The webinar, “What do Affluent Consumers Want From Their Loyalty Programs” presented by VIPdesk and Affinion Loyalty Group, generated great interest, and an engaged audience had extensive questions for the presenters post event. Loyalty 360 is privileged to share insights gleaned from the post webinar Q&A. Questions posed below, come directly from you, our audience and webinar attendees.
Responses below are courtesy of:
- Charles Christianson, Group VP of Sales and Marketing with Affinion Loyalty Group
- Mark Robeson, VP of Marketing and Strategic Accounts with VIPdesk
Q1: Are there different expectations / changes in behaviors you see in the affluent as their income level rises?
Christianson: We do see different expectations. Specifically, as income and spending levels rise, expectations related to service tend to increase. For affluent consumers, these high expectations are created earlier in the overall customer lifecycle. For example, at the initial interaction point when they are adopting a new product, affluent consumers have high expectations related to trust. We think trust, especially related to the service that you provide, is the most important component of your interaction. The way that you deliver trust is really up to you, your brand, and your brand promise.
Additionally, providing tiered status levels within your loyalty program provides affluent consumers with aspirational yet attainable goals. Perhaps given that 18-34 year old Millennials are beginning to play a role in the affluent demographic, we find that customers are reaching high status levels earlier in their overall lifecycle.
Robeson: To dovetail on that we see increased expectations and changes in behaviors as the affluent—especially those with new wealth—become educated as to experiences available to them. As they become educated regarding new experiences available to them, we as a concierge service field questions about experiences, such as a chefs table in a restaurant, that are available. Then, service expectations rise as the affluent become accustomed to their lifestyle. Globally, this is a trend in some of the big developing markets like Brazil, India, and China where there is a high concentration of new wealth.
Q2. You mentioned that the affluent are spending less. Are they spending less in total or are they spending less on different brands and focusing on a core set of brands that they have that high level of engagement with?
Christianson: I think it’s the latter. The affluent are being more selective in their overall spending. They are embracing a core set of brands and becoming very loyal to the brands that deliver upon their overall brand promises.
The prospect of keeping affluents loyal to your company is one key reason to create a culture of good brand stewards. It is imperative to remember that acquiring a customer doesn’t necessarily mean that you are going to keep that customer for the long term. Initially, I was surprised by the Harvard Business School study that revealed a “flight factor” amongst the wealthy today. But, upon further analysis, it does make sense. There is an incredible amount of competition out there to provide a singular experience. Look at brands like Zappos, Costco, Starwood, Marriott and Nordstrom, just to name a few. They focus on providing the best customer experience. Especially given the lingering economic hangover, these brands have to compete for fewer dollars. However, there are certainly signs of life.
Spending on high fashion, for example, is growing four times faster than mainstream fashion spending. This is a good indicator that the affluent are willing to spend – albeit selectively.
Q3: How do you cross pollinate all of these elements when the main channel for our organization tends to be bank advisors?
Christianson: I’m assuming that you’re asking about a loyalty program related to an asset management account, where a financial advisor is the main offline contact for a redemption experience. There is a trend toward one voice. So, in other words, the financial advisor has to be empowered to be able to act as that one voice. And the advisor needs the desktop tools to deliver that singular experience. Perhaps the financial advisor has to hand off the customer to someone else who delivers that “one voice.” Regardless, the experience has to be highly integrated across reward categories.
We are definitely seeing a trend toward being able to perform multiple types of redemptions – travel, merchandise, gift card, experiential, concierge – at one nexus point to create a simple yet wonderful experience. Though this can be very expensive, we are seeing a segmented focus on what I would call ultra high net worth individuals. If a company successfully provides a singular experience for their high net worth customers and they see the overall spend accretion, they may pursue a greater adoption of that experience for other customer segments. In the near future, tools such as Face Time will help companies create a seamless online experience for their affluent consumers.
Robeson: I think that engaging the financial advisor group as a distinct customer constituency is quite pertinent, and can be very effective in helping to deliver that kind of service. In concierge programs, for example, we treat the financial advisor populate as a separate customer sub-set, in order to educate them about how the service can help them as well as how we can help them support their relationship with their client.
Q4: How do you measure ROI on the expense of creating the experiences? How do you measure the bottom line for the program?
Christianson: Our clients are highly concentrated in the financial services marketplace. From an analytics perspective, they are continually evaluating revenue generation in the form of fees, interchange and margin across a variety of products to determine what they can afford to spend from a marketing perspective.
From a business intelligence standpoint, we partner with our clients to determine the appropriate metrics upon which to base that model. For example, in one possible scenario, for a customer with 5 million dollars of assets under management, does it make sense to spend $200 for a live agent to book their airfare, service a concierge request and send a gift card? In that scenario, it makes sense all day long. The key is to perform very careful analysis and determine the breakeven point.
