LOYALTY

Volume 1 Number 1

January 2009 MANAGEMENT

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THE VOICE OF THE PREMIERE ISSUE

LOYALTY FEATURING
OTM Partners
INDUSTRY The Incentive Group
rDialogue
LOYALTY EXPO 2008
IN REVIEW Connexions (CLTS)

Understanding Fuel Rewards

Tackling Common Misconceptions

PREMIER ISSUE
 knowledge. deliver y. results.
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points, miles, rewards, incentives, enhancements.

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 This Month in LOYALTY MANAGEMENT

JANUARY 2009 VOLUME 1 NUMBER 1 W W W. L O YA LT Y 3 6 0 . O R G

DEPARTMENTS
4 Letter from the Editor
6 Contributors

LOYALTY FORUM
8 Your Voice
10 Q&A
12 Behind the Brand/People
Interview with Marti Beller

FEATURES
14 Customer Insulation
Doug Press – The Incentive Group
16 True Loyalty in Tough Times
Steve Yastrow – Yastrow & Company
(above) Steve Yastrow, Keynote Speaker, Loyalty Expo 2008
18 Loyalty: a “Symbiotic System”

E XPO IN RE VIEW
Not a Program
Paul Hebert – i2i
20 Comp CustomersTM
Susan Payton – Egg Marketing & Public Relations Phil Rubin – rDialogue

With 475 attendees from seven countries, 22 Dialing in on Relevance

Connie Chesner – OTM Partners
Loyalty Expo 2008 certainly exceeded
even our expectations! 24 What is Loyalty and How Can I Get Some?
Kelly Passey – Access Development
39 / Expo Off to a Great Start 26 How Do I Value My Rewards Program?
Sarah Phelps – First Annapolis Consulting
40 / True Measure of Customer Loyalty
41 / Engaging Your Customer
TRENDS & REWARDS
42 / Mobile Marketing
27 Gift Cards In A Down Economy
43 / Tech Talk Deb Merkin – Gift Card Partners
44 / Attrition:101 28 Get the Most Out of
Your Travel Program
45 / Marketing to Millennials
John Miller – Connexions (CLTS)
46 / Expo Summaries 30 The Rewards Revolution is Here!
Jim Purdy – Bridge2Solutions
32 Fuel Rewards Marketing and Loyalty:
Gaining a Better Understanding
John Cullen – Pointe Advantage

BEST BUSINESS PRACTICES

36 Successful Hires
Amy DeBerg-Ferwerda – R&P Group

January 2009 | Loyalty Management 3

 FROM THE EDITOR

LOYALTY
in the NEWS
The Motivation Show
and Loyalty 360
Welcome to the first issue of Loyalty Management, a one of Announce Partnership
a kind, customer driven quarterly publication. Here at Loyalty Management,
we define a customer as every person your company touches—your end users,
your key accounts, all of your employees, partners and vendors. We are committed Plastic Jungle Appoints
Gary Briggs CEO
to creating a documented customer-centric forum for sharing ideas, concepts,
Former eBay Chief
and trends across all industries interested in proactively communicating with
Marketing Officer to lead
their customers and each other. gift card services company.

Loyalty Management belongs to you! This is your publication; a platform

for you, our readers, to share your thoughts, ideas and experience with Loyalty 360 and PCATS
others. We are here to help you deliver your message and we believe your Announce Partnership
contribution is valuable.

Supporting this, in our premier issue, we hear from Steve Yastrow, sharing 2020 Marketing to
Offer RewardStream’s
his ideas on building a “We” relationship, demonstrating the importance of Lifecycle Marketing
your brand approach. In addition, contributors from various backgrounds Platform as Core Loyalty
share their theories and strategies. Connie Chesner shares ideas on how to Technology
provide more relevant messages, while Paul Hebert explores the value in Licensing Agreement to
having a more consistent message across all business units. Be sure to check Provide Loyalty Marketers
out the closing section, which brings you the highlights and insights from the with Industry-Best Loyalty
first Loyalty Expo. and Incentive Solutions

We hope you enjoy this first issue! As always, your thoughts, questions, Loyalty 360 Announces
opinions and insights are welcomed. Two New Members to
Leadership Team
Sincerely,
Maritz Loyalty
Marketing Launches
Next-Generation
Technology Platform
Erin Raese
LoyaltyHQTM
Editor
Loyalty Management
Thanks Again Members
erinraese@loyaltymanagement.com
Rewarded with Gas
FuelLinks Joins Airlines,
Retailers, Other Thanks
Again Reward Partners

To read more visit

www.Loyalty360.org

4 January 2009 | Loyalty Management


Contributors
Connie Chesner
Vice President, Director of Research for
OTM Partners. A qualitative research and
communications expert, Connie is adept
at designing, analyzing and interpreting
qualitative data for trends, and then converting
those trends into themes used to understand
the prominent perceptions and beliefs of a
study population.
Connie Chesner
John Cullen
Susan Payton John Cullen is President of Pointe Advantage
Consulting and a recognized expert in the area
of fuel-based reward and loyalty marketing.
Amy DeBerg-Ferwerda
President of Recruiting & Placement Inc
(dba R&P Group). For over 25 years Amy has
been involved either directly or indirectly
John Cullen in the credit card industry. Since 1996, as a
recruiter, Amy has specialized in the Cards and
Payments world.
Doug Press
Paul Hebert
Paul Hebert is currently Managing Director
of i2i – an influence consultancy that helps
companies align the behavior of their
employees, channel partners and consumers
with the goals and objectives of the company.
Paul is widely considered an expert on
motivation and incentives and authors the
Amy DeBerg-Ferwerda highly rated blog Incentive Intelligence.
James C. Purdy Deb Merkin
Chief Operating Officer and Partner for Gift
Card Partners. Deb brings 25 years experience
and global channel expertise in defining and
marketing new products, creating strategic
partnerships, and delivering solutions-driven
programs for both channel partners and end
customers.
Paul Hebert John Miller
Director of New Business Development for
Phil Rubin Connexions Loyalty Travel Solutions (CLTS),
John brings over 10 years of loyalty travel
experience and over 20 years of travel industry
experience including positions within industry
relations, product development and sales.
Kelly Passey
Kelly has over fifteen years of experience in the
financial bank card sector with specific focus on
Kelly Passey incentive and loyalty solutions, including seven
years at VISA managing Incentive Marketing
Services. He is currently the Executive Vice
Steve Yastrow President of Incentive & Loyalty Services at
Access Development.
Erin Raese – Editor in Chief | Caitlin Schar – Editorial Director
Victor Wilcox Graphics Plus Inc. – Layout & Design | Valerie Green – Cover Art
Jet Lithocolor – Print Production
6 January 2009 | Loyalty Management
LOYALTY
MANAGEMENT
Susan Payton
Susan Payton is the Managing Partner of Egg
Marketing. Susan has worked as a writer in
the creative capacity for ten years; harnessing
her creative ability with her knowledge and
experience in marketing, finance and business.
Sarah Phelps
Sarah Phelps leads the Loyalty Program
Support services practice for First Annapolis
Consulting. Her areas of expertise include
strategic planning, outsourcing, operations
management, negotiations and partnership.
Doug Press
Doug Press, President & CEO of The Incentive
Group, has over 30 years of Marketing expertise
uniquely gained on both the agency and end
user sides of the desk. He leads the formulation
of winning customer loyalty programs for mid
size to Fortune 500 brands and previously
served as CMO for a billion dollar publicly held
computer company.
James C. Purdy
Jim is a founder and executive vice president of
Business Development for Bridge2 Solutions,
Inc. His career spans three decades in awards
development and strategy, managing sales
teams and client programs in various executive
roles with S&H, Carlson and Marketing
Innovators.
Phil Rubin
CEO & President for rDialogue. Phil has nearly
20 years of strategic marketing experience
with an emphasis on loyalty and relationship
marketing, integrated communications,
partnership development, promotions and
program development.
Steve Yastrow
Founder of Yastrow & Company. Steve Yastrow
has acquired a singular reputation among
business decision makers as an outside partner
who challenges organizations to take a fresh
look at themselves from the inside out. As a
consultant, speaker, and writer he encourages
his clients, audiences, and readers to reinvent
how they connect with customers.
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January 2009 | Loyalty Management 7
 LOYALTY FORUM: Your Voice
Favorite Loyalty Programs
We posed the question: What are your top 3 favorite loyalty
programs and why? Here’s what you’re saying.
Jack Williams CEO, eCommlink
American Airlines AAdvantage: Able to earn miles from
a large, diverse group of merchants. Multiple earn with one
burn allows me to continue my “equity” in the program for
years. The availability of seats for “burn” are limited at the
last minute, or you have to use many more miles to get an
“any time” seat, the reality is if played right you can save
considerable dollars on long flights.
Marriott Rewards: The earn here is not as broad as the
AA program, yet at ten points per dollar spent, it can add
up. It is the upgrades to much better rooms, concierge floor
with free breakfast and snacks can really reduce your cost of
traveling, and not require travel out of the hotel. When I am
in New York City or Washington, these advantages seem to
be nice, and in the winter, really nice.
The Kroger program for rewards that sends a check of
$5.00 after each $500 spent in a Kroger unit. While not real
sexy, or fancy, if you are spending this much often, then you
have a real 5% savings on your food costs.
Caitlin Schar Director, Loyalty Management
“Really Nice Restaurants,” Valued Member Program.
Hands down the BEST loyalty program created! Besides
providing excellent food, atmosphere and service…the
instant and frequent rewards make this program easy
and valuable, which keeps me coming back again and
again. They understand who is trying to win whos loyalty.
Don’t make me sweat to earn your loyalty—reward me to
encourage mine!
2 & 3... Nothing compares! Truly, for me, any good
program prioritizes ease of redemption and is quick to earn/
deliver value.
8 January 2009 | Loyalty Management
Loyalty 360 Team Laura Rusche, Director of Marketing;
Amanda Chasteen, Operations Associate Manager; Ashley
Bankes, Sales Coordinator, and Annie Lerner, Marketing Intern
Kroger Plus Card: Love getting personalized coupons
based on our spending habits, gas rewards/ rewards for
everyday and essential spending.
CVS: Purchase prescriptions each month and don’t realize
how quickly the rewards add up / rewards for everyday and
essential spending.
Other Favorites:
American Express Card: Free flights and can accumulate
miles from shopping online /being rewarded for loyalty and
usage in ways that matter to us.
Speedway: Purchase so many gallons, get some free/
rewards for everyday and essential spending.
Coach/Victoria Secret: Rewards for loyal customers /
special sales, coupons / rewards for being brand loyal.
LaRosas: Local pizza place, pay for a Buddy Card (typically
a fundraiser), and you get all different types of rewards /
joining philanthorpy and everyday spending.
Sudhakar Boddu Principal at Computer Sciences
Corporation
I like the loyalty program which gives points (like airline
miles). That’s because of the recent Delta’s turn around.
Delta came out of its troubles, as its customers had invested
their time and money with them over the years and it also
became their collective responsibility to keep Delta moving.
As long as Delta was offering reasonable fares and service
Delta frequent flyers never deserted Delta.
Mike Wittenstein Speaker. Facilitator. Consultant at Mike Wittenstein Speaks
My idea of the ideal loyalty program is one that simply provides a great customer In our next “Your Voice”...
experience. An experience so good and meaningful to me that I want to repeat
it—and don’t need to be paid to do it!
Who, what,
Lynne Marmulstein GP-Product, LLC
where are you
One program that I like is the Discover rewards program and getting $$ back to use loyal to without
as I prefer and that Discover rewards me additionally when I shop at certain retailers program
incentives?
& online. Secondly, the air miles programs are a favorite, as we enjoy traveling.

Mike Kolowski Datavantage Corp Loyalty matters but it is not

My first Loyalty program I strongly endorse is the Charter One MasterCard Mega always earned through incentives,
Rewards. Paying Bills is a must and being rewarded by my bank and MasterCard just points or coupons. An expanded
makes it better. In the last 6 months just paying my bills online, I have ended up with understanding of what makes us
$100.00 gift card to Best Buy (my choice), just in time for the holidays. “Loyal” may help marketers think a
My second Loyalty program to mention tonight would be CVS. They are not only bit outside of the box.
paying attention to how much you spend, but your product types. So while the receipt
coupons are printing out giving you $4.00 off your next $15.00 purchase, they’re What am I loyal to?
also printing out $.50 off of Neosporin since you just bought Band-Aid’s for your My hairdresser… my jeans…
daughter’s “boo-boo.” my coffee shop (and I don’t just
Lastly I have to throw in Micro-Retail’s “Relate CRM” software for my third mean Starbucks, I am loyal to a
selection. Our loyalty CRM product is in use at Bebe, New York and Company very specific location). Why? The
and quite a few other retailers. It’s a favorite because of the versatility. “Relate” overall quality of experience, the fit
does Customer Management, Loyalty modules, Gift Cards, Deal and Promotion and the people. There is something
Management. This isn’t just a plug for our product, it is one of my favorites. I love what
more personal than just a targeted
I do with this product, helping retailers and their customers. L
offer, with any of those to whom I
am truly a loyal customer.

