Auto insurance is not the most sexy purchase you can make as a consumer. It’s one of those “must have’s” and often its hard to differentiate the pros and cons between major insurers to make a decision.

I’ve admired the advertising creativity from Allstate and Progressive over the past year or so. Dennis Haysbert has put an incredibly trustworthy and down to earth face on Allstate’s brand and their ads have ranged from serious to funny, all effective in their own way to communicate Allstate’s brand promise.

And, who doesn’t like ditsy Flo, the Progressive girl, complete with her tricked-out name tag?

State Farm, the biggest of these competitors has been strangely quiet. Big Red offers not only insurance but banking and investment services through their State Farm Bank group, but for some reason has kept their light, comparatively speaking, under the bushel basket.

Progressive has launched a new campaign to pitch Loyalty in the past month and I’ve seen splashy print ads in USA Today and ESPN The Magazine touting “We Like Long Term Relationships”  and announcing rewards for new and existing customers alike.

I have to smile when any big brand chooses to put the “L” word front and center in their advertising. Customer Loyalty remains front and center with customer facing businesses, large and small and there is growing realization that growing a satisfied customer base and keeping them around for an extended time drives fundamental business and shareholder value.

I also have to let you know that Progressive’s program is a Loyalty program with a little “L”, and deserves a smallish Loyalty Asterisk™ for its manner of expressing its value proposition to consumers (i.e. calling benefits commonly offered across competitors a Loyalty program). Dig in to their web copy and you will see that they offer a myriad of tenure based and other discounts, not unlike what Allstate has been touting for the past few years and a similar package to those I have earned with State Farm, having been a client for over 25 years.

The difference? Progressive is the only of the top 3 insurers to use the “L” word and as such, makes it so.

The range of options to execute a Customer Strategy to develop and nurture brand loyalty has never been greater. They have always existed, but with points-fatigue on the rise and consumers demanding transparency and value, every brand should evaluate the Big L and the Little L as they form up a go-to-market plan.

That’s the best way to get yourself a tricked-out Loyalty program.

Amazon announced it is selling more Kindle books than hardcovers, the US Postal Service is in jeopardy, and Continental Airlines will begin allowing travelers to scan themselves on board flights. As change marches on, what other familiar aspects of our lives will join the milk-man in a mythical global retirement home?

Keep an eye on traditional points-based loyalty programs, because they just might be next.

Points programs have been around for decades because, as my friend Jim Ryan told me, “they work”. Jim, the former CEO of Carlson Marketing, knows this business cold and although we both agree that points-based loyalty currencies are an effective medium to change & measure consumer behavior, the companies which foot the bill for these programs are increasingly opting for something different.

I did a market scan recently and found a few examples of how Loyalty Marketing is being redefined:

• Ford ran its “Fiesta Movement” campaign (to be profiled soon in Loyalty Truth) over a year ago, recruiting 100 agents to drive a Ford Fiesta and document their experiences through written and video blogs. The results? Ford created over 11 Million social networking impressions, created a 37% awareness of the new car across Generation Y (Millennials), and enjoyed one of the best new car introduction campaigns in years.

• Tropicana launched Juicy Rewards, a hybrid of the on-carton coupon model which typically requires consumers to enter codes online till their fingers bleed in order to win something of value akin to a paper clip. The difference here? Tropicana has aligned itself with a strong portfolio of merchants offering discounts that equate to 5X the value of the product purchase price.

• Clorox launched CloroxConnects, a social site that serves three key audiences, consumers, partners, and employees. Better described as an Engagement Platform, Clorox encourages participation from each group and awards badges and recognition rewards based on proprietary game mechanics.

Don’t miss the subtlety of these new loyalty program formats. Each program has well defined business objectives, predictive analytics and financial modeling are used to refine audience targeting, and a loyalty processing platform is needed as the backbone to run the program in most cases.

In other words, the fundamentals to engage, interact with and retain customers remain consistent. The key difference is that instead of keeping score by awarding points, companies are moving towards scoring as much by social behaviors as transactional.

For the past 30 years, Loyalty programs have been designed by Boomers for Boomers. The influence of a digitally connected generation is more apparent than ever, and consumer engagement will only happen if you re-tool marketing strategies to embrace the Millennials and others who want more transparency and immediacy in their brand relationships.

Are you equipped to make these changes?

Suppose you had a business whose sales had dropped 13% over the past year, continuing a multi-year sales decline. You’d probably look for ways to run your business more efficiently by cutting expenses. You might even consider reducing your prices to attract more business.

