Cartera Commerce, until recently known as Mall Networks, and Vesdia, long ago known as Baby Mint, have announced a merger that will change the supplier side of the merchant funded loyalty landscape.

Or will it?

Like my reported allergy to penicillin, someone told me long ago that there was no such thing as an original idea. I’m not sure if either statement is true, but if the latter really is the case, then the U.S. Patent office should close its doors and all the filers of new business process patents should just focus on better execution rather than fencing in their intellectual property from others.

Merchant funded loyalty was an “original idea” only about 6 years ago. In that distant and ancient age, Vesdia and Affinity Solutions were the two pioneers who laid claim to birthing the concept and in my book, it has been Affinity Solutions which has best developed and executed the concept over the years.

Merchant funded loyalty programs were born of “the necessity” also known as the Walmart litigation against Visa and MasterCard. That litigation was settled in 2003 and ultimately caused the associations to pay Walmart and other retailers enormous sums of money.

In a uniquely 21st century evolutionary pattern, merchant funded programs were deployed rapidly across the debit card portfolios of major card issuers in the U.S. and multiple competitors joined in the game. Within a short 4 years or so, merchant funded programs evolved from innovative and industry-saving strategy to table stakes for savvy debit card issuers.

That’s good for business, but some trimming of the competitive group was inevitable as pricing and demands for innovation placed pressure on the supplier group.

The re-branding of Mall Networks to Cartera is partial acknowledgement that suppliers needed to expand their branding and capabilities set. The merger of Cartera and Vesdia is further testimony to the ongoing consolidation in this sector.

With the Card Act of 2009 implemented last year, and the Durbin Amendment on the way, card issuers will continue to pay attention to providers which deliver valid consumer value propositions for their cards at a manageable cost. There is plenty of room for growth in debit card rewards and in the broader rewards and loyalty markets.

Due to my affiliations throughout the supplier side of the loyalty marketing business, I will hold further comment on this merger for the moment.  Let’s just agree that this space deserves watching, and the significance of this merger will be better understood as 2011 continues.

Cartera Commerce, until recently known as Mall Networks, and Vesdia, long ago known as Baby Mint, have announced a merger that will change the supplier side of the merchant funded loyalty landscape.

Or will it?

Like my reported allergy to penicillin, someone told me long ago that there was no such thing as an original idea. I’m not sure if either statement is true, but if the latter really is the case, then the U.S. Patent office should close its doors and all the filers of new business process patents should just focus on better execution rather than fencing in their intellectual property from others.

Merchant funded loyalty was an “original idea” only about 6 years ago. In that distant and ancient age, Vesdia and Affinity Solutions were the two pioneers who laid claim to birthing the concept and in my book, it has been Affinity Solutions which has best developed and executed the concept over the years.

Merchant funded loyalty programs were born of “the necessity” also known as the Walmart litigation against Visa and MasterCard. That litigation was settled in 2003 and ultimately caused the associations to pay Walmart and other retailers enormous sums of money.

In a uniquely 21st century evolutionary pattern, merchant funded programs were deployed rapidly across the debit card portfolios of major card issuers in the U.S. and multiple competitors joined in the game. Within a short 4 years or so, merchant funded programs evolved from innovative and industry-saving strategy to table stakes for savvy debit card issuers.

That’s good for business, but some trimming of the competitive group was inevitable as pricing and demands for innovation placed pressure on the supplier group.

The re-branding of Mall Networks to Cartera is partial acknowledgement that suppliers needed to expand their branding and capabilities set. The merger of Cartera and Vesdia is further testimony to the ongoing consolidation in this sector.

With the Card Act of 2009 implemented last year, and the Durbin Amendment on the way, card issuers will continue to pay attention to providers which deliver valid consumer value propositions for their cards at a manageable cost. There is plenty of room for growth in debit card rewards and in the broader rewards and loyalty markets.

Due to my affiliations throughout the supplier side of the loyalty marketing business, I will hold further comment on this merger for the moment.  Let’s just agree that this space deserves watching, and the significance of this merger will be better understood as 2011 continues.

