Tap their Loyalty

022 | January - February 2013 |

e c a l l s h i m s e l f a Hgrandfather of loyalty and

coalition loyalty programs,

And by no means is he wrong. Not

only is his knowledge on the history of

loyalty programs impeccable but the

insights he shares with regards to its

current market dynamics, global

trend and future potential can leave

you wanting to record each word that

he has to share. Says Pearson, “I think

the original loyalty programs were

airline programs going back to

American Airlines and The British

Airways. They were the pioneers. This

was back in the 1980s wherein the

frequent flyers could collect points

and redeem it for something free.

Post the airlines, it was the hospitality

industry and it was only towards the

early 1990s that the retail industry

started having strong loyalty

programs for their customers. So to

speak, we are sitting on something

that is just about two decades old.”

Adding more to the history bit he

says, “Originally it was just value add

to the customers. Only later was it

seen as a means of promotion and get

people to consolidate more of their

spending then they might have done

in a more fragmented environment.” Over the years, across the world,

loyalty programs gained momentum

and to encash on their growing

importance and popularity, the

concept of coalition / partner loyalty

programs came into being. Shares

Pearson, “Changes that this industry

has witnessed have been enormous

as people started looking to innovate

around the programs that they had to

offer. We had three dimensions – one

is just the program itself – thinking

about how do I take it to the next level

– probably the easiest one of that is –

once you started understanding the

customers, it was time to reward

them according to their spending

patterns and segment them into

silver / gold / platinum members. So I

think you saw program expansion in

terms of – So what do I get for joining

/ being a good customer to this brand

/ retailer? The second thing that

quickly happened in the late 1980s

and early 1990s was the emergence

of a partner model which not only

offered great learning's to the brands

/ retailers but also incremental

benefits to customers - an ability to

earn bigger and more aspirational

rewards. The third dimension I think

is really being driven more over time

over the past 10-15 years with the

Retail Feature

We all know the importance of the customer in retail. We also know that it is the customer

satisfaction which will help us carve a niche for ourselves and our brand amidst fierce

competition prevalent in the market today. No wonder, each retailer today is all set to woo his

customer with attractive loyalty programs. But then, is designing and implementing a loyalty

program as simple as it sounds and more importantly is it enough to just have a loyalty

program in place relevant to just our brand when the customer wishes to redeem his cash /

points earned? We get talking with Bryan Pearson, president and chief executive officer,

LoyaltyOne and author of the book The Loyalty Leap to put our queries to rest.

023 | January - February 2013 |

internet and advent of database

technology enabler which has given

rise to what I call Relevance

Marketing. This ability to actually

deeply understand the profiles and

segments of customers you have and

connect their shopping behavior and

be able to communicate and design

the marketing activities on a one to

one basis. This has been a trajectory

that has really driven various

programs we see today.”

Ask him whether it is okay to segment

customers according to their

shopping patterns without offending

them and he says, “If you don’t then

you miss the opportunity. It is usually

20 per cent of your customers who

represent 80 per cent of your

business so why wouldn't you want to

concentrate on them?”

With LoyaltyOne recently entering

India to set their operations, Pearson

and his team have had to face

c h a l l e n g e s c o n s i d e r i n g t h e

uniqueness of the Indian market and

Indian consumers. As he shares

details on this, “I think globally you

face a challenge in every market you

go to. The foundation of elements of

what drives consumer behavior is

based on his hopes and fears but once

you get down into putting cultural

filters on and see and understand

how the economy works in different

countries, the structure of business in

different countries etc. then you

automatically get the architecture of

what you need to build. Every market

has its own unique dimensions and

how you need to put things together

and the subtleties that need to be

taken care of. India has two

fascinating challenges – first is that

unlike the other bigger markets, in

India the payment vehicles are not as

pronounced and the second is the

distinction between the network on

the organized retailers and the small

kirana stores.”

Customers of a loyalty program can

be segmented into 4-5 categories

according to Pearson. There is a set

which looks at ways and means to

make the dollar stretch further

through ways of the points earned.

Then there is another set which

usually just derives a sense of pride

being a privileged member to have

personal emails being addressed to

her, the store being open an hour

earlier for her during the launch of a

new collection or a sale. The third set

of customers belong to a category

where they want to monetize quickly

on the points they have earned and

then the last set of customers belongs

to the category of 'aspirational

customers' who will redeem their

points for goods or services they

wouldn't have spent their money on. Sharing more insights on loyalty

marketing, Pearson says in his book –

The Loyalty Leap: True Loyalty

m a r k e t i n g t r a n s c e n d s t h e

programmatic experience that

occupies the wallets of most

consumers – make a purchase, earn a

few points. The best loyalty

Retail Feature

In a coalition loyalty program, the

conversation is much richer when

companies from a variety of

industries are involved, and the

opportunities for communication

multiply. Further, the richness of

the data obtained from customer

spending across categories

enhances the ability of each

participating company to fine-

t u n e i t s m a r k e t i n g a n d

communications strategies and

u l t i m a t e l y a c q u i r e n e w

customers.

024 | January - February 2013 |

marketing leaders have come to

understand that their programs are a

way to connect with customers on a

leve l e levated beyond mere

t ra n s a c t i o n s . T h e c u s t o m e r

information and insights that arise

from these loyalty programs is the

fuel required to empower a new

competitive platform. For over 20

years, programs developed at

LoyaltyOne have affected the

behavior of more than 120 million

people around the world. We also

operate the AIR MILES Reward

Program, the largest loyalty program

in Canada, where we work with two

decades of customer spending

information to bring incremental

value to more than one hundred

leading brands. In Canada, our brand

has higher penetration than any

credit card, higher usage than laundry

soap, and higher retention than any

wireless service.

Coming to the discussion on coalition

loyalty programs, Pearson explains,

“ I f l o y a l t y p r o g r a m s a r e a

sophisticated way to develop deeper

ties with the consumer, then coalition

loyalty programs – in which group of

companies band together to offer

customers a common ‘reward

currency’ and create a shared

database – is loyalty on steroids. It is

collaboration of dozens, or even

scores, of retailers, airlines, banks,

and other organizations all operating

under one program – through one

card – that allows members to earn

their points wherever they want, and

then to redeem them however they

want. The basic premise of the shared

database and cost infrastructure also

enables each company to devote

more energy to understanding its

customers and developing the

relationships that matter, using the

funds and resources gained from the

efficiencies of the coalition model to

fuel the growth.”

Adding further, Pearson says,

“Visibility also is raised in a coalition

environment. Companies are able to

better understand their customers,

which products they buy, how

frequently, and where. A company

has visibility because the database is

shared, and not only into its own

customers; it can also understand the

behavior of non-customers – those

patrons of other coalition members

who may live across the street but

choose not to enter its store. Last, a

coalition model can amplify the

company's voice in customer

relationships. The conversation is

much richer when companies from a

variety of industries are involved, and

the opportunities for communication

multiply. Further, the richness of the

data obtained from customer

spending across categories enhances

the ability of each participating

company to fine-tune its marketing

and communications strategies and

ultimately acquire new customers.”

Pearson concludes saying it is

important to see and recognize the

real value of loyalty program as a

means to gather relevant information

about your customer and not just

look at it as a below the line

promotional activity. As he says,

“Customers can only be acquired,

churned and re-activated so many

times before they tire of your brand.

There is a proven marketing equation

in which customers willingly share

information with you in the

expectation of being better served

a n d v a l u e d d u r i n g f u t u r e

transactions. Capitalizing on that

e q u a t i o n i s o u r b u s i n e s s

responsibility.”

Retail Feature