Please write us! Do you have an answer? Question? Or comment?

We want to hear from you. E-mail us at: Mailbag@LoyaltyManagement.com. Share your voice !
You can also find us by visiting Loyalty 360 groups at: Twitter, Linkedin
and Facebook.

January 2009 | Loyalty Management 9

 Q&A
LOYALTY FORUM: Q&A

Ask the Experts

Q: “What are best practices in keeping employees engaged in

this current economic environment?”

A: The best way that’s worked for me in my career has been

honesty. This honesty comes about from rethinking the top-down
models of management and to develop a real trust in the shared role all
of us play in shaping an organization. Let’s talk about our challenges, our
opportunities, our goals, and our purpose. Develop a dialogue around all
of that to gain a broad range perspective that will help us all understand
the pulse of an organization and help drive action plans and results that
comes from everyone within the organization.
—Langston Richardson, Executive Creative Director, VP at infuz
A: Understand what employees expect and meet or exceed their
expectations. Set performance goals and reward them for meeting
them or exceeding them. Let them understand the Lifetime Value of a
Customer. A customer is not a “one sale customer” but an opportunity
to build a relationship with that customer and eventually boost
profits and sales to let you (employee) keep your job. Here’s a link to
an article I wrote on the subject: http://loyaltycoach.com/articles/
expectations.html
—Allan Katz, Owner, Loyalty Marketing Institute

A: I think the process is the same in this environment as it would be in a better economy. To provide an environment in which people are encouraged
to excel, develop their skills and delivery, and offer excellent customer service—is a challenge that requires special leadership and focused management.
From the three secrets of the classic One Minute Manager (Ken Blanchard and Spencer Johnson):
One Minute Goal Setting (clear goals/expectations/accountability for each assoicate)
One Minute Praisings (frequent ecouragement—“Catching them doing things right”)
One Minute Reprimands (Immediate, Specific corrective feedback, followed by encouragement for them to improve)
When these steps are used often and repetitively they form the basis for achievement and help build a business relationship that can engender
loyalty. There is much that can be done beyond these basic steps, but without all three of these, associate development will be difficult.
—Gary Duke, Installation & Service Mgr @ ESS (Electronic Security Specialists

Q: Do you have a question?

A: Maybe you have the answers.
What are your best practices? What is your advice? You are our experts!
We will publish your thoughts in our upcoming issue…

Write us at: Mailbag@LoyaltyManagement.com or plug-in to the Loyalty 360 social network at:
Twitter, LinkedIn and Facebook. Share your thoughts and start a discussion!

10 January 2009 | Loyalty Management

 January 2009 | Loyalty Management 11
 LOYALTY FORUM: Behind the Brand/People

Marti Beller
The other side of Marti Beller,
the President of Affinion Loyalty Group

A veteran in the loyalty industry with more than 14 years of experience

developing and managing loyalty programs for some of the most recognizable brands, Marti
is considered a visionary throughout Affinion as well as the industry. The achievements which
make up a professional bio are only a fraction of the whole; personal experience, interests and
ideologies shape the choices which lead to success and further distinguish great leaders. Loyalty
Management asks Marti Beller questions to better understand who is Behind the Brand?

What do you consider your greatest achievement?
Professionally, I became President of ALG at 32 and many
people would assume that I would list that among my
greatest accomplishments, but to loosely quote an old
saying, “Getting there was the easy part, staying there…
now, that has been difficult.” I could easily point to one
of many product innovations we have made at ALG, or
the culture that I have helped to create and foster; but
when I consider what made that all possible I think it boils
down to the consistency of leadership that has resulted
from staying at one company for 15 years, weathering
the inevitable storms that come over that time period.
Like many, I could have jumped at any point and left
any mistakes that were made behind for someone else to
correct, but instead I feel they created a platform for the
next level of professional growth. Over the past 15 years,
this industry has gone through significant changes, and
I’ve enjoyed making it through the hard times to savor
the good ones. So, interestingly, I think it has been my
commitment and loyalty to a company that I believe in so
much that brings me the most pride.
Equally important would be empathy. I think it is
both an innate and a purposeful skill to try to understand
someone else’s situation, problem or viewpoint. The ability
to put yourself in another person’s shoes sets the stage when
trying to find win-win outcomes.
Which talent would you most like to have? I would
like to be able to sing well. I love music. Music is a total
mood changer for me. So if I could have brought that to
life, versus just being a benefactor of it, that’s talent that I
would have loved to have.
What’s your personal motto? Things turn out best
for those who make the best of the way things turn out.
I believe you can look at most things either negatively
or opportunistically. It’s not a rose-colored glasses thing,
because I think I’m very realistic. I just choose to believe
there are opportunities in almost every situation, and
that those doors of opportunity open all the time—but
many people miss them. Taking those opportunities and
making the most out of every single one of them is a non-
negotiable for my life.

What are the qualities you most admire in a person?
I admire people that are thoughtful regarding their
intentions. I fundamentally believe in win-win and I think
that there are too many times in life where people lose
sight of that. Intent matters. People who are thoughtful,
self-aware and will push their creative minds to their limits,
regardless of where those limits are, receive my admiration.
I believe that positive, thoughtful intent leads to positive
results, even when momentary adversities arise.
Which person has made the most impact in your
life? My daughter, without question, has had the greatest
impact on me. She made me realize that not all results
can be measured in a single day’s time. I became more
intentional around the legacy I would leave—both
personally and professionally—because of her. It was always
important to me, but she changed the way I approached
it. I have an innate intensity, and for me, results matter.
After having my daughter, I became acutely aware, and

12 January 2009 | Loyalty Management


in turn more tolerant, of longer time horizons by which
certain levels of success are measured. I think that changed
me from being a good manager to a good leader and from
running the company as a good vendor to a good partner.
That’s just one of the many ways she has impacted my life.
Which charities do you support? My favorite charities
are Make-A-Wish and St. Jude’s. As a board member of
Make-A-Wish for six years, I feel a strong local connection
to it, but both charities show the power of children that
fight through great adversity that most adults would handle
with far less grace and optimism.
Who are your favorite writers? My favorite writers
are all business leaders. And those favorite writers change
over time. John Maxwell and Stephen Covey have had the
most long-standing impact on the way I approach every
day. One book that I love that was more autobiographical
than instructional is Carly Fiorina’s book, Tough Choices.
It strikes me as being more realistic and less self-promoting
than many books of its kind.
What is your opinion on the current state of the
economy? There is not much that I can say that hasn’t
been said by so many people more qualified than I am.
I’m clearly not an economist, but I think this downturn
is going to last for quite some time. It took some time to
get here, and I think it will take some time to get out. I
personally see this as a huge opportunity for change. If
necessity is what promotes invention, we will be in a very
needy time, and through that will come great things where
people put their minds to use to their maximum ability.
I also think about the economy in terms of the types of
programs we run. I think they’ll change slightly. I think
they’ll still be very important as consumers will want and
need rewards more than ever. However, I think consumers
will move away from a sense of entitlement and more
toward a joint alignment of goals between the people
offering the rewards and the people consuming them.
What were your biggest challenges in 2008?
Amazingly, we did not feel the impact of the economy the
way many companies did in 2008. I think our primary
challenge in 2008 was to not lose sight of the fact that even
though we were enjoying huge success, we are sure to face
“My daughter... has had
the greatest impact
on me. She made me
realize that not all
results can be measured
in a single day’s time.”
one of the hardest years in 2009. We realized that although
we were doing well, we needed to challenge ourselves by not
creating a false sense of security. When people ask me why I
think we did so well, my instinct is that we have been born
and bread as a fast, nimble company. We did not have to
veer from our core competencies as the economy changed in
order to meet the challenges inherent in such difficult times.
What can we expect from ALG in 2009? A lot of
energy. We didn’t weather 2008’s storm, so as other people
are going in to their second year and it feels harder, we still
have a lot of pent up energy and a lot of excitement for
others to draw from. I could answer in terms of products,
and we have plenty of them coming out. We’ve had the
biggest product development year in our history in 2008,
and have done incredible things in terms of new product
development. But I think our energy is the highest I’ve ever
felt it, and I think it’s because we survived so amazingly
well in a year that so many people have suffered, and that
has created a huge momentum for us that I don’t think will
stop any time soon.
Word of advice for a novice loyalty marketer? Don’t
get married to your ideas to the point that you don’t see
where it might not be working. I think loyalty marketing
is really hard, and your reputation will be created on the
programs you support. If you’re selling something you can’t
deliver, you will be found out—and it’s close to impossible
to come back quickly. I think the cycle of the comeback
from a major miss in this industry is 5 to 8 years, and there
will be many more new novice loyalty marketers in the
space by then.
Reputation matters, deliver what you say you’ll deliver
and play a niche role if a niche role is all you can be—don’t
try to be all things to all people. L
January 2009 | Loyalty Management 13
 FEATURES

Customer Insulation
by Doug Press – The Incentive Group

The warm and fuzzy Pink Panther is the branded mascot that most often comes to mind
when we mention the word Insulation. Thanks not to Inspector Clouseau (Peter Sellers) but to the Owens
Corning brand, this fiberglass form of insulation is the mental association we make at the mere mention of
the word. But in the world of Customer Loyalty, Insulation has a much more profound and economically
valuable meaning. It is the impenetrable marketing fabric we co-create and deftly weave around our
customers to protect and preserve the relationship that they enjoy with us and our brand.

W hen you think about the traditional use of

home Insulation, it’s clear that this substance is
often applied to areas that are in fact outwardly facing
Step 1-Engagement, Step 2-Dialogue, Step 3-Loyalty.

1) Engagement—We begin by looking at the

such as ceilings, walls and floors. After all, they’re exposed.
Exposed to the elements of everyday environmental
factors including snow, ice, rain, wind, cold, sunshine and
humidity. Now, as we think of our business we know that
our most valuable assets…our customers…are constantly
exposed as well. Exposed to competitive offers, pricing
discounts, substitute products (real and perceived) and
especially true in recessionary times, exposed to customers
buying nothing at all as a means of achieving cost savings.
Therefore, it is totally logical that we take on, as a primary
responsibility of the Enterprise, the task of creating
Insulation around our Customer.
How do we create Insulation? It is not one thing that we
do but rather is the end result of 3 disciplined processes;
Engagement Level of customers based on both how
well they understand our products and services and
how committed they are to them. The Engagement
Quadrant allows us to plot groups of Customers
based on these two axes with the clear intent of
moving them towards the Northeast quadrant and
making them Brand Ambassadors. Not meant in any
pejorative sense, but our failure to effectively engender
our customers understanding and commitment can
lead to brand sabotage. After all, people are media,
and to the extent we can delight them with our brand
experience and the relationship they have with us,
their proclivity to act virally…by touting our brand
and referring others…is greatly enhanced.

