Whether you love technology or struggle to keep up with it, you have to admire how new developments push our limits. The limits I’m talking about are our imagination, our time, and our comfort zone.

Last year’s debate over the use of RFID (Radio Frequency Identification) is quickly giving way to a new battle front, “Neuromarketing“. While RFID devices were challenged by well organized consumer privacy groups such as Caspian for basic breaches of privacy, the revelations of of Neuromarketing seem capable of creating Supreme Court worthy debates.

Neuromarketing was profiled this week on CBS’s 60 Minutes and is explained as a technology that employs a specialized use of MRI scanning called “functional MRI,” fMRI for short.  In layman’s terms, its proponents are touting that we will soon be able to see what is going on inside the brain and decipher what people are thinking.

RFID has been used by Walmart, the US Military and many others to bring efficiency to the supply chain and dollars to the bottom line. Contactless cards were introduced a few years ago in the US and misunderstanding of the technology’s limits has caused some consumers to buy wallets and purses that block signal transmission and others to simply panic that we are all marching headlong into an Orwellian future. The technology does have some risk, though rarely as it is portrayed by the media and consumer protection groups.

Neuromarketing carries a higher sniff test for risk just by virtue of the way it’s advocates describe it. Neuroscientist Marcel Just painted the benefits of the technology as “thought identification” on the 60 minutes segment and one of the leading companies in the industry, Neurosense, stated it has  plenty of clients including “Unilever, Intel, McDonald’s, Proctor & Gamble, MTV or Viacom.” As there are purportedly about 92 neuromarketing agencies worldwide, it’s clear that a lot of resources are being applied to advance the cause.

Each of these technologies has application outside of consumer marketing and maybe that is just where they belong.The question in my mind is how the technology is put into practice in a sensible way that consumers will accept. I can understand that reading minds could be useful to validate live survey responses and focus group chatter. I can also see that a retailer could hone its inventory management by reading the thoughts of consumers passing by a display window with dresses in 3 colors and learning that the green model was most popular.

What I don’t envision is that consumers will accept their thoughts being translated into real-time store promotions or something similar. No matter how “relevant”, having a sales associate in the Apple store walk up and offer an unsolicited suggestion for  the best case for your new iPhone strikes me as just plain creepy.

We’ve been down this road before with chip cards and RFID enabled devices. The premise that personalized service or personal shoppers could be anonymously triggered as the RFID-enabled loyalty card of a “best” customer passed the scanner at the store entrance was not appealing to any survey or focus group respondent I have ever encountered.

The only possible scenario that I consider practical is using a mobile device to opt-in or invite current promotions to be pushed to me before I entered a particular store. Let’s say I am ready to visit Nordstrom and am sitting in the food court having some coffee. If I could open the mobile marketing application on my iPhone listing all of my loyalty program memberships, select Nordstrom and click on “today’s deals”, I would be happy to have specific offers and specials sent to my mobile phone. I could also opt-in to “personal shopper” and, if I qualified in the loyalty program, I would trigger that service upon entering the store (GPS enabled phone, right?).

The debate will rage on and next year the argument may be substantially the same with a different device or technology filling in the blank occupied last year by RFID and today by Neuromarketing. If we keep in mind that business is driven by pleasing the customer and not about advancing a particular technology, then we will have an easier time choosing the path to success.

Regardless of your hobby, profession or even your belief system, these days it’s easy to find a group of people just like you. Go to online community organizer Ning and you’ll discover over 1 million communities, for everyone from sand volleyball enthusiasts to landscape architects to supporters of the Kwam Um School of Zen.

Now it seems more and more companies are getting into the act, especially those focused on the Gen Y (Millennial) market. From game maker Xbox to the Vans shoe company, companies with true-blue followings have created thriving online meeting centers where the devoted can exchange ideas, discuss products, solve problems and even schedule meet-ups.

But while social communities can work for some brands, it definitely feels like a stretch for others. So upon learning that Allstate had joined the fray with its Good Hands Community, I was skeptical. After all, who wants to join a community sponsored by an insurance company?

