The Global Loyalty Infusion: Best Practices and Innovations Around the World

The color green. In Europe and in North America, green marketing is red-hot—and that heat extends to the loyalty space, with green-themed programs and altruistic reward options proliferating. In the U.S., GE Money's Earth Rewards Platinum MasterCard contributes up to one percent of purchases to carbon offsets. In the U.K., Barclaycard's Breathe Card offers a similar value proposition. Since April 2007, when Wells Fargo made renewable energy certificates available for redemption in their Enhanced Rewards program, green rewards options have proliferated. No fewer than 20 loyalty programs have added environmental rewards and benefits to the mix in 2007.

Green, of course, isn't the only form of altruism; the rise of socially responsible value propositions has continued throughout this decade. Early versions, such as the college-savings themed coalition program Upromise in the U.S., paved the way for a new generation program offers that leverage their customers desire to do well by doing good—such as the American Express Members Project, which allowed Membership Rewards members to suggest and vote on charitable causes, one of which Amex promised to fund up to $5 million. Taking altruism a step farther, the uTango coalition in the U.S. allows young married couples to apply a percentage of their purchases to a savings fund that promises a payout of up to $1 million—if the couple can stay married for 30 years.

While altruistic and community-minded benefits certainly carry broad consumer appeal, their proliferation highlights a broader trend, and one more likely to transform the loyalty industry: the use of database segmentation to target green and altruistic rewards to those customers most likely to respond. Loyalty marketers include altruistic rewards not for their PR value, but for their bottom-line benefit.

The data difference. Loyalty marketers are blessed with access to an incredible amount of customer data—but have historically been cursed by their inability to leverage that data to benefit either their customers or their brands. Today, that curse has been lifted as the next generation of loyalty marketers perfects the art and science of building customer value. Facing a saturated market, these marketers understand that share-of-customer battles will now be won in the database.

In the retail sector, such U.K. companies as Tesco and Boots have led the effort to analyze the purchase patterns of loyalty program members, segment them by their shopping proclivities and deliver relevant offers that result in incremental lift and cross-sell revenues. North American companies, meanwhile, are also entering the data game more aggressively. The U.S. grocer Kroger Co. and health-and-beauty retailer CVS/pharmacy are attempting to replicate Tesco's success across the Atlantic. In Canada, two AIR MILES Reward Program sponsors, health-and-beauty retailer Rexall/Pharma Plus and DIY retailer RONA, are mining collector data across multiple dimensions to predict and respond to attrition, proactively influence segment migration and create relevant offers.

Relationship banking. In 2003, Puerto Rico-based financial services company Banco Popular pioneered the concept recognizing and rewarding their customers across their entire relationship with the retail bank. Designed to build loyalty to the banking brand rather than to individual card products, Banco Popular's Premia program has allowed the bank to gather actionable customer data and that delivers bottom-line benefit.

This concept was quickly replicated in the U.S. with such launches as Citi's ThankYou Network and National City's Points program. In Canada, Bank of Montreal likewise rewards AIR MILES reward miles across banking lines. Look for this relationship banking model to spread beyond North America as financial services companies around the globe seek to capture customer loyalty by leveraging their loyalty programs to cross-sell them into multiple product relationships. The future of financial services loyalty lies not solely in the credit card, but more broadly in the entire banking relationship as customer look for financial partners rather than mere credit providers.

Moving beyond plastic. Loyalty marketers are continually looking for ways to differentiate the ubiquitous plastic payment or membership card. In the U.S., electronics retailer Circuit City issued a "Pirates of the Caribbean"-themed gift card that doubles as a DVD embedded with the film's trailer. In Dubai, Dubai Bank's Royale MasterCard, targeted at the ultra-affluent, is a caviar-colored black reward credit card encrusted with real diamonds.

If there is a hint of desperation in these offerings, it's because the days of having customers carry a plastic slice of your brand in their wallets may be numbered. Cardless payment technology continues to make inroads; contactless payment systems such as MasterCard's Paypass, Visa's Wave and ExxonMobil's Speedpass continue to proliferate—and you don't necessarily need a plastic card to use these systems. Garanti Bank issues a contactless radio-frequency identification (RFID) patch that customers can use to turn their cell phones or watches into payment devices. Biometric identification and payment systems continue to proliferate in the grocery and high-volume retail sectors.

But the true card-killer might be mobile payment systems that turn cell phones into credit or debit payment systems through RFID or SMS messaging. Such systems are already entrenched in Japan, and will soon proliferate in emerging markets where lack of widespread broadband access has made cell phones the loyalty platform of choice—in South Africa, more than half a million people use their cell phones to conduct their banking transactions. Loyalty marketers will soon live in a world with Visa-branded cell phones and text messages that indicate how many loyalty points a customer has earned sent with each purchase. This new generation of tools will require marketers to create value propositions rich enough to create a desire to opt in—because without explicit customer opt-in, you're only creating more spam.

Of course, loyalty marketers can ill-afford to throw these ingredients together at random. There's a culinary term for such ill-considered conglomeration: confusion cuisine. But by paying attention to global practitioners honing the art and science of loyalty and relationship marketing, by networking with them and learning what their programs bring to the table innovation, you can help move the art and science of loyalty marketing forward. Listen to your customers, analyze their behavior through effective segmentation, choose strategically-aligned partners and leverage the latest in payment and communications technology—but do these things strategically, with your business objectives and brand strategy guiding your choices.

So, to you loyalty innovators, a tip of my wine glass. I can't wait to sample the latest loyalty cuisine.

Bryan Pearson is president of Alliance Data Loyalty Services, operators of AIR MILES, COLLOQUY, ICOM, Precima and Direct Antidote. He can be reached at bpearson@loyalty.com

Related Articles:
Loyalty Library: The Seven Key Elements of Best Customer Management, Part One
Review and Renew