14 January 2009 | Loyalty Management

“We know that our most valuable assets…
our customers…are constantly exposed
to competitive offers, pricing discounts,
substitute products, and exposed to
customers buying nothing at all as a
means of achieving cost savings.”
Th e E n g ag e m ent Qua dr a nt
Engaged Customers Deliver Results
Ambassadors
Understanding
Bystanders
Champions
Weak Links
Loose Cannons
Saboteurs
Commitment
2) Dialogue—Next we need to establish a basis for
having a meaningful and relevant Dialogue around
the areas of mutual interest with our customer. This
begins with having a web based Dashboard Loyalty
tool that “speaks to the Customer”. It has to allow
for timely inbound and outbound communications
that help to educate, communicate and motivate the
customer in a manner that is both convenient and
comfortable for them. It should cause them to select
a goal for themselves then measure progress on an
easy to read Gauge. The Dashboard should bring
forward relevant information that they are intrigued
by on a regular basis, presented in a compelling and
timely manner. Selecting rewards that the customer
finds uniquely motivating to them is a critical
success factor. Finally, a good Dialogue allows for the
assigning of urgency to those behaviors that are of
greatest importance to your Brand.
3) Loyalty—The commitment a customer feels
towards your Brand or the Relationship with you
is a function of many factors which you are quite
familiar with. It is an emotional identification that
your Customer makes with the Product, Services and
Relationship you provide. We all measure Customer
Loyalty in various ways, most commonly with metrics
around intent to repurchase and recommend to
others. But, we also have seen that leveraged cross
sell of multiple products from the same brand can
drive incrementally higher levels of loyalty across
any customer set. It is clear that the most effective
Customer Loyalty Program, and supporting initiatives,
utilize expert structuring and best practices for
engendering deeper, more pervasive loyalty across your
segmented Customer Base.
Why Insulate? Well in these economic times it is well
established in B2B marketing circles that there are arguably
fewer new customers to be had. Therefore, one very savvy
strategy for growth is to reduce your Attrition Rate.
Imagine effectively insulating your customers so we can
drive your Customer Attrition down from 22% to 16%.
All other things being equal, this would result in a 6% year
over year growth in your business!
With customers tightly insulated from competitive
pressures, dramatic reductions in attrition and the
aforementioned growth are not only possible…but the
buzz fostered by the comfort of Insulation will have some
new customers itching to get their head wrapped around
your offerings. L
January 2009 | Loyalty Management 15
 FEATURES
True Loyalty in Tough Times
by Steve Yastrow – Yastrow & Company
Everyone is trying to steal your customers.
And, with the current economic climate, you can bet that your
competitors will step up their efforts to pilfer your customers.
So, what are you going to do?
To answer this question, let’s first think about another question:
Why wouldn’t a customer leave you for a competitor?
Is it your products? Are your products so unique
enough that no competitor can offer a substitute?
Your services? Are your services really one-of-a-kind?
What about your promotions and offers?
Are they special enough to bond customers to you?
We live in a world of crowded store shelves and endless
purchase choices. Your customers believe there is always
another product, service or deal they can substitute for
yours. You may believe your offerings are unique, but your
customers may not agree.
What do your customers think is unique about you?
What is it they “can’t get anywhere else?”
I spend a lot of my time helping companies differentiate
themselves in their customers’ minds. What I see, time
and time again, is that when people feel passionate about
doing business with a company, when they say, “I can’t get
it anywhere else,” it is usually because they have a strong
relationship with that company. Simply put, relationships
are the best differentiators.
16 January 2009 | Loyalty Management
S
o, what makes the best customer relationships?
When the customer can’t think about you without
also thinking of themselves—“We” relationships.
What happens when customers believe they are in a
“We” relationship with you? They are loyal to you and to
their relationship with you.
Notice what I wrote. They are loyal to you and to their
relationship with you. I specifically did not say that they
are loyal to your loyalty program, or loyal to your weekly
coupon offers, or loyal to your frequent buyer program. I
said they are loyal to you and to their relationship with you.
This distinction is very important. We often lull ourselves
into a belief that we have a loyal customer just because
the customer buys whenever we make them an offer. But
this customer’s loyalty may be fleeting, and she may leave
you as soon as a competitor makes her a better offer. I
call this “transactional loyalty,” when a customer is loyal
to your promotional offers, but is not really loyal to you.
Transactional Loyalty is a fragile type of loyalty. And, it is
the type of loyalty most companies are trying to cultivate.
I
encourage you to think about a more valuable
type of loyalty than Transactional Loyalty. Consider
True Loyalty, where a customer is not only loyal to
your promotional offers, but is loyal to you and to her
relationship with you as well. True Loyalty is much more
sustainable than Transactional Loyalty.
How do you create “We” customer relationships that
result in True Loyalty?
Every relationship in your life was built one interaction
at a time. If you have enough relationship-building
encounters with someone, you will eventually have a strong
relationship with that person.
Which brings you face to face with a very important
question you must ask about your current loyalty efforts:
What do our loyalty programs and promotions lead to,
more promotions or stronger relationships?
If your loyalty programs become a dependency for your
customers, without which they would have no reason to
buy from you, you have created Transactional Loyalty that
is vulnerable, fragile and weak. Take away the promotions,
and you have taken away your customers’ reasons for
buying. If, on the other hand, your loyalty programs and
promotions are building blocks of a We relationship,
your customer will develop reasons to buy from you that
transcend promotional offers. This customer
will be an example of True Loyalty.
At their best, loyalty programs and
promotions eventually create their own
obsolescence in customers’ mind. Sure,
customers like the rewards. But their
reasons for buying go well beyond the rewards. I am
writing this article on a United Airlines flight from
Chicago to Frankfort. I guarantee you that the most loyal
1K flyers (what is that?) sitting in first class appreciate the
miles they are earning for this flight but, even more, they
appreciate their relationship with the airline. On the other
hand, those frequent flyers on this flight who are less loyal,
and booked United primarily for the miles they will earn,
are those who have only a transactional relationship with
the company. American Airlines could probably steal this
second group if they made a rich enough offer.
Which brings us full-circle to my opening comment.
Everyone is trying to steal your customers. As we fall
deeper into an uncertain economic abyss, there is no asset
more valuable to you than your customer relationships
and the loyalty that comes out of those relationships.
If you want to thrive in 2009, focus on creating True
Loyalty, where every offer you make and every reward you
give lead not just to more offers, but to sustainable We
relationships and True Loyalty. L
January 2009 | Loyalty Management 17
 FEATURES

Loyalty: a “Symbiotic System”

Not a Program
by Paul Hebert – i2i

Customer loyalty has been around for some time—over 100 years according to some sources.
Starting with stamps given to customers who paid cash for purchases in the 1800’s to the more
formal programs such as Green Stamps and the well-known frequent flyer programs of today.
Some studies indicate that over 75% of consumers belong to a loyalty program of some kind.
A Jupiter report from 2003 showed that companies spent over $1 billion on loyalty programs.

Loyalty is big business. Customer loyalty is the
holy grail of marketing. If a company has loyal customers
their cost of customer acquisition almost disappears,
price sensitivity is reduced, customers’ tolerance for
mistakes increases and the company realizes higher profits.
Customer loyalty is good business.
Because customer loyalty drives so many great business
benefits it’s no surprise that the industry continues to
grow—more programs, more offers, more rewards, more
points. But we’re not really getting all we can out of loyalty.
Service Profit Chain
Way back in the dark ages (1997) an idea called the
Service Profit Chain was proffered by some Harvard
academics—Heskett, Sasser, Jr. and Schlesinger—linking
customer loyalty to employee loyalty and customer
loyalty to profits and growth. Their basic premise was that
customer loyalty was driven by employee loyalty, customer
satisfaction was driven by employee satisfaction and profit
was driven by customer loyalty. The typical representation
of this idea was a “chain of events” that led to profit.
This revelation drove an increase in attention on employee
satisfaction and employee loyalty.
Human Resources can now focus on employee loyalty
and satisfaction and feel like they are contributing more
to the business than just making sure W-4 forms are
completed. Unfortunately—they don’t talk much. There is
no connection between what the HR department is doing
to drive loyalty and engagement with employees and what
Marketing is doing to drive loyalty with consumers. But
let’s really complicate this—Sales (sometimes Marketing)
typically has the responsibility for driving sales within a
distribution system—dealers, distributors, wholesalers,
etc. There are a variety of promotions and incentives
offered to distribution channels to drive sales. Sometimes
called “frequent buyer programs,” sometimes they are
hidden within “co-op” programs. By whatever form they
are presented, they bear an eerie resemblance to loyalty
programs—do “x” get “y,” hit a goal and be crowned a
“Gold” member.
But alas, and a lack—they aren’t connected. In other
words…
n HR runs employee loyalty programs
n Marketing runs consumer loyalty programs
n Sales runs distribution loyalty programs

Separate But Equal

Serv ic e
Internal Employee Perceived
The Marketing Department P ro f i t Service Employee Retention & Value of
Satisfaction
typically drives the customer Cha in Quality Productivity Service

loyalty program and helps the

business drive sales. With the Profit & Customer Customer
new-found connection to profit Growth Loyalty Satisfaction

through the Service Profit Chain,

18 January 2009 | Loyalty Management


No one runs the strategy that links
these initiatives together. Now is the
time to make that happen.
It’s a Symbiotic System—
not a Program
Loyalty is a system of initiatives that
connect to, and rely on each other to
be successful. Individually, programs
can work—and work well. When you
think of your programs in terms of
a symbiotic system you can multiply
the affect of any one program to
create results that are greater than the
individual results of each program.
“A true loyalty
By definition, symbiotic systems
are any interdependent or mutually
beneficial relationship between two
persons, groups, etc. A true loyalty
strategy is symbiotic. If you’re really
serious about loyalty with your
customers—you then must also
be serious about loyalty with your
employees and distribution partners.
One without the
other is incomplete
Consumer and less effective.
The loyalty
CHANNEL EMPLOYEE strategy is less a chain
than a network,
with interactions
between all audiences. Loyalty
strategies must take advantage of
the fact that employees not only
deal with consumers but with the
channel partners and vice versa. In
addition, loyalty programs targeted
Questions
that need to be
addressed include:
n W
 hat links the program for
the consumer back to the
employee?
n Do
 the consumers have a way
to interact and reward great
customer service? Does your
employee recognition program
include customer input?
to consumers must take into account
that for a majority of businesses,
n Do
 consumers have a way to
consumers probably interact more
interact with each other? Can
with the distribution channel than the
one customer drive another
sponsoring companies themselves.
customer’s behavior? How
are you leveraging the social
It’s the White Space
networking aspect of the new
There is a lot of information and economy?
there are a lot of companies that provide
loyalty program services from design n Do
 non-customer facing
and reward fulfillment through data employees understand the
analysis and business intelligence. loyalty program? Do they know
what their role may be in driving
loyalty?
n Does
 the distribution channel
strategy is symbiotic.” have a way to connect to
employees at the sponsoring
company?
There are also a lot of companies who n Are
 the members of the
can put together a great employee distribution channel consulted
recognition program designed to on how the customer loyalty
increase engagement. Distribution program is designed and
incentive programs are very common delivered?
and can be implemented easily. Each
of these discrete pieces can be designed n D
 o members of the distribution
and implemented flawlessly—and channel have any way to
effectively. But it is less about the customize the consumer
individual pieces than the white space program for their audience?
that is between them. (Within the scope and strategy
of the base program of course.)
Do yourself a favor and look for ways
to connect the white space between n H
 ow does the program pull
your programs; take advantage of the in the channel members and
symbiotic nature of loyalty and enjoy a make them want to support the
greater return on your program. L consumer program?
January 2009 | Loyalty Management 19
 FEATURES
Comp Customers,
a Better Customer Metric
for Managing the Business
by Phil Rubin – rDialogue
T
here is a fundamental difference between metrics
that report on the business performance (i.e., how
are we doing?) versus metrics that enable you to
manage the business (what do we do?).
Take retailers, for example, who are struggling with
double digit sales declines over the critical Holiday
period. The metric they follow, along with investors,
is “comp sales,” or comparable same-store sales. For
loyalty programs, there are similar numbers for program
performance; metrics such as “total program spend,”
membership figures (growth, attrition, etc.) and now
Net Promoter Scores (NPS).
NPS is the loyalty metric most in vogue these days and
while it’s a good, high-level metric for measuring broad
customer “loyalty” (and significantly better than Customer
Satisfaction), it’s not effectively used as a management
tool. A promoter doesn’t necessarily equate with a valuable
customer. Comp Sales can identify dips in sales by region
and by product, but that doesn’t give an indication of
how to fix the problem, other than mass promotion (i.e.,
discounting).
These days, most retailers have loyalty programs and
store-branded credit cards, giving them insight into
spending at a customer level. The value of loyalty programs
rest in the ability to track and manage customers. The
data yielded from programs, along with the ability to
relevantly communicate with customers is the power
that is increasingly overshadowing effectiveness (and
measurability) of other marketing activities.
20 January 2009 | Loyalty Management
TM
With these data in hand, there is a much better metric
to focus on: Comp Customers.
Comp Customer metrics are similar to Comp Sales
metrics, but don’t confuse the two. Comp Sales measures
comparable stores sales over prior periods; it measures
changes in the total revenue. It does not reflect changes at
the transactional or customer levels.
“The value of loyalty programs rest in the
ability to track and manage customers.”
In contrast, Comp Customer metrics provide visibility
into how individual customers are spending compared to
a previous period. Comp Customer measurement provides
insights into which customers are trending up and which
ones are trending down, and by how much. This allows
marketers (and others in a company focused on driving
sales) to look at individuals and groups of customers (e.g.,
segments) in terms of spend and trend. With these insights,
they can then treat them differently in terms of messaging,
offers and timing of communications.
So while many retailers struggle and default to mass
promotion, there is a way for them to impact declines more
profitably: with the right loyalty tools and Comp Customer
analysis on hand. The following real world scenario
illustrates the value of using Comp Customer metrics to
guide marketing decisions and investments.
“Comp Customer metrics provide
visibility into how individual customers
are spending...{this} provides insights
into which customers are trending up
and which ones are trending down...”