Yet, even before looking at the site, I saw how it might work—if Allstate didn’t stray too far from its core area of expertise, insurance. The Good Hands site could be a place where customers could engage with agents on insurance issues, from making sure they had the right coverage and deductibles to learning how to adapt policies to life changes like a new car, new house or new baby.

But the folks at Allstate appear to have set their sights on a much wider mandate. As the Good Hands Web site states, it’s a community where you can “share your thoughts with others about hopes, dreams and challenges. Together you can share ideas about keeping families safe, saving money and preparing for what’s next”.

The community home page feels a little more down-to-earth with menu categories that include “Making a Difference”, “Daily Spending” and “Personal Finance”, and discussions on “helping others” “stay-cations” and “living debt free”. It’s all well intentioned, but the topics feel a little off-base for Allstate and better suited for the Peace Corps, AAA or Capital One respectively.

For auto insurance policy holders, there is a category on “All Things Wheels”. But I can’t seem to find any discussions on auto insurance, as posts are concentrated on issues like checking my oil, being alert at the wheel and hybrid automobiles. How about helping me figure out how much collision I should carry on my 8-year old Saturn?

The other thing that doesn’t feel right is there is not an insurance agent to be found on the Good Hands site. You see, the chief bloggers and hosts of the community are Allstate employees Ben and Amit who are both identified by the title “Strategy and Content Manager”. No offense guys, but I think Allstate policyholders would prefer to communicate with honest-to-goodness insurance agents.

So overall, a kudos to Allstate for the effort. It’s a nicely designed site that really is trying to engage with current and potential customers. But let’s not forget, you’re an insurance company. And with so many potential communities for people to join these days, it feels like Allstate may be stretching its good hands a little too wide.

Final note: For a company that does an online community right, check out Intuit. Its Intuit community connects customers with small business owners and features discussions hosted by Intuit-sponsored business professionals. The Intuit community keeps the focus where it belongs: helping small businesses succeed.

Tom Rapsas is an independent Creative Director, Writer and Strategist. He can be reached at tomrapsas@gmail.com.

“P” as in Profitability, that is.

Part of the challenge in playing the Loyalty Marketing game is that we, as strategists and solutions providers, tend to confuse the issue for our clients through our own marketing-speak. We spend too much time battling over semantics and definitions when all our clients really care about is increasing their bottom line. An article in this week’s Wall Street Journal “Why a Loyal Customer Isn’t Always a Profitable One” is a great example of how the debate can send the wrong message.

The article is attributed to a group of four led by Tim Keiningham, Global Chief Strategy Officer at Ipsos Loyalty and author of the newly published book Why Loyalty Matters. The premise of the article is that many companies incorrectly associate so-called “loyal” customers with profitable ones. The article states that “most company surveys wrongly define what constitutes a business’s most loyal, and thus desirable, customers” and goes on to make the valid point that “when customer value is included in the measure of loyalty, the goals of improving loyalty and financial performance are synchronized”.

So far, so good, but the article centers on the phrase “loyal customer” as if there is a consistent definition of the term in Websters and Wikipedia. There is no universally accepted definition of a “loyal customer” (is loyal defined by “x” transactions per month or a Lifetime Customer Value forecast in excess of “Y”?), only agreement on how to determine success in what we commonly refer to as a loyalty program.

The business has always been about creating profitable behavior change across a designated customer group. Existing customer behavior is assessed and objectives set for the program in terms of a percentage or numerical increase in activity (increase transactions from “A” to “B” or average purchase amount by “C” percent)  over a specified period of time. Distinct goals are set by segment or subset of the overall customer base and the potential for incremental revenue by each group influences the level of investment justified by the program sponsor.

For more on the monetization of loyalty, read Michael Hemsey’s article just published at Loyalty360.org. Michael is President Kobie Marketing and knows the business very well.

In my opinion, the WSJ article painted the industry as missing the point about connecting loyalty and profitability.  Consider this quote: “Creating and nurturing real customer loyalty requires satisfying customer needs and wants at a sustainable profit. Too often, customer-loyalty experts have ignored the latter in the belief that loyalty and profitability are synonymous“.  Best Buy certainly understood the relationship between customer profitability and loyalty after learning that “as many as 100 million of its 500 million customer visits each year are undesirable”. The electronics retailer subsequently took lots of heat in the press after rolling out its new “angel-devil strategy” during 2004.

