At Hanifin Loyalty we like to talk about what it takes to build customer loyalty, but we also pride ourselves in being good listeners. We listen to clients and we listen to customers. Like the old saw said “God gave us one mouth and two ears for a reason”. Maybe they should be used in that proportion.

We’ve been listening to Millennials lately and we’ve shared a series of posts from our “Mystery Millennial” giving our followers insight into how Generation Y perceives the marketing efforts of big brands and local merchants.

Today’s story highlights why our Mystery Millennial loves Toys R Us.

Toy shopping with my little toddler is so much fun these days.

She sits in the cart eying the shelves with the kind of awe that such an exciting place inspires in children; innocently free from greed at her age. I love to indulge her wonder, and am amazed at what holds her attention, i.e. the cheapest trinket in the store. Much to my pleasure that’s a purchase that makes us both happy!

On a recent outing to Toys R Us I signed up for their rewards program. I had heard good things about recent updates to the program, and decided it would be beneficial to try and save some money. My experiences at the store surprised me, and the loyalty they established with me was not what I was expecting.

The main reasons I now shop at Toys R Us are less financially based and more thanks to the customer experience in-store. I have been reminded what old fashioned customer service looks like and how that often has far more weight with my purchase decision than just saving a few dollars.

The smiles, help, and conversations I have enjoyed from the employees at Toys R Us (even from the shy tech dude at the game counter) have renewed my love for shopping in-store rather than online. On one visit, I was inconvenienced when a security tag was left on a shirt by accident. It’s embarrassing when the alarms go off as you walk out the door and I appreciated the way store employees handled the situation and truly tried hard to make me a happy customer.

I will continue to shop at Toys R Us and Babies R Us. Maybe it was the money-saving rewards program which brought me into the store to begin with, but my loyalty to this store in particular was won by the sense of welcome and good cheer that I received from the people that work there.

In my opinion, a rewards program gains true loyalty when the fact that you just saved money is over-shadowed by the pleasure it was to shop!

Editor’s Note: There is wisdom to be gained by listening to our youth! Millennial marketers should lend an ear.

If you aren’t convinced of the depths of our individuality as human beings, then stop texting at the next red light and have a look at the bumper stickers on the cars ahead of you.

I did just that, though I might have looked while texting, and saw three different calls to action to cure a disease. There was a pink ribbon representing breast cancer, a sticker for Team in Training which supports Leukemia and Lymphoma, and another for ALS, known as Lou Gehrig’s disease. That was just at one stop light in my neighborhood.

My thought, as it related to customer strategy and loyalty marketing, was how different all of our customers are and what a big challenge it is to offer them something that piques interest and springs them into action.

The loyalty and rewards industry has two big issues which it is facing today:

1. Program membership is at its highest level ever, but participation levels are lagging. It seems we can get people to join with an initial offer, but there’s not enough value to keep people engaged.
2. There is a tremendous financial liability that brands have accumulated on their balance sheets, which now is being impacted by stringent international accounting standards.

Charitable giving has long been a feel-good tactic applied by brands to solve both problems. Social responsibility and green causes look good on corporate resumes and can stimulate engagement with program members on a temporary basis. It is also a great vehicle to help burn off orphan point/mile balances.

The trouble with charitable outlets for loyalty points in the past has been lack of choice. If you offer me 3 choices after clicking on the “Causes” tab on your program website, I may not identify with any of them.

As illustrated by the bumper sticker example, we’re all individuals, there is an incredibly long tail of interests that shape us as people. I might want to build a house for Habitat for Humanity or give to my local church, while you may want to support Livestrong in its battle against cancer or donate to your child’s 3rd grade classroom to help defray the cost of classroom supplies.

The game is changing with the launch of KULA Causes. The founders of KULA Causes come from diverse backgrounds, and have depth of knowledge and experience in cause-related public works around the world. Gerrit McGowan, one of the Founders and CEO, worked with and for the United Nations for 10 years, helping charities and non-governmental organizations bring value to their causes.

