable onitems with low price-sensitivity.Be sure to understand price-sen-sitivity by cardholder segment. Forexample, your best andmost loyalcardholders may be less price-sen-sitive on a category or item thanoverall metrics may indicate.


To drive unit sales, offer dis-counts. The lower the price, the moreunits will move.

To avoid margin leakage, offerpoint-based rewards—lower priceswon’t increase the unit sales ofitems that would sell at specific ratesanyway.

1

2

High Penetration

Low Penetration

POINTSDISCOUNT

1

2

Core

POINTSDISCOUNT

Destination1

1

Convenience/Impulse3

Traffic 2

21www.colloquy.com

A fashion retailer could “bring the season” forward offering loyaltyreward points on such items asswimwear or winter jackets, andgradually introduce discounts as aninventory-management mechanism.Multi-buy point-based rewards canalso function well for clearance, inaddition to targeted markdownstoward cardholders who have pur-chased in a particular category. Forexample, the winter jacket purchasermay respond well to targeted point-reward offers on gloves, scarves orother related items.

5. The Items’ Prestige Value:Brand/Niche/Fashion Items

Finally, higher-end products have strong impact on what to offer—and what to not offer. Discountingshowcase items that define yourcompany, products, services orbrands is generally not advisable.Doing so can interfere with brandand quality perception, especiallywhen the items are highly fashion-able. Instead, use loyalty point-based rewards to stimulate trialamong your customer base.


Maintain quality/in-fashionperception.

Discount competitive brands.

Use point-based rewards tostimulate trial.

Rarely will you see heavy discount-ing of prestige cosmetics, designer

1

2

3

clothing or even high-end home-entertainment equipment. Unlessthey face significant competitivepressures, such items are best suitedto loyalty point-based reward offers.

Lower-scale brands are generally tiedmore to price and price-sensitivity—however, private-label brands maybenefit from point-based offers asa mechanism to generate trial andrepeat. A grocery retailer might useloyalty point offers on private-labelitems to shield its brand againstnational brand competitors anddiscount offers.

Walking the bottom lineThe best loyalty programs focus onknowing and giving to customers.In return for their loyalty and repeatpurchases, we as loyalty marketersgive them opportunities to earnrewards—such as points and dis-counts—that encourage them toreturn again and again. We learnabout customers and can predicttheir behaviors through intelligentdata collection and careful analysis.Our customers return because wedeliver a satisfying mix of what theyneed and expect, and what excitesthem.

Taking the additional step of refiningthe offer mix—whether it consistsof point-based rewards or dis-counts or a combination of both—enhances cost effectiveness,improves return on investment, andincreases customer value. Whenoffers and offer mix are relevantand timely, we present customerswith meaningful reasons to engageevery day with our brands, storesand products.

And we give them every reason tofollow us as we navigate the highwire, so they can relax and com-fortably enjoy the view—exciting,but with no danger of falling.

Shawn Stewart is COLLOQUY Contributing

Editor and Associate Vice President, Retail

Analytic Solutions, AIR MILES Reward

Program.

Such highly price-sensitive itemsas commodities, diapers and paperwill generally benefit more fromdiscounts because they’re highlycompetitive and undifferentiated.However, on occasion high-price-point items that are price-sensitive,like jewelry, can benefit from offer-ing point-based rewards where priceis related to brand and quality per-ception. It’s important to test point-based rewards versus discounts to discover margin opportunitiesand ultimately generate item-levelloyalty-point sensitivities.

4. The Items’ Seasonality orNewness

A changing product mix is anotherimportant attribute to consider.Promotional offers for new or sea-sonal items must be handled withcare. Begin by offering little to nodiscount on new items at the begin-ning of a season (or other time-sensitive milestone) to avoid settinga low-price precedent. Instead, giveyourself room for later markdownsby using point-based rewards tostimulate customer trial. As the endof the season approaches, graduallyshift from the point-based offersto discounts for final clearances tomove units out.


Early in the season, mix compet-itive discounts with loyalty points.