I can personally attest that most organizations have a high level of awareness that building loyalty is not about creating emotions which somehow equate to profits. On the contrary, they understand that the game is about marrying qualitative (attitudinal) data with quantitative (transactional) data to create a compelling value proposition that, when sprinkled across portions of a customer base, will return measurable ROI.  The smarter practitioners are in analyzing results and evolving promotions to maintain the attention of most valued customers, the longer we sustain the behavior change.

It is easy to point towards an assortment of companies that rely too much on customer satisfaction surveys to predict loyalty and also too many convinced that answering “one question” will reveal who the loyal customers are. My confidence level in saying that business understands the connection between profitability and marketing investment in its customers is based on having to justify the ROI of my proposed solutions to companies across industry and in different geographic markets for the past 12 years.

I only wish I could get away with justifying the proposed budget for a loyalty marketing solution with the same fuzzy metrics that are accepted when evaluating branding campaigns, general advertising, and even social media (so far). If the Ipsos article were fully on target, my job would have been a heck of lot easier over these past dozen years.

Take it a step farther and I’ll assert that while every company doesn’t need a “loyalty” program, EVERY company needs a well planned and executed Customer Strategy. Imagine if our industry ditched the “L” word and adopted a more inclusive term. The semantics debate might be de-fused and we could get down to business.

One of the challenges in the Loyalty Marketing business is that few organizations share tangible results.

I still am occasionally asked the question “Does Loyalty Work?” and wish I could point to more specific evidence in public forum as an answer. Telling people that you are restricted from disclosure due to confidentiality agreements meets ethical standards, but is frustrating.  And, the information shared at conferences is typically sanitized in case competitors are listening.

The dearth of proprietary data shared by program sponsors makes continuous improvement in our sector a bit problematic. That’s why Hanifin Loyalty is fortunate to be able to share the results of Zion Bank’s merchant funded rewards program launched in 2005 in a new case study published on our web site.

Merchant Funded Rewards models represent the innovation of choice among today’s card rewards programs in North America. It’s not a big surprise as “Pay for Performance” affords benefits to participating merchants, card issuers, and cardholders alike.

At the same time, merchant funded programs have proliferated so quickly, almost exclusively centering on online shopping, that banks are challenged to differentiate their offers.

Zions Cash Rewards is unique in that it centers its value proposition on an extensive brick and mortar network of everyday spend merchants which brings high relevancy and interest to the bank’s cardholders.

Documenting this case study would not have been possible without Cynthia Smith, SVP & Director, Bank Card Products and Services Zions Bancorporation and Kelly Passey, EVP, Access Development. Thanks to them both and to their organizations for supporting this effort.

I hope you will download and enjoy this detailed Case Study which shares results of the collaboration between Zions Bank and Access Development to achieve success.

What’s Your Plan?

Contributed by Mike Capizzi

Economic tidal waves cause disruptive things to happen along the loyalty marketing shoreline.  Whether tsunami or riptide in magnitude, the resulting on-shore event carries the potential to drown the beachcomber or create a sea-side hero.

Which will you become?

The current economic environment has many loyalty marketers scratching their sun-burned foreheads.  Large enterprises with well established loyalty marketing program strategies may not weather the tidal wave.  If their firms become subject to an inevitable round of cost cutting, dilution of the loyalty program value proposition and abandonment of best customers, then bodies will be washed ashore by the pounding surf.  Call the ambulances and the shore patrol.  Please bring a few extra body bags.

Loyalty marketing service providers who feed off of the large enterprise client will be companion victims.  How do you resuscitate the relationship and corresponding revenue potential when your client is on life support? Don’t scratch your head or reach for the sunscreen; you should be well entrenched in your “Baywatch” plan.  Otherwise you’ll fall victim to the never ending cycle of the rise and fall characterized by the coastal tides.

Simply stated, what’s your plan?

