Loyalty Programs: Points To Reject

Points-based loyalty marketing turned either 31 this year, if one starts counting with the AAdvantage program, which launched in 1981, or 33, if one starts the clock with the program started by the now-defunct Texas International Airlines.

Regardless of which date one chooses, the points-based program which – among other incentives – rewards participants with more of the same items purchased has been around for more than three decades. While its introduction was revolutionary to loyalty thinking then, there is need for a new upheaval today.

Imagine a loyalty program design session in which, at least initially, mention of points was forbidden. Participants would be required to brainstorm about either experiential rewards or branded premiums. In either case, the focus would be on payoffs that reinforce the relationship with the marketer, and that couldn't be gained through any other process.

What would rewards look like? Exclusive access, unique merchandise or premium service are all currently used. But often programs consider these side benefits to the discounted standard merchandise which is positioned as the "real" benefit.

For some lifestyle companies, such as Apple, Harley Davidson or Playboy, offering unique branded items is a no-brainer. Any brand that has an identity so strong that people will pay to have it permanently tattooed onto their bodies (possibly NSFW) should be offering its adherents exclusive merchandise if they demonstrate desired behavior.

The hospitality industry is very good at using tailored experiences, such as changing room amenities to suit a valued traveler's desires. Can this be brought over to other programs? You bet: Most food shopping rewards are fairly brainless: Spend a certain amount and the chain will give you back some of your cash. (The details differ: This is the bottom line.)

But a program that states, quite plainly, that marketers can opt in to have messages tailored based on their purchases can, if correctly designed, spur sales of previously unpurchased items. Imagine a supermarket program that asks participants which merchandise it can use to suggest additional purchases.

Giving consumers a voice in how this information is reflected back to them will boost their affinity for the program – it becomes THEIR program. Some may not wish their hygiene item purchases, for lack of a better term, rubbed in their face.

Others, who are struggling with weight loss, may buy a one-time treat but not want additional promotions for desserts. For them, the option to receive main course suggestions, or vegetable-based dishes, would reflect what their stated desires are and potentially stimulate new category purchases… without offering rewards that cut away at margins.

Regardless of the brand, the last premium a loyalty program should offer should be undifferentiated merchandise. Downloads from iTunes have become a popular currency… but while these may spur temporary upticks in behavior, they don't necessarily build long-term affinity. A song is a song is a song: Remembering the source of it, once it's on the iPod, isn't something most consumers really care about.

When considering experiential rewards, the initial question has to shift from "how can we get a loyalty program participant to purchase more of our offerings" to "how can we make the participant's life better, in a way that he or she will associate with our brand?"

This does not ignore the basic reason for being of a loyalty program: They exist to make the sponsor money. The second question, once the first one has been asked, is "do we believe this will, in the long term, result in higher purchase levels, and do we have the systems in place to accurately measure changes in behavior over long periods of time?"

There is nothing wrong with offering discounts and promotions. These are perfectly acceptable ways of giving up margin to spur short-term bumps in sales, or stimulate trial of new products. But these activities should not be confused with long-view loyalty marketing, which is a more-sophisticated premise than a buy ten, get one free proposition.