He explained to me that the name KULA has roots in a system of giving practiced by Melanesian Islanders and the Coastal First Nations of Canada. As he stated “KULA introduces a “Currency of Giving” which changes the way loyalty program sponsors and brands will view the linkage between data driven marketing and charitable causes”.

KULA has three implementation models, allowing for “direct earn”, “direct burn”, or a “Currency Exchange”. A brand can build a Customer Strategy around this Currency of Giving or position KULA as a reward option. Whatever path is chosen, program members can convert any reward currency to make a donation to one of over 2 Million certified charities around the world. In the U.S., these donations are tax deductilbe, making KULA a “win-win-win” for consumers (program members), brands that sponsor loyalty programs, and the charities themselves.

Ask any seasoned loyalty professional and they will tell you that a “balanced blend of reward and recognition” is key to successful program operation over the longer term. To make a connection emotionally with program members is a tall task. It’s also a tough one to have to manage millions of dollars of accumulated points on the balance sheet.

KULA can help to do both, and brands that embrace KULA should see an uptick in member engagement levels as well as reduction in financial liability.

In the spirit of full disclosure, I am working with KULA Causes in an advisory capacity to help them manage their high-growth environment. I know the points of pain in our industry these days, and have seen how KULA can relieve some of the pressure.

Loyalty Marketing needs an injection of innovation, and KULA Causes is a great source for that spark. Their potential goes beyond just our industry and will develop in surprising ways. In the interim, anyone wanting to increase member engagement and manage financial liability should take note of KULA Causes.

That would be good for all of us, right?

Aeropostale, Inc. is a specialty retailer fighting for the attention of a client base exhibiting limited or no attention span. I’m not mean, just the father of three children, so let’s just say that I’m experienced.

No matter how you describe it, today’s consumers are distracted and its not easy to engage them for long. That’s been the dilemma of marketers trying to reach Consumer 2.0, the always-on, always-connected generation of shoppers who seem to give as much attention to their mobile handsets and touchpads as they do the person next to them in line.

If it’s a challenge to engage and maintain dialogue with Millennials and those of us in older generations who have adopted the electronic life, think of the orders-of-magnitude greater challenge that exists when targeting 14 to 17 year-old young women and men (Aeropostale®) and 7 to 12 year-olds (P.S. from Aeropostale®). By the way, marketers need to find another verb than “targeting”. It’s mildly offensive for most people and somehow really doesn’t fit when talking about elementary and middle school kids.

To break through the clutter of this noisy and competitive retail world, Aeropostale® announced the introduction of P.S. Rewards, a multi-channel rewards program designed to benefit customers whether they shop in-store or online. According to the press release dated July 19, Scott Birnbaum, Senior Vice President of Marketing and E-Commerce at Aeropostale, Inc. stated “P.S. Rewards formalizes this (strong following) relationship and allows us to recognize our best customers with special privileges and activities.”

P.S. Rewards is free to join and members can earn 1 point for every dollar they spend in-store or online.  Once members accumulate 75 points, they receive a $5 certificate towards a future purchase, equating to just over a 6% funding rate. To balance reward with recognition, P.S. Rewards members receive “exclusive” benefits including access to VIP sales and events and birthday gifts.

The P.S. Rewards program is enabled by Smart Button, a technology savvy company that is making headway in the specialty retail segment. When asked about the new program, Trevor Edwards, Director of Business Development and Sales, told me “P.S. Rewards is an example of a new breed of loyalty execution that can help retailers enhance brand affinity, increase sales, and deliver a superior customer experience”.

I have no idea what’s planned next for P.S. Rewards, but given the fact that both the kids who love the brand and the parents who are paying the bills need to remain engaged, Aeropostale needs to invoke true creativity to deliver messaging for each group in the channel they most prefer to communicate. It will be interesting to see what comes next.

