We also realized it was a new idea, one some would be afraid of.  And, as the owner of the Red Sox said in the closing scene of the movie Money Ball – the first one through the wall always gets bloody.  We knew that.  We got bloody and our efforts are paying off.

In fact, I read last week that AMC is using their stock to thank their loyal customers and begin the process of connecting the company’s success to the customer in a more tangible and direct way.  We love to see companies striking out and being innovative.

AMC Entertainment Wants Its Best Customers to Take Stock

That was the headline last week on BusinessWeek online.  From the article:

AMC Entertainment is launching a new strategy to deepen its ties to those in its customer loyalty program: Make them company shareholders. The second-largest U.S. cinema chain plans to go public later this month and is offering the 2.5 million people in its Stubs affinity program the chance to buy shares—without fees.

The post online continues to highlight the fact that the AMC company is a forward thinking, innovation machine:

“The cinema chain is pitching its stock to the market as it portrays its business as being on the cutting edge of a transformation in how Americans go to the movies. AMC says its experiments with larger reclining seats, in-theater dining, and alcohol available at its multiplexes have all been successful.”

We knew our option for rewards – stock in the company – wouldn’t appeal to everyone.  We knew it was a bit different and it would take someone with vision and an innovative culture.  It also takes someone willing to break through the wall – to risk getting a bit bloody.  AMC is proving to be that kind of company.

Maybe, just maybe, you are that kind of company too?

Connect with us – let us show you how we did this before and how we can do it for you on an ongoing basis – giving your customers a better reason to use your service and product – and an even greater reason to recommend it to others.

Don’t stop at a onetime event – think of stock as a loyalty reward as a long term strategy designed to drive sales and create more loyal customers willing to socialize your brand in all of their online and offline channels not because they get points – but because their investment in you grows and becomes more valuable.

Are you willing to take that single step of 1,000 miles and be one of the first through the wall?  We’ve been there and it really doesn’t hurt.

Truthfully – it hurts more when your customers defect to a competing brand because you didn’t give them a real reason to stay with you over and above a few more shekels.

Related articles

• Seems There’s Not Much Difference Between a Loyal Customer and a Hostage (loyaltyshares.com)
• Loyalty Programs – Long-Term Viability In Question (loyaltyshares.com)

When someone hates where they are but can’t leave they aren’t loyal – they’re being held against their will.

Based on new information from a new poll on webflyer.com it would seem that your loyal customers are really hostages.  How long do you think they will allow you to keep them prisoner to their loyalty points before the pain of change is less than the pain of staying with you?  I’m guessing not too much longer.  One or two more “devaluations” in your point program and they will have nothing to lose.

Except you of course.

Might be time to think about how to give them a way to be really loyal.  Just a suggestion.

Related articles

• Loyalty Programs – Long-Term Viability In Question (loyaltyshares.com)
• Company Stock as Loyalty Program Reward – Poll Says Awesome! (loyaltyshares.com)
• LoyaltyShares – Lions’ Den Videos and LoadFactor Interview (loyaltyshares.com)

Sounds like a great marketing strategy.

Until it isn’t.

Double, double toil and trouble – fire burn and cauldron bubble…

This article on the consumer advocate site called Elliot.org takes a unique approach by likening the current state of airline loyalty programs to a currency in a bubble ready to pop – and not in a good way.

From their article:

Apparently, the sky’s the limit for mileage programs. From 1981 to 2005, the number of unredeemed miles mushroomed from 2 billion to more than 14 trillion.

And it hasn’t stopped. Have a look at Delta’s latest annual report. It says SkyMiles members cashed in more than 262 billion miles for 11 million award redemptions in 2012. Of the revenue miles flown on the airline during that period, 8 percent came from award travel, according to the airline.

Delta won’t say how many trillions of unredeemed miles are in the wild, but it’s not hard to determine. For unredeemed mileage credits, which Delta refers to as “breakage,” it attaches a dollar value during the period in which the remaining mileage credits are expected to be redeemed.

Delta uses statistical models to estimate breakage based on historical redemption patterns, so even the airline doesn’t know exactly how many unredeemed miles are floating around out there. Last year, the aggregate deferred revenue balance associated with the SkyMiles program was $4.4 billion, according to Delta.

So, in Delta’s case they let you earn miles like crazy, yet redemption is lacking – and lacking to the tune of $4.4 Billion – that’s with a “B.”

Something isn’t right here.

