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….

What’s Your Plan?

Contributed by Mike Capizzi

Economic tidal waves cause disruptive things to happen along the loyalty marketing shoreline.  Whether tsunami or riptide in magnitude, the resulting on-shore event carries the potential to drown the beachcomber or create a sea-side hero.

Which will you become?

The current economic environment has many loyalty marketers scratching their sun-burned foreheads.  Large enterprises with well established loyalty marketing program strategies may not weather the tidal wave.  If their firms become subject to an inevitable round of cost cutting, dilution of the loyalty program value proposition and abandonment of best customers, then bodies will be washed ashore by the pounding surf.  Call the ambulances and the shore patrol.  Please bring a few extra body bags.

Loyalty marketing service providers who feed off of the large enterprise client will be companion victims.  How do you resuscitate the relationship and corresponding revenue potential when your client is on life support? Don’t scratch your head or reach for the sunscreen; you should be well entrenched in your “Baywatch” plan.  Otherwise you’ll fall victim to the never ending cycle of the rise and fall characterized by the coastal tides.

Simply stated, what’s your plan?

If you are on the client side, get ready for the merger and acquisition tidal wave.  You have a loyalty program, you have a team in place to manage it, you rely on your loyalty marketing service provider to deliver.  You understand best customers, you reward and recognize them appropriately, you have the metrics to prove it.  Who cares?  Here comes the judge and he ain’t pretty!  He carries an axe in one hand and a spreadsheet in the other. When you are merged, taken over, re-structured or otherwise displaced, will anybody care about your past accomplishments?

Of course they will if you have a plan.  Best customers always deliver disproportionate value to the enterprise.  Can you prove it?  Can you articulate the merits and shortfalls of your own loyalty program initiatives versus the concepts and ideas of the acquiring entity? How would the programs best be merged?  How will customers benefit?  Which segments overlap and where is the real potential for incremental revenue post merger? Which service provider or technology platform is best equipped to handle the combined loyalty program databases?  What does the transition roadmap and timeline look like? If you don’t have answers, or at least well thought out opinions, then proceed directly to the unemployment line.  Do not pass go.  Do not collect anything except severance.

If you are a service provider, the picture is even gloomier.  Who is the incumbent loyalty partner and what strengths, weaknesses, competencies, do they exhibit vis-a-vis your own organization?  What do they charge?  What is their cost per point?  How do they add value?  What can you do to position yourselves as the effective and efficient alternative to the incumbent?  If all of this is overwhelming, I understand.  If you are not ready to deal with the impending surge, or prefer to bury your head in the sand, then get ready for the unemployment line.  Bring muffins and a no-whip latte for your ex-client.  You can meet and sympathize with each other every Tuesday morning.

My point in all of this is that you must have a concrete plan.  In writing. With supporting business case tools and logic.  Loyalty program change management is not a new thing; although the art may be lost the artists still remember.  When the tsunami strikes, you will either float to a higher ground or sink in the swell of the salt water.  Victim or hero.

What’s your plan?

Mike Capizzi is Managing Director of Marketing Strategists LLC, an independent consulting practice which focuses on best customer marketing.  Often called the “Loyalty Evangelist” by his industry peers, he has written, spoken, advised and educated on the topic of loyalty marketing programs around the world for more than a decade.

What’s Your Plan?

Contributed by Mike Capizzi

Economic tidal waves cause disruptive things to happen along the loyalty marketing shoreline.  Whether tsunami or riptide in magnitude, the resulting on-shore event carries the potential to drown the beachcomber or create a sea-side hero.

Which will you become?

The current economic environment has many loyalty marketers scratching their sun-burned foreheads.  Large enterprises with well established loyalty marketing program strategies may not weather the tidal wave.  If their firms become subject to an inevitable round of cost cutting, dilution of the loyalty program value proposition and abandonment of best customers, then bodies will be washed ashore by the pounding surf.  Call the ambulances and the shore patrol.  Please bring a few extra body bags.

