Some people are always pushing the envelope.

Don Peppers is one of those people.

Listening to his closing keynote presentation at the Mega Event 2010, I enjoyed a refreshing set of new ideas and one of the most compelling calls to action for brands wishing to build customer loyalty and improve customer satisfaction.

Peppers talked about building customer loyalty in the context of digital media, a world that is untamed today and which stands to unleash further surprises on both consumers and businesses over the next few years.

Simplified, winning brands in the future will build “Trustability“, a loyalty version of Whuffie that more often than not will mandate trading a short term loss for a longer term gain. Those corporate executives who remain entranced by quarter-to-quarter delivery of numbers to meet the expectations of “the street”, may find Trustability to be an elusive commodity.

Peppers emphasized that brands do not have the option to treat customer service like an item they put on sale at the end of every quarter.  Customer experience has to be delivered with sincerity and through associates which have either the power to make decisions on the spot or have access to systems and supervisors who are nimble enough to respond in real time to defuse customer angst.

From a loyalty perspective, Trustability means that breakage is a big no-no. Peppers reminded us that people don’t want their hard-earned miles nixed through fine print in the programs rules. In my lingo, the Loyalty Asterisk™ needs to be removed from every step of the loyalty value chain, especially at time of redemption.

Peppers reminded the group that Loyalty and profitability were flip sides of the same issue and that tweaking program rules to trigger short term gains would negatively impact customer loyalty over the longer term. The United Mileage Plus campaign that promises to be “the program that wants you to use your miles” is a great example of how to create Trustability through a loyalty program.

Peppers’ final exhortation reminded anyone listening that it is treacherous to attempt to compensate or fake your way to social media notoriety. In time, those who manipulate social networks thinking they can build a “persona” that enhances their business will be found out and reviled. Not just for today, but for a long time in the future.

Trust me, Don Peppers and Martha Rogers are right on this one.

Evidence of the health of the loyalty marketing business is that my list of subjects to write about grows faster than I can type.

Yesterday, as I picked up the USA Today slipped under the door in my NY hotel room, a glossy 8 1/2 x 11 flyer fell in my lap and changed my blogging plans for the day.

“It’s Like Joining EVERY Hotel Loyalty Program. Except, it’s only one.” was the message. Flipping the piece over, the offer was clear: book  and stay 10 nights using Hotels.com and earn 1 free night at any of the 60,000 hotels offered through the site worldwide. Better yet, signing up for the WelcomeRewards™ challenge offered the chance to win 2 bonus nights over the course of 30 total nights booked.

The punch card might be the oldest loyalty tactic in town, but it works well for Southwest Airlines and for Hotels.com. I did a quick comparison and the simplified approach is not too far away from the basic value promised by traditional hotel loyalty providers Marriott and Intercontinental Hotels Group. For example, if a member of Marriott Rewards or Priority Club stays 10 nights at one of their respective properties with average room rate of $100, a free night is on the radar.

I know that Marriott and IHC offer multiple ways to boost earnings and have much more sophisticated programs overall, but for the budget driven traveler, joining WelcomeRewards™ is not a bad deal.

Interesting to me is that the program was launched in July 2008 but has had low visibility in the consumer eye. Also, given that Hotels.com is an operating company of Expedia, I wonder why the ThankYou! Rewards currency that Expedia uses wasn’t extended over to this brand.

WelcomeRewards™ comes with a few conditions (a/k/a the Loyalty Asterisk™), specifically:

• Rewards may be redeemed at “eligible” hotels, but I could not find that term defined on the web site
• The maximum value of a free night can’t exceed the average daily rate of the 10 nights used to earn the reward. You can however, choose to pay the difference if you really want to stay at a higher priced property
• Taxes, fees, meals, incidentals and any “other costs associated with the booking” are not covered by the free night
• Each loyalty credit is valid for three (3) years from date earned
• The program may be terminated by Hotels.com at any time

Summing it up, the flyer that dropped in my lap reminded me why brands continue to choose data-driven incentive (Loyalty) programs to engage and retain customers. Far too many people that I have heard from are using travel aggregator sites like Hotels.com and Expedia to shop around and then login to their frequent guest account at the airline or hotel chain of their choice to book reservations.

To break the habit, Hotels.com had to do something and WelcomeRewards™ is an easy to understand program that delivers sufficient value change a few consumer minds.