Toward the end of the season,replace loyalty points with discounts

1

2

Beginning of Season

End of Season

POINTSDISCOUNT

1

2

POINTSDISCOUNT

Best1

Better2

Private 3

Good 2

that addresses the challenges of B2Bloyalty using the power of peer refer-rals. Peer Advantage has figured outhow to manage the twins, and itssuccess earned it an honor as a final-ist in the 2012 COLLOQUY LoyaltyAwards.

The winning formula Peer Advantage rewards existing cus-tomers for providing referrals basedon their experiences with Teradata totheir peers at prospective customercompanies or existing customersconsidering an expansion. It workslike this: Teradata invites a currentcorporate customer to participate inthe program, and identifies key rep-resentatives at the organization whowould be the most helpful in provid-ing peer references. When a Teradatasalesperson believes that a potentialor existing client would benefit frompeer referral, he or she submits arequest to the Peer Advantage team,which identifies the best membercompany to fulfill the request.

“Our sales reps select the role theywant when they submit the request,”says Maria Sturgeon, Peer Advantageprogram manager. “Most of the timetheyare looking for business users orsomeone in IT management or ITsupport. It is important that we havethat information when we submit therequest to our reference customer.We make sure it’s the right peer-to-peer level.”

Peer Advantage contacts the programmember, and requests a meeting orsome other client interaction (clientmembers are also rewarded forspeaking at conferences, or gener-ating positive media coverage). Thenthe member company receives pointsfor the meeting or other event. Thosepoints are redeemable for executiveeducation, Teradata conferenceregistration, airfare to the confer-ence, and other business-specificrewards that benefit the membercompany.

The key metrics measured are bothsoft (the good will generated by the


B 2 B R E P O R T: T H E G EM I N I E F F E C T

such rewards is up and running,changing the behavior of a singleclient has a far greater effect on thebottom line than it does for a B2Ccompany.

COLLOQUY calls this dichotomythe Gemini Effect. In other words,B2B clients are like a pair of twins,or a split personality. One side ofthe manager’s brain is focused onrational business decisions and thebottom line, while the other side isstill attracted by benefits and rewardswith personal appeal. A successfulB2B program must speak to bothsides.

Teradata, a Dayton Ohio-based ana-lytic data solutions company withmajor corporate clients throughoutthe world, created a loyalty program

PARENTS OF TWINS say that having twoinfants is much more challengingat the beginning. But once they geta little older (and the parents gainexperience), the pair are actuallyeasier to manage than a single childbecause they entertain each other—each has a permanent peer to chatwith.

Creating an effective B2B loyaltyprogram is like raising twins. Theinitial challenges can seem toocomplicated—companies range insize from Fortune 500 behemoths tomom-and-pop shops; employeesrotate frequently, making it difficultto keep databases current; and find-ing business-appropriate rewardsthat appeal to individual associates orexecutives can prove to be a thornyproblem. But once a program with

Peer Power Teradata’s B2B loyalty program again proves the adage that your bestsales force may be your existing customers

B Y P H A E D R A H I S E

program with customers andprospects) and hard (customerretention, prospect conversion andlifetime value of a customer).

Peer Advantage’s success is based onthree critical strategies:

1. Maintain the data. It can betempting to view the B2B field as abunch of very similar corporatecustomers. Teradata obviouslydoes not take that view. Theymaintain a robust database thattracks client size, preferences andneeds, as well as numerous otherfactors. They track multiple con-tacts at each company, and infor-mation is updated regularly to stayon top of corporate turnover.

Teradata’s data-manage-ment tools enable them totake a snapshot of the wholeprogram at any time. “Ourmanagement database

allows the staff to go in and see howmany references we are workingon—by member company, forexample,” says Sturgeon . “Weneed to make sure they arespaced out, and that we are usingthe complete reference base andnot inundating any one company.”

Because the database is so robust,it yields a surprising amount ofdetail, much of which shows up inweekly, monthly and quarterlyreports. “Our database allows usto look at their current activity aswell as their company’s past his-tory,” says Sturgeon. “This allowsus to assess total references, aswell as the most active peer com-panies and those we need to getmore involved in the program.”