Well if you’re the United States Postal Service (USPS), you have a different take on what to do about a double-digit decline in revenue: you decide to raise your rates to make up for lost income, in some cases dramatically.

According to BtoB Magazine, in early-July the USPS requested that standard-mail letter rates, the kind used most often for commercial direct mail campaigns, be increased 5%. The USPS also asked that standard-mail parcel rates, used to send small-size merchandise and product samples, be raised a whopping 23.3%.

Raising prices to make up for decreasing sales? Is that any way to run a business?

Mail volume is dwindling because consumers are increasingly using electronic communications as alternatives to postal deliveries. That’s an undeniable fact. The proof: from 2007 through 2009, the volume of mail handled by the USPS fell by 36 billion pieces, a 17% decline and the greatest drop in its history.

This year, the USPS is on track to lose a stunning $6.5 billion. Yet, instead of doing something to manage expenses, the Affordable Mail Alliance reports that in 2009 the USPS managed to reduce labor costs by a mere single percentage point, 1%.

I have long been a proponent of direct mail, believing it best to give consumers a choice of communications vehicles. We’ve also seen studies showing that most people still prefer snail mail over e-mail, viewing it as a welcome respite from their clogged inboxes. But this latest plea for another price increase begs the question: At what point does it become cost prohibitive to use a communications medium whose delivery costs can run up to 100 times more than that of its electronic competitors?

I hate to say it, but maybe it’s time to consider eliminating mail—and the USPS—from the marketing mix.

What do you think?

Tom Rapsas is a seasoned Creative Director and Direct / Loyalty Marketing guru. He is also a valued contributor to Loyalty Truth. You can follow him on Twitter: @TomRapsas

I’m honored to have made strong alliances with respected people in my industry. Though I wouldn’t turn down sensible sponsorship, each of the icons on the right hand panel of the Loyalty Truth are there through mutual agreement, not due to an advertising deal.

Once in a while, one of my strategic partners gives me time on the soapbox. I wanted to share a piece here written about the impact of social media on loyalty and millennial marketing.

This was originally published in the Loyalty Guide, a great publication available from The Wise Marketer which I would encourage you to add to your library. A free 50-page Executive Summary, including chapter samples, table of contents, text searching, licensing and ordering details is available here.

How to earn loyalty from social media and Millennials

With data-driven marketing starting to resemble a mature industry, progress and change are clearly just around the corner, according to Bill Hanifin of Hanifin Loyalty. If you agree that the industry has its origins in the American Airlines AAdvantage programme in 1981, and in light of the first North American credit card rewards programme being launched around 1992, then the industry itself is something like 20 to 30 years old. In which case it’s time to stop leaning on the excuse that “we’re still learning” and assume the responsibilities of loyalty marketing adulthood.

For years, Bill has been asked the question, “Does loyalty really work?” and, with growing patience, he answers the question with a practised response: “Yes, it does work. The concept of measurable marketing programmes that link customer and transactional data is more attractive than ever”. I also explain that the magic of successful loyalty marketing programmes lies in attention to the details of execution, the diligent usage of collected data, and attention to financial measurement.

As Bill has turned his attention to recrafting loyalty programme designs to engage Generation Y, he has noticed that value propositions are changing and the communication channels used to convey promotional messages are also new, untested, and evolving before our very eyes. The key to successful ‘Millennial marketing’ lies increasingly with the effective incorporation of social media tools into our communications plans and, despite what you may read on Twitter, there are not nearly as many ’social media experts’ around the world as you might think.

Loyalty programme sponsors are launching communities, setting up Twitter accounts and Facebook fan pages, and some are even rewarding members with promotional currency for updates on social media sites. With more of this activity being evident in the market now, the new question that he is being asked regularly is, “Is this social media thing here to stay, or is it just a fad?”

That is a valid question on the surface, but his answer is another question: “Do you want to be able to communicate with the 80 million Millennial consumers in the US, a segment which is emerging as the most important economic force in the market, and equal in size to Baby Boomers?”

Of course, implied by his answer is the idea that we don’t have to like social media – and we don’t even have to necessarily understand it – but we do have to admit that social media and social networks are the preferred communication method of the Millennial consumer. While growing rapidly among the 18-29 age group, social media is also making inroads into older demographics as well.