Growing up in Cleveland, Ohio, I got used to my home town being the butt of nightly jokes on national television. “On a clear day in Cleveland…you can see absolutely Nothing!” was a popular refrain from Johnny Carson. The “Mistake on the Lake”, the flaming Cuyahoga River, a mayor who skipped a Presidential visit to keep his bowling night – it all added up.

At the other end of Lake Erie is Buffalo, New York. No stranger to ridicule, the area has struggled economically while maintaining a fierce local charachter as the home of hard-working, value-preserving Americans.

Imagine the challenge of the local newspaper in this area. The Buffalo News not only operates in a tough advertising environment, but is battling what all newspapers are facing – extinction as consumers prefer to get their news and information from digital sources.

Imagine my surpise when I learned that the newspaper had established MyBuffalo.com and started Rack’em Up as an incentive program to drive participation in “Western New York’s Social Network“.

The program is simple, but effective. People are invited to enroll in order to participate and are then able to earn 50 points each for a variety of activities. Participants accumulating over 500 points per week are automatically entered into a random drawing to win one of three prizes.  The earning opportunity results from posting on a blog, starting a discussion forum topic, posting a video or photo or inviting friends to join MyBuffalo.com.

In a day where creativity and innovation is demanded for survival, I applaud the use of social networking by MyBuffalo.com to create reader engagement. I’m sure that subscriber retention and advertising rate support are goals of the program. It will be interesting to see evidence of success in reaching those two goals.

In the meantime, Let’s Go Buffalo!

I was dining with my wife at Carrabba’s recently and she asked me the BIG question, though it’s probably not one that you have in mind:  “So, do a lot of businesses still do this loyalty stuff“?

I had just written a post about new execution formats that Loyalty Marketing programs were taking in the Big L and the Little L and I paused before answering her question.

That morning I had received a call at home from the Fort Lauderdale Sun Sentinel informing me of “Subscriber Rewards“. An insider’s club that offers “reader benefits and special privileges”, it was an intriguing pitch from a newspaper and I asked for more information. I haven’t received anything yet and can’t find anything concrete about the program on the paper’s website, but it seems to consist of merchant discounts offered on some exclusive basis to home delivery subscribers.

Just before dinner, we had strolled through Steinmart (did I say it was date night?) and, as I noticed the quality merchandise from well known brands offered at prices that should make mainline retailers shiver, I realized that Steinmart’s business model was its loyalty program. I have written about this before and believe that a points based program is not always mandatory to secure my return visit and longer term brand loyalty.

Steinmart punctuated its customer shopping experience with a personal note from the Chairman thanking customers for their business. Stacked by the check out station, it was a nice touch and something I had not seen at other retailers.

With these two examples in mind, I started to answer my wife’s question with an emphatic “yes” when I was interrupted by our server, cheerily asking if we wanted to join the “Amici Club“. Carrabba’s had apparently launched a customer club and had trained the server thoroughly in how to properly present it table-side and explain the benefits. I have a habit of testing the proficiency of front line staff in these areas and our server passed with flying colors.

My wife’s question had clearly been answered: Loyalty is alive and well and in favor with CMO’s who recognize the power of data-driven measurable marketing.

Indicative of today’s market is that I had seen three examples of brands in different industries launching distinct models. Here are some implications to consider:

• The Sun Sentinel might be seeking to increase renewal rates among home subscribers and to sustain advertising rates for merchants with its discount oriented scheme. Will they take a second step to query subscriber preferences and tailor the offers to make them more appealing and relevant?

• Steinmart’s merchandising and service model can create repeat visits but aren’t they leaving something on the table by allowing their customers to remain “invisible”? Sure they have a cobranded credit card, but shouldn’t there be something more fundamental in place and with a lower enrollment hurdle?

• Carrabba’s was taking the first step with highest potential in my opinion, seeking to create a platform for learning about customer desires and preferences. I’ve just received my first email from Amici and they offered me a free appetizer on a return visit in exchange for registration online. Simple, but a good start to create engagement. I wonder if they tested different incentives?

My free lesson in Loyalty at dinner reminded me that every organization can benefit from a sound Customer Strategy and that program designs will be more tightly integrated into the customer experience and shaped to meet unique industry needs. Tremendous opportunity remains in helping business leaders get the model right and design strategy that is complementary to their core brand.

I was also reminded that it pays to keep date night with your spouse on the calendar. You never know what you might learn!

