The Backward World Of Loyalty: “I’d Like A VCR, A Wired Phone and a Plastic Loyalty Card, Please”
Written by Todd L. MichaudTodd Michaud spent years leading retail technology teams for Dunkin’ Donuts and Baskin-Robbins and today serves as the VP of IT for a billion-dollar franchise restaurant company. He also runs Power Thinking Media, which helps restaurants and retailers with social and mobile challenges.
When it comes to loyalty, many retailers are stuck in the 1990s. Does anyone else find it funny that in a world where you can very easily have a video conference with your kids from a $500 tablet over free Wi-Fi from a random hotel, we’re expected to keep a 3.3- x 2.2-inch piece of plastic in our wallets to get benefits from some of our favorite retailers? It’s funny how technology can drive a blistering pace in some areas, but slow down to a crawl in others. Especially in an area—such as CRM—where the application of technology could directly impact a retailer’s top and bottom lines.
The problem is that many of these retailers are still considering launching a card-based program. After all, in their mind it’s, better than a Flock Of Seagulls-style haircut—I mean, punch card-based system. But if you asked these same marketers who are looking at these packages if they are carrying more than one of another retailer’s loyalty card in their own wallet, they would say “no.”
I believe the reason most retailers are stuck in a card-based approach is because there is no existing vendor in the stable that offers a comprehensive, technology-based up-to-date approach. Loyalty is not an extension of POS, nor is it an extension of your Web site development. And it is certainly not an extension of giftcard processing. Loyalty is a data-intense program that is as important as merchandising and should be treated in the same way. It is about mobile and geo-location, along with data-driven marketing and real-time offers at the POS. Loyalty is about leveraging technology to maximize your relationship with each customer.
Most retailers I speak with are looking to either launch a loyalty platform or completely rebuild their existing program. Because of the fragmented nature of the technology approaches currently in the value chain, these retailers look to reduce their complexity by leveraging a vendor they are already doing business with. After all, the last thing the CIO wants is to manage yet another vendor. So they reach out to their POS vendors, their digital agencies, their E-mail marketing vendors and their giftcard processors. Most of these companies have some form of a loyalty package available today.
But almost each one has a massive drawback. If you use your POS provider, that approach requires a ubiquitous platform throughout the chain—something that it is extremely rare. If you partner with your giftcard processor, you are going to find challenges when leveraging other data sets from inside (and outside) of your organizations to enrich your loyalty campaigns. It’s much worse when retailers try to leverage their existing giftcards for loyalty. With this approach, retailers further burden their customers by forcing them to loan the retailer money (loading the card) to receive benefit. Talk about a barrier to entry!
Go with a digital agency, and you will quickly find that choosing a company largely focused on marketing and then asking that firm to take on an operational role (and manage systems that become mission critical) will mean asking the company to deliver services it is not designed to support. For those of you who have purchased a monthly a service from a professional services firm, you will know what I mean.
That is not to say that each of these vendors will not have an important role to play in the overall loyalty approach.
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February 7th, 2012 at 11:42 pm
Todd,
This reminds me of the few loyalty programs I actually use. Two use a phone number the clerk enters at checkout. I see the discounts immediately at the POS (Safeway), or I get a discount coupon in the mail (BevMo). The airlines I am unfortunate enough to live on recognize me immediately online and at check-in, so I’ve never seen the point in the cards they send.
The common thread in each case is immediacy. I carry no additional plastic in my wallet I can avoid. Then again, I’m not a typical consumer so maybe others have different experiences as retailers or consumers.
February 8th, 2012 at 12:02 pm
Loyalty should be the main driver for all your targeted services and promotions. Not a lot of retailers do that very well. The best at it in my experience is Best Buy. Being part of their Rewards Zone not only automatically assigns the points to your purchase, but also sends you an electronic copy of your receipt, and any follow up coupons and specials. They are not perfect since you still have to manually link your loyalty acct with your on-line and credit card account but they are going in the right direction.
February 9th, 2012 at 10:20 am
Great piece! And too true, unfortunately.
We’re at a nexus in the evolution of customer reward and incentives and the tools that are being used are based on 1980’s batch processing technology. The keys to developing programs that actually drive business are as you state:
1) Build it off customer behavior, tracked in the CRM
2) Make it form factor agnostic
3) Integrate customer communications, promotion and rewards so that relevant and actionable opportunities are being delivered to the customer.
We all need to remember that we NEVER own the customer. If we’re lucky, the customer owns us.
February 9th, 2012 at 11:41 am
Agreed with eliminating the physical coupon. Staples rewards me with rebates that I need to log on to the website to print and bring to the store. I should be able to state at the register I want to redeem the rebate on my profile. The same when they give me a Staples card for rebates. Why bother sending me plastic when I should be able to use it virtually thru access to my profile.