2. Focus on the individual. PeerAdvantage offers rewards that ben-efit the member company. Still,it’s an invitation-only program,and the Gemini Effect is at work inthat Teradata clients are personallyflattered to be asked to contributebusiness time and expertise. Thereference process begins with the

sales reps seeking a client willingto speak with a prospect, and PeerAdvantageworks to make the rightmatch.

There is turnover among primarypeers, but that can be a benefit tothe program, says Sturgeon. “Theyoften go to other companies andre-enroll in the Peer Advantageprogram there.”

Typically, a person at each par-ticipating customer company isdesignated as the “primary peer.”He or she acts to facilitate thematch from within the company.That makes the invitation-onlyaspect of the program—and theprimary peer’s controlling rolein the reference—its main soft, orego-stroking, benefit.

3. Support the business.Partici pat -ing customers earn points thatare accrued not by the individualemployees who make the referrals,but by the entire company. Theorganization can then redeem forcorporate benefits and experiencesincluding business books, Teradatamerchandise, airfare and/or reg-istration fees to Teradata’s annualconference, and executive edu-cation at area business schools.Again, the Gemini Effect is at playby appealing to both the businessand personal sides of the brain—conference attendees whose air-fare is covered may decide toextend the visit through the week-end and bring along a spouse.

Sturgeon’s team reviews the pro-gram regularly to determine whichrewards are most important andbenefit customers the most. Mostcustomers want conference regis-tration, along with travel expensesto the conferences. “With changesin the economy, a lot of conferencetravel has been cut,” she says, “sothis gives them something theymight not have otherwise.”

The number of points earned forreferrals depends on the type of

activity, with a clear bias towardrewarding more for face-to-faceinteractions, such as hostingprospective customers at themember company’s site.

When peers pay off Peer Advantage, which had its humblebeginnings on an Excel spreadsheet,has grown to be a respected andvalued customer-acquisition pro-gram with strong backing fromsenior management. “Our sales vicepresidents are among our top sup-porters,” says Sturgeon. “The ulti-mate measure of success is drivingTeradata revenue to the bottom lineand growing the customer base.”

Sturgeon tracks every contact and itsoutcome, and reports three-yearincreases of 120% in new Teradatacustomers supported by PeerAdvantage references, 100% in newmember companies, 64% in salesreferences and 46% in total refer-ences. “The sales force gives usstrong support because they knowthey need references,” she says.“References in any industry of thisnature are typically in the top twocriteria for choosing a company.”

Parents may say that twins aredouble trouble, but for Teradata,they are double the reward.

Phaedra Hise is COLLOQUY’s Senior Editor.

So is her twin sister, Phaedra Hise.

Entries into our annual COLLOQUY Loyalty Awards presented each

September consistently showcase innovation, strategic design and,

yes, results. This is the first in a series of print and online profiles

of the finalists and winners. Teradata was a finalist in the Innovation

in Loyalty Marketing Category.

For a PDF recapping the 2012 winners, and for information on entering

the 2013 COLLOQUY Loyalty Awards, scan the QR code or

visit www.colloquy.com/Loyalty-Awards-1. There you will

also find links to recaps of the 2010 and 2011 winners.

Celebrating ExcellenceHonorees in the COLLOQUY Loyalty Awards

23www.colloquy.com

www.colloquy.com/Loyalty-Awards-1


on new meaning when it comes tothe criticality of information.

Systems must gather and synthesize—in real time—massive amounts ofdata about customer behavior on agranular level and make it availableinstantly to marketers and customer-facing personnel. In addition to astrategic blueprint and a holisticallyprepared organization, companiesmust choose technology solutionscreated specifically to withstand thehigh-volume, high-speed rigors ofreal-time marketing.

S T R AT E G Y R E P O R T: T H E P OW E R O F N OW, PA R T 3

on all these years will shake andrattle under the extreme challengesof marketing at warp speed, ulti-mately imperiling your mission.And make no mistake, customersand competitors will notice if yourtechnology isn’t up to the task.

The sound decisions and responsive,rapid-fire execution that characterizesuccessful time-based marketingdepend on purpose-built technology.In time-based marketing, dataisn’t gathered merely for futureanalysis. The Power of Now takes

“The Power of Now” and “ExtremeMakeover, Time-Based MarketingEdition” (see the next page for details)recently addressed strategy andorganizational change when engagingin real-time marketing. Now it’s timeto discuss technology—the engine thathelps enable time-based marketing.