L
et’s start with “Smart Stores” which is
facing comp sales declines of 15%. Let’s assume
their performance is on par with their competitors.
Everyone has a loyalty program and everyone is basically
running the same program (just like real life!).
Just like their competitors, they know that sales are down
in Region A and B for products X, Y and Z. But unlike its
competitors, Smart Stores just developed Comp Customer
reporting. Using a proprietary customer segmentation
scheme, they divide customers into four key groups and
assign each customer to one of those four groups.
Analysis of activity among those four segments shows that
two out of four segments actually show increases, with one
segment performing significantly higher than the others.
Unlike Smart Stores, “Typical Stores” is resorting to the
old mass marketing, spray and pray, discounting approach.
This approach yields the same offer and deep discount to
everyone, including those customers that are continuing
to shop in spite of the downturn. While they might have
slightly higher sales at the end of the period, they will erode
profitability by offering deeper discounts than necessary to
customers that would have shopped anyway (i.e., dilution).
“There is a way for retailers to impact declines
more profitably: with the right loyalty tools
and Comp Customer analysis on hand.”

Based on this knowledge and their ability to send email
to customers, Smart Stores decides to send different email
versions to each segment, messaged different based on how
each segment is doing from a Comp Customer standpoint.
They smartly provide a richer offer to those customers with
negative comps, knowing that it will take more to win
them back.
To those customers in the best performing segments,
they employ a message more focused on reasons to shop,
new merchandise and a more value-added offer, rather
than a deep discount. They even recognize and thank
these customers for continuing to patronize them and
reinforcing their core value proposition.
The real value of a loyalty program, and loyalty
marketing, comes in using the data and the program to
do better relationship marketing through better insights.
The Comp Customer metric provides that window of
insight into how customers are behaving and who we
want to target to behavior differently. In any market, but
especially a tough economic market, it’s a vital tool in
prioritizing limited resources to drive customer behavior
at the greatest profit. L

January 2009 | Loyalty Management 21

 FEATURES

Dialing in on Relevance
by Connie Chesner – OTM Partners

T hink like your audience . Talk like your audience .

As customers we all have been on the receiving end of some really bad marketing. We’ve seen
marketing communication that clearly misses the mark. Whether it is the direct mail package from
your existing credit card company treating you like a brand new prospect, or the poorly timed
“would you like an apple pie with that?” you hear just after ordering a salad—we know what an
irrelevant message is and what it does to your perception of a brand.

To hit the mark, a message must be relevant to
consumers. But what are the hallmarks of relevancy?
How can we be sure that our communication is on
target? And what are the associated benefits for your
product, service or brand?
When a message truly connects with its intended
audience there are two principles at work. Relevancy is
achieved when:
n We think like our audience
n We talk like our audience.
How to get started: think and
understand.
Learning how to think and talk like our audience
begins when you engage consumers in strategic
conversations with two overarching strategies. First,
determine who to talk to. You need a diverse group of
customers to ensure that the insights gleaned from your
conversations are applicable across your markets. Next
use trained researchers to ask pointed questions and
probe for information in areas of additional insight.
Leave bias out of the conversation by engaging outside
resources not entrenched on a day-to-day basis with
your industry. During analysis, look for commonalities
in thoughts and language across customer segments.
In structuring your conversations you may end
up asking questions similar to those that led to the
development of your products and services. In addition,
you’ll delve into customer psychology getting to the core
of what really makes them tick, even in areas of their
lives which may seem only tangentially related to your
products or services. These areas often prove to be the
most valuable in effective communication. Understand
how customers think about your category and then your
product, service or brand. How do they make decisions
specific to your category? For instance, someone who
values independence is driven by different motivations
in making financial decisions than someone who places
a greater value on family security and work ethic. When
underlying motivations for the same action are different,
uniform messaging will not be very effective.
By taking the time to truly understand your
customer’s motivational drivers via these conversations,
your efforts will be appreciated and rewarded. Engaging
customers in a meaningful dialogue and then messaging
back to them in terms they are familiar with, creates a
sustainable point of differentiation. When customers
know they have been heard, they will flock to your
brand.
The idea is to know what to ask, how to ask it,
and then develop your marketing communications
accordingly.
Then talk in a familiar voice.
Your customers likely do not think about your
products, service or category in the same way that you
do. The words and phrases they use will vary, sometimes
dramatically, from yours. For instance, most customers
do not use phrases like “financial instrument,” “service
area,” or “share of requirement.”
Relevance comes when we actively seek to understand the
customer’s language and adopt it in our communication.
It is about moving from corporate-speak to a tone and
voice that customers can respect and relate to.

22 January 2009 | Loyalty Management

 In order to do this effectively, you must carefully listen
to how your customers are phrasing their talk around
your category, products, and services. Don’t judge their
choices, embrace them. After all, your goal is to learn
about the world from THEIR perspective and to then
mirror that back to them through your communication
choices. Because this can be difficult to do, trained
researchers are often brought in for their active listening
and interpretation skills which reveal language choices
and patterns of the audience which can later be engaged
during message design.
Caution: Know your own voice.
Does this mean you should inject “dude” into every
communication? Should you defer to using slang or even
crass language because of common usage among your
target audience? Of course not. The important thing to
remember is that relevance is about context—how your
target audience thinks, talks and makes decisions and how
this impacts their perceptions of your brand and how your
brand is expressed via different communication channels.
Don’t judge your customers’ choices, embrace them.
Thinking like your customers and picking up on
language cues can help you understand how to make a
compelling connection between your brand and your
audience. However, what you say and how you say it
must also be brand appropriate. Otherwise, you end
up with a transparent attempt that panders to your
audience—a mistake that most audience segments will
recognize and reject.
Take the process further.
Now that you are thinking and talking like your
audience, what can you do to move these ideas into
actionable strategies that can improve your business?
Consider these two general approaches.
1. You now understand that your customers do not
think and talk about your products, services or
category the same way you do. Also, your customers
probably differ from one another in terms of how
they talk and think about your products, services,
or category. Often you can segment customers based
on motivational drivers and the language they
prefer. For example, not all customers within the
same financial institution are enticed by the idea
of consulting with an investment group. Some
customers view the term “investment” as riddled
with risk. Therefore, any mention of “investment”
in messaging will turn them off right away. To keep
customers engaged, the message must be relevant
and individually tailored.
 nowing how best to segment and customize
K
communication to an audience based on motivational
triggers can be a challenging task. Identifying existing
customer segments through conversation is the
first step—an actionable step toward making your
messaging most effective. Then develop a strategy to
get the right messages to the right customers. Your
strategy will vary based on the specifics of your project
and objectives, but will get your brand noticed and
promote loyalty among your customers.
2. Use customer conversations to help you assess their desires,
then improve your current offerings to better align with
your target audience. For example, in a healthcare
setting, it was found that minor changes could be
implemented in routine patient-staff interactions
to greatly improve the patient experience, thereby
increasing satisfaction, loyalty, and advocacy. A sports
nutrition distributor learned that retail customers
desired to have persons educated on product offerings
to make deliveries to their locations. By making a
small change in operations, great gains in customer
satisfaction and loyalty were made.
Once changes have been made to align with customer
desires, communications to existing customers and
prospects alike can inform them of the availability
of desired products and services in language they
understand. With little effort, your product or service
now aligns with customer desires making your offering
closer to customers’ ideal image than the offerings of
your competitors.
In the end, the goal is to make consumer messages
highly relevant. When marketing messages are highly
relevant and brand appropriate, the connection is
made with your brand and the relationship begins. By
continuing to use highly relevant messaging over time,
the relationship will evolve and customer loyalty will
emerge. But it all starts with a conversation and careful
listening which focuses on your customers and what it’s
like to live in their worlds. L
January 2009 | Loyalty Management 23
 FEATURES
What is Loyalty and
How Can I Get Some?
by Kelly Passey – Access Development
Today’s consumer is savvy enough to know that just
because you say it’s a deal, doesn’t mean it is a deal.
If you want real loyalty, deliver real, relevant value—and
make sure redemption is frequent and encouraged.
I
may have over 40 ties in my closet, but not all are
created equal. I am most loyal to the one my daughter
gave me two years ago for Fathers’ Day—it’s 100%
polyester, probably from K-Mart, and may have cost as
much as three dollars. However, there is an ‘emotional tie’
to that tie that does it for me.
In the marketplace, I like to define loyalty as the
increased likelihood a consumer will engage or re-engage
with a brand or product upon an identified need. Put
simply, loyalty means new business, repeat business and
referrals—loyalty means revenue. If your loyalty program
isn’t having an impact in these areas, it’s time to reassess
that emotional tie.
Loyalty methods vary widely and many venture into
staggering complexity, yet too many of them disregard
their fundamental purpose—to ‘emotionally’ connect
with the customer. Simply having a loyalty program isn’t
enough, it must offer the customer relevant value and
make them feel special frequently enough to actually
create the ties that bind.
Offering true value is important, because a customer
never tires of getting a deal. They never stop wanting to
feel smart or special. Getting a good deal feels good and it
never gets old—“deal fatigue” just doesn’t exist.
Contrast that with “loyalty fatigue,” an increasing
buzzword in our industry. The average household in the
24 January 2009 | Loyalty Management
U.S. now participates in upwards of 12 loyalty programs,
but is the average household a very loyal household? Or,
more likely, is this 12-program phenomenon an indicator
that people are still looking for the right deal and haven’t
found it yet?
“If every program truly delivered
a real deal—‘loyalty fatigue’
simply wouldn’t exist.”
Effective loyalty programs do have significant power
to influence purchasing behavior, with 80% of those
who participate in a loyalty program reporting that their
membership in the program impacts their purchasing
decisions. In fact, 60% of consumers say they are spending
27% more than they did before joining their favorite
loyalty program, and would spend less if a company were
to discontinue.
So, why the fatigue? Consumers keep adding yet another
program into their wallets—even as they are literally awash
in a flood of points, miles, beans, xyz-bucks and pennies
on the dollar rewards all in the name of “Loyalty.” Put
simply, not every program delivers the deal it promises,
and customers are getting soured on that. If every program
truly delivered a real deal—“loyalty fatigue” simply
wouldn’t exist.
O
nly creating a true emotional connection can
remedy loyalty fatigue, and luckily, delivering true
loyalty has a simple formula: 1) know your customer,
2) deliver true value and 3) keep your program simple.
First, know your customer. Take a look at your
loyalty program. What is the emotional tie? Have you
assumed that your customer must want points, simply
because you created a points-based program? What
does your customer think is important? Yes, the answer
is different for everyone, but there are some universal
favorites: We all like to save time. We all like to save
money. We all like to feel smart. We all like a good deal.
For example, a few years ago HSBC created a Cab
ride program in NYC to help customers get to the bank’s
branches. That one cab ride probably created more loyalty
than could any number of points or miles. The program
was personal, practical and memorable, and it earned
HSBC an emotional tie with its customers. HSBC got
to know their customers—and they offered them a good
deal. And, although this approach may seem pricey, if you
consider loyalty for the buck, it surely compares more
favorably than your average banking loyalty program.
Next, deliver true value. Today’s consumer is savvy
enough to know that just because you say it’s a deal, doesn’t
mean it is a deal. If you want real loyalty, deliver real,
relevant value—and make sure redemption is frequent and
encouraged.
A healthy loyalty program brings you “goodwill dollars”
when the customer is rewarded—you invest in an incentive,
and the return comes in the form of repeat business,
referrals, or a larger purchase. Despite this fundamental
principle, many loyalty programs have evolved that require
program administrators to discourage redemption to
keep the programs solvent. Ironically, this is currently the
standard model for much of the financial sector.
This phenomenon disregards a fundamental factor to
loyalty—redeemers outspend non-redeemers three to one.
It is not the existence of an incentive that will get customers
to bring you more business, it is the redemption of that
incentive. A successful loyalty program both encourages
redemption and drives revenue. In a very successful
program, redemption directly drives revenue.
Keep any rewards/loyalty program simple. Value
your customers’ time. Don’t make them count points or
accrue miles for years. Save them money without requiring
them to jump through hoops. Make them feel smart
because they got a great deal, not just because they finally
figured out how your loyalty program works.
An easy-to-use program simply increases the redemption
factor, which in turn increases the power of your loyalty
program. If you want repeat business, give repeat rewards.
If you want frequent business, give frequent rewards. If you
want customers to think of you first, then think of them
first, by valuing their time, money and intelligence with a
practical program that promotes brand redemption—and
therefore, brand allegiance.
Offer real value. Encourage redemption regardless of
your ‘currency’. Make it easy, and make it often. In this
economy, it has never been more critical to refocus on these
fundamentals and create that emotional tie—the one that
will bind your customer to you for years to come. L
January 2009 | Loyalty Management 25
 FEATURES
How Do I Value My
Rewards Program?
Let me count the ways…
by Sarah Phelps – First Annapolis Consulting
L
aunching and sustaining a rewards
program requires investment, focus and above
all, patience. Once in market, the only way the
program is optimized is if the sponsor utilizes marketing
and other resources to call attention to the program and
remind current members and prospects of the benefits of
being a “loyal” patron of their business.
Today’s environment has all program sponsors, financial
institutions and retailers alike, evaluating each line item
of expense in their business looking for ways to generate
savings that go straight to the bottom line. Certainly
rewards program reserves and administrative expenses are
not immune to such scrutiny and can be an easy target
for financial analysts. After all, it really is just returning a
portion of precious margin to customers…or is it?
“Financial analysts have a tendency to underestimate the value
that an organization garners from a rewards program.”
Financial analysts have a tendency to underestimate
the value that an organization garners from a rewards
program. Financial institution sponsors will look at
per card performance for rewards and non rewards
customers, compare interchange revenues, net out
the rewards reserve rate, and call it a day. Retailers,
on the other hand, sometimes limit their evaluations
to average sales per ticket, net out in-store discounts
provided to rewards members and look no further. In
each case, the broader benefit of the rewards program is
underestimated, potentially…grossly underestimated.
There are several additional elements of rewards
program value to consider. Perhaps the most under
recognized with the greatest potential impact is customer
attrition. The length of a rewards customer relationship
as compared to a non-rewards customer can be eye
opening to skeptics of the value of rewards programs
26 January 2009 | Loyalty Management
to its sponsor. Not only should the revenue over time
of the relationship be considered but also the cost of
replacing that customer in the event that they do attrite.
In addition, the number of products carried by the
customer, or the number of incremental visits is also
important to include.
Another example, but perhaps the hardest to
quantify, is the marketing value of various forms of
communications that the rewards program supports.
Each statement, e-mail and web visit supported by
the rewards program would have to be replaced by
another, less permissive, and often more costly, form of
communication that equally impacts member awareness
of the program and the sponsor’s value and brand.
This is not to say that opportunities do not exist
to reduce rewards program costs. There are several
strategies such as segmenting programs to target top
tier customers with the most compelling value. There is
also the potential for adjusting redemption options or
raising redemption costs. Adding a nominal membership
fee is also an option to consider. The impact of any of
these changes however, needs to be closely monitored to
quantify their impact on customer revenues.
At the end of the day, the value of a rewards program
and of the customers participating in it should be
carefully evaluated before employing any cost cutting
measures. Those evaluating rewards program costs should
look to the items mentioned above and consider others
that may be unique to their organization. One potential
challenge in all of this is the availability of behavioral
data to support such an analysis. Those embarking on
a new program construct should carefully consider the
data points that will be necessary to support continued
program analysis such that the program’s performance
can continually be measured. L
 TRENDS & REWARDS