“While not every business needs a Loyalty Program, every business does need a well planned and executed Customer Strategy.” This is one of the loyalty mantras that I share on Hanifin Loyalty and the statement represents a guiding light on the path to innovation in the next wave of Loyalty Marketing.

For some businesses, building a brand so strong, so magnetic, so powerful is the foundation of its Customer Strategy. Achieving this summit is one of the most challenging tasks in business and, if done successfully, virtually precludes the need for a formal loyalty program, certainly one with points or other promotional currency involved.

The World Triathlon Corporation, owner and organizer of Ironman® and Ironman® 70.3 branded events, has climbed this summit, having turned a quirky and semi-dangerous undertaking in 1978 into a worldwide brand that attracts a brilliant demographic and brings tremendous economic impact to its host communities.

With the addition of the Ironman® 70.3 Series, WTC offers more than 50 events on the calendar each year and has the support of advertising partners including Ford Motor Company, PowerBar, Timex, Gatorade, Janus, and Philadephia Insurance Companies.

Ironman Lake Placid is the oldest of 7 US based events, and I was fortunate to be in town for the 10th anniversary race this past weekend. The compelling nature of the brand was on full display with over 2,500 registered athletes and their friends and families burning off nervous energy by shopping in the Ironman® store and patronizing local businesses.

Consider that the entry fee is $575 and that the average tri-bike sitting in the secured transition area is worth $4,000 (my estimate) and you can see that over $1.4 Million in entry fees alone were collected for the weekend and over $10 Million in two-wheeled treasure was waiting for a ride. Multiply these numbers by the 50+ events per year and you begin to understand the magnitude of the Ironman domain.

Ironman may still be a quirky and puzzling event for outsiders to grasp. Some of my friends have challenged the Ironman passion as nothing more than a mid-life crisis for over 40 types, suggesting that buying a new Corvette would be a heck of a lot easier. Others snipe that triathletes are narcissictic, type-A personalities preening their zero-body fat physiques in high-tech fabrics before the crowds. (OK, you’ve got the Type-A part correct).

Let me dispel some myths. As I volunteered at an aid station on the run course this weekend, I saw every size, shape, age, and ethnic origin of athlete pass me by. I would go so far as to say that, if seen in street clothes, many would never be mistaken for Ironman athletes.

I’ve also found that while some of the younger age brackets are the most competitive (30 -39 for instance), I have also noticed that as one moves up in age group, finish times don’t always increase, i.e. there is much more going on here than just signing up for the t-shirt.

Fred Reichheld, the Godfather of Loyalty Marketing, sketched out a continuum of business benefit resulting from adopting an enterprise approach to loyalty. At the end of the rainbow are price premiums. I would venture to say that Ironman, given the nature of the event and level of entry fee, is effective on all levels of lifecycle marketing, (acquisition, usage, retention, cross-sell) and delivers on price premiums across the board as U.S. based events generally sell out quickly after race day each year.

All the praise aside, there is always room for improvement. There is probably a limit on the number of events that WTC can stage each year in the U.S., and more emphasis on triathlon as a youth sport would help fill the funnel with future athletes. The fee structure could price out aspiring Iron-athletes from participating in the future, and the cost of Ironman branded merchandise is obscene at times, spawning a mild “love-hate” relationship with the brand. For instance, a fellow volunteer (himself a 9:44 IM finisher) commented as he pulled on a dollar-store poncho to thwart a rain shower that it would have been worth $70 if it had the IM logo on board.

There are other iron-distance events on the calendar, but WTC has created brand-swagger and is enjoying the price premiums created with its highly emotional participants. The fact that WTC backs up the current frenzy for its branded events with tremendous athlete experience adds glue that keeps people signing up for more. Even their finish line announcer, Mike Reilly, is part of the experience. Mr. Reilly has been the main announcer at the Ironman® World Championships in Kona since 1989, and it is his unmistakable voice that welcomes athletes to the finish line.

There may be some danger to IM that it becomes an elitist event, but then again, maybe that’s what it is all about. The Ironman® distance triathlon is still acknowledged to be the most challenging one day endurance event on the planet, and “if it was easy, everyone would do it!”