EXECUTING IN REAL TIME brings with ita turbo-charged increase in speedand complexity, the likes of whichmost marketers haven’t encounteredpreviously. The technological chassisthat your organization has relied

Marketing at Warp SpeedReal-time marketing depends on purpose-built technology

B Y J O E D I S H A R O O N

25www.colloquy.com

Decisions about the technologyinvestment, including the choiceof technology partner, are thereforecrucial—for myriad reasons. But thereare ways to avoid common pitfallsand make the tech-conversionprocess less traumatizing foreveryone involved.

Turbo-charging the engine Whether this project is to be con-ducted entirely in-house or withthe help of an outside firm, the“dream team” that Todd Nelsondescribed in part two of this seriesis the crew that will establish theparameters and drive technologydecisions and acquisition.

For the sake of the endeavor,members of this team must beempowered to instantly deal withunexpected issues and changesthat will undoubtedly arise as thetechnology piece of this projectprogresses. Not all their decisionswill be popular or politically expe-dient. But, if you’ve selected theright team, the technological deci-sions these individuals make willimprove the organization’schances for real-time success,because the choices are made byleaders representing all groupswith a stake in the project.

First of all, everyone must under-stand a core concept: Real-time tech-nology is not a marketing database.All systems—operational, transac-tional, marketing—work togetherto make time-based marketing areality. Unfortunately, engagingreal-time tech isn’t a simple matter

of overlaying a marketing-focusedsolution on top of existing systemsand flipping a switch.

So, an analysis of current systems isneeded early on. You must answersuch questions as:• How and where do we gather operational and transactionaldata now?

• Are there separate repositories forthe data, and are they integrated?If not, can they be integrated?

• Can our organization interact inreal time for operational purposestoday? If so, how?

Assessing and understanding thecurrent state of the organization’sinfrastructure helps guide the proj-ect team’s decisions about projectscope.

It’s important to match the tech-nology project’s scope to yourorganization’s culture, as well as to its aspirations. Whether theproject is envisioned as robust orsimple, it’s important to under-stand the current infrastructureand know what your organizationcan reasonably handle. Someorganizations can deal with thepressure of planning and imple-menting a major project at a highlevel of complexity and scale. Othersprefer to plan and map, and thenembark on a careful process oftesting, evaluating, modifying andre-testing. Know your company’sculture and capability, and don’tstart at the level that would com-pletely up-end the normal cadenceof the organization.

Build or buy the warp drive?In time-based marketing, scalematters, and so does speed. At theretail register, where there is notime to lose, processing speed canmake or break customer satisfac-tion, revenue, and loyalty goals. Thecustomer is standing and waiting,so regardless of the challenges, youmust deliver personalized, rele-vant marketing messages to thatcustomer—right now. It can’t wait.

On the internet, websites have onlya second or two to show a pagebefore consumers start thinking,“Hey, this seems slow. I’ll go else-where.” Similarly in the point-of-sale environment, any particularleg of the process should happenin milliseconds. Your technologysolution must be specifically builtto handle that kind of demand.

The technology solution that drivesreal-time marketing can’t be ahybrid of a stand-alone piece ofservice-oriented architecture on topof a mainframe. The universal needfor world-class loyalty programsdemands that the transaction andmessaging environment be one andthe same, and—this is important—that they be governed by the sameset of rules. So, all touch points mustbe synchronized.

For example, if you message a real-time reward at point of sale andthe marketing message is based onpoint balances, the transactionenvironment synchronizes with themessaging to set the correct triggerpoint. When the point balancechanges—as it may have during that

In Recent Times . . . In “The Power of Now” (spring 2012 issue of COLLOQUY),

the first of our three-part series on time-based marketing,

John Bartold introduced the real-time marketing concepts and

cautioned against embarking on this new type of marketing

without a strategic blueprint. He discussed the pros and cons

of bounce-back, point-of-sale strategies, and location-based

offers.

