Microns and Loyalty: Gamifying and Rewarding Attention

Published June 2-10, 2021

1

Loyalty Programs – 1

As consumers, we are part of many loyalty programs. Loyalty brands are a win-win for brands and consumers – brands get greater spends and additional data on their customers, and consumers get rewards and other benefits for their loyalty. Previously I wrote about loyalty programs (based on a LinkedIn series by Ajay Row) as part of a series on Velvet Rope Marketing.

Here is a good overview from Wikipedia:

A loyalty program is a marketing strategy designed to encourage customers to continue to shop at or use the services of a business associated with the program. Today, such programs cover most types of commerce, each having varying features and rewards schemes, including in banking, entertainment, hospitality, retailing and travel.

A loyalty program typically involves the operator of a particular program setting up an account for a customer of a business associated with the scheme, and then issuing to the customer a loyalty card (variously called rewards card, points card, advantage card, club card, or some other name)…By presenting a card, customers typically receive either a discount on the current purchase, or an allotment of points that they can use for future purchases…Loyalty programs have been described as a form of centralized virtual currency, one with unidirectional cash flow, since reward points can be exchanged into a good or service but not into cash.

Investopedia has more: “Loyalty programs are offered by retailers and other corporations as a way to attract and retain customers.  [They] offer rewards, discounts or other special incentives and are designed as a reward for brand loyalty. The programs benefit companies not only by developing customer loyalty but by providing crucial information on how customers are spending and what products or types of offers are most appealing… Loyalty programs provide two key functions: They reward customers for brand loyalty, and they provide the issuing company with a wealth of consumer information… Once a customer becomes comfortable with the app, they begin to trust the company will deliver a consistent experience at each time. At this point, customers will stick to a hotel, restaurant, airline, etc., because of points more than anything else.”

Zaius outlines the benefits of a loyalty program: “For growing brands, the biggest appeal of loyalty programs is that they can help generate revenue faster than a marketing strategy that focuses on recruiting brand new customers. Repeat and loyal customers make up 8% of a typical ecommerce site’s traffic but drive 41% of its revenue, and loyal customers spend 5x more than first-time buyers. So, while it might sound scary to turn marketing attention away from new customers and toward existing ones, tapping into your returning customers and converting them into loyalty members is worth the investment…72% of adults in the U.S. belong to at least one loyalty program, and a typical U.S. household actively uses five to 12 of them.”

Clarus Commerce discusses various types of loyalty programs: points, cash back, punch card, tiered, coalition, premium (fee-based) and hybrid.

The most popular ones are typically those of airlines. In fact, airline miles have become a sort of tradeable currency – where we can earn miles for various activities outside of flying (hotel stays, car rentals, spending via co-branded credit cards) and spend miles on various purchases besides airline tickets. In India, the largest free loyalty program is Payback (owned by American Express) which has 100 million members.

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Loyalty Programs – 2

A table from the book “Customer Relationship Management: Concept, Strategy, and Tools” summarises the key characteristics of loyalty programs (LPs):

An excellent new book, “Loyalty Programs: The Complete Guide summarises the pros and cons of loyalty programs:

From a consumer perspective, the benefits a loyalty program can provide, include:

  • Value: members may be rewarded with points, miles, discounts, value-adds or other tangible benefits which non-members do not receive.
  • Exclusivity: members may be provided with exclusive benefits such as access to lounges, priority queues and VIP events.
  • Recognition: members may be shown appreciation through the delivery of surprise gifts or rewards.
  • Relevancy: members receive tailored communications, offers and rewards specific to their individual preferences, increasing the usefulness and appeal.