Gift Cards in a
Down Economy
by Deb Merkin – Gift Card Partners

W e agree, we’re in a down economy. Budgets are

being stretched or eliminated, customer behavior “Gift cards have both “trophy”
is harder to predict, and getting the biggest bang for the
buck is more important than ever.
and “halo” value. Recipients are
reminded of how the card was
A down economy can certainly have an impact on acquired when they redeem it or
any loyalty program. However, unlike other sales and
marketing programs, loyalty programs have historically
share it with family or friends.”
endured economic downturns. A recent Incentive Research
Foundation (IRF) study, “Effects of a Down Economy on
gift they really want. Berg added, “As you’d expect, we are
the Incentive Industry,” looks at ways incentive program
finding the most popular redemptions are a mix of brands
administrators are adapting their travel and merchandise
that provide “everyday needs” like gas, groceries, discount
incentive programs in response to current economic
merchandise and home improvement items, yet we are
conditions.
also seeing an increased interest in experiential rewards
that provide a reprieve from life’s daily demands!”
Results of the survey show that a down economy has
more of an impact on travel incentive programs than on
For consumer promotions you can tap into the versatility
merchandise non-cash programs. Some 81% of survey
of gift cards to stimulate trial purchase, stimulate repeat
respondents say that a down economy is having a negative
purchases, stimulate larger purchases, introduce a new
impact on their ability to plan travel incentives, while
brand, combat or disrupt competitors, reward employee
only 48% say that it’s been harder to plan and implement
performance. Gift cards have both “trophy” and “halo”
merchandise non-cash programs.
value. Recipients are reminded of how the card was
acquired when they redeem it or share it with family or
“We are certainly seeing a significant increase in gift card
friends.
redemptions in all of our client’s programs. In addition to
having a broad choice of appealing cards in our programs,
Gift Cards are here to stay. Even as the retail market
the economic downturn has accelerated redemptions in
struggles, at this difficult time, consumers value Gift Cards
general,” shared Nancy Berg, Vice President of Operations
from the right merchant. Using them can enhance your
at Kobie Marketing.
program more than any other vehicle.
Since most survey respondents agree that the use of gift
An additional tip from Berg, “As a buyer we are far more
cards is increasing, certainly you should be looking at ways
conscious about the brands we are working with and the
to use closed loop gift cards to your advantage. A closed
inventory levels we are carrying… we believe it’s important
loop card is one that is issued by a specific retailer. Looking
to differentiate your value proposition through these
at these cards there are those that can be used to purchase
rewards. We anticipate customers will find loyalty/rewards
everyday consumables like gas, food, and those that can
programs increasingly appealing as a way to supplement
be used to purchase wished for items like electronics,
their income and enjoy access to value-added discounts
travel, dining, or apparel. Because gift cards have become
and other benefits.” L
so prolific they give the recipient the freedom to choose a

January 2009 | Loyalty Management 27

 TRENDS & REWARDS

Get the Most Benefit

out of Your Travel Program
by John Miller – Connexions (CLTS)

The Travel Industry of America (TIA) reports 2008 overall travel spend to be down 9% with
2009 dropping even further. So what does this mean for loyalty travel? The answer might
surprise you. Although there has been a decrease in travel demand across all travel sectors,
leisure, business and incentives, loyalty travel program members have remained committed to
their program and continue to value how far their points can take them.

I
n tough economic times program members
look to the value of their program to stretch their
spending. Industry statistics show general purchase
travel is down, however loyalty travel remains strong as
members use their points to take that trip they may have
just purchased in good economic times.
As program members look to their travel programs to
provide even more value in today’s market it may be time
to ensure you’re getting the best value from your travel
rewards. As the travel industry changes it’s vital to keep
abreast of those changes to deliver the expected customer
experience and value to your program members.
Due to the complex nature of travel rewards historically
many had to be fulfilled using a travel agent or concierge
service. Also program members have been trained to pick
up the phone if they wanted to book travel rewards.
Using online self-booking redemption tools, like
Connexions Loyalty Travel Solutions’ Online Rewards
Exchange (ORX) program, members have the ability
to select travel rewards at price points that meet both
their and the program’s requirements on a website that
is available well beyond traditional call center hours. By
exceeding 60% of transactions online, the ORX platform
helped CLTS clients save in excess of $3M in operating
costs in 2008 while improving customer satisfaction scores.
Using a travel reward strategy of shifting to an online
delivery has many positive features for both the loyalty
program and its members. Travel is one of the web’s most
prevalent products and consumers are very in tune with
searching various websites and making travel reservations
online. It is very American to “do it yourself ” and online
redemption tools provide that service. Loyalty programs
can also reduce fulfillment costs by using online booking
tools which shift travel redemptions away from high
cost call centers. Call centers will still be required for
select programs and segments of the cardholder base but
used appropriately online booking tools will increase the
program member’s engagement with the program as they
come online to shop itineraries and see how far their points
will take them.
Going beyond just the airline ticket many program
members are using points to take the sting out of their
entire vacation. Many programs are now flexible enough
to allow travel rewards that include hotel stays and other
components of vacation packages. While hotel stays have
typically been in travel programs, they were traditionally
presented as a certificate based reward which provided
access to limited hotel brands and came with associated
“blackout dates.” With the advent of the modern online
booking tool program members have the ability to book
any hotel property in the travel provider’s reservation
system thus greatly expanding the reward choice, usability
and lowering the cost of delivery for the program not to
mention eliminating the issue of managing certificate
inventory. The same is true of rental car rewards.
The most important recent evolution in travel
redemption has been the introduction of dynamic points
plus cash, where even when the customer is penalized for a
partial redemption, programs are experiencing up to 70%
voluntary utilization of points + cash. Additionally, this

28 January 2009 | Loyalty Management

enables a customer to utilize their reward currency toward
any travel product (air, car, hotel, cruise, etc.) The message
from customers is clear, when the cost of travel goes up, I
don’t expect my reward program to carry the entire burden,
but look to my reward program as a savior that enables me
to take a trip that I otherwise couldn’t afford on my own.
CLTS expects that partial reward utilization will continue
to grow in 2009.
O
nline self-booking redemption
also provides program members the option to
use points + cash to buy down part, or all, of
their desired travel itinerary. This leads to accelerating the
redemption of a traditionally high value reward and creates
more engagement with the program. Rather than waiting
15 to 24 months or longer to get a “free” airline ticket many
program members are opting to use the points and cash
model to get their reward now and using split pays to do
so. Satisfied they can get the high value reward when they
want, program members start earning for the next reward
sooner. There are a variety of pricing models available for
program managers allowing for the cost per point to be
managed to meet the program’s economic model.
As online redemption tools evolve to make the
redemption process easier, access to travel reward inventory
at competitive rates is going to be a key ingredient for a
successful program. Just having a delivery tool won’t make
you competitive. For many programs travel rewards are
a key enticement and the reward cost, even if in points,
needs to be on par with the large online travel agencies
(OTA) in the market place. Unlike merchandise travel
rewards don’t have the option of using a different model
or brand to try to distinguish the reward. The travel
supplier network is very upfront with item costs and the
sheer number of travel web sites makes masking a ticket
cost nearly impossible. Due to the clearly visible product
pricing working with a provider of scale will only benefit a
program.
Proactive deal sourcing by your travel provider is another
great way to keep program members involved with the
program web site. Rotating specials and last minute deals,
especially in today’s economy will drive traffic to a program
site. The key here is speed to market and consistency of the
message. Members need to know that on designed times to
check their program site for the latest offer.
Adding ancillary travel components to the redemption
mix also benefits programs. Components such as
destination activities and events can be booked in the same
travel redemption itinerary creating a complete solution
for the program member. Gone are the days of booking
a reward ticket and then searching for companion tickets
at another source. Not only is this a better customer
experience but it drives additional card spend for the
ancillary products.
The future of travel rewards continues to evolve with
new tools and creative applications all designed to reduce
delivery costs and improve member experience. The ability
to shop and redeem for cruise and packaged vacation
inventory are two of the rewards on the horizon for online
fulfillment. Working with the right travel provider is the
key to getting the most benefit from your travel rewards. L
January 2009 | Loyalty Management 29
 TRENDS & REWARDS

The Rewards
Revolution
is Here!
by James C. Purdy – Bridge2Solutions

The new rewards revolution has begun in earnest, evolving from the convergence of online
consumers with new robust technology such as sophisticated web services and services oriented architecture, reward
programs now provide real-time online catalogs offering millions of choices—all branded and easily managed for
the program sponsor’s specific needs. With it, the sales incentive, employee recognition and consumer loyalty
program marketplace has a new spark of life—emanating from the power of personalized choice and selection that
the rewards side of the performance equation can now offer. Technology has brought speed and vast selection to
our everyday lives and redemption options in point programs have now caught up.