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.

These days, it seems that consumers can’t buy a major appliance, personal computer, or big screen television without being offered an extended warranty.

The irony in the sales pitch is that talking points from store personnel leading up to the purchase decision are centered on the high quality of the item being considered for purchase.  Once that decision is made, whoosh, the chatter morphs to emphasize the need for a “consumer protection plan” to shield you from any number of consequences – especially manufacturers defects.

Most major appliances and consumer electronics are sold with a one year manufacturers warranty, hence the evolution of sales pitch from quality to protection communicates a (wink-wink) message that, despite the advertised quality of the product, you are rolling the dice that it will function as intended beyond one year. If there was ever a better example of fear-based selling, I can’t think of one.

I’ll leave the full analysis of when it makes sense to buy extended warranties to Consumer Reports and others who have more time on their hands. I do instinctively know that the lower the price and more disposable the item, the less it makes sense to buy a protection plan. It’s interesting to observe how some products like computer printers have devolved into this category as prices have come down, repair costs have skyrocketed and new technology is plentiful. Rather than buying a printer warranty, your money would be better spent buying discounted print cartridges!

Long ago, I added added Extended Warranty Plans to the list of Loyalty Asterisks™ in the market today. As a brand, you should be careful to monitor the presence of the Loyalty Asterisk™ in your marketing mix as they throw up barriers making long term customer loyalty tougher to achieve by creating mistrust and diluting value.

Always shopping with a cautious eye towards these plans, I was gripped by signage in Dick’s Sporting Goods offering Footwear Coverage.  As the copy read, I was being offered “Added protection from failures due to defects in materials and workmanship, including those experience during normal wear and tear.”

If you are asked to make a list of popular multi-line sporting goods stores, only a few come to mind. My list would include Sports Authority, Dicks, and Modell’s. Though they have similar inventory, store layouts, and staff knowledge on the floor, each chain has its own personality and Dicks has been my favorite of the three. I’ve also been running since I was 15 and am convinced that it is wise to replace running shoes every 400-500 miles to improve performance and avoid injury. Depending on your running volume, that equates to 2 pairs of new running shoes per year for anyone training for more than a dog walk.

That said, the idea of a consumer protection plan for running or any other athletic shoes is just plain mad. Dick’s announced the warranty coverage in February 2009 and while it makes more sense for high priced treadmills, it’s value is questionable for expendables such as shoes. Readers of Runner’s World seem to agree.

Dick’s offers ScoreCard Rewards, a basic rewards program that delivers about a 3% deferred discount (spend $300 get $10). With consumers seeking transparency and value in the retail shopping experience these days, the offer of a clearly suspect extended warranty product undermines the “loyalty” that Dick’s is seeking to achieve with ScoreCard Rewards.

Consumers keep score on the sum total of offers made by retailers and ultimately evaluate brand worth on a holistic level. Now that’s something to mark down in your retail playbook!

When I’m working with any of my business partners in the Customer Strategy Network, whether from the UK or New Zealand, I’m used to being treated as a second class citizen.

There is something about the British-influenced accent and manner of speech that simply makes everything they say sound more intelligent than my best shot. At the least, we like to jab each other about this in fun, but the truth is, my foreign counterparts have a knack for getting their message across.

Yesterday as I opened white mail from Office Depot’s Worklife Rewards® and email from Best Buy’s Reward Zone®, I was struggling to put my finger on how the two programs contrasted in their management of member communications. My English friend cleared it up for me in one pithy phrase by saying “people don’t like fiddly things”.

When it comes to maintaining customer engagement with rewards and loyalty programs these days, nothing more telling could be said.

That day, I received a threefold brochure from Worklife Rewards informing me that I had earned a reward for $11 and included a plastic card that I could take to the store and use to redeem against purchase. The brochure provided a mini-statement of my account as well as some partner offers from 1-800 Flowers, Ameriprise Financial, Budget & National Car Rental, and LaQuinta.

The communications piece was easy to read, got to the point, and the delivery of the reward got my attention.

On the same day, I received an email from Reward Zone informing me that my account needed activation. This was strange to me as I have had an account with Best Buy since the program opened over 5 years ago. The next day I received an email from Best Buy offering me their cobrand credit card, but referencing a different reward account number. Strange as well.