Core challenges consumers face when engaging with loyalty programs can include:

  • Value: the rewards provided by the program are not always adequate, compelling or accessible. For example, the member may not spend enough with the brand to earn access to a sufficiently desirable reward, or the reward they can access are not appealing.
  • Program saturation: consumers may be overwhelmed by the sheer volume of loyalty programs being promoted to them, with most consumer companies offering a program to their customers.
  • Marketing assault: many loyalty programs send large volumes of marketing materials to members via email, SMS, push notification, banner advertising and mail. For some members, the volume of marketing received may be perceived as excessive, while the content may not be relevant.
  • Data capture and control: a loyalty program may capture personal data in ways the member is not aware of, or does not approve of, and use it for purposes the member may not deem appropriate. The member may also feel they have a lack of control over how their data is captured and used by the program.

Loyalty programs done right can be a very powerful platform for customer retention and revenue maximisation.

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Loyalty Programs – 3

A 1995 HBR article had this to say about loyalty programs and rewards: “A rewards program can accelerate the loyalty life cycle, encouraging first-or second-year customers to behave like a company’s most profitable tenth-year customers—but only if it is planned and implemented as part of a larger loyalty-management strategy. A company must find ways to share value with customers in proportion to the value the customers’ loyalty creates for the company. The goal must be to develop a system through which customers are continually educated about the rewards of loyalty and motivated to earn them. Achieving sustainable loyalty, measured in years, requires a strategic sustainable approach.”

From a recent HBR article: “Customer loyalty programs are ubiquitous, accounting for more than 3.3 billion memberships in the United States alone. And they can confer tremendous advantage: Members are more likely than others to buy from a retailer whose program they belong to, they visit the website or store more frequently, and they are more likely to download the retailer’s app, follow or otherwise engage with the retailer on social media, and recommend it to family and friends.”

Payback India’s then CEO Gautam Kaushik spoke about multi-brand loyalty programs in early 2020 in a Business Standard interview: “Multi-brand loyalty is a very successful concept as it works for the customers and the partners beautifully. Let’s talk about the customers first. They can join the programme with any one partner and use their membership across all participating brands (more than 100 in the case of Payback) to earn or redeem loyalty points and to avail of all other privileges. It offers them a lot more value for a very small effort and that keeps their engagement high. For the participating brands in the network, it is great as they have access to a diverse set of customers, the cost burden of point issuance is lower vis-à-vis standalone programmes as they get a ready set of customers who hold points, which are earned from multiple brands within the loyalty network.”

During the pandemic, airlines were saved by their loyalty programs! From HBR: “When the bottom fell out of air travel, loyalty programs stood out for their resilience. Although people had stopped flying, they continued to spend with program partners, specifically the co-branded credit cards. Accrual from non-air sources (activities other than flying) now account for more than half of all miles earned in major programs. This type of spending has proven to provide a natural hedge during downturns… At $24 billion and $22 billion, respectively, the disclosed pro-forma valuations of AAdvantage and MileagePlus exceeded the airlines’ own market capitalizations at the time ($6.5 billion and $10 billion as of July 1, 2020).”

Who would have thought that the loyalty programs of the airlines would be worth more than the airlines themselves! And yet, for many of us who were members of JetPrivilege (now Intermiles), that should have come as no surprise. It had 10 million members as of 2019.

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Loyalty Programs and Me

My first brush with a loyalty program was Pan Am’s frequent flyer program when I was in the US in the late 1980s. I remember making an India trip and earning triple points and some more – enough to get another round-trip for free. What an introduction to the world of airline miles!! I then became part of every airline I flew – signing up was free. Over time, the one I have benefited most from has been the Star Alliance one – especially because of the US trips. It is never easy to get the free tickets because it is hard to sync business travel with seat availability.

The other loyalty (membership) program that has been useful has been Amazon Prime in India. It’s a no-brainer to sign-up for. One thing I do when I travel to the US is to create a new email ID and sign-up for free for Amazon Prime for 30 days so I get their free shipping while I am in the US. A bit cheeky, but offers good savings!

There are of course the credit card loyalty programs where points keep adding up. I had an interesting redemption recently – Citibank offered me an opportunity to use my points to pay for a Swiggy order (which I accepted).

