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One-Third Of Loyalty Rewards Uncashed

April 20, 2011 Leave a comment

I thought I would share this article from Tanya published in Marketing Daily as it demonstrate one more time the need for consumer to redeem their point to become truly engaged and loyal. Marketers who think low redemption increase their P&L are missing the true and larger benefit of loyalty program for their company.

Study: One-Third Of Loyalty Rewards Uncashed

by Tanya Irwin, Tuesday, April 19, 2011, 3:58 PM

Of the $48 billion in consumer loyalty reward points dispensed each year, at least one-third (or $16 billion) are never cashed in, according to a study from Colloquy and Swift Exchange.

Broken down to the individual, the “2011 Forecast of U.S. Consumer Loyalty Program Points Value” study finds that the average household that is active in loyalty programs earns $622 a year, but does not redeem $205 of those rewards.

That’s enough to buy an airline ticket, purchase a week’s worth of groceries or even a smartphone, says Kelly Hlavinka, Colloquy managing partner. Loyalty marketers have work to do, because while unredeemed points may translate to short-term corporate savings, they do not equate to long-term customer relationships.

“If redemption equals engagement and engagement delivers customer satisfaction and profits, then loyalty marketers should encourage their members to make the most of their rewards,” Hlavinka said in a statement. “In short, redemption is good.”

The financial services sector is the biggest provider of rewards at $180 billion a year. The travel and hospitality sector is the second-largest industry in terms of rewards, at $17 billion a year. The retail industry, although it makes up 40% of all loyalty program memberships, issues the smallest value in rewards at $12 billion a year.

The study comprises consumer-oriented reward programs from a host of merchants, including those from travel and hospitality, retail and financial services. Taken together, the sheer amount of currency issued by this group demonstrates the economic muscle and potential untapped benefits for all involved in rewards programs, which were launched some 30 years ago.

Marketers need a “transformational tool” that can translate rewards and points into tangible goods, says Nancy Gordon, chief operating officer of Swift Exchange, in a statement. The rewards industry is “ripe for transition from a culture of accumulation to one of realization in the fullest sense,” she adds. “That means helping consumers make rewards-based purchases as easily as they buy anything else in their daily lives.”

The number of loyalty memberships in the U.S. is 2.1 billion, exceeding 2 billion for first time — up from 1.8 billion in the 2009 report. The average household has signed up for 18.4 programs, compared with 14.1 programs in 2009. Despite the increase in overall membership, the average number of programs in which households actively participate is just 8.4. Overall membership of 2.1 billion represents a 16% increase compared to the 2009 report, but a slowdown from 2007 to 2009 when memberships rose 34%.

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Digital rewards increase engagement & loyalty

April 15, 2011 Leave a comment

Digital rewards increase engagement & loyalty

Published Thursday April 14, 2011 in http://www.thewisemarketer.com

An important part of making an advertising campaign successful is being different, and this is something that ad agencies are good at. One growing trend that has caught the attention of those seeking differentiation in the eyes of the consumer is the use of downloadable digital content to build brand loyalty and engagement, according to a report by The First Club.

The company’s own research has shown that digital rewards for the ‘digitized consumer’ are increasing as marketers shift their budgets from traditional advertising and promotions to online, digital, and interactive ‘new media’ channels. Another recent study predicted that digital revenues will grow rapidly, reaching an estimated US$20 billion in 2015. dmason2 This article is copyright 2011 TheWiseMarketer.com).

“It’s easy to see that the digital channel will be a very important one for brands throughout 2011 and beyond. But by implementing a digital rewards programme alongside a digital ad campaign, agencies can create more value for their clients’ customers, and therefore, more value for their clients,” explained Jill Goldworn, co-founder and president for The First Club. “In fact, 48% of consumers spend more with a company whose loyalty programme offers digital content that is relevant to them personally, whether that be downloadable music, movies, books, games, software or other information.”

