A thought provoking email hit my inbox the other day. Written by David Baker, Vice President of email solutions at Avenue A/Razorfish, the title “What is Loyalty Marketing Today?” caught my eye. You can read the post at http://blogs.mediapost.com/email_insider/?p=672 and it might be worth a visit to David’s blog.

The premise was similar to a question posed by a banker at the Millennial Financial Services Forum. As many discussions around consumer marketing tend to do, the subject at the conference had turned to loyalty programs, what tactics work, how to manage their cost, and what new approaches are around the corner. “So, do these programs really work or do they just take away margin from the sponsor?” was the question thrown to the group.

The question posed by David Baker was prompted by the saturation of similarly constructed programs in today’s market by asking “What are the keys to a great loyalty program?” and “What will the future of loyalty programs be?”

Taking these in order, the sad nature of the banker’s question is that she was asking based on her accumulated experiences with poorly executed programs. If every bank has a credit card program that earns 1 point per dollar which may eventually be redeemed for items in an online catalog, then what is the point? Where is the differentiation? And, how does one bank gain advantage over another or, as she suggests, are they all just eroding margin by participating in a game they are forced to play?

The industry is long overdue for innovative tactics that will draw new attention to rewards programs and re-energize cardholders towards their rewards. At the same time, the massive stores of data that are currently possessed by card issuers has been vastly underutilized. From the mailings I receive, it appears to me that they are either generated from a risk management standpoint (credit line increases, courtesy checks, etc) or are travel offers that lack personalization. It would take a very small effort to learn that I am not a golfer in order that the issuer could stop sending me offers having to do with the little white ball.

The best part about David Baker’s questions is that he offered his own answers. He polled his team and shared a short list of highlights. Reading the responses, it is clear to me that the “keys to a great loyalty program” are many and that loyalty is going to be created as part of a holistic effort that includes good customer service, strong value exchange, brand support, social buzz and some form of exclusivity.

The answers to the “future of loyalty” question indicated that personalization will still be important in the digital world, programs will become more narrowly focused and quick hitting, and further differentiation is needed.

The sum of these answers reinforces the need for change and innovation in the industry. And, unlocking knowledge of how Millennials make purchase decisions and create brand preference represents the foundation to success with this large population group.

Can you hear the footsteps of nearly 80 million people? It might be the sound of Generation Y running away from your current loyalty offer. It’s time to invest in this budding consumer group and meet them on their turf, whether through use of social media or their mobile phone.

The future is now…..Bill Hanifin