I’ll save you the details by saying that a duplicate account had been created through one of my purchases and only after multiple attempts to login to both accounts and a phone call to the customer service center was I able to resolve the matter.

The good news is the matter was resolved. The bad news is that I don’t think many people would have taken the time and exercised my patience to endure the process. I’m a Loyalty Geek and had I not been looking into this for business reasons, would have disconnected with Reward Zone and given the program no further attention or energy.

Loyalty program sponsors and operators need to constantly seek out the “fiddly things” in the member experience and seek to streamline and simplify that experience with the objective of keeping consumers in love with their brand and their rewards program. Best Buy had a few too many Loyalty Asterisks in the process for my taste and I’m sure these Fiddly Things would have driven the average customer mad, causing them, in English parlance, to “bugger off”.

Don’t let that happen to your brand.

I’ve gotten into a bad habit with my children. Whenever they ask me about overzealous promises from a product advertisement, I just tell them “It’s probably not true, it’s just marketing stuff“.

The bad part is that I am instilling a degree of cynicism in the little ones, but then again “buyer beware” has served us well for decades. To get their money’s worth, consumers need to be cautious, if not skeptical, of claims made and should complement personal research with word of mouth recommendations where possible.

My broad-brush description of marketers can be justified simply by witnessing the lack of loyalty transparency in favored market practices today. I really don’t want to read an email telling me that I can earn a 10% rebate on “all purchases made” only to click through and see that there is a monthly dollar cap on my savings. I also don’t enjoy seeing items priced “less mail-in rebate” while I end up paying a higher price at the register and later struggle with paperwork to realize the savings.

To its credit, Best Buy has partially broken from the mail-in rebate habit as it offered 5 Android smartphones at an introductory price with no strings attached.

In the B2B world, the use of whitepapers as the bait in email solicitation is becoming highly annoying and merits a huge Loyalty Asterisk™.  Just this week, I filled out a form to receive a “Whitepaper” from Socialtext covering critical requirements of enterprise social software. Thinking I was going to learn something, I realized as I was reading the document that it was not much more than a capabilities document for their own product reformatted as a whitepaper.

It is a simple and often used formula – take the key features and benefits of the product you are selling and create an outline that proclaims the same key points as “best practices”. The Loyalty Asterisk™ remains prevalent in advertising and promotional circles today and marketers need to accept that building campaigns with roots in gently misleading the public does not breed long term customer or brand loyalty.

In the words of Generation Y (Millennials) it’s “annoying”! Translated, it means “I’m not buying your stuff!”

If marketers are selling quality, performance, and reliability as part of their product or brand promise, then they need to deliver the message with a higher degree of transparency than is seen today. I consistently advise my clients to deliver offers with accurate pricing and all conditions proclaimed up front rather than play the bait and switch game.

The beauty of Web 2.0 and social media in particular is that consumers have the tools and communications channels available to be able to research products, compare opinions, and provide feedback to friends in an almost instantaneous manner. Brands that market with a heavy dose of the Loyalty Asterisk™ will be skewered on Twitter, Facebook, and in the blogosphere.

Rather than play the game and suffer the penalty, marketers would be wise to play it straight, exercise some Loyalty Transparency, and enjoy the complements and adulation of consumers as they award the brand for delivering just as promised. If you are running your business without social media tools to monitor brand mentions and conversations, you need to step up your game.

Adopting the right tools and building a commitment to marketing transparency will yield improved results. I am here to help you with both endeavors.

Fred Reichheld may have asked the Ultimate Question, but few seem to have “just one answer” to the question.

Napoleon Hill was quoted as saying that  ”Lack of loyalty is one of the major causes of failure in every walk of life.”

I tend to agree.

In business and in life, if you show sincere concern for another and if you frame your relationship in trust and transparency, the odds will be in your favor to win better results.

Just because I coined the term Loyalty Asterisk™, doesn’t mean that I want to see it perpetuated in business.

Customers are concerned with the privacy and protection of their personal data. They are increasingly skeptical about online targeting of advertisement and promotion.

Companies which make a commitment to using their data in a responsible manner, who deliver customer experience and product quality consistent with their brand promise, and who treat Loyalty Marketing as icing on the cake rather than the cake itself, will be the winners as the economy ramps up once again.