There are a lot of bespoke loyalty programs. The one I have used is the one which gives points for dining at Quattro and SpiceKlub (in Lower Parel near my office). I wonder how I can redeem my points in a Swiggy-Zomato delivery-centric world! Most of the others (Raymond, Baskin Robbins, Bata are the ones I can remember) are linked with my mobile number and tend to just add the points and send a reminder periodically, but there typically aren’t enough points to redeem. Maybe I should try a multi-brand program like Payback just to explore how it works.

As I think about it, none of the loyalty programs has been really exciting (except Amazon Prime with its free shipping, video, music). There is much that can be done to improve loyalty programs. Indian brands have not fully exploited their power.

As I explored the world of loyalty programs, I also wondered what it would take to create a loyalty program for emails (microns). After all, the email inbox is where many of us spend a lot of time and brands spend a lot of money delivering content to us. This is the story we will take up next.

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Email Inbox and Attention

Here are some statistics from Netcore’s Email Benchmark Report 2020 which analysed over 50 billion emails sent by brands to consumers:

  • 77% of the users prefer email as the channel to reach out to them
  • 38% of users don’t check their promotional emails anymore
  • Gmail dominates the email volume globally with a whopping 72% of the total volume share; Yahoo had 15% and Microsoft Outlook 8%
  • The average Open Rate is 12%. The average Click Rate is 0.5%.
  • Media and Publishing brands deployed the best campaigns which received the highest engagement with 75% open rate
  • The optimum subject line length which has received the highest open rates is between 30-40 characters and 7-8 words
  • With 36 campaigns, Deals/E-coupons brands have the highest monthly frequency of campaigns sent

Email is the best channel for brand communications and 88% emails (7 out of 8) are not opened. And despite all this, email is seen to have the best RoI across all channels

So the big takeaway is: 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.

This was my thinking behind microns – short, informational and identified emails that can be consumed in 15-30 seconds. This itself should take open rates higher. What more could be done to make microns even better – towards a 100% open rate? That is where the idea of a loyalty program comes in. And as I studied both email and loyalty, it became clear that these two worlds had never intersected.

I started thinking about a few questions. 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.)

The point about disintermediating the attention intermediaries (Google, Facebook, media platforms, publishers) looked especially interesting and needed further thinking. If one were to craft a multi-brand email rewards program, what would it look like?

Previously I wrote in the micron-verse series: “Our objective with microns is to eliminate waste (unopened emails). Gamifying the process wherein every micron is opened and each action earns points which can then be encashed for rewards is a way to incentivise the right customer behaviour (from a brand’s perspective). Additional points can be given for ‘streaks’ – consistently opening brand mails daily without a break.”

6

Emails, Microns, Opens, Points

If one looks at the open rate of 15%, it would seem that brands have trained customers to ignore their emails. Microns offer a fresh start for brand-customer communications. Previously, we have discussed how microns can drive more opens and engagement. The use of rewards can be an additional layer which can improve performance. What is needed is an intermediary who can bridge both sides of the market – brands and customers.

The intermediary (in this case, Netcore’s MyToday) can offer 1 point to the customer for every opened micron. The points earned could be higher for a streak (continuous daily opens). A click could be worth much more. The points earned could be shown at the bottom of every micron. Brands would pay Netcore to transfer points to customers. Brands could start by offering points to everyone. Later, specific customer segments could be incentivised with more points for every opened micron. The key is to gamify the interaction and do it across brands so that microns as a category become the vehicle to earn points.

The only way this will work is if brands see better performance to justify the additional spend for points. (Remember that brands are already paying for creating and delivering the microns.) My belief is that given the low open rates that emails have, there is plenty of room for improving RoI for brands:

  • Let’s say a brand pays 1 unit for every email that they send
  • For 100 emails, the brand spends 100 units for email delivery
  • 15 emails get opened, so they are spending 6.7 units for each open
  • Assume microns have an open rate of 50% and are priced based on opens
  • Also assume 1 unit is paid to the customer (email recipient for every email)
  • Thus: 100 microns will cost 100 units – 50 going to the email service provider (for the 50 opens), and 50 as reward points to the end customer
  • The brand spends the same, but sees 50 opens of microns as against 15 of emails – definitely a better RoI
  • And there are delighted customers who now have 50 reward points to spend

To complete the analysis, let’s understand the economic analysis for the service provider.

