ipromote: Two Places at Once

Beenz sold to Carlson Marketing Group. My-Points sold to United Airlines’ sister company, United Net Ventures. Netcentives and Flooz are bankrupt, with Flooz shut down completely.

As archaeologists of defunct Internet-only loyalty programs, we can surmise about the reasons they failed and establish stronger footing on paths to success.

The decline and fall of online loyalty plays have underscored the need for retailers to build loyalty marketing strategies that integrate offline and online worlds.

Why the trash heap?

To begin with, there was never a significant market for pure online loyalty programs. Most were spawned by loyalty ignoramuses in the heat of dot-com mania, propelled by venture capital and drunk on the notion that online shopping would displace traditional shopping almost overnight. That distortion of reality cost investors billions of dollars.

Dot-com insanity aside, branded online programs had serious flaws. They ignored every loyalty marketing best practice. Deployed as coalition programs, or “networked currencies,” they provided little or no strategic advice to their clients, relying instead on the presumed power of their reward offering — primarily frequent-flier miles and gift certificates. With hard benefits as their only substance, they functioned essentially as digital trading stamps, limited even further by their eagerness to de-leverage their promotional value proposition by monetizing their currency through its conversion to dollar-denominated gift certificates.

The failings are too numerous to list. What’s more important are the lessons we can glean from the mistakes. There’s no doubt the Internet has changed loyalty marketing. Here are some ways to apply Internet thinking and skills to integrated — and more viable — offline and online loyalty programs.

Customer “self-service” is enabled. That liberates consumer members from the time and trouble of live-operator calls or complex interactive voice-recognition mazes.

A digital dialogue can remedy member problems and answer questions faster than a phone conversation. Rules engine technology can invisibly route member communications to the appropriate information resources, and members don’t have to sit on hold. More than half of the typical member-service inquiries can be handled quickly and simply by member-initiated actions on a program’s Web site. That means a lot more customer dialogue at a much lower cost.

Dialogue is enhanced, allowing enriched relationships with customers and improved marketing efficiency. Personalized online surveys, designed to fill in the missing lifestage/lifestyle details of member profiles, can become part of every member’s Web site activity, continuously enhancing the sense of relationship. Listening, after all, demonstrates interest. And acting on what is learned builds credibility.

For example, new members might receive bonus points to fill out a survey. That data, processed in real time, can yield an immediate special offer that sparks account activation.

Or when a top member visits the sponsor’s Web site, the sponsor can push relevant information to the fore. A hotel, for instance, can look at data offline to determine which frequent business travelers have also stayed at its properties for pleasure trips. When those members pop onto the Web site, rules engine technology can be programmed to offer them special deals that achieve incremental bookings for the hotel and accelerate frequent-guest point earnings for the member.

Research and targeted sales promotion run on a compressed cycle when they run online. In less than a minute, an offer can be created and launched without personnel or hardware expenses. The Internet is an accelerator to campaign development and success. Program managers can learn more at lower costs and use information quickly to add more value to customers’ perception of their relationship with the program sponsor.

Personalized benefits (special deals and bonus point offers) communicated quickly via e-mail provide unquestionable added value and can stimulate purchase activity. With radically lower production and delivery costs, this, too, is a win-win proposition.

Online purchase activity is a given. The Internet is a valuable additional sales channel. While it is unlikely to ever be the dominant sales channel for most retailers, it’s now a mandatory option. Sales transactions on the Web take place in a highly efficient, cost-effective, and self-service environment in which software-driven suggestive selling can grow transaction size with increasing precision, driven by ever-richer member profiles.

Any loyalty strategy must address offline and online marketing. Building on that fundamental rule, marketers will succeed by exploiting all of the new leverage the Internet allows while adhering to the tried-and-true principles that have emerged offline over the past two decades.

Richard Barlow is ceo of loyalty marketing company Frequency Marketing, Inc., Cincinnati, and publisher of the Colloquy newsletter. He can be reached at [email protected].