Digital content can be used to reward loyalty throughout the selling process, right through from supply chain partners to end users, as well as to drive sales promotions and incentive campaigns. Agencies can also collect consumer data for up-selling and cross-selling purposes, and then use that data as an efficient way to track consumer response to each digital campaign.

At the same time, digital rewards offer endless promotional opportunities through both social media and other online distribution channels. And, because the channel is digital, unique up-selling and cross-selling opportunities can be implemented in minutes rather than days or weeks, and the market’s reaction to changes and market trends can also be measured in real time.

The First Club asserts that instant digital content provides brands with a very cost-effective solution to reward their loyal customers. While offering downloadable rewards such as music, games, software, and books, the first club also customizes programmes for both ad agencies and client organisations. These programmes offer controllable message content and instant measurability and CRM functionality.

A white paper detailing the growing trend of digital rewards, entitled ‘Loyalty: Looking Forward: The State of the Loyalty Industry and its Digitized, Instant Future’, has been made available for free download from The First Club’s web site

The film business is slumping

March 28, 2011 Leave a comment

The Economist always provide good “food for thought” and their analysis are usually spot on. This article is another exemple of this. The film industry is at a beginning of a major technology shift. Technology manufacturers have been trying to push a new media format (Blu-Ray) forgetting it is ultimatelly the consumer who decide. Streaming is the future and the film business has to adapt. The next move will probably be against manufacturers who are trying to lock the consumers in a “close internet” environement with their connected TV and other devices. Consumers want the freedom of choice, not only of content but of suppliers.

Enjoy the reading and please do send me you comments, views and ideas.

Hollywood’s disc problem

Video nasty

The film business is slumping. It needs to start dealing directly with consumers

Mar 17th 2011                    | from the print edition of The Economist

IN “THE RING”, a Hollywood remake of a Japanese horror film, a videotape has a deadly effect on those who watch it. In reality the opposite is happening: viewers are killing Hollywood’s home-video business. People are rapidly discovering new ways of watching films at home that pose a grave threat to the most profitable part of the film business.

In America, by far the biggest home-entertainment market, spending on videotapes and discs has dropped by 29% since 2004. Piracy is one reason. Another is the end of the format-replacement cycle: once you have a DVD of “Casablanca” you don’t need another one—and you probably won’t buy a high-definition Blu-ray disc, either. But the big reason is the rise of cheap, convenient rental outfits like Redbox, which runs kiosks, and Netflix, which streams some films and sends others through the post. The move from buying to renting is a calamity for Hollywood, a low-margin business that has come to rely on disc sales to push films into profitability.

Like music, newspapers and books before it, the film business has been disrupted by innovative, fast-moving distributors whose products have caught on with the public (see article). Tinseltown’s attempts so far to see off the threat have fallen flat, partly because the studios have failed to co-ordinate their efforts. But if Hollywood moves quickly and boldly it should be able to disrupt the disrupters.

Led by Sony, a consortium of studios, technology firms and retailers are working on a new way of distributing digital copies of films. The idea is that consumers will be able to buy the rights to films stored “in the cloud” and stream them to any device. That should make buying more appealing. But it also gives the studios an opportunity to go straight to consumers.

At the moment Hollywood is a business-to-business industry: it rents films to cinema chains and ships discs to big-box retailers and rental firms. Digital distribution should allow it to become much more consumer-facing. The studios could greatly expand their efforts to sell films directly. They could offer to upgrade existing DVDs to digital files. At a minimum, they could develop customer databases that they could use to refine their marketing campaigns. The studios are old-school advertisers: every year they spend billions of dollars on scattershot campaigns that often hit the wrong people. Every dollar spent trying to persuade a grandmother to see a Quentin Tarantino film is a dollar wasted (Quentin’s granny excepted).

Here’s looking at you

Disney and Pixar are brands, but most studios are not. Nobody goes to see a film because it is made by Fox. Increasingly though the films they release are brands—consider “Harry Potter” or “Pirates of the Caribbean”. The studios also employ actors and directors who are brands in their own right. They should market directly to people who love those brands.