  • Seemingly, the loser is the email service provider whose revenues have halved
  • In the emails case, the ESP makes 100 units of revenue
  • Emails have a 90% gross margin (GM) so the ESP makes 90 units of GM when sending emails
  • Microns cost lower to send because of their smaller size, so let’s assume 95% GM
  • The micron service provider (MSP) will make 47.5 units margin (95% of 50 units paid for opens)
  • While this looks like a significant loss of GM, given that brands see a 3.3X better performance with microns as compared to emails, they could be persuaded to double their spend which would even the score for the MSP

In a nutshell, the economics can work very well for brands, customers and the micron service providers.

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Rewards and Redemption

The next question to discuss is: will consumers be excited with the points they earn opening microns? (Of course, there is high content value in microns so the points work as the icing – that extra nudge.) Let’s look at it from the consumers point of view.

Assume I get about 30 brand messages a day. Let’s say 10 of these become microns. For opening these, I get 10 points. (I could get additional points for specific actions in the microns – clicks, answering some questions, providing feedback.) So, in a month, I can potentially earn 300 points if I open all the microns. Is that good? What can I do with these points?

This is where the second half of the loyalty program needs to be set up correctly – rewards and redemption. What can be the notional value of each point? It could range from 1 paisa to 10 paise to a rupee. If we assume the value of a point to be the cost that brands typically pay for an email, it will be in the range of 1 paisa. This may not be exciting for consumers to act on the points incentive – their earning over a month will be Rs 3. The way to make the points more valuable would be to offer exclusive digital products not available anywhere else – thus increasing their value for consumers.

Brands could actually pay a lot more for the opens and clicks – after all the return they get on an action performed by a recipient can be substantial. What a loyalty program using microns does for them is help them set up a direct attention relationship with their customers. Brands thus need to think of microns as helping them with top-of-mind recall – increasing mental availability. Therefore, to make microns loyalty a success, the points, rewards and redemption story needs to be made compelling by brands. That is what the best loyalty programs – especially the airline frequent flyer programs – do so well.

Where the micron service provider comes in is as a coalition builder. It does not make sense to have each brand operating its own loyalty program. A program across all brands can make it very exciting for customers – much like how airlines miles can be earned across various partners (hotels, car rentals, credit card spending). Designing this loyalty program right and combining it with the power of microns can be the next big innovation in transforming how brands interact with their customers.

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My Wishlist

I asked myself: as an email subscriber of many brand newsletters and a loyal customer of many brands, what would an interesting microns loyalty program look like?

  • Identify microns and points clearly: the Subject line should tell me that the email I have received is a micron, and the number of points I will get by reading it
  • Points for opening microns: I would like this; it makes it fun; we like rewards, even though these are small
  • Points for actions: clicks, providing some info about my preferences should get me some more points. Actions can be made easier by using AMP – such that the responses and interactions can be done within the micron itself.
  • Points should work across brand microns in my inbox: I should not have to be enrolled into separate loyalty programs
  • Points visible in every micron: I should be able to see in real-time the aggregate points I have earned
  • Points to ensure I read microns daily: this is the idea of a “streak”. Let’s say I get 1 point for reading on day 1, 2 points for day 2, and so on till I get 5 points for day 5. After that, every micron that I read daily should get me 5 points. If for some reason the streak breaks, I get reset to 1.
  • Points to encourage me to refer microns to others: a multi-level marketing program for microns would be cool!
  • Points as currency: I should be able to make the points I earn as my primary storage; so whenever I give my email to a brand, they should be able to connect their loyalty program to this microns program. This is because I expect to be earning a lot more points through my Inbox than other activities.
  • Rewards: what kind of rewards would I like? Perhaps, points which allow me to pay for firewalled content for sites that I have not subscribed for (eg. Nikkei Asia where I would perhaps read 4-5 articles a month and therefore don’t see the need to subscribe). Digital content could be a good starting example of rewards – something which does not have a high cost for the micron provider.
  • Levels and Leaderboards: These can be used to drive greater participation and unlock more valuable rewards.