LOYAL customers are leaving their rewards on the table – and in the Elliot post, the author is saying many of those holding points in their account will end up holding air very soon if the programs continue the way they are going.

What to do?

Focus on the People Not the Profit Center

I get that airlines (and other brands that run loyalty programs in general) see their reward program as a profit center – buying rewards at a discount – selling them for points at a profit.  That’s their right.  But when the process creates a house of cards that ultimately will screw their best customers – there is something fundamentally wrong with the model.

You shouldn’t design a reward system to reward loyalty in a way that punishes the people providing that loyalty.

Where’s the ethics in that?

If you’re a CEO and your loyalty program is structured in a way that the only way it is viable is to bite the hand that feeds it, you might want to consider a different model.

One that truly rewards your loyal customers.

Psst:  Just an FYI- we have an app for that…. It’s called LoyaltyShares and it not only helps your customers – but it helps you.  It’s not just another way to siphon points – it’s a way build long-term loyalty and align with your loyal customers to drive more sales, more revenues and better customer engagement.

Or you can just offer another magazine subscription – I hear customers really want that after spending $500 on a ticket.

Related articles

• Brand loyalty programs: Are they effective ? (newmediaandmarketing.com)
• What the airline industry needs to know about social loyalty (tnooz.com)

Unfortunately – study doesn’t paint a pretty picture of loyalty programs for the airline industry.

Unbiased Opinion and Research

You know we’ve been pushing for more creativity and innovation in loyalty programs by suggesting that companies include their publicly traded stock as a redemption option thereby increasing overall loyalty and providing a huge point of difference for the company and their loyalty program.  It seems the Deloitte research is hinting that our point of view has validity – or at least the idea of innovation and new redemption options is needed (they didn’t mention LoyaltyShares specifically.)

To pull some statements and data from their research summary (all emphasis is ours):

• “Based on our survey findings, we believe that now is the right time for airlines to consider further investment in customer loyalty.”
• “More sobering is our finding that airline loyalty programs are far from effective in engendering that loyalty.”
• “44% of business travelers—and a remarkable 72% of high-frequency business travelers—actually participate in two or more airline loyalty programs.”
• “An undifferentiated one-size-fits-all approach to loyalty improvement will seldom be fully successful because no two travel cohorts—and no two individual travelers—are identical in what matters to them in the air travel experience, airline loyalty programs, and the manner in which they prefer to engage and be engaged. Airlines need to embrace this fundamental premise.”
• Only 34% of all respondents agreed or strongly agreed with the statement – “[My preferred airline] has the best loyalty program in the industry.”.
• Similarly, only 66% of all respondents indicated they would switch to another airline even after achieving highest status level.

So….

Airline customers – loyal airline customers (or at least those that are pulling in loyalty awards from their activity) – have no problem switching… don’t think the primary program is all that great… and will spread their loyalty over multiple providers.

I haven’t checked my Webster’s lately but I’m pretty sure those are all the words one would use to define “disloyal.”

The fact is this then – there are really no loyal customers.

Or at least the airlines aren’t given customers any real reason to be loyal.

“Airlines need champions. Put simply, the flying passenger has the potential to serve as an airline’s most effective marketing tool. Yet, our research shows that only 38% of survey respondents answered positively when asked whether they would serve as a brand ambassador.”

Think about that graphic and the accompanying quote from the research.

Word of mouth is potentially the most effective marketing tactic available and yet 2/3rds of an airlines loyal customers won’t stand up for the brand.

But let me suggest this…

• If those same customers have a financial stake in the success or failure of that airline would they speak up more?
• Would they recommend the brand more often if their recommendation could conceivably enhance their portfolio?
• Would loyal customers who now own stock in an airline hit the twitters and Facebook to push the brand they are most loyal to – and the brand that gives them more than other brands?

We think so.

Investors ARE More Loyal #FACT

We posted a while back on the impact being an investor has on loyalty.  But to pull the statistics from that post:

• Bain & Co found:
  • On average, customers who are investors frequent businesses 1.7 times more often than typical shoppers
  • Spend 1.5 times as much money
  • Remain customers 1.1 times longer and
  • Generate 2.1 times the number of business referrals
• A survey of 500 investors found that share ownership improves share of wallet performance
• A Australian study found that amongst four of the five sectors they studied, customers owning stock in a company were more attitudinally loyal, less likely to churn, more likely to be advocates, and more amenable to cross-selling communications

It’s Not That Hard To Be Unique

And it’s easy to do with our LoyaltyShares methodology and process.  We can put your stock in the forefront of your redemption portfolio – engage your most valuable customers and provide you with a unique and differentiated program.