When people are asked about their greatest fears, you might be surprised by the results.

In recent polls, I have seen public speaking rank ahead of getting cancer and being stricken by terrorist attacks!

Apparently in Canada, the list would be different still. A recent article in the Toronto Globe & Mail reported that in a recent Angus Reid Strategies poll of 624 Canadian parents, talking about finances with their children was one of their greatest fears. Over all, the Moms and Dads surveyed felt better prepared to discuss sex, drugs and alcohol than to broach the topic of finances. And I thought that the conversation about the “birds and the bees” was enough to break a sweat!

According to Sarah Boesveld’s article, the survey findings shine a light on the real state of adult financial literacy and points to the particular squeamish-ness of Canadians about financial conversations. Steve Garmaise, associate director with Foundation for the Advancement of Investor Rights (FAIR) was a bit more opinionated, saying “most Canadians and most parents are fairly ignorant about financial matters…and would rather hand it off to someone else.”

I would venture to add that Canadians are not alone in this regard. This is yet another reinforcement of a clear opportunity in the marketplace, and the enterprise which is able to communicate financial basics and planning skills to the public without making them uncomfortable can create loyalty among its customer base without giving away the first point or mile.

Who is better to assume this leadership role than commercial banks? Banks have multiple channels through which they can communicate (retail branch networks and secure internet banking portals) and enjoy a high frequency/high visit environment. They have an edge over competitors including brokerage firms and insurance companies which have less frequent interaction with their clients and can be too narrowly product focused.

Having just written about Social Banking and illustrating how Bank Of America is launching products designed to address consumer’s need for financial product transparency, the Canadian survey is interesting and timely. The question is: how should a bank go about executing a financial literacy campaign?

Do you include features of Financial Literacy in a relationship banking model, or is it better to skip the rewards and focus on delivering a clear message and creating trust that the products recommended are the ones a person actually needs? Time will tell, but I do believe that “what doesn’t kill you makes you stronger“. For banks, this means that flagging consumer confidence in their offerings coming out of this recession can be used as a golden opportunity.

Banks can rebuild their brands and stake out a competitive edge in the near term through marketing products as financial advocates for their clients and with a message based on value and transparency. This is the time to leave the disclaimers, fine print, and hidden clauses out of product offers. No Loyalty Asterisk™ here, please! Sun Trust is talking about “Banking Solid“and Bank of America is leading with its innovative approach to credit cards and mortgages.

Let’s see which organization makes this message a part of the core brand message, not just a convenient fad that dries up and blows away when times get better.

I had two hours to kill in Chicago O’Hare and needed something to drink. Just as I was teetering towards the familiar Starbucks installation, I spotted an inviting alternative across the concourse – Argo Tea. I’d never seen this chain before but was attracted by the Asian-tea-fusion feel to the place. As I scanned for the menu, the “take me” jumped out at me. There was a brochure for The LoyalTea™ Club.  I was hooked.

I’m sure you have encountered retail stores or restaurants whose design and layout not only catch your attention, but communicate an unspoken connection that makes you feel comfortable and invites you inside. This was the case with Argo Tea and, combined with my natural curiosity to see if their loyalty program passed the Loyalty Asterisk™ test, I had to linger for a few minutes.

I was not disappointed.  In fact, I was elated to see a reasonably modest outfit get Loyalty right.

The staff was well trained, helping to orient me to the reasonably complex array of tea drinks and smoothies. I was offered samples and while enjoying an Iced Pom Tea™ I asked about the LoyalTea™ program. I was greeted with an enthusiastic and knowledgeable brief on the program and handed a brochure and card which I later discovered was a “three-in-one” card serving as Gift Card, Debit Card, and Reward Card. Taking a page out of the Starbucks Duetto Card playbook, the card was really a stored value card that could hold my loyalty points and be loaded with cash value to pay for drinks and food.

Supporting the offer was the succinct and smashing brochure that clearly explained the program benefits and key features. Sporting the tag-line “Blends with Benefits“, the front of the brochure let me know what I could expect in short order:

• Register online and get a free drink
• Get a free drink on your birthday
• Load $50 on your card, and we’ll give you $5 more
• Buy a food item and drink to get 10% off
• Buy 10 drinks, and get 1 free
• Buy 5 tea packs, and get a free infuser

The inside of the brochure highlighted the triple threat nature of the card itself and encouraged takers to register the card online to protect the value on board from theft or loss.  The benefits on the front panel were reiterated with added details, and the value proposition was explained with instructions on how to calculate points into dollars  by “dividing the number of points by 1000 e.g. 4880 points = $4.88″.

