There has been a LinkedIn discussion ongoing for several weeks that, if you care about customer marketing, causes you to stretch your mind a bit.

The question? “Can you use ONE WORD to describe the biggest challenge for Loyalty professionals?”

I read the litany of responses and found it worth documenting what keeps loyalty and database marketing professionals up at night. The answers that popped up with highest frequency fall into 2 categories and provide insight into the macro themes we are confronted with these days to build long term sustainable customer loyalty.

Core Challenges:

These one-word descriptions describe the challenges we have faced in loyalty marketing from the outset in the early 80’s. We’ve got to start with objectives to reach a good result and we are continually challenged to be financially accountable to project stakeholders.

• Accountability
• Budget
• Commitment
• Creativity
• Education
• Knowledge
• Objectives
• ROI

Loyalty Futures:

Now that we’ve mastered the art of enrollment, we are challenged to increase and maintain consumer engagement with loyalty programs. We need to do a better job using the massive stores of data we already possess as well as carefully enhancing it with more preference data to enable personalization.

We also need to move beyond traditional models and embrace ways to capture the attention of Consumer 2.0, an increasingly powerful population segment in the US and beyond. All of this needs to be accomplished in an environment of withering patience, both from corporate management and in terms of consumer attention span.

• Data
• Differentiation
• Evolution
• Engagement
• Non-conformity
• Patience
• Relevance
• Stickiness

The term most often suggested to define the biggest challenge for Loyalty Marketing professionals was Relevance, indicating a self awareness of our need to make program offers meaningful, transparent and “real”.  In turn we must communicate offers more effectively via preferred channels. It might also give a hint to the importance of including local merchants in loyalty programs to bring value to consumers on a daily basis.

Two other one-word answers to the question emphasize the changing nature of customer loyalty: Groupon and QR Codes. Translated, there are two distinct challenges to wrestle with here.

1. How to position traditional loyalty economics against the simplistic allure of deep-discounted daily offers
2. Whether and how to incorporate  social and mobile communications channels into existing programs

The (r)evolution known as Social Loyalty has begun and the new e-Book from Hanifin Loyalty of the same title will be released in January 2012. In the book, we’ll address the nature of the changes underway and shares strategies that you can use to remain relevant with Consumer 2.0 in 2012 and beyond.

Stay tuned.

Loyalty is Social and American Express knows it.

The credit card issuer launched its “Social Currency” campaign back in March and I have to admit that upon first review, I thought it was more show than go. Since that time, the multiple campaigns launched in market with partners including Foursquare, SCVNGR, and Facebook validate their commitment to incorporate digital tools and redefine cardholder perception of card based rewards programs.

The original ads that proclaimed Membership Rewards Points to be a Social Currency inspired my imagination of what they might offer. Would they enable points to be used with a check-in, at point-of-sale to complete a transaction, or to facilitate P2P payments between card-holding friends? The first offers weren’t quite this imaginative, being limited to cardholders being able to shout out their favorite use of points on the company’s Facebook page and offering its version of “deal of the day” with special offers on redemption items.

Nothing wrong with either of these, but I was hoping that the concept of “Social Currency” would evolve and fulfill the idea in earnest, rather than becoming another “Blue Card”, i.e. a smart (chip) card with more sizzle than substance.

My suspicion and skepticism has been gradually swept aside as Amex announced its merchant based test with Foursquare at SXSW and later took the check-in deals nationwide.

More recently, Amex teamed up with SCVNGR and Levi’s to create the first paperless daily deal redemption system. Using Amex’s Smart Offer Engine, the same one used to support the Foursquare promotions, cardholders can sync their SCVNGR LevelUp account with their Amex account and use daily deal coupons in real-time without having to print a coupon. That by itself should drive consumer engagement based on curiosity over an innovative and easy to use rewards delivery system.

To top it off, Amex now lets cardholders cash in their Membership Rewards Points to buy advertising on Facebook. Incorporated as a benefit in its Open Network, real business value is offered to small to medium businesses. Reports disclose that $6,750 equivalent of points buys a $50 Facebook ad, meaning a conversion rate valuing points around 70 basis points. Regardless of how you feel about the exchange rate, the new option allows business people to get something useful for their business for free and differentiates Amex from other card issuers.

Amex used the tagline “We live in a world of possibilities. Isn’t it time we had a social currency to match?” to introduce the concept of Social Currency.  What they unlocked at the same time was the consumer’s imagination as to the many new ways points can be used to gain rewards.

American Express may have also changed the way we look at credit cards. Millions of people desired an iPhone, not to make calls, but for the available apps and the cool things they would do for you.

Today, many people “don’t want another credit card”.  Through the multiple campaigns and partnerships introduced by Amex this spring, consumers they might want an Amex card for the “many cool things” that Membership Rewards will do for them.

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?