In 2009, there were approximately 40 delegates at a loyalty conference who participated in a Twitter conversation during the conference. This represented about 10% of total attendees and the volume of Tweets during the event was less than significant. Interestingly, almost one year later, Bill made a quick evaluation of the Twitter accounts of those 40 delegates, and found that only a small handful were still actively participating and growing their network. This of course says less about Twitter itself than it does about how the core of the loyalty marketing industry is engaging with social media.

An increasing number of our clients and potential clients with whom we speak are active in social media and inquire about our depth of understanding of the tools. There is interest in incorporating social media into loyalty programme designs. Advertising agencies and specialty ‘new media’ marketing agencies are rapidly taking the high ground in this emerging area of member communication.

So, rather than waste time apologising for social media and wringing our hands over whether Twitter, Facebook, Mixx, StumbleUpon, or Propeller will survive, Bill is listening to clients and learning as much as he can to serve their growing needs.

Fred Reichheld told us long ago that we should listen to our customers to better meet their needs. We need to do the same with our own clients and exercise our own form of retention programme. Some 80 million Millennials may have different tastes from your own generation, but we need to meet them where they are and build transparent and open communication plans to build engagement and engender their loyalty.

This article is an extract from the 30 chapters of detailed coverage in ‘The Loyalty Guide 4′, which is The Wise Marketer’s latest 1,000+ page global guide to customer loyalty and engagement techniques, best practices, models, metrics, practical advice, market data and research. The report provides hundreds of detailed case studies, forecasts, trends, tables and visual materials to support new initiatives, presentations and proposals and represents a complete, portable reference library of customer loyalty, engagement and marketing strategy.

Frequent Flyer Miles, American Express Membership Rewards Points, Citi ThankYou! points,  AirMiles – which loyalty currency holds the crown as the world’s most recognized and highly valued?

While that debate rages on, let me suggest that the answer might be “none of the above”.

It’s not the points or miles that will drive consumers to shift their shopping habits in favor of  your brand.  It might be the TIME those points represent.

What’s more important, Time or Money? That question has been debated since the industrialized world has matured.

The conversation has reignited in the US as Americans have experienced tough economic times, triggering self evaluation of lifestyle and priorities. In a fascinating story on CBS Sunday Morning, Jim Axelrod reported that, “of the 33 richest countries, the U.S. is the only one with no legally-required paid vacation for its workers”. The finding came from a study authored in part by John Schmitt of the Center for Economic and Policy Research. Axelrod went on to say “Even when times are good, people don’t take their vacation – they don’t want to be seen as ‘That guy who’s always taking his time off,’ who values his time off more than being at work”.

This angst over taking what vacation time we do have is in direct conflict with the fact that “69% of all middle class Americans say their number one desire in life is to have more free time”. At least, that is what Congressman Alan Grayson (D Orlando) cited on CBS as part of his motivation to introduce legislation in Congress to require companies with over 100 employees to offer paid vacation by law.

This is more than a casual social issue as the US now has one of the highest gaps between rich and poor among all industrialized nations. A report from the Organisation for Economic Co-Operation & Development (OECD) stated that, on average in 2005, the richest 10% of the population in OECD countries have 9 times more income than the poorest 10%. In Mexico the ratio is 26 to 1, the United States is over-indexed at 16 to 1 while Canada and the UK were at par with the global average.

Time is a currency that all of us desire, whether rich, poor, or somewhere in the middle. It is highly liquid and does not come with capacity or fulfillment issues ala frequent flyer miles.I can see a new category of rewards options opening up that save time, make time, or share time for program members.

I won’t go into specifics, but let’s just say we’ve got lots ideas to make this work and, once again, change the game in Loyalty Marketing.

Got time to hear about it?

I have a young daughter and being the competitive type she will sometimes challenge me to a race. There’s just one condition—I have to give her a head start. This is important, at least to her, because it increases her chances of winning—and seems to motivate her to run even faster than if we’re at the starting line together.

It’s something I thought about as I read a passage in Switch, the new book by Chip Heath and Dan Heath. They tell a story about a local car wash that ran a promotion featuring loyalty cards. Each time a customer bought a car wash, they got a stamp on their card. When the card was filled up with 8 stamps, the customer got a free wash – a concept known as punch card loyalty.

But at one point, the car wash tried something different. They gave customers a card that needed 10 stamps to qualify for a free car wash, instead of 8—except the card already had two stamps on it, effectively giving customers a “head start”.

According to the book: “The goal was the same for both sets of customers. Buy eight additional car washes, get a reward. But the psychology was different. In one case, you’re 20 percent of the way toward a goal, and in the other case, you’re starting from scratch.”