It will not be easy to take such a radical step. But the trail has been blazed by another medium. Record labels have been hit much harder by piracy and have seen retail outlets disappear. They have been forced to deal directly with consumers. Lady Gaga’s website is run not by the pop star but by Universal Music, which uses it, and the consumer information it collects, to sell directly to her fans. That outfit has become far better at mining consumer data than the film studios. A common refrain in Hollywood is that the film business must not go the way of music. In this sense, at least, it should.

from the print edition | Leaders

Mar 17th 2011                    | from the print edition of The Economist

Instant Redemption Rewards

March 21, 2011 1 comment

Instant Redemption Rewards

How to reach customers neglected by traditional loyalty programs.

Wednesday, March 16, 2011

Published in Hotel Interactive.com

Jill Goldworn & Denis Huré

There is no doubt that loyalty programs are on the rise today. In the U.S. alone, there are 1.8 billion individual memberships in loyalty programs, everything from airlines to convenience stores to movie theatres. In light of this huge number, the general perception is that consumers are happy to join loyalty programs – eager to enjoy the added rewards that come with loyalty programs. The reality, however, is that they’re not. Confirming this expectation gap, a recent survey by the Chief Marketing Officer Council found that some 32% of consumers surveyed felt that participation in loyalty programs holds “little to no value.” Ouch.

What has emerged as a result of this disconnect is a new direction in loyalty programs: instant reward redemptions. In the past, instant rewards have been limited to cash or discounts at the register; maybe a free item of very low value. Technology, thankfully, has given rise to this new breed of instantly redeemable rewards – the digital, downloadable kind. These instant rewards promise to finally eliminate some of the traditional problems associated with loyalty programs, like engagement and delivering value.

Problems with Traditional Programs
According The Journal of Retailing, “the rewards associated with loyalty programs provide a means to establish reciprocity between the customer and the company.” But problems that have plagued this interaction, or reciprocity, throughout the years and usually stemming from the delay between collection and redemption by loyalty program members. Whether a program’s threshold for redemption is too high, or the redemption process is too cumbersome (which often the case, ask any FFP member), traditional loyalty programs suffer from program inefficiency. And here’s where instant redemption provides instant relief, specifically in two areas:

Low-Threshold Consumers
In the past, a big problem has been the loss of “low-threshold” consumers. For these consumers, who maintain a low accumulation of points (or whatever program currency), the traditional loyalty program concept fails: if the point threshold is too high, the program has become irrelevant because the consumer feels the reward is not obtainable. In such cases, the loyalty program is actually hurting the brand. It suffers because the consumer disengages from the brand before they have received an added “reward” for membership.

Instant reward redemptions provide companies a very affordable alternative to offer these low-threshold consumers an easy way to burn low point accumulations. Loyalty program managers also benefit, as studies have shown that these “light buyers” represent a large increase in spending and purchase frequency post-redemption. In other words, they’re not a segment to be ignored.

Delayed Redemption
Another area of concern with loyalty programs is cumbersome redemption processes. Regardless of the delivery method, timing is of the essence in loyalty programs. In fact, the timing is (almost) everything. The longer the delay in collecting a reward, the less powerful the loyalty creation. Here, instant rewards reduce the delay between collection and redemption and, therefore, a larger chance for loyalty engagement success.

Digital Content: The Ultimate Instant Reward Redemption
Digital content, offering loyalty members downloadable content (such as music, movies, software, books, games, magazines), is emerging as the premier medium for the delivery of instant reward redemption. The sheer selection of digital content that is available, along with its monetization potential, makes it an excellent vehicle for instant reward redemption programs. Consumers want instant rewards, and digital content is the next logical step. Research from Mintel confirms this fact: 47% of consumers surveyed said their choice of loyalty program would be influenced by instant redemption options, such as cash or discounts. Jackpot!