Or you can add magazine subscriptions to your redemption mix.  They’re a big hit with the scouts and elementary schools I hear.

Related articles

• Company Stock as Loyalty Program Reward – Poll Says Awesome! (loyaltyshares.com)
• LoyaltyShares – Lion’s Den Videos and LoadFactor Interview (loyaltyshares.com)

While we’ve been doing that loyalty program users have been commenting and filling out our survey (here) and the one on FrequentFlier.com.

In both cases the numbers are overwhelming…

First, from our own survey:

Most of our survey respondents don’t think much of the options they currently get in their loyalty programs…

If given the option to redeem for stock program members would jump on it…

And of those redeeming…

And lest you think we’re cooking the books FrequentFlier.com is running their own poll and they are seeing similar desire for a stock redemption option…

The bottom line – members of loyalty programs want more options and one of the options that is resonating with them is YOUR company stock!

Give us a call – shoot us a note – we’re here to help you build long-lasting active loyalty with your customers.

Videos – both our presentation at the Lions’ Den session at the Loyalty Innovation Show – FFP Spring Event 2013 held this past April and an interview our VP of Business Development Skip Kitchen did with Roger Williams from LoadFactor.tv.

We’ve embedded both videos in this post and would love to hear your feedback on our concept and how you think it could impact overall customer loyalty.  Does owning shares of stock create a stronger, more active loyalty than a simple point program for merchandise and travel?  Let us know.

Below are the embedded videos – subscribers via email and/or RSS may need to click through to see video.

Interview with Roger Williams from LoadFactor.tv

Lions’ Den Presentation

As you would expect – we think the answer is yes!

Tim does a great job of outlining some of the reasons stock is a great option for loyalty program rewards and references the program we ran for Jameson Inns a few years back.  He has one thing incorrect… Tim says the program was “dropped” after a couple of years “presumably due to lack of interest.”

The truth is the company was taken private by investors (who saw the chain as a great investment – wonder if our loyalty program had anything to do with it?)  The members were very happy with the program and frankly threw quite the fit when it was announced that the program would end.

Tim also highlights something we firmly believe:

As I said at the time, “the powerfully self-reinforcing aspect of such an approach to loyalty marketing should not be underestimated. Awarding customers with stock in a company vests the recipient with a compelling stake in that company’s success, which encourages the stakeholder to do more business with the company, which earns him even more shares, and so on.”

And… in today’s social media turbocharged network, loyal customers with stock have an even greater interest in evangelizing the brand in order to drive greater stock returns.

It’s what we like to call a win-win-win.  The brand wins with greater word of mouth, the customer wins with potentially greater award value as the stock price increases and the shareholder wins with greater stock values as well.

Seems Like A Popular Idea

The article also included a poll asking readers if stock should be used as a loyalty award.  Not surprising to us – 84% said “Awesome – a great addition to existing awards.”  Those results matched our results from our own ongoing poll (click this link and give us your input!)

Want To Know More?
See us at the Spring Freddie Awards!

It’s a great idea who’s time has come.  And this April 25 we’re going to be talking about it at the Loyalty Innovation Show – FFP Spring Event at Freddie Awards.  Since 1988, the Freddie Awards have been widely recognized by frequent flyers and travel industry executives alike as the preeminent honor for frequent travel programs.

As part of this event they hold something called “The Lions’ Den.”  The Lions’ Den provides companies with new loyalty-related products & services a chance to give a 5-minute sales pitch live & unrehearsed to the board of “Lions” and then receive honest & critical feedback in front of our conference audience.  Well… we’re going to be on stage pitching our idea along with 4 other companies with innovative ideas.

Yeah… it sounds a bit scarey but we’re confident in our product and the value it brings.

Check it out and if you can – register and attend the event!

Loyalty programs were initially designed to reward loyal customers, give them a reason to come back and spend more – without dropping prices and deflating the cost of the product in the market.  Sure, points/miles earned are discounts – but deferred discounts that allow brands to maintain a market price at a level representative of the brand image.  Neiman Marcus doesn’t want their store to offer prices similar to Wal-Mart for similar goods.  The price provides a brand value signal and loyalty rewards allowed brands to keep their brand image, provide a discount and motivate customers to buy more.