The result: those who got a head start were about twice as likely to stay in the program and redeem for a free car wash. As the book points out, it seems this group of customers was more motivated when they were partially finished with a longer journey than at the starting gate of a shorter one.

It’s something to consider in all loyalty endeavors: What if you gave new members a head-start? Would they be more motivated to stick with your loyalty program? It works with my daughter, it worked for the car wash in Switch, and it just might work for you.

Tom Rapsas is a 20 year direct and loyalty marketing veteran and heads up Creative Services at Hanifin Loyalty. He can be reached on Twitter @tomrapsas

Don Peppers and Martha Rogers gave birth to the concept of 1 to 1 Marketing over 15 years ago. The brilliant marketing innovation is intended to “illustrate the importance of treating different customers differently. (from their website).

From a practitioners viewpoint, 1 to 1 has also been difficult to execute while attaining measurable ROI.  “Mass customization” has been the closest application of the general idea that most marketers have achieved.

In my opinion, Web 2.0 communication tools including social networking platforms finally open the door to communicate with consumers on an individual level without breaking the bank, but a big question remains: how do we gain insight into the customer preferences that drive purchase decisions?

• Yes, you can survey, but the process does not invite accuracy unless carried out within a permission driven environment
• Focus groups are not conducive to promote a diversity of opinions shared with full transparency
• Satisfaction surveys are pretty window dressing that don’t serve as reliable predictors of future purchase behavior
• And NO, there is not just one question that can be asked to determine future customer loyalty

A conversation with a friend provided an example of how bundled preferences can become a purchase-decision reality.

Marketers try so hard to collect and understand personal preferences through qualitative surveys. And, after all the work and investment, we find the behavioral data contradicts survey results on many occasions.

How can we re-engineer our methods of collecting attitudinal data from consumers to achieve better results?

• Could we use social media to encourage people to outline their “dream ticket” of one-stop shopping for grocery, fuel, or mobile phone service?
• Could we create a member community that provides value to Elite level collectors and opens the door to collaborative conversation?
• Could we employ location based marketing and social sites like Foursquare to generate “instant” surveys on favorite haunts?

If we changed our approach to consumer research, what might we find?

Keep asking questions across your customer base and listen more diligently.

The answers will come clear in time.

Neil Rogers was the original “shock jock” in South Florida radio. Not being a fan, I was in a clear minority as he stacked up top ratings year after year before retiring in 2009.

Part of Mr. Roger’s shtick was living in the gray area of FCC regulation, and he was reminded from time to time by his employer that there are 7 dirty words that can’t be spoken on the air.

Rick Barlow was a man of different fiber. Mr. Barlow was the founder of Frequency Marketing, a company conceived and developed as the Loyalty marketing business unfolded.

Barlow had a laser-like focus on perfecting the art and science to “identify, maintain, and grow best customers through long term, interactive, value-added relationships”. That phrase is emblazoned on a coffee cup still in my cupboard, a souvenir from my days in Barlow’s Cincinnati office.

The evolution of the marketplace has placed pressure on “Loyalty” and how it is defined. Use the “L” word in a meeting and most people instantly think of points and miles, selling the concept short.

Has this made “Loyalty” a dirty word?

I’m not dropping the L word, but I do prefer to talk with clients about the need for a well planned and executed Customer Strategy. The broader term remains founded on the blending of behavioral and attitudinal data to create profitable behavior change across a portfolio, customer base, or market. The advantage of a Customer Strategy is that it allows for forms of execution well beyond points or miles and can be effective using no currency at all.

To underscore that I am not the only one concerned about being labeled the “points” guy, I was witness to a lengthy discussion at Templeton College where a room full of loyalty “experts” debated whether they should use different language to describe what they do. Suggestions ranged from “Customer Management” to “CRM” to “Relationship Management”, but in the end the group agreed it was becoming overly narcissistic and stuck with Loyalty.

Today, the idea of creating enduring customer loyalty to a brand is a lofty goal. Mark Johnson, CEO Loyalty 360 was recently interviewed by Fox Business on the subject and I have included the video here.

As Mark mentions, it is well within the capability of business to use its data intelligently to build relationships to give it an edge over competitors using pricing and discount strategies.

Loyalty lives, it’s just a lot more complex to deliver these days.

The proven model worldwide to form a multi-partner Coalition loyalty program is essentially the same, regardless of the local language.