Technology Enables, but Imagination Wins

Tasti D-Lite not only rolled up its sleeves to take advantage of open API’s from Twitter, Foursquare & Facebook to integrate them with its point-of-sale system – it used its imagination to make an otherwise familiar loyalty program structure become the first and most widely executed example of “Social Loyalty” in the restaurant category.

Imagination Wins, but Flawless Execution Keeps Your Job!

All the hard work invested by Tasti D-Lite and its POS vendor, PC America, in integrating the SNAP Social Loyalty application would go for naught if the resulting customer experience didn’t work. Last night I took my family to visit a newly opened store in Boca Raton.

I did the unthinkable – I had forgotten my TastiTreat loyalty card and had no idea of my number or how to connect with Tasti Rewards – so I simply asked the cashier to help. She asked my last name and within seconds said, “oh, you’re Bill”. Nothing more needed to be done. We enjoyed our tasti treats and had some fun looking at the social posts resulting from the transaction.

No Loyalty Asterisk™ Here

Everything worked, the customer experience was put ahead of any policies or procedures, and the interaction between customer and the rewards program was nearly invisible.

This is a great example of how loyalty program execution should take place, and there are big lessons to be learned from the simple purchase of a tasti frozen dessert.

Note: In helping clients take the first steps towards new Social Loyalty models, Hanifin Loyalty is a SNAP agency partner. Affiliations aside, the desserts at Tasti D-Lite are great and SNAP works!

Rewards comes in all shapes and sizes. Some small, some large, some that you save for over a long period of time, but not too many that are delivered in the same moment that your transaction takes place and that can be cashed in almost immediately.

When I made a quick stop at CVS today, two nice surprises took place.

1. Yes, there was a $12 CVS Extrabucks coupon appended to the bottom of my receipt. It had a few restrictions and was good for 45 days. A bounceback visit was not required and I could have returned down the aisle for a few more items and cashed in.
2. Almost a better surprise was that the cashier alerted me to the award, telling me to be sure not to throw away my receipt as it carried evidence of my twelve bucks. I’ve advocated for better training of store associates to ensure that the value of rewards programs is delivered to each customer and for some reason, brands don’t hear the message. CVS clearly gets it.

Interesting also was that as I checked my email later that morning, the notice of my $12 “quarterly earnings” was sent to me around the noon hour. I had three options to enable my reward and printing from the email or at the Extracare coupon center in-store were the two most obvious.

The fact that CVS is apparently printing the rewards on receipts for purchases made in April is an improvement. I don’t know if the reward will print out on the receipt for EVERY purchase I make during the month or if it generates only on the first purchase. Either way, its an enhancement to the customer experience and, better than telling me that their loyalty program is “going green”, is evidence that green rewards are a reality at CVS.

There are some aspects of CVS ExtraCare mentioned in a previous post that I still do not understand and maybe never will.

1. I have absolutely no idea how the $12 was calculated. The receipt did say it was issued based on my winter spending, meaning I have to guess about my spend during previous months to figure out the amount of return I am getting for my patronage. Since the award printed on April 1, I imagine the rewards are calculated with one quarter delay and are issued on the first day of the ensuing quarter.
2. My receipt tells me the amount of my “Spring” spending. I am guessing that CVS does not adhere to the Farmer’s Almanac definition of Spring and instead equates Spring to a calendar first quarter, i.e. Jan 1 – Mar 31. I don’t really care how they delineate the time, just wish they would make the message more clear.

Overall, twelve bucks is twelve bucks – a pretty solid reward given the average amount of purchase made in the store per visit. While some brands fret over 1 or 2 percent give back or generate 10% off coupons on next visit that only amount to $2-3 maximum, CVS delivers hard dollars of a more significant amount.

Maybe the mystery they create is intentional. If so, I give them credit for prescribing their own version of “surprise and delight”.

What do Marketers and Rodney Dangerfield have in common? Neither gets respect and each has resorted to self deprecating humor to deflect criticism – or to make a point.