So with this information acquired from recent surveys and obvious positive consumer sentiment, the next question seems to be: Is digital content a good substitution for cash or discounts?

In a word, yes. According to Mintel’s study, 61% of respondents said that lower overall cost for merchandise they would have purchased anyway is an important attribute of a loyalty or rewards program. It’s feasible to assume then, that relevant content – content that the consumer is likely to purchase regardless – is a good substitute for cash or discounts. And considering that 65% of Internet users have paid for intangible digital content, there is a huge market for relevant and engaging digital content waiting to be developed. In the UK, a recent YouGov survey showed that among those aged 18-34 who had engaged in digital activities, 22% spent more than £5 on digital books, the digital content category receiving the highest spend.

Digital content presents a win-win strategy
Digital content gives businesses the chance to burn points off their balance sheet, while offering the entire spectrum of loyalty program participants the opportunity to redeem points for merchandise in which they are interested or already purchasing on a regular basis.

In essence, instant digital rewards have bridged the gap between reality and perception. By making rewards instantly redeemable, businesses can give their customers the value that they seek: relevant rewards instantly and anywhere, loaded onto the devices they use in their everyday lives. Instant digital rewards, it seems, have created a new trend in loyalty programs: programs that work – for everyone.

Loyalty: Looking Forward
Featuring latest statistics and defining characteristics of various industry loyalty programs presented by the first club, “Loyalty: Looking Forward,” can help program managers grasp emerging loyalty trends and their digitized, instant future. To download a copy of the whitepaper, visit http://www.thefirstclub.net/en/white-papers

Denis Huré is CEO and Jill Goldworn President and Co-Founder of the first club.

About the first club
the first club is the first global solutions provider to present a new, better, and more effective way to offer rewards and build loyalty by delivering relevant, digital content that is instantly gratifying to today’s consumers. the first club digital solutions can enhance loyalty, promotions, incentives and any type of rewards programs by offering the latest in premium content that will engage consumers worldwide, with attainable low-level rewards. Consumers can redeem rewards instantly to access the very latest in digital content in 12 languages, including millions of music tracks, mobile phone apps, games, eBooks, audio books, and soon casual games, digital magazines, movies and TV shows to engage with their favorite brands. the first club solutions are easily integrated into existing loyalty and reward programs, are cost-efficient and scalable to encourage low level reward redemption, increase customer loyalty and create additional revenues for brands. For more information, please visit www.thefirstclub.net, or the first club consumer site, www.thefirstclub.com.

If Point Redemption is a good thing….

March 17, 2011 Leave a comment

The following article about loyalty point redemption comes to you from one of my favourite resources, Colloquy (http://tinyurl.com/5tagp9e).  As readers of this blog will know, I am passionate about the loyalty space and Colloquy’s article reinforces how important for Loyalty program to promote redemption to engage its members. The action of collecting points is the first step of engagement with a brand, but unless you actually redeem these points, how loyale are you since you did not experience the benefit of the program?

What do you think about? Do you share this vue?

If Point Redemption is a good thing, then why don’t more loyalty programs promote it?

Posted on 03-16-2011

Aline Ostrowski is a consultant for LoyaltyOne and a COLLOQUY Contributing Writer.

I have recently spent a significant amount of time developing a redemption optimization plan for a client. In the plan, we examined the target redemption rates versus the actual, the primary factors causing the lower-than-target redemption, and a plan against each factor. I have been living redemption! Although my client is “pro-redemption,” the exercise led me to think about redemption in a broader context, and about the approaches that various programs take.

First, let’s quickly level set on a few redemption fundamentals. Redemption is the key driver in sustaining loyalty program participation and brand engagement.  Members who redeem their points and get a reward are more likely to increase  program participation, churn at a lower rate, increase spend/frequency, and stay engaged with the program and brand longer.  We’ve seen that time and again in the analysis we’ve done – and COLLOQUY has written about the Relationship Chain effect extensively.  After 3-5 years, most loyalty programs show that 50-65% of members have received a reward. The result should be a positive net-financial impact.