I think it’s safe to say that the same applies to WTC’s Customer Strategy.

There’s a secret society that I wish to unmask. It’s not as menacing as the Knight’s Templars, but if you are tasked with selling consulting services, marketing technology or loyalty marketing solutions, you will immediately identify society members by their common behaviors.

It’s the “Society of Graduate Buyers“. These are the folks who, in the course of a sales or capabilities presentation, ask the tough questions and take “poker face” to a whole new level. Ask them for a detailed description of next steps at the end of the meeting, and they will immediately defer to the procurement officer sitting at the end of the table or indicate that the decision makers are going on vacation for the next week or two and “we’ll get back to you”.

Seasoned salespeople are used to the process and have developed thick hides, therefore you’ll understand that I’m just having some fun here. In fact, if you don’t get frustrated by the white collar version of a “stiff arm”, you can learn a thing or two.

In a recent meeting, one of the client group threw me a curve ball, asking if I had experience with both “Big L and Little L” loyalty programs. He went on to explain that, by his definition, Big L programs feature an explicit value proposition with a promotional currency (points, miles, stars, credits) while Little L programs score member behavior and use the data to trigger promotions, offers, and communications without full transparency to the consumer.

The answer of course was “yes” as I’ve worked to leverage behavioral and attitudinal data to create value propositions articulated in many forms besides points. I would include viral, word-of-mouth, and social media programs with a data backbone in this group. The client must have been a consultant somewhere in his past as giving something familiar a catchy name is part of the trade (ever hear of the Loyalty Asterisk™?).

The lesson I learned from this encounter was simple:  loyalty marketing is anything but business as usual these days and practioners need to constantly test themselves to stay abreast of how the market perceives our craft. We also need to expand our definition of how customer loyalty can be created, and embrace that we have the tools to achieve multiple goals across the business from acquisition to retention and cross-sell.

I’ve added the “LIttle L” to my loyalty glossary and have pledged to give the next set of Graduate Buyers the benefit of the doubt. Never know what I’ll learn next!

There’s a secret society that I wish to unmask. It’s not as menacing as the Knight’s Templars, but if you are tasked with selling consulting services, marketing technology or loyalty marketing solutions, you will immediately identify society members by their common behaviors.

It’s the “Society of Graduate Buyers“. These are the folks who, in the course of a sales or capabilities presentation, ask the tough questions and take “poker face” to a whole new level. Ask them for a detailed description of next steps at the end of the meeting, and they will immediately defer to the procurement officer sitting at the end of the table or indicate that the decision makers are going on vacation for the next week or two and “we’ll get back to you”.

Seasoned salespeople are used to the process and have developed thick hides, therefore you’ll understand that I’m just having some fun here. In fact, if you don’t get frustrated by the white collar version of a “stiff arm”, you can learn a thing or two.

In a recent meeting, one of the client group threw me a curve ball, asking if I had experience with both “Big L and Little L” loyalty programs. He went on to explain that, by his definition, Big L programs feature an explicit value proposition with a promotional currency (points, miles, stars, credits) while Little L programs score member behavior and use the data to trigger promotions, offers, and communications without full transparency to the consumer.

The answer of course was “yes” as I’ve worked to leverage behavioral and attitudinal data to create value propositions articulated in many forms besides points. I would include viral, word-of-mouth, and social media programs with a data backbone in this group. The client must have been a consultant somewhere in his past as giving something familiar a catchy name is part of the trade (ever hear of the Loyalty Asterisk™?).

The lesson I learned from this encounter was simple:  loyalty marketing is anything but business as usual these days and practioners need to constantly test themselves to stay abreast of how the market perceives our craft. We also need to expand our definition of how customer loyalty can be created, and embrace that we have the tools to achieve multiple goals across the business from acquisition to retention and cross-sell.

I’ve added the “LIttle L” to my loyalty glossary and have pledged to give the next set of Graduate Buyers the benefit of the doubt. Never know what I’ll learn next!

“P” as in Profitability, that is.

Part of the challenge in playing the Loyalty Marketing game is that we, as strategists and solutions providers, tend to confuse the issue for our clients through our own marketing-speak. We spend too much time battling over semantics and definitions when all our clients really care about is increasing their bottom line. An article in this week’s Wall Street Journal “Why a Loyal Customer Isn’t Always a Profitable One” is a great example of how the debate can send the wrong message.

