“Hard work is the price we pay for success.” – Vince Lombardi

Considering that the NHL just dropped the first puck of the new season, I found Lombardi’s words very appropriate: they are as true when building and launching loyalty programs as they are when scoring a breakaway goal.

Running an effective loyalty program takes an enormous effort: training IT staff, designing creative customer outreach, analyzing data to make rewards relevant and much more. That’s why many merchant-run programs struggle for success or fail completely. They lack the infrastructure to offer true value and don’t have the capabilities to manage stellar programs.

This realization is central to Points’ existence and the development of our merchant-focused product. Points Business Solutions is designed for merchants and businesses looking to benefit from everything loyalty programs offer – without the operational headaches.

Recently, we sat down with Kelly McLean, Product Marketing Manager at Points, to discuss the nature of today’s loyalty landscape and how merchant-facing loyalty products like Points Business Solutions are helping businesses work better and be successful.

The Current Loyalty Landscape: how does it look and what has impacted loyalty programs the most in recent years?

The current loyalty landscape is exciting and filled with potential. Partly due to the still-sluggish economy, people want more opportunities to earn rewards throughout their everyday lives. Points have become an alternate form of currency which consumers appreciate as an added value. Brands know this and are keen to use loyalty programs for incentivizing longer-term and more profitable customer relationships.

Airline mergers and frequent-flyer program growth have also had an impact. These developments initially generate member confusion and concern that end up being beneficial. Uncertain of how mergers will affect their miles and status, many members brush up on the details of their current program benefits. By educating themselves to make sure they’re still getting a good deal and their rewards are safe, members become more engaged. They may not like what they find out, but at least they’re doing their research. Smarter, more loyalty-savvy program members have spread into other industries as well.

Why have merchants been inspired to integrate new loyalty program offerings versus building their own programs?

To some degree, this is a reaction to the above, with airline and coalition loyalty programs leading the way. There’s a strong “keeping up with the Joneses mentality” at work. With airlines merging loyalty programs or cross-honoring incentives with hotels, other merchants are saying “me too,” creating their own loyalty programs.

Companies are finding, though, that creating a loyalty program is like building a whole new company. Two things typically happen after a program launch:

  1. The company sees great results for a little while.
  2. Eventually the program gets more complicated – e.g., through rule changes and new tiers – as the company tries to keep people engaged and earning rewards through purchases and other desired interactions.

The result: a program that becomes cumbersome, burdened by its own early success. Integration with existing loyalty programs can help resolve this paradox – it’s an easier way to manage demand from the customer base they’ve already created without being overwhelmed by having to manage the program in-house.

The type of loyalty program integration that we provide gives merchants an “easy out.” They can add it as a redemption offer to their existing program, earning XYZ points redeemable for Advantage Miles, US Airways miles or Alaska miles, etc or merchants can completely shut down their existing programs and just add this incentive.

What are the top strategies merchants are using to engage customers to buy, spend, or acquire rewards?

You often see what I call the “insurance or cell phone model plan.” That’s when brands use very large incentives to get customers in the door and then use smaller incentives to keep those customers engaged. Telecoms and cable companies are a good example. While this strategy may be working now, however, I don’t see it as sustainable. Long-term customers will want their loyalty rewarded with the same caliber of incentives that new members receive. Otherwise, they could take their business elsewhere.

There also seems to be a trend back towards coupon clipping. People are printing a lot of coupons, so merchants can add a Points incentive to an existing coupon offer. We’re also seeing the importance of non-purchase activity. Customers are being incentivized to perform behaviors such as offering an email address or telling a brand their opinion regarding an experience or product in exchange for the chance to win large amounts of points.

Half Time Break…

Loyalty programs show much potential but merchant-created programs are proving too difficult to maintain. That’s why so many brands are giving up the go-it-alone approach, choosing instead to join coalition loyalty programs.

The second part of the Q&A with Kelly, Marketing Incentive Programs, Tips and Trends Part 2, will look at the benefits of merchant-focused loyalty products and why this trend is only beginning to gain traction.