Where’s the Loyalty in Loyalty Programs?
"We've been cleared for landing," I hear over the PA from the pilot after a 5 hour flight from KOA to LAX. I'm stressed. I'm stressed because my flight left over an hour late, and I need to make a connection in LAX to get home to Atlanta. "Will I make my connection? How long will it take to taxi over to the gate? How quickly can I get off this plane? How far away is it to the connecting gate? Will I have to run to the gate?" These are the questions running through my mind as I am focused on getting home. As soon as the plane lands, I turn off Airplane Mode and fire up my Delta app.
Bad News: I've missed my connection.
Good News: I'm booked on the next direct flight to Atlanta with seat assignments. When I deplane, I don't need to run, I calmly exit the plane and the Delta app displays the gate number for my new connecting flight.
Traveling is often stressful, especially since there are so many unknowns when problems arise, i.e. missed connections. How will I get home? When will I get home? Where will I sleep tonight?
According to Diane Estner, Hospitality Consultant and contributor to Hospitality Upgrade, It is in these micro-moments that we remember who helped us in our travel journey and leave lasting impressions that affect our future purchase decisions.
First, let's take a step back and look at the big picture in loyalty programs.
- Save Money
- Save Time
- Add Value
Easier said than done, right? Watch the entire 8/25/2016 meeting here.
Requirements of Loyalty Programs:
- Clear, Simple & Compelling offers to motivate customers to spend more dollars and more often with merchants. Even more effective are compelling PERSONALIZED offers.
- Awareness, Time, & Patience - Merchants first need to make customers AWARE of the loyalty program to customers; Customer opting into the program takes TIME and PATIENCE from the merchant.
- Analytics - Accurate collection of customer behavior data, reporting, dashboards, predictive analytics, program and process improvement from analytics.
- Associate training to help execute the discount or reward.
- Error correction / override - Unfortunately, systems aren't perfect. Perhaps the SKU for the eligible product wasn't entered into the system and now your customer didn't receive their discount? Additional associate training and supervisor training is needed to override the system when errors occur and keep customers happy.
- Fraud control - Systematically limiting methods for customers to "game the system" or disqualifying a customer that "cheated the system"
Two examples of loyalty programs that were popular prior to mobile (and are still popular today) are punch cards & barcode key tags.
Punch cards were great. The offer was simple and concise as it was printed on a 3 x 2 inch card; an associate with little training could usually execute the promotion.
- Fraud - Customers started punching their own cards.
- It only rewarded your most conscientious customers who remembered to present their cards at point-of-sale.
- Manual redemption of rewards requiring associate training. Little to no automation.
- Manual tracking of rewards on individual cards with little to no analytics or reporting.
- Customers would lose their cards (or forget to get it punched) and then become dissatisfied.
- Since the loyalty promotion was printed on the card, merchants had to reprint cards each time they wanted to change a promotion, but continue to honor old cards in circulation. This made it difficult for merchants to change promotions.
Barcode Key Tags
Barcode key tags were also great in that it provided customer analytics on purchases, the promotions are automatic (i.e. Kroger Plus Card), immediate gratification for the customer to receive their discounts, better fraud control (no self-punching by customers / harder to cheat the system). More promotions could be offered since the promotion was no longer limited to what could be printed on a small card. Associates had to be trained to scan the cards, but reduced the manual redemption of rewards.
Drawbacks: Since the offers were not written on the key tag card, customers (and associates) had to consult an additional source (i.e. Newspaper ad, content management system, online coupon list, and/or access to the customer's account) to view the promotion. Since merchants could offer multiple promotions and/or change promotions on a regular basis (without reprinting the cards as wit the punch cards), this created complexity for the shopper. Additionally, more training was necessary for managers and associate training to execute promotions manually if the system did not provide the promotion automatically.
Mobile resolved many of the problems found with key tags and punch cards. Mobile eliminated the need for shoppers to carry around printed punch cards and key tags with virtual loyalty cards. Mobile combines the advantage of a key card in that promotions could be updated frequently, with the attribute of a punch card in that the offer could be displayed on the mobile app, thus reducing the amount of associate training needed. Like barcode key cards, mobile loyalty apps provide customer analytics, immediate gratification discounts, and reduced 'forgetting cards' since the card was on the phone.
Since customers' mobile devices are always on, mobile provides more points for data collection, and has capabilities to lower fraud with geo-fencing / Location Based Services, and created more user awareness with push notifications. Mobile also had the advantage to create personalized and targeted offers based on user profiles, shopping patterns, location, time of day/week. For example, a mobile loyalty app could push a notification for a lunch-time promotion right before lunch time and end the promotion just before dinner.
Mobile loyalty programs were not a "slam-dunk" from the beginning. In 2010, Foursquare and Starbucks announced a partnership to reward the most loyal customer (aka Mayor) at each Starbucks coffee shop with $1 off a drink. Great plan since the offer was localized to individual Starbucks locations. The first fail in the implementation was associate training. There are so many associates, they weren't all trained on how to implement the $1 discount for the mayor. After Starbucks solved that issue, they found that their employees started checking-in on foursquare and became mayors of most locations. They also had people who would walk by or drive by (on their regular commutes) and check-in on Foursquare to the locations (without buying anything) just to compete to be the mayor.
Today, Starbucks has one of the most successful mobile loyalty programs that is tied to actual purchases and offers tiered promotions, but the Foursquare partnership is no more.
Biggest Opportunity for Loyalty Programs
One of the biggest opportunities for loyalty is in travel and hospitality, as today's travel industry is big bucks and extremely competitive. Most customers are price sensitive, but travelers still expect good travel experiences.
I discussed pre and post mobile experiences with key tags and punch cards. How about pre vs. post mobile travel experiences?
At the beginning of this article, I told my story of missing my connection and Delta making the experience as frictionless as possible with their mobile app.
Rewind to pre-mobile, same situation, different airline (airline name intentionally omitted). July 2008, I've just landed after a long flight. I've missed my connection. I stand in line for customer service at the airport for 30 minutes to an hour. Associate rebooks me to Baltimore, (about 600 miles away from my final destination of Atlanta). I land in Baltimore, only to be told I missed another connection, and am booked on a flight to somewhere in North Carolina. At this point, I spot a gate with a plane marked for Atlanta, and I have to get a supervisor involved just to get a seat on that flight. 10 hours after my original arrival time, I land in Atlanta. I never flew that airline again.
What does this mean for loyalty programs today?
Since mobile is always-on, always with the customer, having a mobile component is an obvious choice when it comes to implementing a successful loyalty program. Even if you are a small merchant, there are now subscription based products developed for small businesses with little to no technical expertise required to launch a mobile loyalty program.
Loyalty is not always in the form of a discount
At the September 15, 2016 session of Wireless Technology Forum on Seamless Travel Experiences Enabled by Wireless, I learned that loyalty is not always in the form of a discount.
In the travel and hospitality industry, it's about a seamless experience, being there for your customers in those "micro-moments" - Diane Estner, Hospitality Consultant and contributor to Hospitality Upgrade,
Jesse Maddox, CEO, TripLingo and Darin Wonn, IHG discussed how IHG partnered with TripLingo to provide an IHG Translator App for their premium customers.
Mahesh Gupta, GM Enterprise Mobility, Delta enabled bag tracking, bag carousel push notification, and proximity based boarding passes for their travelers on the Delta app.
Wearables, VR, and the future of hospitality industry was also discussed. Watch the full panel discussion here.