Breaking down the walls: Loyalty Magazine Awards 2019

This was my second year on the judging panel at the Loyalty Magazine Awards. Really, for those relatively few brands achieving impressive levels of customer engagement, it’s breath-taking how fast the industry has progressed in such a short time.

The casual observer at last night’s ceremony (and the professional one alike) would have been struck by the many extraordinary, showpiece technological achievements which were made in the past year. Gamification and personalization have come on leaps and bounds in loyalty to supplement points and rewards. One brand even overcame the persistent limitations of blockchain to run a successful trial.

Independent of individual program achievements, the most important development across the industry has not been in individual technological triumphs, but a hastening structural shift in how brands understand and approach the purpose of their loyalty programs.

Over the past decade, legacy loyalty landscape were mostly a tangle of walled gardens: that heavily restricted customer data sharing, recognized only the most frequent customers, and limited opportunities for mid-tail and longer-tail customers to earn and burn.

Such limitations left enormous sums of money on the table and restricted brands from figuring out who, among their less frequent customers, could be persuaded to allocate more share of wallet - if given the right incentives.

On evidence at last night’s awards, these walls are crumbling.

Fears and misunderstandings (as well as some very real obstacles), which used to pervade the whole loyalty industry, are now being picked off by one pioneering brand after another, as the untapped potential of a more open, collaborative future for loyalty marketing becomes ever more clear.

What is great about The Loyalty Magazine Awards is the willingness to share why each brand won their award or received special recognition – which allows us, as practitioners, to learn, and not just enjoy the gin fizz.

This is a very rigorous and professionally-run competition where the judges dedicate 30-50 hours each to find the best of the best. Looked at in a different way, each application receives 6-10 hours of consideration on the objective merits of design, execution, and results as it is judged.

You can see the full list of winners in this month’s Loyalty Magazine, but here is a selection of the winners which I feel best illustrate where the industry is heading.

1.      Looking beyond transactional rewards

Points are perceived by customers as a kind of currency; underperforming loyalty brands, equally, prioritize this purely transactional insight.

More enlightened marketers, on the other hand, see points as a way to keep score of customer actions at many different touchpoints along complex customer journeys. A few – such as Tarte, a US cosmetics brand – are way ahead of the game.

To see why, visit their website, where you encounter various opportunities to earn points for many forms of non-transactional engagement.

The program won Tarte the "Best Loyalty Programme of the Year – Non-Food Retail" award. By the end of its first year, loyalty members made up 44% of Tarte.com revenue, despite only making up 21% of the total customer base.

Customer journeys to the moment of purchase are highly complex and too few brands are engaging with key steps along the way, to understand why customers buy, or fall out of the funnel.

Pre- and post-purchase insight, combined with insights from complementary partners, tells the richer story of what drives individuals and can unveil how to influence those decisions. Loyalty points make this possible.

For the next evolution of this trend, consider the success of Italian soccer team AS Roma – who didn’t issue points at all, and won ‘Best Loyalty Without a Name’.

Instead of using points as incentives, AS Roma built ′love′ and engagement around an information and gamification portal, to stimulate interaction between the brand and all stakeholders, and reveal valuable insight to drive even higher levels of enthusiasm for the team.

During last year’s Loyalty Debate, convened by Loyalty Magazine, Loyalty consultant Iain Pringle condemned an excessive “obsession with only transactional data”.

You can watch the Loyalty Debate in full here.

2. Mastering customer data (finally)

Collecting data at more touchpoints is very useful. But you must make that data actionable to realize any actual benefit.

More than one brand at this year’s awards demonstrated just why this is so important, including Parfumerie Douglas, a German retailer and winner of ‘Best Customer Experience’.

Much like Tarte, they measure customer activity at every touchpoint, store all the data in a single database, and leverage the insight across every channel – right down to the cashier-receipt – to “provide individualised and holistic experiences based on customer profiles.”

Accolades aside, the brand also won 160% database growth over the past 24 months.

The work needed to pull this off must not be underestimated; judges praised the brand’s “impressive integration of online and app experience at the POS which is a massive IT challenge.”[1]

To avail additional insights, brands are collaborating and beginning to share data to really understand a customer′s passions, so that engagement mechanics can be personalized to stand out from most marketing noise.

At the same time, loyalty technology microservices are now emerging which can operate in front of your existing loyalty stack – making it easier to adapt to new opportunities and manage your customer data without upending your entire infrastructure.

You can read our article on loyalty technology microservices to find out how they greatly reduce costs and enable more agility.

3. Practical applications for “future” tech

Loyalty bells and whistles have been capturing stakeholder attention for a long time. With more agile approaches to data and technology, some brands this year translated them into meaningful business outcomes.

TravelCo Nordic, a group of seven tour operators, put forward one of several award-winning gamified propositions and won ‘Best Short-Term Loyalty Initiative.’ Because their ‘Picture your next destination’ gamified experience was integrated with their CRM, they successfully attracted over 130,000 new users in only 6 weeks.

