Introduction
Hinda, a leader in incentive, recognition, and loyalty programs, recently gathered together some of its most experienced rewards specialists to talk with Loyalty 360 about the ever-evolving loyalty marketing world. Specifically, we asked them about the changing landscape and what trends might signal the future for reward portfolios. In this, the first of our three-part series, we discuss the escalating arms race in rewards to stand out in the competitive loyalty marketing arena.
We were fortunate to have over 125 years of awards merchandising experience in the room, including: Jim Valenti, Director Merchandising; Ana Tovar, Associate Buyer; Chelsea Piereth, Buyer; Michelle Flores, Senior Buyer; Sharon Authier, International Buyer; Tocanda Neeley, Associate Buyer; and Wendy Reed, Senior Buyer.
Let’s begin with a little background into the progression of awards in loyalty programs. What have you seen over the years?
Wendy Reed: When I first began working with loyalty programs, they had relatively few award options. Almost all of the awards were merchandise and the assortment in most programs was pretty small compared to today’s standards. As the field became more competitive, loyalty marketers began adding options. Some credit card programs launched cash back offers. More established programs combated this by adding gift cards and a wider merchandise selection.
Jim Valenti: Today, programs are moving beyond points. Their customers’ expectations have changed. Consumers are more engaged and generating a higher customer lifetime value. That means loyalty marketers need to align experiences, value, and opportunities beyond transactions. That’s why programs have broadened their categories to appeal to a wide range of people. Their offerings might include a robust merchandise selection and even luxury awards for their top earners. But they have also moved into experiential awards to capture the imagination. Points-to-cash tries to compete with cash-back offers, while points-at-retail or gasoline discount options can help credit card program sponsors encourage continued use of their cards for items purchased weekly. The overall mix is changing to try to reflect as many of the personal preferences of consumers as possible.
Wendy Reed: The trend has been to add the hottest, newest items but sometimes focusing on that doesn’t work out as well loyalty markets hope. We’ve seen programs add new subscription meal services like Blue Apron or Home Chef. We’re even seeing things like makeup sample services being added to programs. Some work well with loyalty programs, but many of these specialty offerings might heat up and cool down very, very rapidly. The real challenge today is keeping up with the latest trends while also predicting which trends working in retail may work well in the loyalty space. Retail is different from loyalty. Some things that may be flying off retail shelves may not translate to a loyalty program catalog well.
Is this “evolving rewards” mix an effort to reach different audience segments, different generations? Or are there other goals?
Ana Tovar: It’s a little of both, targeting different audience segments and different generations. You really need to create a reward offering that covers as many categories as possible with a healthy selection in each category to attract a wide range of participants.
Sharon Authier: But loyalty marketers are really trying to stand out from the competition. Many programs are now using exclusives. American Express, for example, has exclusives for certain concerts and events to show rewards no one else can match.
Jim Valenti: To Sharon’s point, the loyalty space has become an incredibly competitive environment, making it very important to define what loyalty means for your brand. Some of the shift in rewards we’re seeing are because marketers have learned just how critical is it to include the voice of the customer in every brand conversation. As these programs have captured more data over the years, they’ve been able to make their award selection and the experience much more personal. But that comes with a responsibility to become good stewards of data.
Does an expanding reward portfolio get participant attention and, perhaps more importantly, does it actually improve engagement?
Sharon Authier: In the case of American Express, some people carry the card specifically for those exclusives and the benefits they get at those events through their program.
Michelle Flores: True, but you need to remember exclusive venues or pre-sale events won’t appeal to everyone. But unique offerings can create that wow factor and help loyalty marketers drive people into their programs. So, they can get attention and even increase engagement, but don’t expect most people to redeem for what I’d call those “elite awards.” Many will just go back to the catalog and redeem for what we would consider “standard offerings.”
Promoting special experiences and offers always gets attention. But, at its core, we’re really talking about personalizing a loyalty experience for each individual consumer. Over 80 percent of marketers say customers are demanding personalization. And most marketers are using experiences and offers to appeal to segments of their audience in a kind of mass personalization. The real challenge though is making each member feel the program is treating them as an individual and making them feel special. Doing this at scale across an entire membership is the biggest gap today between tech and rewards.
Wendy Reed: But loyalty marketers tend to look at continually expanding rewards to appeal to a broader base and make their program feel more personal to members. They also see it as a way to stay on par with a competitor’s newest offerings. However, we don’t really see much evidence that participants are demanding more and more items. Expansion is more often driven by loyalty marketers, but making your award selection overwhelming can be as big a problem as having too few options for a participant who is trying to shop the awards website. So, just continuing to add more and more new items trying to get to “mass personalization” may not be the right answer. What may be more valuable to both program sponsors and members is identifying who deserves a personalized program and stepping back to look at what’s important to those members and which moments matter most in that customer’s journey.
Jim Valenti: There’s also other factors to consider though. Financial service providers might be operating credit card loyalty programs for many credit unions and banks. These providers need those organizations to come on board with their programs. To differentiate themselves, they want the latest and greatest offerings to get the credit unions and other potential customers buying into their program. So, while engaging card holders is important, they first must impress the credit union management to even get the program.
So, it’s like channel marketing. Not only do you have to get the attention of the end-user or cardholder in this case, but also influence the brand or channel to use your tools in the first place.
Jim Valenti: And sometimes that brand or channel is guarding against their competitors by offering a selection of awards, a kind of “blocking strategy” to keep their credit. But you need to think about the member side as well, you can’t assume you know what people want. You really do have to slice-and-dice the data to understand the consumers and then use your analysis to infer what they want. From there, you build out test groups and test new experiences.
All this tech and data open new worlds of personalization to us. But committing to creating personalized member experiences will take real investments in order to deliver. We’re talking about investments in predictive algorithms, machine learning, and artificial intelligence. That’s what makes it so hard to scale a personalized approach across your entire membership.