If you are on the client side, get ready for the merger and acquisition tidal wave.  You have a loyalty program, you have a team in place to manage it, you rely on your loyalty marketing service provider to deliver.  You understand best customers, you reward and recognize them appropriately, you have the metrics to prove it.  Who cares?  Here comes the judge and he ain’t pretty!  He carries an axe in one hand and a spreadsheet in the other. When you are merged, taken over, re-structured or otherwise displaced, will anybody care about your past accomplishments?

Of course they will if you have a plan.  Best customers always deliver disproportionate value to the enterprise.  Can you prove it?  Can you articulate the merits and shortfalls of your own loyalty program initiatives versus the concepts and ideas of the acquiring entity? How would the programs best be merged?  How will customers benefit?  Which segments overlap and where is the real potential for incremental revenue post merger? Which service provider or technology platform is best equipped to handle the combined loyalty program databases?  What does the transition roadmap and timeline look like? If you don’t have answers, or at least well thought out opinions, then proceed directly to the unemployment line.  Do not pass go.  Do not collect anything except severance.

If you are a service provider, the picture is even gloomier.  Who is the incumbent loyalty partner and what strengths, weaknesses, competencies, do they exhibit vis-a-vis your own organization?  What do they charge?  What is their cost per point?  How do they add value?  What can you do to position yourselves as the effective and efficient alternative to the incumbent?  If all of this is overwhelming, I understand.  If you are not ready to deal with the impending surge, or prefer to bury your head in the sand, then get ready for the unemployment line.  Bring muffins and a no-whip latte for your ex-client.  You can meet and sympathize with each other every Tuesday morning.

My point in all of this is that you must have a concrete plan.  In writing. With supporting business case tools and logic.  Loyalty program change management is not a new thing; although the art may be lost the artists still remember.  When the tsunami strikes, you will either float to a higher ground or sink in the swell of the salt water.  Victim or hero.

What’s your plan?

Mike Capizzi is Managing Director of Marketing Strategists LLC, an independent consulting practice which focuses on best customer marketing.  Often called the “Loyalty Evangelist” by his industry peers, he has written, spoken, advised and educated on the topic of loyalty marketing programs around the world for more than a decade.

Loyalty 360 held its Loyalty, Reward and Incentive Expo 2009 at the Westin Diplomat in Hollywood, Florida between May 31 – June 2.  Over 500 attended the second edition of this conference and the report which follows was published at www.TheWiseMarketer.com on June 16, 2009 as filed by Bill Hanifin, North American Contributing Editor.

If you are interested in the latest news on Loyalty and Relationship marketing, I strongly encourage you to Register here for a free subscription to the Wise Marketer

Among weekly updates and special reports, the WiseMarketer also offers the Loyalty Guide III, the most comprehensive resource covering the industry today.

New Channels Aid Loyal Customer Dialogue

The recent Loyalty Expo 2009 conference in Florida saw nearly 400 delegates (I was corrected by the organizer later that the number was over 500) gather to share ideas and innovations, with the overall informal theme being the discussion of new channels of communication that have recently become available to loyalty programme sponsors, and ways of fostering more meaningful dialogue with programme members, according to our US contributing editor Bill Hanifin.

Mobile phone applications and social media were hot topics and the conference sponsor, Loyalty360, put both into action itself during the event. Partnering with Vayulogic and Hanifin Loyalty, the organisers solicited feedback for conference sessions with SMS messaging and shared a live Twitter feed to foster networking and encourage real time discussion of presentations.

The three day event began with a series of workshops, most compelling of which was arguable “The Gamification of Loyalty“, presented by Barry Kirk and Tim Crank of Maritz Loyalty Marketing. The session demonstrated how game playing and competitive scenarios can be introduced in loyalty schemes to drive higher engagement, participation, and activity levels.

The general session keynote presentation featured Timothy Keiningham of IPSOS Loyalty, speaking about the realities and myths surrounding customer loyalty (largely based on Keiningham’s recently published book, Why Loyalty Matters).  Deborah Eastman of Satmetrix followed with an overview of the Net Promoter Score (NPS), and expanded on the basic concept to describe a methodology that could be applied as a planning mechanism for loyalty initiatives.

The conference then featured a range of subjects including sixteen panels on topics ranging from mobile marketing, B2B loyalty strategy, and global approaches to loyalty, grocery specific learnings, and how to translate the voice of the customer into higher programme engagement.