The article is attributed to a group of four led by Tim Keiningham, Global Chief Strategy Officer at Ipsos Loyalty and author of the newly published book Why Loyalty Matters. The premise of the article is that many companies incorrectly associate so-called “loyal” customers with profitable ones. The article states that “most company surveys wrongly define what constitutes a business’s most loyal, and thus desirable, customers” and goes on to make the valid point that “when customer value is included in the measure of loyalty, the goals of improving loyalty and financial performance are synchronized”.

So far, so good, but the article centers on the phrase “loyal customer” as if there is a consistent definition of the term in Websters and Wikipedia. There is no universally accepted definition of a “loyal customer” (is loyal defined by “x” transactions per month or a Lifetime Customer Value forecast in excess of “Y”?), only agreement on how to determine success in what we commonly refer to as a loyalty program.

The business has always been about creating profitable behavior change across a designated customer group. Existing customer behavior is assessed and objectives set for the program in terms of a percentage or numerical increase in activity (increase transactions from “A” to “B” or average purchase amount by “C” percent)  over a specified period of time. Distinct goals are set by segment or subset of the overall customer base and the potential for incremental revenue by each group influences the level of investment justified by the program sponsor.

For more on the monetization of loyalty, read Michael Hemsey’s article just published at Loyalty360.org. Michael is President Kobie Marketing and knows the business very well.

In my opinion, the WSJ article painted the industry as missing the point about connecting loyalty and profitability.  Consider this quote: “Creating and nurturing real customer loyalty requires satisfying customer needs and wants at a sustainable profit. Too often, customer-loyalty experts have ignored the latter in the belief that loyalty and profitability are synonymous“.  Best Buy certainly understood the relationship between customer profitability and loyalty after learning that “as many as 100 million of its 500 million customer visits each year are undesirable”. The electronics retailer subsequently took lots of heat in the press after rolling out its new “angel-devil strategy” during 2004.

I can personally attest that most organizations have a high level of awareness that building loyalty is not about creating emotions which somehow equate to profits. On the contrary, they understand that the game is about marrying qualitative (attitudinal) data with quantitative (transactional) data to create a compelling value proposition that, when sprinkled across portions of a customer base, will return measurable ROI.  The smarter practitioners are in analyzing results and evolving promotions to maintain the attention of most valued customers, the longer we sustain the behavior change.

It is easy to point towards an assortment of companies that rely too much on customer satisfaction surveys to predict loyalty and also too many convinced that answering “one question” will reveal who the loyal customers are. My confidence level in saying that business understands the connection between profitability and marketing investment in its customers is based on having to justify the ROI of my proposed solutions to companies across industry and in different geographic markets for the past 12 years.

I only wish I could get away with justifying the proposed budget for a loyalty marketing solution with the same fuzzy metrics that are accepted when evaluating branding campaigns, general advertising, and even social media (so far). If the Ipsos article were fully on target, my job would have been a heck of lot easier over these past dozen years.

Take it a step farther and I’ll assert that while every company doesn’t need a “loyalty” program, EVERY company needs a well planned and executed Customer Strategy. Imagine if our industry ditched the “L” word and adopted a more inclusive term. The semantics debate might be de-fused and we could get down to business.

“P” as in Profitability, that is.

Part of the challenge in playing the Loyalty Marketing game is that we, as strategists and solutions providers, tend to confuse the issue for our clients through our own marketing-speak. We spend too much time battling over semantics and definitions when all our clients really care about is increasing their bottom line. An article in this week’s Wall Street Journal “Why a Loyal Customer Isn’t Always a Profitable One” is a great example of how the debate can send the wrong message.

The article is attributed to a group of four led by Tim Keiningham, Global Chief Strategy Officer at Ipsos Loyalty and author of the newly published book Why Loyalty Matters. The premise of the article is that many companies incorrectly associate so-called “loyal” customers with profitable ones. The article states that “most company surveys wrongly define what constitutes a business’s most loyal, and thus desirable, customers” and goes on to make the valid point that “when customer value is included in the measure of loyalty, the goals of improving loyalty and financial performance are synchronized”.