In the second part—”Extreme Makeover, Time-Based

Marketing Edition” (summer 2012), Todd Nelson wrote that

real-time marketing simply doesn’t work when organizations

attempt to bring it to life in an environment of old-style mar-

keting. He advocated for strong executive sponsorship and the

creation of a multifunctional group of decision-makers and

leaders to drive the project and socialize the

changes needed.

www.colloquy.com/Power-of-Now-1 www.colloquy.com/Time-Based-1

www.colloquy.com/Time-Based-1

www.colloquy.com/Power-of-Now-1


transaction—the planned messagemay no longer be relevant. Thesynchronicity between transactionand messaging should ensure thatthe irrelevant message is notdelivered to the customer.

Taking that a step further, thissynchronized system may insteaddeliver another, more-relevantmessage, such as one based on theitem the customer just purchased(for example, an instant discount forbuying an extra item, an invitationto a members-only event, or a last-minute purchase suggestion basedon personal buying history thatmight help the customer achieve areward threshold). And the pro-cessing for these options takes placeliterally in a fraction of a second.That’s why the technology requiredto accomplish these and other quick-switch decisions must be extraor-dinarily fast and nimble.

When exploring possible technologyplatforms and solutions, any invest-ment in real-time technology mustbe thoroughly vetted to ensure thatit’s ready and able to meet real-time’sextreme challenges.

Avoiding a potentially disastrousscenario calls for developing a spec-ification document and scope ofwork that is both clear and precise.During this process, ask questionsthat help your organization moreaccurately assess the proposedplatform and approach:• Where is the proof that the plat-form can handle the scale, volume,and speed required for real-timemarketing? (Ask for completestatistics and data as well as ref-erences that will show the plat-form under consideration hasworked reliably for others whohave successfully implementedreal-time marketing.)

• Will we take a phased approach

or an all-in approach? Why?(The approach to be used mustmatch the organization’s culturaland technological realities.)

• What is the timeframe fromplanning to deployment?(Flexibility is key in planning forthe challenges of developing anddeploying real-time marketingtechnology. Expect the unex-pected.)

• What mechanisms will allow us to keep tabs on the new sys-tem’s effectiveness afterdeployment? (It’s important tocontinually monitor and evalu-ate the system so modificationscan be quickly made to ensurepeak performance.)

Selecting a technology partner—whether the organization decidesto build or buy the technology—isof critical importance. Rather thanlocating a “vendor” of productsand services, companies shouldseek out a true partner who willserve as a member of the projectteam, and who has experience withsimilar projects and transforma-tional processes.

Finally, keep in mind that no tech-nology project is stress-free. Butyou can reduce the potential traumaof planning, implementation, anddeployment of real-time marketingand what might possibly be themost complex and transformativetechnology project of your company’shistory. Honor and respect yourorganization’s unique culture bysetting realistic expectations,schedules, and budgets. Form a“dream team” of engaged executivesand multi-disciplinary experts andleaders who are flexible, nimble,and empowered to make decisionson the spot. They, along with a trustedtechnology partner, will see themission through to deployment—and beyond—at a comfortable warpspeed.

Joe Disharoon, a COLLOQUY Contributing

Editor, is Senior Vice President in the Product

and Platform Group with Epsilon.

©2012 LoyaltyOne US, Inc. All rights reserved. Permission to reprint may begranted upon specific request. COLLOQUY is a trademark of Alliance DataSystems Corporation used under license by LoyaltyOne US, Inc., an AllianceData Systems Company.

The voice of loyalty marketing since 1990

Managing Partner: Kelly HlavinkaPartner: Jim SullivanSenior Editor: Phaedra HiseManaging Editor: Bill Brohaugh Online Editor: Josh MilnerMarket Alert Editor: Joan DenoResearch Analyst: Wardah Malik

Contributing Editors: Dennis Armbruster, JohnBartold, Stephanie Cohen, Joe Disharoon,Lance Du Chateau, Bruce Kerr, Mitch Martin,Todd Nelson, Dan Ribolzi, Brian Ross, AdrianSosa, Shawn Stewart, Fred Thompson

Marketing Assistant: Jeff Stoermer

COLLOQUY Editorial Board: •Graham Atkinson, Chief CustomerExperience Officer, Walgreens