Similarly, we’ve previously argued that brands ought not to waste resources trying to ‘do something with blockchain’, but be prepared to capitalize on genuine opportunities as the tech and network of connected partners evolve.

Blockchain holds a lot of potential, so it’s great to see that one brand has carved out an early success.

Asia Miles, the loyalty program of Cathay Pacific airline group, teamed up with Accenture to do just this. The technology was deployed as part of an ‘Unlock More Miles’ campaign with the airline’s dining partners in Hong Kong.

Diners used to have to wait 6-8 weeks for their points to materialize; the blockchain solution brought this down to a day.

In a climate where customers expect everything more or less instantly, even that one day seems like an eternity, but it’s important to remember that many very large loyalty brands are still sending flat files between partners that get processed in batch. When I last converted a hotel currency into United Airlines MileagePlus, it took three or four business days.

This effort is a marked improvement.

4. Brands leaning on partners to create more value for customers, and for themselves

While martech will continue to evolve rapidly, the low-hanging fruit is in using technology between partners to create more opportunities for customers to earn and burn, and capture a better perspective of what the customer cares about.

GEMS won ‘Best Regional Loyalty Program in the Middle East and Africa’, because the mix of partners allows families to earn loyalty currency across many categories of spend. That loyalty value can then be applied to reduce educational costs for children – creating a holistic ecosystem with material economic benefit to everyone.

Knowing that a Hertz customer rented a car in Athens is not nearly as useful as knowing a customer bought premium gas twice in the past month, or that your customer earned points at Costa Coffee in Paris (1,000 kilometres from home) three times in the past year. Such data points imply who is traveling frequently, who is susceptible to an upgrade offer, and the extent of their personal or business excursions.

As our 2019 Loyalty Strategy Guide explains, the most profitable take on this model is to partner with brands who can offer rewards with a high perceived value, but a low operational cost.

BrandLoyalty, a technology supplier, has forged an inspired alliance with Disney in order to bring this boon to their clients. One of these is ′Plus′, a Dutch retailer and winner of the ‘Best Use of Communications’ award.

The operational cost of many of Disney’s assets – practically speaking, digital files - is effectively zero, but they carry very high emotional appeal. Used as rewards in the Plus loyalty ecosystem, they drove 108,000 app downloads, with each user averaging 10 minutes’ activity a day in the platform.

Exposing a B2C customer to 10 minutes’ advertising a day would be a dream for most marketing executives; conventional media impressions are expensive and they rarely last more than a few seconds.

The idea of doing this practically for free (less the cost of integrations and partnership agreements) demonstrates just how profitable loyalty can be – if you have the right coalition partners on board.

5. Harnessing the power of marketplaces

A well-managed loyalty coalition becomes a single program in which a customer can shop multiple brands – in other words, creating a type of marketplace, with unique value that no brand could provide on its own.

A number of brands who featured in the awards have successfully harnessed market forces for themselves.

ING Direct is one of those brands. The Dutch bank is one of the few remaining banks in the European Union that has held on to a loyalty program after interchange fees were slashed in 2017. Kudos to them. In Poland, ING has partnered with complementary brands to offer customers the opportunity to earn meaningful value from many more places they shop.

This sounds obvious, but most banks are not leveraging their merchant network to deliver value to their current account holders, as we described in a recent blog on loyalty opportunities for financial institutions.

ING’s efforts won them the “Best Loyalty Programme of the Year – Financial Services” prize.

One of the boldest moves, though, was by Turkcell, a Turkish mobile operator which also owns BiP, a messaging platform that pushes relevant content in real time.

The prize Turkcell won was for “Best Use of Gamification in Loyalty” – and it was certainly fun; customers could unlock surprises such as free data and minutes by visiting spots on a map.

The real magic of this effort, in my view, wasn’t the game element, but the fact that Turkcell allowed any BiP user to redeem the rewards - even customers who were on competitors’ networks.

The campaign reached no fewer than seven million people, an impressive feat.

Or, perhaps the move wasn’t so bold?

The theory of marketplaces is well established. Brands such as South Africa′s Pick ′n Pay have proven that ′opening up′ loyalty programs to give customers more freedom unlocks not only higher engagement, but the elusive trust that walled-garden programs have suffered from since the modern loyalty sectors was invented about 35 years ago.

And indeed, as we explained in our blog on loyalty marketplaces, access to competitors is part of the freedom that customers desire.

By enabling this freedom, Turkcell managed to make its own brand the most valuable of all.

6. Improved financial control of loyalty marketing

Legacy loyalty marketing was, frankly, financially profligate. Vast sums of reward value were issued at a blanket rate of 1-3% – but because many of the points would never be redeemed, the projected cost was considered minimal.

Of course, the true cost was far higher, because it led to damaging customer experiences. Customers who do not benefit from the rewards programs ultimately become skeptical of the brand and perceive zero utility from the points. Even CFOs are now waking up to the problem and trying to drive breakage down below 10%.

Effective personalization and flexible redemption alternatives help to solve this problem.