When financial services clients define the affluent demographic they determine a threshold related to their marketing expense per person. It’s imperative to be holistic and look at the overall customer relationship, not simply the one product that serves to deliver the loyalty program. For example, in the financial services scenario, the company looks at all assets under management, not just at the debit or credit card associated with the rewards program. They need to look at the overall relationship (and perhaps the overall household relationship) to determine what income drivers are at play. In general, especially in the affluent and super affluent marketplace, that analysis is being done and it’s highly scientific.
Robeson: You answered that well. My only addition to that would be that we try to always balance the market value against the utilization of the benefit. We do a lot of goal setting with clients and then we manage our programs to hitting those goals.
Q5. Auction and LP – do you have business cases on those?
Christianson: Assuming “LP” means loss prevention, we are seeing a renewed focus on these kinds of enhancements and how they are delivered. Many financial institutions are looking at recasting their loyalty programs and including not just rewards, but also delivering value through soft benefits or enhancements. It’s not always easy to tie the delivery of an enhancement to overall spend; there’s quite often a leap of faith in order to justify it initially. You may need to allow time to see program data maturity. Certainly the trend toward including enhancements is there, especially for affluent programs like Merrill Lynch Beyond Rewards, Chase Sapphire Preferred.
Q6: Do you have any comments on loyalty considerations for global brands? For example, the non-US affluent and how to market to them most effectively?
Christianson: International travel is key. Travel is ubiquitous – people travel everywhere. Gift cards and merchandise are more difficult to deliver across borders due to currency and “offering” considerations. The consumer experience becomes more fractured and the value proposition is more difficult to achieve than with travel rewards. However, you can deliver better service through a global travel-focused coalition program. Brands can learn from leaders in the hospitality industry, many of whom provide consistent, superior service across all locations.
Robeson: From a concierge and travel perspective, there is quite a bit of consistency at the top of the demographic ladder in terms of customer needs in regards to global travel. At an overall services level it’s very consistent in terms of making their international travel experience very comfortable and easy. That said, there are distinct local market considerations when you are looking at how you market to these consumers in Brazil versus Russia—being aware of what their needs are locally is important to marketing to them.
Q7: From the travel benefits slide, what is expedited global entry?
Christianson: Expedited global entry is provided, for example, as a benefit to American Express Platinum cardholders. It is a U.S. government program that allows expedited clearance for approved travelers returning from an international trip. When a customer uses their Platinum card to apply for this benefit, American Express credits the fee that is charged. Once approved, the customer’s membership is valid for five years and can be used at most major U.S. airports.
Q8: Is your research showing that affluent consumers are less brand loyal than in the past? As they shop for value are they more likely to add or drop brands from the consideration set? Are they more loyal to the brands that are delivering value? If you get dropped from your consideration set how do you get reconsidered?
Christianson: I think the idea is, “Are the affluent more or less brand loyal?” I think they are slightly less brand loyal than in the past. More than ever before, the affluent marketplace is focused on service. For example, Amazon bought Zappos, and Zappos doesn’t just sell shoes anymore. They sell virtually everything. Their catalog is exponentially more complex. However, if you cull it down, one could argue that their core product is “service.” Indeed, the overall brand service at Zappos is dictated by what the customer wants. If you call them up to order a pizza, they will order you a pizza. Regardless of what you are buying, you receive remarkable service.
Today the affluent marketplace is more competitive, therefore there is a flight factor that’s involved. Once again, to retain customers, you must stay true to your brand, provide superior service and use multiple channels of media to have personal conversations with your customers. The channels may take numerous forms from Facebook to Twitter to a sophisticated engagement platform that provides customers with access to rewards and a complete array of other benefits. Through personal conversations you can understand what’s driving that customer’s behavior and win them back if they decide to leave. If you are able to segment those who flee and you correct that experience, they are likely to be even more loyal to your brand. I think that’s the key to reengaging.
Q9: Where do we find the HBR study to follow up on?
Robeson: You can find an article related to the Harvard Business School study here.
Q10: What do you see as key for retailers?
Christianson: In terms of your customer interactions, it is imperative to instill trust, deliver on your brand promise and provide real value for the money that they spend. You need to treat superior service as a core product and truly differentiate your brand based on that service. It is not a one-size-fits-all type model; you need to have a personal conversation with your customer and fit your product to their needs.
For a limited time Loyalty 360 would like to extend complimentary access to the playback of this event. Playback access will expire August 15th so don’t miss out! Click here to access webinar presented by VIPdesk & Affinion Loyalty Group: “What Do Affluent Consumers Want From Their Loyalty Programs?”
If you missed it, VIPdesk & Affinion recently released, “Exceptional Customer Service Most Important Aspect of Customer Loyalty, According to New Survey of Loyalty Marketing Professionals”