Fast forward – more powerful computers and better statisticians – now we can throw “big data” into the equation and use the information gathered through loyalty programs to help drive better target marketing and provide intelligence brands can use to increase purchases and decrease marketing costs.

10% Increase For One Person VS a 2% Increase For 20 People

But… one thing I think many brands forget is the fact that getting one loyal customer to buy 10% more is less valuable than getting 20 people to buy 2% more (assuming a common purchasing starting point) – and much, much harder.

If you had a choice would you want 100% of one customer’s discretionary spending or 50% of 100 people’s discretionary spending?  Me… I’m going for a wider net versus a deeper net.  I want more people engaged with me – even if they are engaged at a lower level.

More people = more possible places to grow my business.  I need mass – not just “more.”

Think about it… if the average consumer spends $100 in total on your product each year and you have 50% share – you get $50 from that one customer.  Even if you got 100% of their discretionary spend you only get $50 more – and maybe a small incremental knowledge gain.

But… If you can get that one person to connect to 10 people who also spend $100 in your product category and they increase (or shift) their spending with your brand by only 6% – or $6 each – you get a bigger revenue bump AND you get a ton more data.

Win – Win – Win.

But what about your loyalty program helps you leverage this equation?

Social Is Key

I know, I know.  You have a twitter account.  You have a Facebook page.  You’ve started pinning stuff on Pinterest.  You’re SOCIAL!!!!!  But you’re not “social.”

Social is about sharing and converting.  Social is about me, talking with someone else, about your brand – not just clicking and liking hoping to get another few miles or points.

Social is about getting more business from the interactions you loyal customers have with customers who aren’t loyal, or customers who are loyal but you can’t see them.

What Gets People to Engage Their Networks?

There is a study by Pew from a year ago that talks about the number of “connections” people have through social networks. From that study:

• Average American has an overall network of 634 social ties
• Average internet user has 669 social ties, compared with non-users, who have an average of 506 ties.
• The more frequently someone uses the internet, the larger the network tends to be. The average person who uses the Internet at home several times per day, has a network of 732 ties, while someone who uses the Internet only once a day has a network of 616 ties.
• In addition, mobile phone users average 664 ties, and those who have internet access through a mobile device like a smartphone or tablet computer tend to have about 717 ties.

What this says is people are connected and getting more connected.

The real question you have to ask yourself as a marketer is this…

What do you offer your loyal customers that will make them WANT to socialize your brand with this huge network?

Right now a loyal customer’s investment in your brand stays the same if they recommend your product or service.  The number of points they have stay the same.  The number of miles they have stay the same.  The “value” of their points stays the same.

But… what if the investment your loyal customers could go up in value the more they socialize your brand within their networks?  Would they work harder for you?  Would they actively promote your service and your brand?

We think offering your stock as a reward option helps you mobilize the huge “untapped” social network within your loyal customer base.  Stocks can increase in value – and there is a direct cause/effect between stock price and customer loyalty and revenues which can help move the stock up – AND – increase the value of the customer’s investment in your brand.

Make It Personal

Think about how you talk to your neighbors, friends and acquaintances about the companies you invest in.  If you have Apple stock do you recommend Apple products?  Sure you do.  Do you have stock in GM – do you recommend Chevrolet?  Sure you do.  Same goes for your loyalty program.

If your loyal customers have stock in your brand they WILL socialize their loyalty and drive greater OVERALL success.

Get 10% more from 100% more people.  Don’t just focus on 100% of 5%.

Related articles

• An Open Economy in the Loyalty Rewards Space – Good For Whom? (loyaltyshares.com)
• Re-Gifting Loyalty Miles and Points (loyaltyshares.com)
• Is Your Loyalty Program Mutually-Beneficial? (loyaltyshares.com)

Loyalty is a funny thing.  We think it can be bought.  We think it can be manipulated.  We think it is about what they “want.”  In some cases the sponsor thinks it is all about what “they” want.  How else could you interpret it based on the way loyalty programs are structured and run today?

But loyalty isn’t any of those things.

Loyalty is about a mutually beneficial relationship.  Loyalty is about true relationship building based on things we value.  Loyalty is a two-way street.

And I think we’ve missed out on the “mutually beneficial” part.