The Marketer’s dilemma is that developing effective marketing strategy is not as easy as it appears. Sometimes, an awful lot of work is poured in to validating an assumption that we intuitively thought to be true at the beginning of a project. At the end of a planning exercise, observers can rightly ask “what was the big deal?”or “didn’t we know that from the start?” Because of this, consultants have been chided for being the folks that charge you to tell what time it is on your watch.

The temptation to shortcut the planning process is always there, but prudent business people know that working through a process or methodology is the best way to manage risk and ensure that all considerations for strategy are vetted. No matter how much work is done, the project should not be declared a wrap until one important step is performed at the end: a reality check to see if customers will “get” our message and understand the value offered in whatever marketing campaign is crafted.

A while ago I wrote about how Marketers Can Be Real Bozos, and whether it was a good or bad idea to use our own lingo in the ads we create.What happens when marketers go beyond using lingo and take aim at themselves to sell their own products?

Ford’s “No Nonsense” campaign for its F150 trucks took a direct shot at the marketing crowd, shouting in this ad that “we don’t need a bunch of donut eaters at a focus group” to tell us what we want in a pickup truck.

Bank of America has been promoting its Cash Back card product describing it as “Refreshingly simple. Rewards with no hoops to jump through” and reassuring customers that there are “No Hassle, no tricks, I know what I get, not like those other card reward programs”.

Someone convinced Ford and Bank of America that if self-deprecating humor worked for Rodney Dangerfield and Jerry Seinfeld, then it will work for them.

I wonder though if their respective marketing teams paused to take the acid test I suggested. If so, would BofA have criticized its other reward cards offers to benefit its cash back product? And, what does Ford think will happen the next time they go to recruit for a focus group (you know they still do them)?

The Ford campaign is funny and since I’ve never been a big fan of focus groups, we can let them off the hook. BofA on the other hand has to think longer term about its messaging. If all reward cards other than cash back are nothing more than “hoops and hassles”, they have just trained upcoming Millennials and other consumers who pay attention to their ads that cash back is the only way to get value from a card.

Maybe that reality check would not have been such a bad idea after all.

The loyalty supplier business is full of contrasts. Go-to-market strategies, and business models cover the spectrum. Looking East to West across the range of choice for brands operating traditional points-based loyalty programs, the offerings can be categorized somewhere  between old-school and ground-breaking. One key area of difference boils down to a single word – breakage.

By definition, the value of unredeemed points has been the cherished prize of whatever party owns the points bank. For years, many vendors “sold” points as part of their service offering, and breakage became a hidden value from which the vendor accrued value.

Eyes are wide-open today, with everyone benefiting from the loyalty value chain attentive to breakage – both its magnitude and how it is shared. Breakage is an important assumption in projecting loyalty program ROI, and sharing in the pot is heartily negotiated between vendor and brand.

Increasingly, the conversation around breakage is changing, with more progressive brands and their vendors asking if breakage is (gasp) a good thing.

Managing breakage has been thrust into the spotlight as new regulations are in play mandating how unused value in rewards program are to be tracked and funded. The rules, referred to as IFRIC 13, have become frequent topics of interest in industry conferences and have gained attention from global accounting firms seeking to carve out a new area of core business.

Beyond accounting standards, brands are attentive to how breakage impacts the success of their rewards programs and the associated satisfaction levels of their customers.At the Airline Mega Event this past October, a “Liability Forum” was presented with panelists describing breakage as “an asset to be used for program improvement” rather than just a kitty from which to bolster profits at quarter-end.

During the Mega Event, United Airlines presented a new communications campaign that highlighted this new view on breakage, saying that United Mileage Plus is “The program that wants you to use your miles”.