Do all this and the email inbox itself becomes a game! And gaming companies have done wonders in hooking their consumers. Marketing has a lot to learn from games.

The gamification idea is echoed in this excerpt from Game-based Marketing: Inspire Customer Loyalty Through Rewards, Challenges, and Contests: “In this socially networked, choice-driven world, the old methods of reaching consumers with advertising messages have simply stopped working as well as they need to. Game mechanics, on the other hand, are steadily rising to the surface. In everything from the airline you fly to the ATM card you use, savvy marketers are turning to the power of games to increase their return on investment, provide essential predictability, and—above all else—engender the kind of customer loyalty that wasn’t before possible… The future of marketing is games.”

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Can It Work?

What I have described above is a theoretical construct. At present, microns are in their infancy (we are just getting started with the idea at Netcore). Emails have generally been free from incentivisation; so, to imagine a loyalty program for microns can be considered as wishful thinking at this stage. Making one idea a success is hard enough, and here I am combining two big ideas together – microns and loyalty. So, can it really work? Let’s take them one at a time and then together.

We are being flooded with brand emails in our inbox – and all sorts of other messages in our other inboxes (SMS, WhatsApp, Facebook Messenger) and feeds (Twitter, Instagram, Snap, Pinterest). Brand messages have to compete in our inboxes with messages from family and friends, and the various groups and communities that we are part of. Attention is the prize that everyone wants and it is getting splintered into micro-moments where the mindset is more ignore and delete, rather than read and delight. It is in this world that microns can come like a breath of fresh air.

Emails come into our mailbox rather than us seeking them out and that is their superpower. With a focus on building a long-term relationship and a daily habit, some brands can become part of our life with the useful information that they provide. Microns are the best carrier for such nuggets – short and simple, clearly identified and useful. Made-for-mobile microns are the vehicle for brands to become friends. Friends are always welcome to connect with us; similarly, brands can use microns to make that connection via a subscription. Content will play a critical role for making microns work; too much promotional messaging and customers will opt-out or ignore. AMP offers a way to make microns interactive and open a whole new world of interesting use cases. That has been the thinking behind us creating MyToday, a made-for-microns publishing-subscription platform.

Adding elements of loyalty and gamification can make microns much more rewarding. Our attention has a lot of competition; if someone is willing to pay us for it, they have the potential to stand out. By disintermediating the media and ad platforms, brands can build a direct hotline to their customers, with the rewards working as magnets for visibility, engagement, actions and eventually, transactions.

While many brands have their own loyalty programs and could potentially add microns as another mechanism to earn additional points, a better approach would be to start with the customer’s inbox and craft a rewards program that incentivises all actions done within. This would necessarily have to then be a loyalty program that cuts across brands – that is what I have described in this series. Inbox attention is the prize; and there is no better inbox than the email inbox. Every other inbox has its limitations – SMS costs a lot and is limited to text, RCS is not widely available and dependent on the mobile operator, others like WhatsApp are controlled by a single entity who can alter the rules at will. The only mailbox free from monopoly control is the email inbox.

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To summarise, 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.

The entity that does it successfully can then open up the exciting world of rethinking the inbox itself for microns. Hotmail created a personal inbox for us in the late 1990s, Gmail made it hugely better in the first decade of the 21st century, and WhatsApp reinvented it for the mobile era in the 2010s. Imagine a new inbox for the 2020s that connects an individual’s dual identity (email address and mobile number) with a focus on brand messages rather than P2P and group messages. Microns can serve as the building block for this next-generation ‘gamified’ inbox. That’s our next story.