Past Writings on Loyalty
I have written two essays in the past couple years on loyalty. The first explored how velvet rope marketing (differentiated experiences for Best Customers) can transform loyalty. The second discussed how microns (messages with rewards) can gamify and reward attention.
There are some very big differences between the standard loyalty programs offered by brands and VRM. Typically, anyone can opt-in to a loyalty program and start earning points. The brand does not control who joins. There is also very little experience differentiation – the points are linked to spending, and that’s about it. In VRM, it is the brand which decides who gets to be part of the differentiated experience. Think of VRM as ‘By Invitation Only’, an exclusive club whose entry is decided by an algorithm which calculates Customer Lifetime Value (CLV), a forward-looking and predictive metric based on the expected future transactions and their value. CLV, as used for VRM, can be a better measure of segmenting customers and determining Best Customers.
Any brand can offer a loyalty program with rewards. Customer Experience differentiation via VRM for Best Customers can become the moat a brand builds to ensure greater customer loyalty, higher spending and a ‘profits monopoly.’ This can give us a new definition for customer loyalty – receiving more than 50% of the spending by a customer in the category.
… VRM is the secret sauce to ensuring customer loyalty and higher profits. Using CLV, it becomes possible to identify the current Best Customers for a business. Decoding the customer genome of the Best Customers offers the attributes to ensure more targeted new customer acquisition. This is the cycle that every business needs to drive.
The email inbox is one of the most powerful marketing platforms. Hundreds of billions of emails make their way to inboxes each month, all competing for our attention. And yet, most emails are ignored by the recipients. Imagine the multiplier impact if more emails could be read by their recipients.
What if brands could incentivise their customers to open and click on emails? (Of course, this could be easily abused but that can be addressed by monitoring the time taken for actions after opening an email, or what happens after the click. And incentives could be offered on a differential basis to the best customers versus the others.) Why has a multi-brand email loyalty program never been created? (This could be because no single email service provider has a large enough market share to get the critical mass for making such a program successful.) Would consumers respond to such a program or just ignore it? (The only way to know would be to actually do it and find out!) Is paying for attention a good thing? (Of course, it is – all advertising is about paying for attention. The difference is that brands pay intermediaries rather than their consumers.)
… There is a very interesting opportunity to build a loyalty program which monetises attention via microns by building a two-sided platform: connecting brands and consumers. It needs to have two components: the earn (how consumers can get the reward points) and the burn (how can they redeem these points). The innovative format of microns (short, informational, identified content) combined with a multi-brand loyalty program can lay the foundation for a big breakthrough in brand-customer engagement via the most ubiquitous identity that customers have – their email address. Such a program could, in short order, become the world’s largest loyalty program.
To summarise: Consider a new loyalty program that focuses on the upstream of transactions (attention, engagement and habits), begins with push messages because they are the way most customers are brought back to a brand’s properties (website and app), disproportionately incentivises Best Customers, and works across multiple brands that engage with customers through their inboxes.