At the Cards and Payments Loyalty Conference a month later, panelists were asked “what is the ideal level of breakage” in a loyalty program. Fabio Garcia, head of cards at Banco Popular, got the audience to lift their eyes from their smartphones when he asserted that “zero” was the ideal figure. His logic? More redemptions equates to higher customer engagement, lower credit risk, and is a precursor to longer term program satisfaction.

Here are a few take-aways on Breakage & Liability Management:

1. Have a clear strategy for ownership of the points bank and how ensuing financial benefits will be allocated. Craft a position on acceptable levels of breakage, with customer engagement & satisfaction guiding the process.

2. Run from vendor relationships where points are sold on issuance and the spoils of breakage are held exclusively by the vendor.

3. Be prepared to defend your business case against financially driven colleagues who contend that higher breakage will add value to the program (hint: higher program value is offset by lower customer values over time).

The loyalty supplier business is full of contrasts. Go-to-market strategies, and business models cover the spectrum. Looking East to West across the range of choice for brands operating traditional points-based loyalty programs, the offerings can be categorized somewhere  between old-school and ground-breaking. One key area of difference boils down to a single word – breakage.

By definition, the value of unredeemed points has been the cherished prize of whatever party owns the points bank. For years, many vendors “sold” points as part of their service offering, and breakage became a hidden value from which the vendor accrued value.

Eyes are wide-open today, with everyone benefiting from the loyalty value chain attentive to breakage – both its magnitude and how it is shared. Breakage is an important assumption in projecting loyalty program ROI, and sharing in the pot is heartily negotiated between vendor and brand.

Increasingly, the conversation around breakage is changing, with more progressive brands and their vendors asking if breakage is (gasp) a good thing.

Managing breakage has been thrust into the spotlight as new regulations are in play mandating how unused value in rewards program are to be tracked and funded. The rules, referred to as IFRIC 13, have become frequent topics of interest in industry conferences and have gained attention from global accounting firms seeking to carve out a new area of core business.

Beyond accounting standards, brands are attentive to how breakage impacts the success of their rewards programs and the associated satisfaction levels of their customers.At the Airline Mega Event this past October, a “Liability Forum” was presented with panelists describing breakage as “an asset to be used for program improvement” rather than just a kitty from which to bolster profits at quarter-end.

During the Mega Event, United Airlines presented a new communications campaign that highlighted this new view on breakage, saying that United Mileage Plus is “The program that wants you to use your miles”.

At the Cards and Payments Loyalty Conference a month later, panelists were asked “what is the ideal level of breakage” in a loyalty program. Fabio Garcia, head of cards at Banco Popular, got the audience to lift their eyes from their smartphones when he asserted that “zero” was the ideal figure. His logic? More redemptions equates to higher customer engagement, lower credit risk, and is a precursor to longer term program satisfaction.

Here are a few take-aways on Breakage & Liability Management:

1. Have a clear strategy for ownership of the points bank and how ensuing financial benefits will be allocated. Craft a position on acceptable levels of breakage, with customer engagement & satisfaction guiding the process.

2. Run from vendor relationships where points are sold on issuance and the spoils of breakage are held exclusively by the vendor.

3. Be prepared to defend your business case against financially driven colleagues who contend that higher breakage will add value to the program (hint: higher program value is offset by lower customer values over time).

I’ve given lots of thought to the convenience retail sector of late and have been haunted by Rick Barlow’s caution that “Even the best Loyalty program can’t overcome a core business problem”. There are a few core business problems that exist in convenience retailing, most of which seem to be accepted by ownership. If allowed to continue, they will squash the effectiveness of every dollar spent on promotional marketing. Here’s a short list of C-store ills:

1. The store is dirty, inside, outside, at the counter, in the restrooms.

2. The store does not provide a secure environment for your visit. We have all been in C-Stores where you feel like packing your “Nine” before entering.

3. The store managers allow a “black market” atmosphere to take hold, i.e. it’s the store where anyone underage can find their way to cigarettes, alcohol or anything else that has age restrictions for purchase.