Although the fundamentals are familiar to most in the loyalty industry, it’s interesting to me why more programs do not do more to promote redemption. I know that one reason redemption is not promoted is a financial concern; if too many points are redeemed, then the point-liability breakage benefit will decline. I argue, however, that if a program is structured properly and the highest-value members are earning the largest portion of the points, and if receiving a reward after a redemption has a positive financial impact, the program should be actively promoting point redemption.

Below are a few examples of loyalty programs that are getting it right and promoting redemption:

  • ThankYou Rewards, Delta SkyMiles, and My FedEx Rewards: Regular communications are sent to members announcing new reward options available. This program has also started promoting redemption specials to motivate members; for example, in March ThankYou members can redeem for a Lowe’s gift card for 1,000 points less than usual.
  • MyCoke Rewards, United Airlines Mileage Plus, and Disney Rewards: Emails are sent to members informing that their points are going to expire. The member is prompted to perform an activity, redeem the points or earn more points, to prevent loosing the points.

These are examples of how loyalty programs are working to maintain or rejuvenate member interest in the program and the brand.  Not only is it a good practice to update members on reward options, it is considerate (and motivating, at least for me in the aforementioned programs) to let members know when their points are about to expire.

And remember, point redemption for a reward is a good thing. Promote it more to your members.

Aline Ostrowski is a consultant for LoyaltyOne and a COLLOQUY Contributing Writer.

The State of the Loyalty Industry and its Digitized, Instant Future

March 8, 2011 1 comment

Loyalty: Looking Forward

Denis Huré and Jill Goldworn, the first club

The State of the Loyalty Industry and its Digitized, Instant Future

In any industry, loyal customers are the cornerstones of successful businesses.

In consumer-centric industries, the loyal customer is one that is familiar with an offered product or service, inclined to have a positive impression of the company or brand, and represents the best opportunity for a repeat transaction. For B2B companies, the relationships established with loyal clients will often lead to more clients, and repeat business is the foundation upon which growth is built. These are commonly accepted beliefs of business and are the rationale behind loyalty programs.

Loyalty programs are generally acknowledged as necessary and useful, yet everyone seems to have a different opinion on their inherent value. Are they holdovers from a bygone era, where a more diverse marketplace and a less bargain-thirsty customer base necessitated greater effort to create and maintain loyal customers? Or are they integral business tools, still conferring considerable advantages on those companies that wield them well?

More importantly, do loyalty programs work in their current state? Is it still effective to offer pieces of main product as an enticement for repeat business?

The simple answers are “sometimes” and “somewhat.”

The solutions to the challenges faced by loyalty programs and the way forward for the loyalty industry lay in the digital realm: the adoption of digital rewards, the acknowledgement that consumers are seeking more relevant and redeemable rewards at their fingertips, and the implementation of loyalty strategies that leverage the latest technology to meet consumers’ needs and desires.

Let’s look at the numbers: some 71% of marketing decision makers said that loyalty schemes have become more vital to successful business over the last two years, according to a study by GI Insight released in early 2010*. The total loyalty market in the US remains incredibly robust, as measured by Colloquy1 at 1.807 billion individual programs in 13 different segments. Yet a survey by the Chief Marketing Officer Council found that 32% of consumers feel that program participation holds “little to no value,” while 37% believed individual rewards held even less value, all of which presents a loyalty paradox.

These findings tell us that loyalty programs are at a crossroads, and that while they seem certain of occupying a position of importance for most businesses, they will take a much different form in the future than they do today. Consumer needs have evolved, technology has evolved and so will loyalty programs, driven by forward-thinking companies in step with technology and consumers’ constantly evolving attitudes, to provide relevant, enticing digital rewards.