P
articipants and programs have changed
over the years, from the stamp programs of 100
years ago, to the online breadth and depth of
rewards today—in between and still valid are emblematic
jewelry, logoed merchandise, BOGOs, plaques, trophies,
premiums, plateaus, catalogs, gift certificates, debit cards,
gift cards and of course cash discounts or cash back.
Participants have become more savvy and consumerism
has made them more impatient—when they know they
have earnings, they demand their rewards. Bank loyalty
programs currently offer various reward options for different
portfolios. Personal preference has become imperative as we
all have grown accustomed to searching online for the exact
item that we want– cardholders want experiential rewards,
events, various activities and tours, online travel planning
and seemingly limitless merchandise choices.
Having millions of reward options already accessible
online then opens up future opportunities for accessing
desired redemption options. My company, Bridge2
Solutions, offers bridge technology necessary to present
millions of rewards, in easy-to-browse user interfaces, for
those companies operating point accrual systems/programs.
The white label plug and play ability along with real time
rewards pricing, availability and accessibility has been made
possible through advances in web services technology.
We are helping to revolutionize rewards redemption for
all categories of point programs—mostly avoiding dollar-
denominated media—equating the earnings currency to
the redemption currency. If you earn in points, you redeem
in points.
What about results? Our collective vision to
bring the widest breadth of rewards to the marketplace
in a real-time environment started less than five years
ago—while we knew we had a good reward solution, we
didn’t know the extent of the results that vast selection
and real-time inventory could bring to a rewards program.
The excitement and changing environment of a real-
time “living” rewards catalog drives many more visits to
the catalog URL by the participating audience—which
translates into 5-10 times more brand “hits” per month for
the sponsoring company. “Adding such an extensive catalog
with ease of navigation increases the value of any rewards
program,” said Michael Ruege, Executive Vice President of
USMotivation, headquartered in Atlanta, GA. “Participants
are visiting their program sites much more often because
they have such a wide variety of reward options and
choices. Rewards range from books and CDs all the way up
to individual travel and high-end electronics. Choice is the
catalog’s biggest attraction and our program sites create a
customer experience that is personalized-there’s something
for everyone.”

30 January 2009 | Loyalty Management

“Adding such an extensive
catalog with ease of navigation
increases the value of any
rewards program.”
—Michael Ruege, Executive Vice President,USMotivation
T
he engagement of the
participant in a point rewards
program directly corresponds
to the reaching of business goals
wrapped by the program. Additionally,
in the last year alone, we’ve fulfilled
over 40,000 different SKU’s proving
that participants truly are individual
and desire very different rewards.
The capability to offer this kind of
selection only comes with the latest
of technology advancements, after
all, offering more than 6 million
items doesn’t mean walking into a
huge warehouse filled to the top with
merchandise with no labels or signage!
Technology is enabling us to offer
vast selection in an easy to navigate,
searchable interface that mirrors
leading online retail experiences.
The last couple of years have had
the equivalent impact on the rewards
marketplace as the previous 10
had on the same market. Rewards
selection and redemption have now
caught up with the earnings and
reporting technology of consumer
loyalty, employee recognition and
sales incentive programs. There is
no more need to espouse “awards
neutrality” when millions of award
choices may now be presented in easy
to navigate online catalogs for all types
of programs. The customer-participants
have let us know that this is a different
world—they want to earn points, they
want to burn points and most of all
they want rewards that make sense to
them, whether a redemption is for a
cappuccino machine, a 10mp camera,
tickets to a theater production, an
iPod, zip-lining in Costa Rica, a flight
to Montreal, green appliances, or 20
DVD’s—let them make the decision
and select their personal choice of
rewards priced in the earnings medium
of the program.
In summary, the rewards revolution
is here—enabling sponsoring
companies to embrace more attractive
choices for today’s target audiences.
Considering the latest global economic
environment, it is more important than
ever to attract and retain customers
with the assistance of offering valid,
enticing, timely rewards for points
earned, while making the selection
process entertaining, and desired
items simple to locate and quickly
delivered. If the point earners are
redeeming more, then they will in turn
want to earn more in the sponsoring
company’s program. So, in the last
part of the first decade of the third
millennium—technology and creativity
are in sync for point earning and
point redemption activities—creating
excellent opportunities to maximize
the effectiveness of rewards programs.
Not too long ago, many of us were
predicting that the TV remote would
become what the mobile phone has
become—the access technology of the
real world to the online world. Today,
and in the near future, technology
will take revolutionary jumps in the
U.S. and abroad and as biometric and
mobile devices edge out the plastic card
market for identification, information
and payments—I guarantee that
rewards programs will evolve
accordingly. My TV remote told me so
… where the heck is it anyway? L
January 2009 | Loyalty Management 31
 TRENDS & REWARDS
Fuel Rewards Marketing
and Loyalty: Gaining
a Better Understanding
by John Cullen – Pointe Advantage
In recent years, a number of misconceptions have grown up around
the use of fuel rewards marketing programs in the retail industry.
Driven by ignorance or competitive zeal, some have questioned the
usefulness and profitability of fuel incentives.
The simple fact is that fuel rewards are working right
now for a wide range of retailers including grocery and
convenience stores, automobile dealerships and on-line
retailers, among others. They have used this program to
attract new customers, build consumer loyalty and drive
incremental sales and higher profits. And the program is
broadly applicable to all retailers and service providers of
every type and size. From the local dry cleaner and the
hair salon to your favorite restaurant, your accountant
and all of the larger category killer retail chains. These
diverse businesses can leverage innovative fuel-based
rewards programs to remodel their retail marketing and
customer loyalty schemes and to drive same-store sales
and increase profits.
And over time, fuel-based rewards will evolve from a
closed network, retailer-centric model, to a broad based
community reward market where consumers will no longer
decide “what” they buy, but “where” they buy it. And with
community fuel-based rewards consumers will cross over
retail channels and retail brands to accumulate rewards,
using free gas as the common currency. As a result, market
share will shift away from retailers who do not offer fuel
rewards to those that do.
To understand how we can get from here to there, let’s
take a closer look at how this increasingly popular form of
retail promotion is being used today.
32 January 2009 | Loyalty Management
Understanding Fuel Rewards
Understanding fuel-based rewards means understanding
the consumers’ attitude toward their fuel purchases. Buying
gas isn’t gratifying and no matter what the price, consumers
always feel like they are paying too much for a gallon of
gas. Fuel-based reward programs exploit this sentiment
and the high perceived value of gasoline. In fact, today’s
shopper would rather get a dollar of free gas than an actual
dollar, because they perceive more value in the gasoline
than in the currency.
Fuel-based rewards put this powerful consumer
perception to work for retailers, manufacturers and fuel
redemption locations.
Most fuel rewards programs are relatively simple:
consumers shop at a given retail outlet, where point of sale
tags and other marketing and advertising vehicles are used
to identify participating products or qualifying purchase
requirements. Shoppers receive a Free Gas voucher or
electronically issued fuel reward at checkout when they
meet pre-established purchase requirements, then redeem
the reward at a participating fuel station. From the
consumers perspective this program more than exceeds
the test for program understanding and ease of use by
providing instant gratification with instantly issued rewards
that are available in real-time for immediate redemption.
There’s nothing to mail, nothing to track and no waiting
weeks for the reward to be activated. This program is as
simple as 1-2-3; shop, earn, redeem, 1-2-3.
By communicating a free gas offer at the shelf, where
70% of all brand purchase decisions are made, fuel-based
rewards can be used to shape and drive consumer buying
behaviors.
Recently, however, several crucial misunderstandings
have arisen about the efficiency and cost effectiveness of
fuel incentive programs.
Tackling the Common Misunderstandings
How can fuel-based rewards be used to drive profit?
Some compare fuel rewards programs to loss leaders which
are not profitable. But in fact, real world experience shows
that when fuel rewards programs are expertly planned and
run in an efficient and optimized way, they generate new
sales and higher profits.
Here’s a real-world example of precisely how a fuel
rewards program can work.
Imagine, for example, that a retailer sells 100 units
of product at a full price of $1.99 generating $199 in
revenue and $70 in gross profit. When that product goes
on promotion, discounted 20% to reach a new retail price
of $1.59, a 130% increase in unit sales must be minimally
achieved to break even at gross profit. What if I told you
that through a fuel rewards program the retailer that
repurposes the margin dollars from the temporary price
reduction could achieve incremental profit ranging from
160% to 324%, the difference being whether or not the
fuel center is owned and operated by the grocer or if it is a
partnered fuel redemption center.
So let’s take a closer look at the fuel rewards offer,
repurposing the margin dollars from the example above:
With fuel-based rewards, the retail price remains at
full retail, $1.99. The fuel offer, using cents-off-per-
gallon methodology would be .04 or 60 cents maximum
redeemable face value (.04 x 15 gallons). Assuming 50%
redemption the effective cost of the promotion comes
in at 2 cents-off-per-gallon or 30 cents in total (.02 x
15). Typically this single unit promotion would yield a
minimum increase in units sales of 40% driving product
revenue to $279. Since the product was sold at full margin,
margin dollars would have increase to $112. But what
happened at the pump? With fuel rewards unlike temporary
price reductions where these margin dollars walk out the
door with your customer, these same dollars are redeemed
at the pump driving 1050 incremental gallons of gas from
a planned consumer redemption event. In turn, $2,824 in
fuel revenue is derived (15 gallons at $2.79) and $115 gross
margin dollars from fuel reward redemption.
(continued on next page)
January 2009 | Loyalty Management 33
 Fuel Rewards Marketing (continued)
The comparison overall looks like this: To generate new sales and higher profits from fuel
rewards, retailers must understand a number of economic
Full Retail TPR Fuel Rewards and behavioral variables specific to fuel-based incentive
programs, including: how consumers respond to cents-
Product Rev $199 $366 $279
off-per-gallon or dollar off offers, where to set fuel rewards
Gross Profit $70 $70 $112 to achieve specific business goals, how to successfully
Fuel Revenue -- -- $2,824 promote singles, true multiples and combinations, how
Fuel Gross Profit -- -- $115 to handle variable weight items, and how to manage
Overall Revenue $199 $366 $3,103 coordinated basket value and threshold value programs to
modify consumer purchase behavior and to optimize unit
Overall GP $70 $70 $227
movement, incrementality and gross margin performance.
Consider all of these factors and then ask the question,
Powerful results but this example doesn’t consider the
“What happens when gas prices fluctuate during the
additional value when product multiples and product
year, how should I adjust my reward to retain consumer
combinations are used in creating qualifying reward
relevance and maximize program revenue and profit?”
purchase requirements or the impact of new customer
acquisition and increased shopping from existing
To gain this expertise, without building a massive
customers. Fuel reward customers by definition are your
internal infrastructure, astute retailers can now call on
best customers; buying more per visit, shopping more
the services of experienced fuel rewards partners. Those
frequently, sharing their stories about the size of the fuel
specialized companies offer comprehensive support for
rewards they’ve earned with friends and driving good will
fuel rewards programs, including sales and marketing, data
for your brand and store.
collection, management and analysis, sales coordination,
offer management, billing, collection, offer clearing and
Have the technological hurdles been eliminated
redemption processing.
to allow for scale and program stability? Yes. In
fact, the technologies needed to implement and operate a
The bottom line is retailers can leverage a well-planned
successful fuel rewards program—the hardware, software
and coordinated fuel reward program to attract more and
and integration strategies—are affordable, proven, stable
better customers and to encourage those customers to visit
and readily available from a number of reputable vendors.
more often, spend more per visit and purchase more fuel
The real problem is that very few retailers have the specific
rewards products at a higher sales price, thus generating
marketing experience and expertise needed to run a
greater revenue and a higher gross profit per transaction.
successful fuel rewards program.

The issued fuel rewards can then be redeemed at

All too often, retailers acquire the hardware and software
the retailer’s fuel location, or at an allied fuel retailer,
needed to deploy a fuel rewards solution, but their
driving incremental revenue and profit and establishing
technology vendor simply does not offer or cannot deliver
a 360-degree marketing circle between grocery and fuel
the marketing expertise needed to make the program meet
locations. That is why leading grocery retailers—companies
it’s potential. And retailers seldom have the expertise, or
like Safeway, Kroger, Meijer, Giant Eagle, Nash Finch
invest in the needed in-house staff required to implement
and others are using fuel-based rewards and over 560 well
and manage a successful fuel incentive effort. In most
known retailers use fuel rewards as a part of their on-line
instances a retailer operating a fuel reward program isn’t
strategies to improve sales, customer satisfaction … and
even aware that their program isn’t reaching it’s fullest
their bottom line.
potential because they are seeing positive results driven by
the power of the free gas incentive. The problem is they
By getting the facts, and improving their understanding
never knew what increases to expect or what offers to use
of fuel reward programs, all retailers can deploy this
to generate even greater results. It’s a bit like buying a jet
effective promotional strategy as part of their loyalty and
airplane, but without the expert knowledge and flight
reward initiatives. L
experience of a seasoned pilot, that aircraft will never get
off the ground or truly soar.