I’ve attended a bunch of conferences this year, and the most interesting from a purely human standpoint was the NACS Show in Atlanta this past October. With over 25,000 in attendance, 3,000 attending the keynote speech, and about 1 Million square feet of exhibit space covering the Georgia World Congress Center, NACS was therapy for anyone suffering from sensory deprivation. If you ever had curiosity about where the tremendously broad mix of products on C-store shelves come from, it was all on display at NACS.

The timing of NACS and the mounting stream of news about Four Loko, Joose and similar alcohol, caffeine, and herbal concoctions aimed at the youth market made me think about how convenience brands may be unwittingly shooting themselves in the foot. Recent incidents on college campuses and the death of one student at Florida State are alleged to be tied to use of this category of products and the Four Loko drink has been banned in its previous form across the country.

There’s another product, categorized technically as incense, but commonly purchased and used by teens as a “fake marijuana”. It’s marketed under various brand names like K2 and Mr. Nice Guy. At the time of the NACS show, there was growing concern in the law enforcement community about this family of products and only 2 weeks ago, the DEA announced plans to ban “legal weed” nationwide.

How does the industry react? Suppliers urge to stock-up before the ban, and my local C-Store now carries something called “K3″. If I were the owner of a national convenience store brand like 7-Eleven, Wilson Farms, Sheetz, or Racetrack, I would seriously consider how my product mix serves my customer base and in turn impacts customer loyalty. For independent C-store owners, all one can do is plead for them to have a conscience. Do none of these people have children in their house?

I understand that we live in a capitalistic society and that we have a constitution granting personal rights and freedom of choice to each citizen, but “while all is possible, not all is beneficial”. You are free to call me naive, but I’ll bet that the bottom line dollar to the store owner would not change significantly if a select number of products potentially harmful to young people were eliminated from stock.

With a clean store, safe environment, and consciously crafted family product offering, any of the convenience brands I have mentioned could market an enhanced brand image that emphasized family, safety, convenience and even value. To continue to conduct business on a “wink-wink” basis may yield profits in the short term but will constitute the consummate anti-loyalty program for C-stores over the longer term.

Congress shocked the industry by taking action against the alcohol/caffeine/herbal cocktail market and C-stores could find more attention coming their way unless they take a leadership role and walk a higher road.

Hailing from Cleveland, Ohio, I have a tendency to root for the underdog.

In a fuel retailing business dominated by a select few brands, Noco boasts a 75 year history in Western New York , operating about 30 stores throughout the region.

A centerpiece of its on-site marketing is the Friends & Family Club, which offers “rewards” including free merchandise, surprise and delight specials, birthday and “members only” specials. Though the rewards carry minimal tangible value, they seem enough to draw consumer attention.

Behind the appearance of a typical rewards program is a clever construct of two distinct card products offering convenience to customers.

The Basic card allows customers to start the pump when paying cash without having to go inside the convenience store to pay first. Filling out a short application and supplying personal information is all that is required.

The second card, known as EZ Pay, is a payment device and links the customer’s checking account for payment, creating a low cost ACH transaction for payment at the pump.

On the surface, the program is innovative and I believe that consumers perceive good value and convenience from both cards. I’m a bit perplexed though as cash customers still have to make a trip inside the store with or without the Friends and Family Basic card. Walk in and pay first to start the pump, or swipe the Basic card and walk in after fueling to pay – your choice but the aerobic activity is the same either way.

If consumers fully understand the arrangement, they would probably be motivated to upgrade straight away to the EZ Pay card, however some people have fears about the data security and giving up linkage to their checking account. I also found it frustrating that only New York residents could enroll in the program, severely limiting interest in Noco from road warriors from neighboring states.

Tweaking aside, the program is well promoted in the forecourt as well as inside their smartly outfitted convenience stores. For Noco, Friends & Family offers convenience to the cash purchaser and encourages low cost transaction costs through use of ACH.

It’s almost enough to make me want to “turn left” to enter a Noco station!