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Are Loyalty Programs Doomed?

Marketing Horizons: Are Loyalty Programs Doomed? Featuring G. Ajay Row, entrepreneurial executive

The marketing world has embraced loyalty programs ever since the launch of the American Airlines Advantage program in 1981. But these transactional rewards programs are headed for the trash heap, says our guest Ajay Row, a longtime authority on retention and loyalty, based in Mumbai. Join us to learn the strategy behind loyalty marketing programs and the strategy that is likely to replace them. The key lies in figuring out who’s valuable to you, what’s valuable to them, and how you can deliver and extract more value in the relationship.

Cyndi Greenglass: How would you differentiate loyalty from retention and customer relationship management?

Ajay: So, let's start with customer relationship management. That's really the ground zero, if you will, for what we're going to talk about today and loyalty programs are just way of delivering CRM. Retention is one of the outcomes of a good loyalty program. So, let's take it step by step, first CRM. I think it really boils down to three questions, who is valuable to me, what's valuable to him or her and how do I deliver consistently over time. Let's talk about life, I mean this is pretty much how life works, isn't it? Every business works this way, every human being works this way, you try and figure out who matters to you, then try and figure out what matters to them and then you try to ensure they have a long-term series of interactions called a relationship. Let's start with that as ground zero and start building on that. I'm going to use the example of dating, boy says hey, you know, I’d love to take you out for a meal and girl says yeah that's great. He chooses an Italian place, and she hates Italian food, she loves Asian food. Scenario two, he asks what kind of food do you like and she says I love Asian food and the coordination of a restaurant, same boy, same girl, same date but completely different results. You’re setting yourself up for success by underpinning what we do with data. We use data points so we know who's valuable to us, and you've got a data point used in order to start a relationship on a positive for it. Now, as you keep building that relationship, keep adding data points so you can deliver value consistently and therefore extract it consistently.

Ruth Stevens: You’ve mentioned the reasons to create loyalty programs, can you run us through those benefits?

Ajay: The reasons why you do a loyalty program start first with the fact that you get data at an individual level. You relate every transaction to that unique member. As you relate every interaction to the unique member, you can put that data together and create a comm channel which you own. The second benefit, you have, which is a communication channel. If you do a bad job on that communication channel and you spam the person, they're going to reward you by ignoring you and that's not what you want to have. You want something which is valuable where we're going to get the 80% open rate, because people value what you communicate with them.

The third thing you get is a currency and a reward system that you control. The fourth thing you get is it in a way to recognize people who you want to recognize, the people who are valuable. You can treat them differently from someone else. You can do alliances, which can a benefit your customers, and it benefits yourself and you make a lot of profit and other alliances, because you know they can be almost entirely profitable. Finally, you can manage that customer relationship more effectively and what we'd like to do is create moments that matter. If you think of a relationship over a period, you know, however long it is, it could be years, it could be decades, it's created by a series of interactions which have moments where that person interacts with your brand, with your service, whatever it is that you do. Each one of those moments gives you an opportunity to create a moment of truth.

Cyndi Greenglass: Looking always forward thinking with our horizons, where do you think loyalty is going in the future?

Ajay: I think loyalty is ripe for disruption. Let's go back to the early 80s when American Airlines launched the first loyalty program the way we know it. American Airlines just completely changed the ball, we didn't need stamps anymore, it was put into a book, we track the miles and we give you the miles. They defined what loyalty would be for the next four years until pretty much now and all the loyalty programs that launch were basically copies of what American Airlines did. I mean, for all practical purposes, you could cut and paste, different loyalty programs have different value propositions. What's changed is, new industries which are data driven don't need to ask you for that unique identifier anymore. Amazon has already bought you when they launched Prime. They showed us their loyalty program can be very different from what we understood from American Airlines. So, think about the technologies coming down the pike. The first thing that's going to happen is you're going to get a bunch of companies who can get data very well and don't need a program to have the data. A new version of a loyalty program, I think, is going to emerge and there'll be many paths to that new version. Retail, for example, I think, will be able to have physical meet digital. This is going to be something huge in the future, magical experience in store. There could intelligence in the mirror, when trying on clothes. It could recreate an event to show you how you are going to look at the event you are going to. It can recreate that event in the mirror and create magic. The fundamental questions are going to remain cost, was valuable to you, what's valuable to them, how do you deliver value and therefore extract value over time right.

Key Takeaways/Three Little Piggies:

  • Moments that matter is the essence of customer experience marketing. We need to create unique experiences that can differentiate and can be memorable enough to not just be tossed away in the mind of the consumer.
  • Loyalty is identifying who is valuable to you and what is valuable to them, then implementing the mechanism that allows you to create those moments that matter. These loyalty programs have five additional assets to offer the firm including access to customer data, owned currency, source of alliance partnerships.
  • The future of loyalty is creating digital moments that marry the physical and digital world; a magical moment that is lasting based on what you have taken away.

Marketing Communications Today presents Horizons, it’s forward-thinking, looking ahead, through the front windshield and beyond, into the marketing future. Join Cyndi and Ruth bi-weekly for new ideas, technologies, tools and strategies that are emerging to help marketers navigate over the marketing horizon.

Meet our guest

Ajay Row

G. Ajay Row is an entrepreneurial executive with 35 years’ experience in data-driven, digital, loyalty, analytics and CRM across a variety of industries and several countries. Launched among the first CRM, loyalty and data-driven marketing programs globally in the 1980s, have since implemented programs across 65+ countries. Built several companies, two to exit, and numerous case studies. 11 years with the Taj and then the Tata Group responsible for CRM. 5 years at ITC. Full-time consultant for several years.

Meet the hosts

Cyndi Greenglass

Cyndi W. Greenglass is a founding partner and Senior Vice President Strategic Solutions at Diamond Communication Solutions, a data driven communications firm specializing in Healthcare, Financial Services and direct response solutions and an adjunct instructor in the Data Marketing Communications online master’s degree program from WVU.

Greenglass has twice been named into the Top 100 Influential BTB Marketers by Crain’s BtoB Magazine and was the 2012 CADM Chicago Direct Marketer of the Year. Greenglass is a member of the Executive Management team at Diamond Marketing Solutions where she is responsible for the strategic planning process, participates in strategic acquisitions, and manages the agency services division.

Ruth Stevens

Ruth P. Stevens consults on customer acquisition and retention, for business-to-business clients. Ruth serves on the boards of directors of the HIMMS Media Group, and the Business Information Industry Association. She is a trustee of Princeton-In-Asia, past chair of the Business-to-Business Council of the DMA, and past president of the Direct Marketing Club of New York.

Ruth was named one of the 100 Most Influential People in Business Marketing by Crain’s BtoB magazine, and one of 20 Women to Watch by the Sales Lead Management Association. She serves as a mentor to fledgling companies at the ERA business accelerator in New York City.

Interested in growing your career with a master's degree in Data, Digital or Integrated Marketing Communications? Request more information today!

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