34 January 2009 | Loyalty Management

 • 20 Years of Winning Campaigns
• Customized Reward Collections
• Single Source Program Management
• Best Practices and Strategic Solutions
• Proprietary Dashboard Platform Delivering an Unmatched Customer Dialogue
• Totally Results Driven Team...due to our CEO having been In Your Seat as CMO

!"#$%&%$'()*+,)$-./#0,1
Contact us for a demo of our web based Loyalty Dashboard at 800-416-2090x12
or e-mail us at info@incentivegroup.com

399 Knollwood Road White Plains, NY 10603 January 2009 | Loyalty Management 35
www.incentivegroup.com
 BEST BUSINESS PRACTICES

Successful Hires
Can Executive Search Firms, Recruiters
& Headhunters Really Help?
by Amy DeBerg-Ferwerda – R&P Group

According to a recent survey, heads of Human Resources of Global 100 companies

stated that their companies mis-hired people 80% of the time.1

Statistics like this challenge us to evaluate our hiring practices and to look at our department and
company statistics to determine how we compare. With an economic mandate to accomplish more with
fewer resources, how can we ensure that we spend our resources efficiently and prevent costly mis-hires.
The cost of a mis-hire for a $100,000 employee is quoted anywhere from $50,000 to $1 million.

The question for today is “Can Executive Search Firms
really help increase the percentage of successful hires?” It
certainly seems the loyalty industry believes that recruiters
have value. Indeed the largest firms in our industry retain
executive search firms for every job above a certain level. But
do we track the success of our hires? Can recruiters help?
Let’s first define a successful hire.
 uccessful Hire = Person hired quickly meshes into
S
the company culture and achieves all first year
business goals at or above standard
So how would an executive recruiter help ensure
successful hires?
What are recruiters? To begin to answer this question
let’s first look all the types of recruiters. Personally, I am
okay with being called anything from headhunter to
executive search professional. This is because no matter what
you call me or any of my peers, there is one bottom-line
fact—the mission of an executive recruiter is to help
our clients realize successful hires. That is what you
pay us to do—to help you do. The most successful hires are
based on partnership that allows the recruiter to be excited
about the opportunity and to offer a chance to interview for
such opportunity to only the very best people.
As Terry Petra has been know to say, “It’s not the what
we do, it’s the how.”
What do they do? Recruiters have “helped” companies
achieve successful hires by simply sending a resume of
someone with whom they have never spoken. On the other
end of the spectrum, search firms interview hundreds of
potential candidates to present a select few top candidates.
Your recruiter may help create your Job Description,
Candidate Scorecard, Interview Questions both oral
and written, and may even be with you for the Face-to-
Face Interviews. There are long lists of services the most
successful firms provide.
How do they do it? Do you need a quick fix, someone
ASAP? If so, a recruiter can still help in several ways. A
recruiting firm can assign a full-time, dedicated team to call
Industry people everyday, all day, until they have people
who meet your requirements. The level of work on the
recruiter’s part can be anything from a brief scan of the
person’s resume to see that it matches your Job Description
to hours of conversations to find the potential candidates
who are interested in and excited about your company and
the opportunity. They may even require that the candidates
achieve at least a certain score on the candidate scorecard
and that the candidates complete written interviews and
provide references and specific salary information.

Brad Smart, President of Smart & Associates, Inc. and author of Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People.
1

36 January 2009 | Loyalty Management

 On the other extreme, if you plan your year to include
adding 3 Regional Sales Managers, 2 more Call Center
Supervisors, a Financial Analyst, and a new in-house
CMO—a recruiting partner can again really help. The
recruiting firm can help you define your expansion roles.
They can help recreate and rewrite roles in which people
have failed or left to make the jobs more interesting with
specific measureable accountabilities and a more involved
definition of your culture. Once your recruiting partner
understands your future (and current) hiring plans and the
profile of employees who fit well within your culture, they
work for you every day. Even when they are searching for
candidates for other companies, when they find someone
who may be a skill and culture fit, the firm can build—for
your company—an inventory of people who want to hear
about jobs within your company. As your jobs are approved
or come open, the recruiting firm more quickly produces
a selection of candidates. Over time, the more people an
industry recruiter knows at your company, the better they
become at helping you hire more successful “A” employees.

What goes wrong? Some companies spend hundreds

of thousands of dollars with the best retained firms in the
world to hire their top managers. But, they do not allow
those same managers the opportunity to retain excellent
recruiters to fill their jobs with the type of A players who
will ensure that the new manager is able to accomplish
corporate goals. Since A players tend to hire and promote
As, both time and money are saved by engaging industry
help to locate, screen, and present top talent quickly and
consistently.
What to do? Train all managers in professional hiring
methods. There are books, DVDs, and other tools available
so that managers don’t have to “wing it.”
Find an industry recruiting partner. Meet with them
in-house regularly. Treat your need to locate and recruit
exceptional talent like you treat your need to stay out of
jail by retaining an external tax and accounting firm and
a quality law firm. Shop for your recruiting partner like
you would shop for a heart surgeon—the best versus the
cheapest. Allow all your managers the opportunity to work
with your company recruiting partner for all levels of jobs.
Your internal Human Resources team is very valuable
in the recruiting process also. They should be involved in
the interviews to explain your benefits and they will most
likely provide your Offer Letter templates. Remember
that even the best recruiter—if they work in-house—is
only believable to a certain point when they speak with
a prospective candidate about how great your company
is. Yet most A employees who are ready for their next
career step will talk with a trusted industry recruiter about
opportunities. They will be more likely to believe the
glorious benefits about working for your company from an
unbiased third party. I’ll bet almost everyone reading this
article appreciates when the “right” recruiter calls to “let
them know about an opportunity.”
Candidates who allow a recruiting firm to present them
for a job opportunity understand that they are one of
3 to maybe 5 people the firm is presenting. This means
that the candidates are much more open about both their
excitement in and concerns about the job and their ability
to do the job.
Companies need no longer tolerate underperforming
employees, or 80% mis-hires. As Brad Smart says, “There
is absolutely no reason for such massive waste and human
pain.” When your Board and your Management team view
the candidates presented for their open jobs like looking
at the menu at their favorite restaurant, things are on the
right track. All of the candidates look good—they just offer
a different way to fulfill your hunger, your need. Yes, the
right executive search firm can really help you benefit from
more successful hires! L

January 2009 | Loyalty Management 37

 EXPO in
REVIEW By Susan Payton,
Egg Marketing & Public Relations

With 475 attendees from seven countries,

our first Loyalty Expo certainly exceeded
even our expectations!

38 January 2009 | Loyalty Management


“I felt like the size of this event provided more
intimacy than others—which made the networking
contacts more valuable.” —Loyalty Expo 2008 attendee
The Loyalty Expo 2008:
We’re Off to a Great Start!
With 475 attendees from seven
countries, our first Loyalty Expo
certainly exceeded even our
expectations. We were thrilled to get
such positive feedback from attendees
and speakers. The conversations
we heard about retention, avoiding
attrition and customer relationships
were truly worthwhile, and we hope
everyone left knowing more than they
did when they came.
As Mark Johnson, President and
CEO of the Loyalty Expo, said, “This
conference was and will continue to be
about the voice of the customer.”
Why They Came
Many attendees were at the show
to learn. The Loyalty Expo offered a
tremendous amount of knowledge
packed into a few short days. Mark
Rubenstein, CEO of EZ Rewards, said he
went to learn from others with more
experience in the loyalty industry. His
company develops loyalty programs
for convenience stores, restaurants
and car washes, and has learned about
loyalty programs as it has gone along.
Liliana Romo and Alma Hernandez
traveled all the way from Mexico City
to learn more about loyalty marketing.
Romo’s company, Ampersand, provides
loyalty programs for companies like Ixe
Financial Bank, who was represented
by Hernandez. The ladies attended
John Dawson’s presentation, “Analyze,
Reward, Understand
and Retain” on
Sunday. They said
“This conference was and
will continue to be about
they learned that
they needed to focus
not only on new
clients but also on
clients who are at a
the voice of the customer.”
higher risk of leaving.
The ladies also said as a result of the
presentation, they would focus on
segmenting their customer base to
better understand varying needs.
Other attendees came “shopping” to
find service and technology providers.
Angi Grisham of AMC recently stepped
into the role of Technology Project
Manager for the theater company.
AMC, she said, does have a loyalty
program, but it has not changed in
nearly 10 years. She attended the
Loyalty Expo to meet exhibitors who
could offer services that could revamp
the company’s loyalty program.
EXPO in REVIEW
John Dawson, of Dataco, made
several good client contacts at the
show. He said he learned just as much
from vendors and clients outside of
the sessions, and that “networking has
been valuable.”
Vendors also found benefit in
attending the conference. Jessica
Rotoli of Hipcricket, who provided
text messaging services during Steve
Yastrow’s general session on Monday,
was at the Expo to offer the company’s
mobile marketing solutions to
potential clients. “We have solutions to
provide companies if they want loyalty
programs.”
Everyone at the conference was
excited about our next Loyalty Expo,
which will be May 31 to June 2 at
the Westin Diplomat in Hollywood,
Florida. L
January 2009 | Loyalty Management 39
EXPO in REVIEW
“Good info
on the current
issues, future
trends, and
different
segments.”
—Loyalty Expo 2008 attendee
The True Measure of Customer Loyalty
Do your customers think of you in terms of “us and them”
or “we?”
Steve Yastrow, Founder and CEO of Yastrow & Company,
and author of We: The Ideal Customer Relationship, gave a
stellar presentation on creating true customer loyalty at the
Loyalty Expo.
Many companies think they need to create new customers,
new products, and new geographic markets to find
additional revenues, but the fact is, most businesses are only
getting 15-20% of the potential business from their clients.
Your existing customer base is where your company’s true
potential lies.
Yastrow explained to his audience, “You don’t drive sales.
Your customers do.”
He went on to say that strong customer beliefs are more
likely to create customer action. If a customer likes what you
offer, they will tell others, who will buy from you. You will see
action through word of mouth.
There is a connection between belief and loyalty, said
Yastrow. You have to give your customers a reason to think
“I can’t get this anywhere else.” This doesn’t necessarily
mean your product, service or experience are unique,
but rather the relationship you have with your customer.
Relationships cannot be duplicated.
40 January 2009 | Loyalty Management
Yastrow told his audience how to create those “We”
relationships with clients:
n Don’t interrupt all the time. Listen to what the client
is saying.
n Create building blocks of customer relationships one
step at a time.
n Every time you interact with a customer, strive to
improve the relationship.
He differentiated between encounters and transactions,
saying that a transaction was not memorable, and provided
no real benefit to the customer. He gave the example of
the cashier at the grocery store. Likely you do not have a
relationship with this person, and you are not better off
because of your interaction. In encounters, you are engaged,
you participate in a conversation, and the experience is
unique.
Yastrow closed by explaining the difference between
transactional loyalty (customer is loyal to offer, will likely
leave if a competitor offers a better deal) and true loyalty
(promotions lead to relationships, customer is loyal to
company, relationship is long lasting). L