Among the highlights, Matt Howland of Loyalty Lab and Greg Dolan of Campbell’s Soup presented a compelling case for extending the relationship between CPGs and consumers beyond traditional channels, while Phil Rubin of rDialogue shared his thoughts on measuring loyalty programme performance.

Jonathan Silver of Affinity Solutions and Nick Medina of ExxonMobil provided insights into on how merchant funded rewards can be made more effective through strong retailer and bank relationships, while Bjorn Larsen of Edhance, Ragy Thomas of Aiti Solutions, and Atle Skalleberg of StudentUniverse joined forces for a lively discussion on how to engage with ‘millennials’.

The second day of the conference featured some 15 breakout sessions followed by roundtable discussions that Hanfin described as “the loyalty marketing version of speed dating“. Among the highlights, Mike Blyth of Groupe Aeroplan presented an insightful look at how UK grocer Sainsbury’s has connected loyalty programme data to SKU-level product information to drive more relevant promotions.

Another key presentation with implications for the future of loyalty was made by Don Hughes, CIO for Kobie Marketing.  Speaking from research recently completed by the company, Hughes talked about leveraging today’s mobile technologies to move products, reduce inventory, and increase communication.

Noting that there will be over 140 million smart phones in use by 2013 and that satisfaction ratings for smart phones are more than double that of conventional handsets, Hughes emphasized the importance of incorporating this medium into loyalty programme communications. Kobie’s study found that 94% of customers will complete a loyalty profile application through the mobile channel, compared to only 47% on the web.

This article is copyright 2009 TheWiseMarketer.com

Speedbumps are everywhere.

They’re in my neighborhood, at the mall and also on the internet.  If you’re in new environs, speedbumps can by definition be mileposts of learning. Ever fly down the street in an unfamiliar area only to discover speedbumps the hard way? It’s not pleasant for you or your passengers and can do damage to your vehicle depending on your velocity at impact.

Web 1.0 had its share of speedbumps, coming in the form of viruses, phishing schemes, and deals that seemed too good to be true from deposed Nigerian princes. Web 2.0 has a different set of annoyances and the more comfortable we get with building virtual networks and storing data in the cloud, the more vulnerable we will be to connectivity outages.

My modest goal in joining the social media landrush is twofold:

• Understand how to best incorporate the social media tool-set to communicate with customer loyalty program and frequent shopping club members
• Reach the Millennial generation in an effective way to build brand loyalty

If you are paying attention to the space, you will understand when I say that there are an inordinate number of social media “experts” and others who claim to be able to build brand awareness and increase customer engagement, all leading to greater customer loyalty for profit. If you’re not involved but observing from the sidelines, trust me on this one – they are ubiquitous to say the least.

In my book the “experts” you want to associate yourself with, and trust your future online loyalty marketing efforts to, are the ones who have been playing the game, taking some lumps, and learning by doing. I’ve been at it long enough to hit a few bumps and thought it was time to share a short list of cautions to consider as you build a corporate or personal social media marketing strategy:

• Concerning your blog, Facebook, and Twitter, add value with everything you post. The criticism that Twitter is a waste of time because all people do is update about their last meal shouldn’t bother you because you won’t be posting this sort of garbage (will you?).

• Remember that everything digital has a life similar to a cockroach, i.e. longer than most of us will live. Be ever so cautious about posting anything that you might regret later. My SM muse told me at the outset to write,read, proofread, and do it again, before pressing the update button. You’ll sleep better and won’t get fired when your legal department reads your Facebook page.

• Reveal personal information with the same care you take with your wallet. Would you let strangers look through your billfold while checking out at Walmart? Didn’t think so. Why then would you post highly personal information online in the interest of being more “human”? There are others ways to accomplish this goal.

• Speaking of being human, do attempt to create conversations, don’t just blast information at the ether and expect people to respond positively. If you equate SM with digital public relations, you are missing out on better tools for that purpose, and are inviting attrition from your fans, followers and customers.

