Brands must drive loyalty programs

By AdNews | 21 June 2002
Simply having a loyalty program is no longer sufficient in a cluttered market and marketers must invest in brand-driven recognition benefits that cannot easily be duplicated, according to Patrick LaPointe, senior vice president of US-based Frequency Marketing. LaPointe, visiting Sydney for the ADMA Pan-Pacific Marketing conference on 26 to 28 June, specialises in strategic planning to provide a range of short-term and long-term solutions to customer loyalty challenges. Loyalty programs are two-pronged, he says. They provide a supplemental value proposition to attract more people to the brand, as well as a means of dialoguing with a customer beyond the product. Successful loyalty strategies must take on a more integrated role in the overall marketing plan by seeking to leverage the companyÕs relationship with its customers. ÒUnfortunately, loyalty is still a relatively new addition to the marketing tool box and many marketers view loyalty programs in a much more promotional context,Ó says LaPointe. Mar-keters tend to approach loyalty programs with short-term expectations, he adds, and then relegate them to an ineffective pile if they do not deliver the unrealistic goals. Only six out of 10 loyalty programs have correct expectations, according to LaPointe. One reason for the relative immaturity of customer loyalty programs is that Òthe number of companies that actually have the ability to recognise their customers is still smallÓ. While it is easy for airlines, hotels, telcos and credit card companies to identify their customers because a database is part of the payment process, says LaPointe, Òin other companies the customer is almost invisible. So [loyalty programs] are immature in application because some industries are only now learning how to capture customer data.Ó In an environment when one loyalty program sounds like the next, the programs that place too much emphasis on points and prizes Òare more likely to failÓ, says LaPointe. Focusing on points and prizes Òis the easy thing to do and customers cannot differentiate between competitor programsÓ. To ensure success, a loyalty program must strengthen program branding and offer tangible benefits, such as access to privileged information, a more convenient purchase or distribution experience, or access to a premium level of support. ÒThe points and prices element does not in itself make a successful loyalty program,Ó says LaPointe. LaPointe believes coalition programs, which are on the rise globally, are the perfect solution as they increase recognition and reward, and can generate new customers in a more cost-effective manner. In Australia, the fly buys program Ñ modelled on CanadaÕs Air Miles Ñ reaches six out of 10 Australians. ÒThere is room for two, maybe three, broad-based coalitions in any given country,Ó says LaPointe. ÒWe will start to see niche coalitions,Ó he adds, Òto a specific subset of demographic audience Ñ perhaps pensioners or teenagers. It could be a tour de force in the marketing landscape.Ó Another Òvery distinct trendÓ is the outsourcing of the program operations that was once considered sacred because marketers were precious about information on their best customers. This will free up marketers so that they Òare then able to enhance the quality of service.Ó Finally, says LaPointe, ÒIt is important for loyalty marketers to know that the loyalty industry is global.Ó ÒLoyalty providers have consolidated [and] tend to be large multinationals. This brings the danger of homogeneity in the offering [and] the risk is that they will be buying the same turnkey package that 12 other marketers are buying. ItÕs a double edged sword.Ó Andrea Sophocleous

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