Engaging Your Customer
The keyword these days when it comes to your customers is:
Engagement.
What is customer engagement? It’s about catching and
keeping the attention of your customers. It’s about providing
value to them. And with over 5,000 marketing messages
coming at every person daily, it “is about being the one or
two brands in a given day that a consumer actually chooses
to spend time with,” says Ian Baer, Managing Partner and
President of Big Fuel, an interactive marketing agency.
Companies and advertisers have been telling stories
of how amazing their products are for years, says Baer.
Screaming the benefits of your product doesn’t work in an
era where consumers can easily tune your message out.
Consumers today want to hear how it relates to them, and
why they should care. You may have heard of WIIFM, or
“What’s in it for me?” Customers care only about how your
product, with all its fancy bells and whistles, can help them
improve their lives. Ignore that, and you’ll lose customers.
Baer says there are “Three Be’s” when it comes to engaging
consumers:
n Be There. Consumers won’t stop whatever they were
doing to come to you. Be where the consumers are, and
be ready to participating in current discussions.
n Be Relevant. The trust you gain by meeting your
consumers’ needs where they are, and based on what’s
EXPO in REVIEW
“With so many
good sessions,
it was difficult
to get into the
exhibit hall!”
—Loyalty Expo 2008 attendee
important to them, can lead to a great opportunity to
follow up with a strong product story.
n Be Useful. You gain tremendous trust and credibility by
providing useful content on a relevant topic -- and that
trust can be quickly redeemed for product knowledge
AFTER you’ve proven you care about what’s important
to them.
These days, it’s fairly easy to engage customers online
using these “Three Be’s.” Consumers are flocking to places like
Facebook, blogs and forums to discuss their problems and
needs. This is the perfect opportunity for you to start and
participate in conversations. Because the Internet is such an
up-to-the-minute platform, it’s easy to be relevant to your
customers’ changing needs, because you can see what’s
relevant and what’s evolving as it happens. And blogs and
emails are the perfect opportunity for you to provide useful
information on your industry. Don’t make it a blatant sales
pitch. Offer resources your audience can use, and the sales
will follow.
Let’s face it. How we send out our marketing message
is changing. We can’t rely on the old broadcast methods
anymore. The consumer is in command, and we must
respect that in order to succeed in this changing
marketplace. L
January 2009 | Loyalty Management 41
EXPO in REVIEW
Mobile Marketing
and Loyalty:
Is it Right for You?
Mobile marketing is affordable, fast to implement,
and gets an increased response.
Go anywhere, the mall, school, work, and you’ll see a good
amount of people using cell phones. They’ve become our
security blankets. We don’t leave home without them. We
use them to make calls, send messages, check email, surf the
web…it only makes sense that loyalty programs would get
the idea to use them sooner or later.
Mobile couponing, while still relatively new in the U.S., has
been huge in Asia for years. The concept is this: text a specific
code to a number to receive text coupons and offers to your
cell phone. It’s convenient and you never forget the coupons,
like you do with their paper counterparts.
At the 2008 Loyalty Expo, Kelly Passey of Access
Development and Ola Ayeni of M-Dialog spoke about this
up-and-coming tool for the loyalty industry. They stressed
three key points:
1. It has to be easy for the customer
2. It should have the largest reach
3. It should be simple and cheap
SMS text messages, which the majority of phones can
receive, are the cheapest to send coupons through, at an
42 January 2009 | Loyalty Management
average of three cents per recipient. Studies show that 80%
of recipients of mobile coupons respond within one hour of
receiving the text.
Passey and Ayeni also offered a variety of ideas to use in
mobile marketing. Coupons are just one example. Companies
can also offer suggestions (a la Amazon) of other products a
subscriber would be interested in, inform subscribers of new
store locations opening, and create advocates by offering a
discount for each person a subscriber refers to the service.
In their presentation, they gave Dunkin’ Donuts in Boston
as a case study. The company sent out a text coupon for 99
cent lattes and saw a 90% response rate and 20% increase in
sales as a result.
While building awareness will be the biggest channel for
mobile marketing in the next few years, the benefits greatly
outweigh the challenges. Mobile marketing is affordable, fast
to implement, and gets an increased response. As a last bit
of advice, Passey and Ayeni urged attendees to add mobile
marketing to their current marketing campaign rather than
rely upon it solely. L

Tech Talk:
Better Serving
Your Customers
with Technology
With millions of people using social networking sites like
Facebook, LinkedIn and Twitter, it’s no wonder major
brands are connecting with consumers on these sites.
Times have changed in the customer service department.
Where we might have started with a one-size-fits-all attitude,
now it is possible (and necessary) to use technology to better
understand our customers and keep them!
More Targeting
Think your blanket direct mail campaign is going to be
effective? Think again.
Technology has become so sophisticated over the years,
it’s now possible for us to give customers exactly what
they’re looking for. That’s what Cardlytics helps banks do
for their customers. Customers of a client bank receive
special targeted offers based on their actual spending. So if
a customer spends $300 over the course of several months
at Anne Taylor, (assuming Anne Taylor is a merchant with
Cardlytics), the customer would then receive a special offer,
like $25 off her next purchase, that would appear next to this
transaction on her online banking page.
The customer gets the savings she really wants, the
merchant gets the sale, and the bank gets the revenue.
Everyone’s happy.
More Simplicity
With an average of six loyalty programs in every American’s
wallet, it’s clear that consumers also want simplicity.
Technology is helping us reach that goal too. More loyalty
programs are taking their customers online, and savings
can be realized through online retail as well as brick and
mortar stores.
ID Loyalty is a company that understands this need for
simplicity. Their platform transfers information for existing
loyalty programs to a consumer’s driver’s license. This one
card can be used for multiple programs, and saves space in
the wallet!
EXPO in REVIEW
More Access
Technology, for better or worse, has made consumers
even busier than they used to be. There’s no time for long,
drawn out computer repairs in between work, life, dry
cleaning pick up and soccer practice. That’s why PlumChoice
developed its online PC and technology services. Computer
problems can be troubleshot remotely, and customers don’t
have to stop their busy lives to get the help they need. The
company can also help set up MP3s, digital cameras and
wireless networks virtually.
“Customers are getting
smarter, more tech savvy,
busier and more impatient.”
Customers are getting smarter, more tech savvy, busier
and more impatient. It’s the role of each company to find a
way to combat this with appropriate techniques that best
serve the changing needs of customers.
More Communication
Today’s consumers are talking to one another, for better
or worse. And they use technology to do so. With millions
of people using social networking sites like Facebook,
LinkedIn and Twitter, it’s no wonder major brands like Crest
Whitestrips, Victoria’s Secret and Jeep (just to name a few) are
connecting with consumers on these sites.
These are exciting times as far as technology goes. We look
forward to seeing what’s in store that will help us offer even
better, more targeted customer service! L
January 2009 | Loyalty Management 43
EXPO in REVIEW

“Including topics
of interest to
merchants and
issuers added
interesting value
to the mix of
participants…”
—Loyalty Expo 2008 attendee

Attrition 101:
How to Keep the Customers You Have
Today in the loyalty industry, we’re seeing a shift from trying
to get new customers to working to keep the ones we’ve got.
The economy is tight, and bringing new customers on board
is tough. It is easier, however, to keep current customers.
Studies show that securing a new customer can cost at least
five times more than keeping a current customer happy, so
why wouldn’t you want to keep your customers?
“Most marketing budgets dedicate
only about 21% to customer
retention—that number should
be closer to 50%.”
At the 2008 Loyalty Expo, John Dawson of DataCo spoke
about attrition and keeping current customers. He honed in
on the importance of studying your company’s demographics.
What are your customers doing? When and why are they
leaving? What can you do to prevent further attrition?
Sometimes the reasons for attrition are simple. Customer
service isn’t up to par. Prices aren’t competitive. Service isn’t
quality. These are things that are pretty easy to fix. But what
about loyalty to your brand? Are your clients ready to stick
with you no matter what? Do you give them a reason to?
Dawson said that while most marketing budgets dedicate
only about 21% to customer retention, that number should
be closer to 50%. He recommends these steps to keeping a
customer loyal to your brand:
1. Drive engagement. Encourage customers to want to be
a part of your brand.
2. Watch for continued relevance. Don’t assume what
you started doing to get your customers’ attention will
work forever.
3. Maintain quality and frequency of communication.
If you send emails or direct mail, give your customers a
reason to want to read it. And don’t bombard them with
mail.
4. Liven up your program. Add new offers, new rewards,
and new business partners to keep your customers
excited.
So think about your current marketing strategy. Does it
focus on attaining new customers? If so, you should consider
shifting gears and refocusing on keeping the customers you
have. Keeping your current customers will help you grow
your business and increase sales in the long run. L

44 January 2009 | Loyalty Management

 EXPO in REVIEW

“Loved the
amount of
time that was
allowed for
networking...”
—Loyalty Expo 2008 attendee

Marketing to Millennials
Recently Bill Hanfin, Managing Director of Customer Growth
LLC spoke at the Loyalty Expo 2008 about marketing to
Millennials. According to Hanfin, Millennials refers to the
generation born between 1977 and 1996, and make up 77 to
80 million of the US’s population. They’re the most ethnically
and racially diverse generation in US history, and are what
Hanfin calls the super-sized “me” generation.
As far as technology is concerned, Millennials are totally
immersed in it. They own computers, cell phones, and
portable music or video devices, and they use websites
as their primary source for news. This generation is
always plugged in, and heavily use text messaging, social
networking and blogs to communicate.
Online rewards and loyalty programs are working
with Millennials. Programs like AceBucks, the largest
“underground” currency for Facebook, and urTurn Rewards
are keeping Millennials loyal to brands.
“According to studies, 62% of teens
are apathetic to advertising...”
Hanfin ended the presentation with a few key suggestions:
n Meet them where they are
– Sell less, share more

In order to market to this segment, said Hanfin, businesses n Fulfill the promise of data
have to understand that there is not just a shift in behavior – “1 to 1” marketing may finally be affordable
with Millennials, but rather they are a wholly different
– Social networking opens the door
consumer.
n Don’t try to rationalize the need
According to studies, 62% of teens are apathetic to
advertising. 42% make purchasing decisions based on – They think differently than we do…you don’t have to
recommendations of friends. Millennials are four times more “get it”
likely to use online banking than download music, and 1.5 n Don’t forget everything you learned
times more likely to use credit cards than Boomers. How,
– Remain attentive to profitability & marketing ROI
then, do you reach them?
– Be attentive to traditional financial models L
Most businesses recognize the need for change in the
approach to a customer strategy for this generation, but have
yet to embrace it.

January 2009 | Loyalty Management 45

EXPO in REVIEW

“The presentations I attended were great...

smart, good speakers, engaging.”
—Loyalty Expo 2008 attendee

EXPO summary: EXPO summary:

Frequent Shopper Data
Speaker Jeff Gale recently gave a presentation on collecting
data about frequent shoppers at the 2008 Loyalty Expo in
Orlando, Florida. He began the presentation with a brief
history lesson on innovations in retail. One of the highlights
was the world’s first grocery store scanner, which was
installed in 1974 and led to better inventory management.
From there, retailers began to ask, what else can we do with
this? So began the trend of frequent shopper programs.
According to Gale, retailers nowadays are utilizing
new technologies in order to draw customers in. Key
demographics can be targeted by:
• Personalized direct mail campaigns
• E-mail
• Recorded voice messages
• Text messages
Personalized direct mail with relevant content is likely
to produce increased response rates; however, E-mail is
less expensive and offers a much faster delivery time. With
voice marketing, specific messages are recorded and sent to
consumers’ home phones and/or cell phones with targeted
precision. Voice marketing is also inexpensive and fast, but
can also deliver time-sensitive messages. SMS (Short Message
Service) texting is similar, but messages are sent directly to
the users’ cell phones and digital devices. Each method has
its own advantages and disadvantages, but Gale insists that
mobile marketing through SMS texting best performs when
it’s used alongside other channels of marketing. L
From Data to Information
to Advantage
In his presentation on Loyalty Marketing at the Loyalty
Expo, Randall A. Fine of the Fine Point Group, remarked
that “Relationship Marketing is like a wet towel and most
companies haven’t started squeezing.” Fine illustrated the
fact that most companies are not taking advantage of the
many opportunities present in the marketing world today.
He explained that there are two sides to Loyalty Marketing:
rewards and offers. Rewards are controlled by the customer
and reward past behavior, while offers are company-
controlled and act as incentives for future behavior.
Fine demonstrated the Fine Point Group’s Proprietary
Loyalty Circle, broken down into five main points:
1. Simplicity – understand how to earn/redeem rewards
2. Control – control how/when/where rewards are
redeemed
3. Aspiration – incents wallet-share consolidation through
targeted rewards
4. Transferability – points travel to other company-owned
facilities or external partners
5. Flexibility – reinvestments can be varied by customer
segment (one size does not fit all) L

We hear you.
We have had a fantastic response to Loyalty Expo. Your questions,
comments and suggestions are all very much appreciated and provide great value as
we get ready for our spring show. We hope you will join us May 31st through June 2nd
at the Westin Diplomat in Hollywood, Florida. Register for Loyalty Expo 2009!
Visit www.loyaltyexpo.com for more information. Thanks for the feedback!

46 January 2009 | Loyalty Management

Building relationships, one person at a time.
Carlson Marketing knows how to take care of your customers.
We have unparalleled experience launching and managing relationship marketing programs.
Our deep understanding of customer data translates into insight – and value – for you.
Our full suite of services, creativity, strategy, execution, end-to-end operational excellence
and enthusiasm all combine to make us the perfect marketing partner.
When you’re looking for direction on how you can turn customer engagement
into organizational value, contact us.

Let our experience work for you. carlsonmarketing.com | 763.212.4520

January 2009 | Loyalty Management 47

LOYALTY
MANAGEMENT