Hurting The Relationship

The 4Hoteliers website had a post recently called: “Hotel Loyalty Programs – Are Your Customers Feeling The Love Or Asking For A Divorce?”  The post highlighted what they believed are the major problems associated with hotel loyalty programs today.  We’d go as far as to say these same issues can be found in most airline and retail programs as well.

They introduced their post with this quote from a CMO study done in 2010 (not much has changed since then IOO – that’s In Our Opinion):

“The reality of today’s loyalty landscape is that too many rewards, points or perk programs out there are still only as sophisticated as those early trading stamp programs.  They dish discounts and free stuff to repeat buyers and gather about as much insight from the customer as those first shopkeepers exchanging place settings for swollen stamp books.”

They go on to list out the various problems with loyalty programs.  We think they are dead on and we think we have a better solution (of course we would.)

But I’d like you to think about your own loyalty program and ask yourself this simple question…

“Does my loyalty program communicate and reward a mutually-beneficial relationship or does it simply reinforce mercenary and transactional behaviors?”

Be honest.

Mutual Means Mutual

We believe linking your customers’ success to your success and linking your success to your customers’ success is mutually-beneficial.

No games.  No tricks.  If you, the company, is successful, your loyal customers earn more, get more and are better off through an increase in point earnings and an increase in your stock price.

If your customers use your product or service more, tell more of their friends about your product or service, you, the company, get more revenue, lower your cost of marketing, lower your cost of acquisition, realize higher profits and a higher stock price.

And, the circle of “mutually-beneficial” relationship goes ‘round and ‘round.

We started LoyaltyShares because we wanted to see more companies actually connect their success to the people who helped create it – and share that success.

You can’t do that through coupons and discounts.  You can’t do that by letting your loyal customers trade their points/miles for competitor services.  You can’t do that unless you somehow make the relationship – MUTUAL.

What are you doing to make the relationship mutual?  Be honest.  Then call us.

(Don’t forget to download our free white paper on the 20 most frequently asked questions about LoyaltyShares here – worth the read IOO.)

Related articles

• Re-Gifting Loyalty Miles and Points (loyaltyshares.com)
• An Open Economy in the Loyalty Rewards Space – Good For Whom? (loyaltyshares.com)

We’ve all heard about re-gifting.  Re-gifting is the process of taking a gift received from one person, opening it, then re-wrapping it and giving it to someone else.  From the re-gifter’s point of view it’s pretty sweet.  You can give a gift and get credit for it without having to shell out any of your money, spending any of your time, and unfortunately, thinking about whether the gift is the right gift or not – it’s just a gift.  No real connection.

However, from the initial giver’s perspective – and the ultimate receiver’s perspective the view is very different.

From the final receiver’s perspective they don’t know you’ve re-gifted (or shouldn’t – it’s bad form.)  They get the gift and they’re happy to get it.

But from the initial giver’s perspective it is very different.  THEY spent time (assuming they didn’t re-gift) thinking about you.  They spent time shopping for you.  They spent time wrapping and sending/giving the gift to you.  They are proud of the gift.  They are invested in the gift.

And then you go and simply re-gift.

There’s a reason this process is frowned on.  It’s rude and it removes the emotional connection between the gift, the gift-giver and the first recipient.

Loyalty Program Re-Gifting

Where am I going with this?  Here.

A friend sent me a copy of an email they received from an airline that was giving a bonus if you traded your hotel earnings for their airline miles.  While I’m sure the airline likes to get the bump in miles and possibly a bump in revenue  I’m pretty confident the hotel company isn’t real happy about the “re-gifting” of their award to their customer.  And, when I think about it it’s like giving someone who isn’t a loyal customer a reason to get something for free for being loyal to someone else.  No one wins in that deal IMHO.

To me – if I’m the person in charge of the loyalty program for the hotel I might look a bit askance at the idea of taking my gift (points) and re-gifting them to an airline.  Why should they get the benefit of the gift I gave to my loyal customers?

I know this is prevalent in the loyalty space – trading points and miles for other brands.  I get that the customer is demanding them.

What I don’t get is why the original program sponsor doesn’t find a more desirable option than re-gifting.

It’s almost like wrapping your original gift twice and saying –

“I know you’ll just give this to someone else so I went ahead and wrapped it again so you don’t have to.  Hope the next person enjoys it more than you obviously did.”

Doesn’t that enable “dis-loyalty?”

Related articles

• An Open Economy in the Loyalty Rewards Space – Good For Whom? (loyaltyshares.com)