Loyalty marketing service providers who feed off of the large enterprise client will be companion victims.  How do you resuscitate the relationship and corresponding revenue potential when your client is on life support? Don’t scratch your head or reach for the sunscreen; you should be well entrenched in your “Baywatch” plan.  Otherwise you’ll fall victim to the never ending cycle of the rise and fall characterized by the coastal tides.

Simply stated, what’s your plan?

If you are on the client side, get ready for the merger and acquisition tidal wave.  You have a loyalty program, you have a team in place to manage it, you rely on your loyalty marketing service provider to deliver.  You understand best customers, you reward and recognize them appropriately, you have the metrics to prove it.  Who cares?  Here comes the judge and he ain’t pretty!  He carries an axe in one hand and a spreadsheet in the other. When you are merged, taken over, re-structured or otherwise displaced, will anybody care about your past accomplishments?

Of course they will if you have a plan.  Best customers always deliver disproportionate value to the enterprise.  Can you prove it?  Can you articulate the merits and shortfalls of your own loyalty program initiatives versus the concepts and ideas of the acquiring entity? How would the programs best be merged?  How will customers benefit?  Which segments overlap and where is the real potential for incremental revenue post merger? Which service provider or technology platform is best equipped to handle the combined loyalty program databases?  What does the transition roadmap and timeline look like? If you don’t have answers, or at least well thought out opinions, then proceed directly to the unemployment line.  Do not pass go.  Do not collect anything except severance.

If you are a service provider, the picture is even gloomier.  Who is the incumbent loyalty partner and what strengths, weaknesses, competencies, do they exhibit vis-a-vis your own organization?  What do they charge?  What is their cost per point?  How do they add value?  What can you do to position yourselves as the effective and efficient alternative to the incumbent?  If all of this is overwhelming, I understand.  If you are not ready to deal with the impending surge, or prefer to bury your head in the sand, then get ready for the unemployment line.  Bring muffins and a no-whip latte for your ex-client.  You can meet and sympathize with each other every Tuesday morning.

My point in all of this is that you must have a concrete plan.  In writing. With supporting business case tools and logic.  Loyalty program change management is not a new thing; although the art may be lost the artists still remember.  When the tsunami strikes, you will either float to a higher ground or sink in the swell of the salt water.  Victim or hero.

What’s your plan?

Mike Capizzi is Managing Director of Marketing Strategists LLC, an independent consulting practice which focuses on best customer marketing.  Often called the “Loyalty Evangelist” by his industry peers, he has written, spoken, advised and educated on the topic of loyalty marketing programs around the world for more than a decade.

Editor’s Note: Mike Capizzi is Managing Director of Marketing Strategists, LLC, an independent consulting practice which focuses on best customer marketing. Often called the “Loyalty Evangelist” by his industry peers, he has written, spoken, advised and educated on the topic of loyalty marketing programs around the world for more than a decade. We hope you enjoy his thoughtful article on getting back to the Basics of Loyalty Marketing. Mike can be reached via Mike@mktgstrategists.com

Back to Basics
By Mike Capizzi

There is an old adage among seasoned and experienced loyalty marketers that says “big is the enemy of great.”   The phrase is a succinct reminder that loyalty marketing programs are about best customers, not customer databases.  Once the magnitude of a marketer’s loyalty program exceeds the parameters of best customer marketing, then the accountants start lurking in the shadows. The bean counters will soon jump in and admonish the loyalty marketing team that “X” cost per member times an ever growing membership equals runaway budgets.

Communications activity and engagement drivers get cut out; the value proposition gets diluted; behavioral, segment or tier bonuses disappear and currency inflation hits the rewards redemption catalogue.  Big weakens the whole schematic; innovation dies and great falls victim to affordable, which is accounting talk for cheap.