• Tom Collinger, Executive Director, MedillIMC Spiegel Digital & Database ResearchInitiative, Medill Northwestern University

•Dan Finkelman, SVP, Chief MarketingOfficer, Retail Services Alliance Data

•Garret Ippolito, Payments and LoyaltyConsultant

• Catherine McIntyre, SVP, CorporateStrategy Group, LoyaltyOne

•Kyle Murray, Director of the School ofRetailing and Associate Prof. of Marketing,University of Alberta

• Bryan Pearson, President, LoyaltyOne• Randy Petersen, Chairman and President,InsideFlyer Magazine

•Mark Vandenbosch, Kraft Prof. of Market-ing, Richard Ivey School of Business,University of Western Ontario

4445 Lake Forest Drive, Suite 200Cincinnati, Ohio 45242Telephone/Fax: +1.513.248.9184Email: [email protected]

COLLOQUY® is published by LoyaltyOne, a globalprovider of loyalty strategy and programs, customeranalytics and relationship marketing services. Itsroster includes: the AIR MILES Reward Program,North America’s premier coalition loyalty program;Direct Antidote, a direct-marketing agency spe-cializing in data-driven campaigns to inspire cus-tomer loyalty; Precima, a consulting and analyticalservices firm that uses shopper insights to boostretail performance; LoyaltyOne Consulting, aglobal loyalty advisor to Fortune 1000 companies;and Dotz, Brazil’s largest coalition loyalty programwith more than 3 million users and 50 sponsors.Toronto-based LoyaltyOne is an Alliance Datacompany. For more than 30 years, Alliance Datahas helped its clients build more profitable, moreloyal relationships with their customers. For moreinformation, visit www.loyalty.com.

The sound decisions and responsive, rapid-fire execution that characterize successfultime-based marketing depend on purpose-built technology.

A more relevant offer could have doubled your response rate.

See how leveraging shopper insights delivers a more profitable outcome at precima.com/marketing

April 26, 2010 4:39 PM

I


P R A C T I T I O N E R ’ S P E R S P E C T I V E

Co-Creativity

ideas through surprising partner-ships is so exciting.

At COLLOQUY, we see co-creationin the loyalty market in four varia-tions: one for partnering with cus-tomers (the way Starbucks has), andthree for partnering with businesses.

1. Partner with a companyalready in your value chain.For example, supermarket chainKroger and Nestlé Purina PetCarebuilt a co-branded online com-munity called Joyful Pet Momentsearlier this year. We call this “ValueChain Co-Creation”—a partner-ship between companies thatalready have a relationship toleverage the strengths of each inimproving a product or service. AtJoyful Pet Moments, customersshared stories and photos of theirpets, saw deals on pet productsat Kroger stores, and played anInstant Win Game awarding win-ners a free Purina product as acoupon loaded onto their Krogerloyalty card.

2. Partner with a competitive com-pany.We call this “Co-opetition,”a partnership between companiesthat offer similar or competingproducts to create a mutually ben-eficial and superior product. AtGeneral Mills, the Pillsbury teamneeded an outside partner to create

a breakfast biscuit sandwich. Theteam used the online innovationvenue “G-WIN” (General MillsWorldwide Innovation Network) toget the word out, and was directedto manufacturer Better BakedFoods. When that company’s “tech-nical capabilities were pairedwith our internal expertise, theresult was a unique and superior-quality sandwich that couldn’thave been achieved as quickly orsuccessfully,” wrote Jeff Bellairs,

YOU’VE PROBABLY CONSIDERED whetherco-creation has a place in your cus-tomer loyalty strategy. After all, we’rein an era where websites and socialforums like Facebook and Twitterenable and empower consumers toprovide ideas directly to companies.You’ve probably read about some ofthe great examples of co-creationwith customers, including MyStarbucks Idea (a site that has loggedmore than 132,000 customer-gener-ated suggestions) and wondered,“Should I be doing something likethat with my customers?”

But here’s what you might not havethought about: Should you team upwith other businesses? Co-creationbetween companies is a differentopportunity for innovation through

collaboration, with intriguing poten-tial for evolving your loyalty strategy.