• Balance openness and immediacy with common sense. You are fully within your rights to moderate comments on any blog you are responsible for, and the practice is highly sensible. You are not obligated to approve comments that have only tangential relationship to the topic or are little more than personal rants.

This list is equally applicable if you are building a personal brand, establishing yourself as a subject matter expert for your firm, or are the corporate officer responsible for setting social media policy across your associate base.

Some brands have adopted the viewpoint that they will hold-fire on their social media marketing strategy until they have it all figured out. Surely this approach will mean that they will have less scars than yours truly, but I’ll also be willing to be that they will be so late to the game that they will wish they had started earlier.

Be cautious, use common sense, and learn from others. If you do this, you’ll achieve your objectives with social media and also be able to recognize a true expert when you see one.

Until very recently I worked on the acquisition side of an auto insurance account, where  these days it’s all about the price—with virtually every auto insurer claiming they can save you $400 or $500 (which makes you wonder, if everyone can save you money, which companies are ripping people off?).

But perhaps the most eye-opening aspect of auto insurance marketing is the lack of respect paid to retention. After all, if you believe the accepted adage that for every $10 spent to acquire a new customer it takes only $1 to retain an existing customer—why are auto insurers plowing so many millions into acquisition and spending next to nothing on retention?

It’s especially important to have a retention strategy these days because of the changing relationship between auto insurance buyer and seller. Once upon a time, most drivers had insurance agents who they had a one-to-one relationship with—but now, with independent agents becoming a shrinking breed, and with the rise of direct-to-consumer providers like Geico, 21st Century and Esurance, times have changed. Most customers have no interaction with their insurance company, unless they have an accident or are mailing in their premium check.

Seems to me it’s time for auto insurers to take a fresh new approach to retaining customers, one that begins building a relationship well before the auto policy is about to expire and the customer can be swayed by the latest “you can save hundreds” TV commercial.

Thought one: Adding a message on a bill insert, while a no-brainer, will do absolutely zilch to build a relationship with best customers. What’s needed is a more robust approach that includes a regular stream of print and/or e-mail communications with relevant information drivers can use like:

• Invitations to online or offline tutorials on choosing the coverage right for me and my family
• Info on safety recalls and maintenance tips for my particular vehicle
• Safety advice for teenage and senior drivers on my policy
• Reminders of why my insurer is the right choice and what it offers that the competitors don’t

Thought two: Start engaging via social networking tools. With people so often confused by their auto policy details (collision? comprehensive? low or high deductible?), it seems like there’s an opening for an auto insurance provider to become the online source for honest, helpful information. So who will step up?

While some auto insurers are moving in the right direction by gravitating toward the communications opportunities offered by Web 2.0, many of the executions are weak at best and some companies have chosen to do nothing at all.

A few quick observations:

• Market leader Geico barely exists in the Web 2.0 world unless you want to count a blog for the Miss Geico offshore racing boat—and a few “Screw Geico” entries from unhappy customers out in the blogosphere. Kash, the bug-eyed stack of money that stars in Geico’s goofy TV commercials, does have a Twitter account—but has just a single tweet over the last 4-months. (Kash may be the quiet type, but one tweet?)
• Esurance icon Erin, animated hero of the company’s television commercials, has her own blog on the company Web site—but after a fast start in 2005, it seems like Erin may be all blogged out—she has a woeful total of three blog entries in 2009. (Is she busy on a TV shoot? Have her write from the set!)
• Then, there’s Allstate. Very active with Twitter, they appear to be doing a bang-up job of responding quickly to customer comments and concerns. They also appear to be the only insurer to set up an online community which can be found at goodhandscommunity.org. The community gets an A for effort, but the execution?

In my next post, I’ll give it a full review … to be continued.

Tom Rapsas is an independent Creative Director, Writer and Strategist. He can be reached at tomrapsas@gmail.com.

If you want to find the perfect boat, you’ve got to know what you want and make some tough decisions. The same holds true for setting the course of your Loyalty strategy.

Living in proximity to water, there are many excuses to buy a boat and, with two of the biggest boats shows in the world on the doorstep, the range of choices is incredible. Let’s say you’re in the market for a center console outboard fishing boat, somewhere between 21 – 32 feet. The Fort Lauderdale International Boat Show and the Miami International Boat Show offer a breathtaking array of options.