So far, so good, but the article centers on the phrase “loyal customer” as if there is a consistent definition of the term in Websters and Wikipedia. There is no universally accepted definition of a “loyal customer” (is loyal defined by “x” transactions per month or a Lifetime Customer Value forecast in excess of “Y”?), only agreement on how to determine success in what we commonly refer to as a loyalty program.

The business has always been about creating profitable behavior change across a designated customer group. Existing customer behavior is assessed and objectives set for the program in terms of a percentage or numerical increase in activity (increase transactions from “A” to “B” or average purchase amount by “C” percent)  over a specified period of time. Distinct goals are set by segment or subset of the overall customer base and the potential for incremental revenue by each group influences the level of investment justified by the program sponsor.

For more on the monetization of loyalty, read Michael Hemsey’s article just published at Loyalty360.org. Michael is President Kobie Marketing and knows the business very well.

In my opinion, the WSJ article painted the industry as missing the point about connecting loyalty and profitability.  Consider this quote: “Creating and nurturing real customer loyalty requires satisfying customer needs and wants at a sustainable profit. Too often, customer-loyalty experts have ignored the latter in the belief that loyalty and profitability are synonymous“.  Best Buy certainly understood the relationship between customer profitability and loyalty after learning that “as many as 100 million of its 500 million customer visits each year are undesirable”. The electronics retailer subsequently took lots of heat in the press after rolling out its new “angel-devil strategy” during 2004.

I can personally attest that most organizations have a high level of awareness that building loyalty is not about creating emotions which somehow equate to profits. On the contrary, they understand that the game is about marrying qualitative (attitudinal) data with quantitative (transactional) data to create a compelling value proposition that, when sprinkled across portions of a customer base, will return measurable ROI.  The smarter practitioners are in analyzing results and evolving promotions to maintain the attention of most valued customers, the longer we sustain the behavior change.

It is easy to point towards an assortment of companies that rely too much on customer satisfaction surveys to predict loyalty and also too many convinced that answering “one question” will reveal who the loyal customers are. My confidence level in saying that business understands the connection between profitability and marketing investment in its customers is based on having to justify the ROI of my proposed solutions to companies across industry and in different geographic markets for the past 12 years.

I only wish I could get away with justifying the proposed budget for a loyalty marketing solution with the same fuzzy metrics that are accepted when evaluating branding campaigns, general advertising, and even social media (so far). If the Ipsos article were fully on target, my job would have been a heck of lot easier over these past dozen years.

Take it a step farther and I’ll assert that while every company doesn’t need a “loyalty” program, EVERY company needs a well planned and executed Customer Strategy. Imagine if our industry ditched the “L” word and adopted a more inclusive term. The semantics debate might be de-fused and we could get down to business.

One of the challenges in the Loyalty Marketing business is that few organizations share tangible results.

I still am occasionally asked the question “Does Loyalty Work?” and wish I could point to more specific evidence in public forum as an answer. Telling people that you are restricted from disclosure due to confidentiality agreements meets ethical standards, but is frustrating.  And, the information shared at conferences is typically sanitized in case competitors are listening.

The dearth of proprietary data shared by program sponsors makes continuous improvement in our sector a bit problematic. That’s why Hanifin Loyalty is fortunate to be able to share the results of Zion Bank’s merchant funded rewards program launched in 2005 in a new case study published on our web site.

Merchant Funded Rewards models represent the innovation of choice among today’s card rewards programs in North America. It’s not a big surprise as “Pay for Performance” affords benefits to participating merchants, card issuers, and cardholders alike.

At the same time, merchant funded programs have proliferated so quickly, almost exclusively centering on online shopping, that banks are challenged to differentiate their offers.

Zions Cash Rewards is unique in that it centers its value proposition on an extensive brick and mortar network of everyday spend merchants which brings high relevancy and interest to the bank’s cardholders.

Documenting this case study would not have been possible without Cynthia Smith, SVP & Director, Bank Card Products and Services Zions Bancorporation and Kelly Passey, EVP, Access Development. Thanks to them both and to their organizations for supporting this effort.

I hope you will download and enjoy this detailed Case Study which shares results of the collaboration between Zions Bank and Access Development to achieve success.