Recent research and respected blog commentators reinforce the “big vs. great” debate. The most recent Loyalty Census published by COLLOQUY pegs the U.S. loyalty population at 1.8 billion members.  The average U.S. household now belongs to more than 14 loyalty marketing programs, yet is active in only 6.  Led by runaway growth in the financial services sector, plus a frenzy of new activity in non-traditional vertical markets, the U.S. loyalty population grew an outstanding 25% between the 2006 and 2008 Census counts.  Going all the way back to the original 2000 Census, the industry has witnessed a CAGR which has exceeded 10% in every year except the tumultuous season post 9/11.

Can all of these members truly be best customers? The credit card rewards marketers thought so, and we all know what happened there.  The travel industry swears by it, but continues to count my dad as a best customer (he passed away in 1997; RIP).  Retailers rush to bulk up, but lose sight of basic tenets which have successfully framed this industry since its inception in the early 1980’s.  I recently asked the CEO of a very respected entertainment industry brand what his definition of loyalty marketing program success would be.  “More members than my major competitor”, he told me, “I’m tired of being second.”

The point is not lost on other loyalty disciples.  My partner, Terri Gaughan, has often written and spoken about this very issue. In a recent blog post at Loyalty Truth, my old friend and colleague Jim Kuschill lamented on the obsessive focus on cost per point in driving recent loyalty program decisions.  Looks like the accountants are at it again!  And Loyalty Truth originator Bill Hanifin recently reminded us that Measurement Plan basics would go a long way in sorting the wheat from the chaff.

Add in the rambling, raving commentaries I hear every day about loyalty marketing costs enveloped by the dark clouds of the current economic environment. Are we headed for ships sinking in a storm?   Big, heavy, bloated ships I might add.  Where not all cargo is precious.  Maybe it is time to throw some things overboard?

Or maybe, we simply need to get back to basics.

While the loyalty marketing program is a great device for capturing customer transaction detail, it is not a great device for recognizing and rewarding entire continents of customers.  The technique was designed for best customers and can only serve best.  Has everyone forgotten about Pareto? Whether its 80/20, 70/30, or 60/40 depends upon your business but the fact remains that in 30 plus years of working on best customer initiatives I have never seen a database where all customers were created equal.   As soon as loyalty marketers lose focus on the raison d’être, and start letting everybody in, and never take anybody out (my dad); then you are headed for a massive migraine when you meet the accountants.

Simple math.  Take $2 million total program costs (I mean total, see Jim’s post) and divide by 250,000 best customers and watch an annual investment of $8 per best customer yield an incremental $16 in annual profit per same.  Take the same $2 million in cost and divide by 1,000,000 members – active or inactive, dead or alive – and watch $2 per database name turn into disappointment.  Start writing your resume.  You are doomed to failure.

We have confused customer loyalty with loyalty marketing programs.  I don’t know how this happened, it just did, and I could write a treatise on why these things are not necessarily related.  I like the French and the Spanish; they use two different words to describe loyalty – one rational and commercialized; one emotional and highly personal.  We don’t.  Loyalty in business or brand relationships is about things I can’t begin to describe, explain, control or consistently measure.

Loyalty marketing programs are about one thing and one thing only – the ability to identify your best customers by segment, the ability to retain their business over a lifetime or service/product cycle, the ability to increase your yield (i.e. incremental profit over incremental cost to serve) vs. others in your category.  Share of customer, not share of market.  Not everybody can be a best customer.  Let’s not forget the basics.

Put a great value proposition on the table for those segments that are truly your best today and/or have potential to be your best tomorrow.  Consider dancing with the others, but don’t spend until you hear the music being played.  Twenty percent of your customers give you a disproportionately high percentage of your profits.  Invite them out, listen to them, learn what they like, collaborate and dance with them. Stay small, stay focused, keep engaging, concentrate on the return and not the budgeted costs.  Your best customers will appreciate the attention and reward you with their patronage, advice and advocacy.  This is and always will be the basic strategy involving a loyalty marketing program.

If we can remember all of this, then current economic woes will not give us migraines.  And we can keep the accountants at bay.

If you need help fending off the bad guys, give me or Terri or Bill Hanifin a call.  We’ll see if we can help you cook up a gourmet feast with only three ingredients.  It’s easy when you know the basic recipes.