By the time you have scoured these shows and are nursing the blisters on your feet, you will realize that there is not one boat that will “do it all”.  With every salesperson claiming their boat offers a “dry ride and fish-ability”, you have difficulty choosing a favorite and rationalizing a wide range of prices.  The happiest boat owners I know solved the problem by refusing to compromise. They knew what they wanted and landed on the boat that was the best in their chosen niche.

For example, the best flats boat available (in my opinion) comes from Egret while the offshore boat of highest magnitude is made by Yellowfin. These boats not only ooze quality but deliver on their promises, and are guaranteed to evoke complements and knowing glances when at the local marina or boat ramp.

Sponsors planning their Loyalty Marketing strategy are in much the same fix.  A quick story illustrates the point. A short while back, I worked on the frequent stay program for a mid-size hotel chain that wanted to stand out in the crowd and attract the “road warrior” customer that was their bread and butter. Dutifully, our team delivered a competitive matrix of programs in the market capturing all known features and benefits.  Looking at the final product, nearly every box was checked in the grid. That’s meant to say that all the major brands had tried just about everything and “copycat” was the favorite play of the day.

We affixed the chart to the wall of our planning room and named it the “what not to do” matrix. The sub-title was “what we won’t allow ourselves to do”, meaning that we would not let the client fall into the trap of sameness that saturated their business. After some work, we recommended a loyalty program design that was unique and it was successfully launched and operated for a number of years. It survives in the market today with some modification.

Having just read Seth Godin’s gem of a book The Dip, I think he would agree the loyalty business is living through a “Loyalty Dip” at the moment. Sponsors who adopt a generic strategy to “reach everyone” will meet with disappointing results and providers that stick with the tried and true may find themselves in a dead end. Those introducing innovation to the business (e.g. through the mobile handset and with social media) will survive the dip and emerge as leaders for Loyalty 2.o.

The point is, be an Egret or a Yellowfin, but please be somebody.

Three men walk into a bar. Sorry, that’s the lead-in to an old Irish joke. In this case, three practitioners of Loyalty Marketing (people who actually create brand loyalty for a living) are on their way to a Florida Marlins game after the conclusion of Loyalty Expo 2009.

Having no idea of the conversation that would ensue, I commented that I did something surprising the weekend before, pay a $25 membership fee to join the Barnes & Noble Member Program. “I got half the annual fee back in one purchase” was my justification.  I also knew that with purchases pending to buy the kid’s summer reading books,  it wouldn’t be long before I recovered the entire fee. Add to that the convenient location of B&N to my house and it was an easy decision.

My friend riding shotgun retorted, “I’d never pay a fee because Borders lets you register for free and I can wait for those 40% off coupons they send by email”.

Not to be left out, our backseat companion added “I always buy my books from Amazon because they have the best prices, but I always wait until my order is big enough to get the free shipping“.

Suddenly we had a mini-focus group at work in a car full of Bibliophiles. Who knew that Loyalty Marketers were such avid readers? More importantly, I realized just how challenging it is to create a value proposition that attracts a wide enough audience to make inroads into competitive offers.  We had three examples right before us, each with an instructive lesson about consumer purchase behavior:

• The straightforward “pay now and recover as you shop” approach from B&N is sure to attract a self-selecting crowd, but does it shift share once the fee is earned back?
• Borders makes it easy for anyone to play, but numbs its membership with a repetitive cycle of discounts and sales that train customers to wait for the one they like best.
• Amazon builds on a low-price model with benefits like free shipping, but will share shift occur when these perks aren’t available?

Each of these strategies has its limitations and there is one common element missing from each program – Participation. My quick take on the Participatory Marketing value chain leads off with Awareness, creates Engagement, and leverages Word of Mouth and Viral effects to create Community and ultimately long term Loyalty.

I may not have these elements in just the right order and possibly abused some buzzwords, but its clear that each of the booksellers that were the talk of the evening needs to take a step beyond promotion and introduce mechanisms for customers to stay with them in between purchases and when the optimal deal is not front and center.

How do you buy books and from whom? Do any of these programs stand out for you, and why?