The Times and The Sunday Times in the United Kingdom have been building a loyalty program for several years that, in 2018, really started to drive material results for the company and for their members. The program, built on rich insights and a sophisticated CRM solution, was able to reduce churn based on algorithms and increase daily engagement with personalized content.

The newspaper won ‘Best Use of CRM’. Estimated economic benefit is claimed to be over ￡15m in retained subscriptions, but this tells only part of the story. Without this program, hundreds of people would be out of a job and daily news readers would have one fewer objective source for global news.

The Gartner CMO Survey in 2018 showed loyalty marketing receiving the lowest investment of any marketing discipline, while spending rose on marketing technology overall.

In our loyalty trend forecasts article published shortly after, we interpreted this to mean not that loyalty had stopped mattering; simply that it had become less expensive, as brands harnessed more effectively tools and technologies to put the right points in the right place.

PAYBACK, a German third-party loyalty supplier, and A.T.U., an auto parts and servicing retailer, demonstrated this perfectly.

They won the prize for “Best Voucher-Based Loyalty Program”. During a two-week spell in summer 2018, customers were tracked visiting A.T.U., and data from a range of sources was collated to identify if the customer would be returning to a hot car.

Those who were, received an offer of 1,500 points for air conditioner maintenance. Such relevant, contextual offers were appreciated and A.T.U. enjoyed a 20% sales uplift.

PAYBACK is unusual, as a third-party loyalty supplier, in that it leaves a much higher portion of the value in the ecosystem to more-rapidly enable interesting rewards for its clients’ members.

With intelligent strategies such as this in its arsenal, it’s easy to see how meaningful results can be achieved.

Size matters… but not as you’d think

As is often the case with business innovation, the most exciting work featured in last night’s awards was done by agile, ambitious, ‘smaller’ loyalty brands – national or regional businesses, as opposed to global ones.

Granted, a number of traditional big players did scoop accolades. Le Club AccorHotels won “Best Loyalty Marketing Campaign of the Year” for an above-the-line exercise which was part installation art, and part biometric data capture system. I’d recommend reading Loyalty Magazine to get the details, it was a truly award-worthy campaign.

But for all their merit, big-money marketing approaches such as these are not what makes an effective loyalty strategy.

For the majority of smaller winners of this year’s Loyalty Magazine Awards, accolades were won, I would argue, by exceeding customer expectations by observing the fundamentals of loyalty:

1. create unique customer value for the most controlled level of investment
2. measure through program execution
3. learn quickly and adapt
4. refine, repeat, and constantly improve.

For smaller businesses, budgets may be lower, but they may only need weeks, rather than months, make decisions – so innovation actually makes it to market at a more rapid pace.

Indeed, lower budgets may actually be blessing.

Loyalty marketing has had big and expensive options since it began with airlines in the 1980s (early V1.0 loyalty coalitions were cripplingly expensive) and the brands who could afford them arguably had less to fear – especially when they competed with only 3-5 peers in their space.

Today, there are hundreds of thousands of loyalty programs (and in most cases with incompatible loyalty currencies). This is a huge problem for the consumer. They might have $2000 per month in disposable income and spend on average 5% for travel, 10% on food and entertainment, and 3-5% in various other categories.

This means that making your program the one that gives consumers access to the greatest value, across all their spending categories, is a mission-critical objective for a modern loyalty brand.

Most programs lack the partners needed to unlock insight into lifestyle preferences across all these spending categories – but on evidence of this year’s Loyalty Magazine Awards, increasingly numbers now have the theoretical know-how, and technological capability needed to achieve that goal.

Doubtless, you can catalyze the process of getting customers to spend more with you using flashy technology and attention–grabbing campaigns – but they alone will not keep customers engaged.

You could easily invest heavily in such things, and customers still find they simply cannot allocate enough spending to your brand to justify actively participating in the loyalty program. This is the principle cause for the majority of customers to not join the loyalty program in the first place

For me, the greatest satisfaction this year was to see Kellogg′s win the award for ‘Best Long Term Loyalty Program’. Kellogg′s really nailed a long-term strategy that makes their customers engage, and perhaps more importantly, Kellogg′s has created an asset that helps grow the business while unlocking vast consumer insights about trends and preferences.

With this understanding, you can become highly relevant to most customers: perceived as trustworthy, offering good value, and delivering a desirable customer experience across all touchpoints.

On evidence of this year’s awards, the easiest way to do this is to embrace collaboration with complementary brands and gives the customer more choice.

This is the key to survival and growth.

Ramp up your loyalty strategy

Would you like your loyalty program to become more valuable to customers?

Currency Alliance can help.

Our free, simple, cost-cutting SaaS tech platform can be used to issue, buy, sell or exchange loyalty currencies with other brands – and you can be up and running in a matter of days.

This gives your customer the freedom to earn and spend their points as they wish – while you gain access to valuable new data, turn dormant points into profit, and maximise engagement with your loyalty program.

Read our Loyalty Strategy Guide to learn more, or get in touch at CurrencyAlliance.com.

[1] Loyalty Magazine, June 2019, p17

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