Banding together to address the painwe all share makes sense these days.The economy continues to stagnate.Competition ramps up from unex-pected places. Categories and chan-nels are blurring. The pace of busi-ness moves at lightning speed andnew tools and channels seem to comein unending waves. That’s why seeingloyalty programs building creative

Is loyalty ready for the dawning era of co-creation?

B Y K E L L Y H L A V I N K A

senior director of G-WIN, in ablog post.

3. Partner with a company thatmakes everybody say, “Huh?”We call these “The StrangeBedfellows.” They’re probably themost intriguing partnerships,involving companies from verydifferent industries to createsomething highly innovative. In loyalty, one of the premierexamples is the co-creation of amobile rewards app by Citi andBest Buy. The app provides aconvenient and fast way for cus-tomers to redeem points fromCiti’s ThankYou Rewards to payfor products in a Best Buy store.Normally, you might not men-tion Citi and Best Buy in thesame breath, but these compa-nies were able to create moreutility and a superior experiencefor both sets of customers.

These variations of business co-creation should inspire you to thinkmore deeply about your loyaltystrategy. When considering align-ments, look for partnerships thataccomplish three goals: 1) increase the utility of the benefitsyou offer consumers

2) strengthen the overall value propo-sition of what consumers receive

3) create a superior customer experience

True, partnering between compa-nies means working in differentand challenging ways. But it alsomeans potentially coming up witha loyalty innovation that you couldnot have developed on your own.

A final thought. If you’re not think-ing about co-creation opportunities,your competitors probably are.

COLLOQUY Managing Partner Kelly Hlavinka

co-created this article with herself.

Co-Creationwith consumerse.g.: My Starbucks Idea

Value Chain Co-Creation

e.g: Kroger/Nestlé partnership

Co-opetition

e.g: General Mills/Better Baked Foods partnership

Strange Bedfellows

e.g: Citi/Best Buy partnership

https://rewards.thankyou.com/b2r/merchandise/MerchandiseHome.do

https://rewards.thankyou.com/b2r/merchandise/MerchandiseHome.do

www.blog.generalmills.com/2012/03/partnerships-behind-the-products/

www.blog.generalmills.com/2012/03/partnerships-behind-the-products/

mystarbucksidea.force.com



www.generalmills.com/Company/Innovation/G-Win.aspx

www.generalmills.com/Company/Innovation/G-Win.aspx

www.softcoin.com/Sites/Kroger_Joyful_Pet_Moments/Page/HomePage/Retailer/bannertoke.bannersiteshortname.bannertoken

smartbutton.com 800.611.2265 302.283.0200

Market Smart. Build Loyalty. Increase Sales.Turn your data into a business advantage. The Smart Button Loyalty Platform delivers significant benefitsto your organization by providing you with the tools needed to create long-term, interactive, value-addedrelationships with your patrons.

• Bulk Email Capabilities• CRM Functions• Segmentation• Online Enrollment• Targeted Coupons• Flexible Points Engine• Online Rewards Store• Analytics• Web Site Portal• Product Code Promotions• Choice Words & Phrases Promotions• Web Service Interfaces• Multiple Rewards Capabilities• Client-Driven Blog• Message Boards• Promotions• Surveys• POS Promotions

Experience a new approach to loyalty and rewards.

“Our qualitative data and vendor analysis showsSmart Button’s loyalty offering is robust andconfigurable for several retail, entertainmentand other service industry environments.

Smart Button’s solution has an effective workflowinvolving all the elements of a loyalty program:planning, implementation, evaluation and analysis.”

Sahir AnandResearch Director—Retail GroupAberdeen Group

At LoyaltyOne, we know that the key to building businesses is understanding how to profitably change customer behavior. We lead enterprise loyalty with unmatched capabilities in loyalty strategy & programs, customer analytics and relationship marketing. Plus, our multi-industry experience means we can develop solutions that are specific to your business needs.

Whether you sell footwear, groceries or something else entirely, LoyaltyOne delivers results.

Discover what LoyaltyOne can do for your business. loyalty.com

We know customers from head to toe.

“LoyaltyOne” is a service mark of Alliance Data Systems Corporation or its affiliates.

TM/SM

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