With a little bit of digging, I learned that Argo Tea is a growing chain that opened its first cafe in Chicago in 2003 and now has over 16 around the Chicago metro area.  Loyalty branding should be complementary to the core brand message and LoyalTea™ was sync’d nicely with the corporate self description that Argo Tea “brings natural and tasty signature drinks to all those looking for healthy alternative beverages and lifestyle experiences”.

The company goes on to say that they are “passionate about bringing teas directly from growers around the world and blending them into unique and delicious signature beverages and teas …. and are committed to being a sustainable business by working with the best local and global tea, coffee, and food artisans and by contributing back to our communities to promote a healthy lifestyle and the conservation of natural resources”.

It is great to see a company get it right and I realize how seldom it is that I can highlight a program that on first impression merits nothing but praise. LoyalTea™ has a great name that survives a good pun and is constructed in a utilitarian way while reinforcing the company’s brand message. The staff were well trained in not only delivering a good customer experience but in reinforcing the value of the loyalty program.

Congratulations to Argo Tea. Did I mention that their drinks were great as well?

After more than 100 posts I can say that Loyalty Truth has achieved a degree of permanency.

Founded on my own conviction and commitment, it is a welcome relief to have help. I express my gratitude to guest contributors Tom Rapsas, Jim Kuschill, Brian Kryzanski, and Mike Capizzi. They have each written about aspects of Loyalty Marketing where they have particular expertise and collectively they represent a growing foundation of support for this blog.

With so much to write about in the evolving Loyalty Marketing industry, the opportunity is here to establish some themes to follow for the future. Keep your eye out for articles categorized as “Loyalty 201“, “Loyalty in Any Language“, and “Loyalty Futures“. In addition, we’ll continue to document instances of the “Loyalty Asterisk“, to address the gotchas and tripwires of Loyalty Marketing.

• Loyalty 201 will address how essential elements of the business are evolving to meet the needs of increasingly empowered and knowledgeable customer groups. Here you will read about new directions in rewards, communications, and marketing technology which drive higher ROI for loyalty program sponsors. I’m assuming that my readers understand the basics and are ready to move on to consume solid food!
• Loyalty in Any Language will share learning from international markets. The influence of culture, custom, and unique business environments on the execution of effective marketing strategy is undeniable. These posts will provide a vital resource for any company with cross border interests. I will not only share my own first hand experiences working outside of our borders, but will showcase loyalty leaders from key markets around the world.
• Loyalty Futures will take inventory of just about anything that can be found in the crystal ball of Customer-centric strategic marketing. Where innovation in building brand loyalty and changing customer behavior is observed, we’ll share it here. Lots of big companies are trying to connect the dots of social media, millennials, digital CRM, and profitability and Loyalty Truth will makes its contribution to the cause.

According to what I read in the blogosphere, my approach to Loyalty Truth is somewhat non-conforming.

• I am driven by substance, not frequency of posting. Though I manage to get a dozen or so posts up each month, I have yet to publish a “throw away” article and hope I never do. There is so much change underway in Loyalty marketing that my inventory of “posts-to-do” is outpacing my time to properly research and post. This approach should translate into high quality posts that are almost mini case studies by themselves. You can be the judge.
• Balancing quality and readability is the next challenge. Beyond a certain length, you won’t spend time to read what’s posted, so I am saving some bigger topics for white papers to be published on the Hanifin Loyalty website.
• Lastly, I have to admit that while writing is an enjoyable pursuit, I publish Loyalty Truth with a purpose. The perspective, opinion, and experience that is baked into each post is meant to offer a teasing glimmer of insight into the value that Hanifin Loyalty brings to its clients. We confidently offer the highest level of strategic advice as well as exacting project management and tactical execution services to make sure clients reach their profitability targets. Give us a chance to serve as your portal for top-tier decision making. You’ll find there is still quite a value to be found in the dollar these days.

I hope you will enjoy these new features and spread the word about Loyalty Truth.

Enjoy the journey….