Operators normally chase down the one or two leaders in each high frequency category (retail, grocery, fuel, banking) to form the foundations of their value proposition. With regional coalitions easier to launch than ones of national stature, consider a new path to partner identification and recruitment, one that is practical to execute and could lead to big results.

What if marketers started the identification process with the consumer, not the partner? Imagine if they paused to understand the way consumers feel about individual brands and which ones fit together best to achieve a partner network that connected with large consumer groups on an emotional level?

A conversation with a friend provided me an example of how bundled preferences become a purchase-decision reality. My friend will remain unnamed, but the complexity of his purchase decision making process is worth some server space.

After bragging a bit on his country’s Olympic Hockey Gold medal, he shared an unsolicited opinion about his favorite Canadian rewards program. His description was transparent and blended logic, emotion, and value.

After ticking off  his range of choices for loyalty programs in his market – AirMiles,  Canadian Tire Dollars, Esso Extras, HBC Rewards, Petro Canada’s Petro Points and Shopper’s Drug Mart, he surprised me by saying “I collect everything through my Aeroplan card“.

Why? Not for just one reason, but several:

• He likes the speed and convenience of paying at the pump with a RFID device and chose Speedpass for its ubiquity over Shell’s Easy Pay device.
• He’s a big Tim Horton fan, which has lots of stores within the Esso C-store footprint.
• He’s an RBC loyalist, having banked there since a young age, and Esso tends to have RBC branded ATM machines at their sites.
• His family has always considered Esso to be their “family brand” of retail fuel.
• And, the more he sticks with Aeroplan, he finds he can accelerate his collecting through his Elite status that triggers partner offers.

Through my quick conversation, I found that it was the combination of brands assembled by Aeroplan that made the difference. I realize that my conversation constitutes a “focus group of one” but it is illustrative of how we can re-engineer partner selection processes to launch and operate multi-partner loyalty programs that are more effective.

This little tale provide evidence into why coalitions work but also points to the reality that even individual loyalty program sponsors should consider the power of developing partnerships in the future.

Either way, it is clear that consumer loyalty is not triggered solely by the collecting activity itself but by brand affinities and the customer experience taken as a whole.

Yesterday was April 1. To my surprise, I received these fantastic offers from three of my favorite loyalty programs.

American Airlines AAdvantage sent me an email offering discounts on fares between some of my favorite and most traveled cities. They even distinguished between those cities which I frequent for business and those for personal or vacation travel. Talk about relevancy, a great deal, and a call to action that I could not resist!

Best Buy Reward Zone sent me a snail-mail offer for a Blue Shirt guided shopping experience to help me select the right HD digital camera just like I told them I was in-market for through a recent survey. They piqued my interest and launched me into action to finally make that purchase to create the video content I plan to post on Loyalty Truth.

CVS delivered on my purchase data they have been collecting through CVS ExtraCare for the past 2 years. Instead of offering me discounts on products that I have not bought and in categories which I don’t shop (cosmetics), they gave me a break on that contact lens solution that regularly costs an arm and a leg. I’ll bet they had Bausch & Lomb reallocate some co-op money based on their recognition of my spend in that category. Whatever the reason, I was delighted to receive the discounts right on my purchase receipt.

Alas, yesterday was also April Fool’s day and none of these offers really took place.

With Good Friday in mind, today would be a good day to think good thoughts and imagine a few ways in which loyalty sponsors could charge up their programs and create the win-win of increased sales and customer engagement.

The best starting point would be using their data to deliver the types of personalized offers I fantasized about on April Fool’s day.

Next would be pledging to never provide incentive for any consumer behavior that is not in the best interest of the customer. Rewarding on debit card use with the quiet aspiration to generate increased overdraft fees would be top on the list. Fortunately this temptation will largely be taken off the table as banks are required to invite debit cardholders to opt-in or out for overdraft protection. Bank of America is ahead of the curve and has already announced that it will curtail overdraft fees on debit as of June 19.

Third would be to understand that higher redemption rates mean higher customer engagement, program satisfaction, and translates to higher customer lifetime values. Seeking higher breakage rates is antithesis to a win-win with customers. The fear of increased costs driven by higher redemption rates can be moderated through disciplined financial measurement of a loyalty program and balancing rewards with little or no financial leverage (cash back) with those that have it (experiences).

All of these Good Friday dreams are well within the power of loyalty sponsors to put into motion. The data is there, the ability to communicate exists, and customers have spoken that they are just waiting for their favorite brand to engage in a relationship with more value and relevancy.

Spring hopes eternal!