Trending Now: Instant Redemption Rewards

February 28, 2011 Leave a comment

By Denis Huré, CEO and Jill Goldworn, President and Co-Founder of the first club

There is no doubt that loyalty programs are on the rise today. In the U.S. alone, there are 1.8 billion individual memberships in loyalty programs, everything from airlines to convenience stores to movie theatres. In light of this huge number, the general perception is that consumers are happy to join loyalty programs – eager to enjoy the added rewards that come with loyalty programs. The reality, however, is that they’re not. Confirming this expectation gap, a recent survey by the Chief Marketing Officer Council found that some 32% of consumers surveyed felt that participation in loyalty programs holds “little to no value.” Ouch.

What has emerged as a result of this disconnect is a new direction in loyalty programs: instant reward redemptions. In the past, instant rewards have been limited to cash or discounts at the register; maybe a free item of very low value. Technology, thankfully, has given rise to this new breed of instantly redeemable rewards – the digital, downloadable kind. These instant rewards promise to finally eliminate some of the traditional problems associated with loyalty programs, like engagement and delivering value.

Problems with Traditional Programs
According The Journal of Retailing, “the rewards associated with loyalty programs provide a means to establish reciprocity between the customer and the company.” But problems that have plagued this interaction, or reciprocity, throughout the years and usually stemming from the delay between collection and redemption by loyalty program members. Whether a program’s threshold for redemption is too high, or the redemption process is too cumbersome (which often the case, ask any FFP member), traditional loyalty programs suffer from program inefficiency. And here’s where instant redemption provides instant relief, specifically in two areas:

Low-Threshold Consumers
In the past, a big problem has been the loss of “low-threshold” consumers. For these consumers, who maintain a low accumulation of points (or whatever program currency), the traditional loyalty program concept fails: if the point threshold is too high, the program has become irrelevant because the consumer feels the reward is not obtainable. In such cases, the loyalty program is actually hurting the brand. It suffers because the consumer disengages from the brand before they have received an added “reward” for membership.

Instant reward redemptions provide companies a very affordable alternative to offer these low-threshold consumers an easy way to burn low point accumulations. Loyalty program managers also benefit, as studies have shown that these “light buyers” represent a large increase in spending and purchase frequency post-redemption. In other words, they’re not a segment to be ignored.

Delayed Redemption
Another area of concern with loyalty programs is cumbersome redemption processes. Regardless of the delivery method, timing is of the essence in loyalty programs. In fact, the timing is (almost) everything. The longer the delay in collecting a reward, the less powerful the loyalty creation5. Here, instant rewards reduce the delay between collection and redemption and, therefore, a larger chance for loyalty engagement success.

Digital Content: The Ultimate Instant Reward Redemption
Digital content, offering loyalty members downloadable content (such as the latest selection in music, movies, software, books, games, magazines), is emerging as the premier medium for the delivery of instant reward redemption. The sheer selection of digital content that is available, along with its monetization potential, makes it an excellent vehicle for instant reward redemption programs. Consumers want instant rewards, and digital content is the next logical step. Research from Mintel confirms this fact: 47% of consumers surveyed said their choice of loyalty program would be influenced by instant redemption options, such as cash or discounts. Jackpot!

So with this information acquired from recent surveys and obvious positive consumer sentiment, the next question seems to be: is digital content a good substitution for cash or discounts?

In a word, yes. According to Mintel’s study, 61% of respondents said that lower overall cost for merchandise they would have purchased anyway is an important attribute of a loyalty or rewards program. It’s feasible to assume then, that relevant content – content that the consumer is likely to purchase regardless – is a good substitute for cash or discounts. And considering that 65% of internet users have paid for intangible digital content, there is a huge market for relevant and engaging digital content waiting to be developed. In the UK, a recent YouGov survey showed that among those aged 18-34 who had engaged in digital activities, 22% spent more than £5 on digital books, the digital content category receiving the highest spend.

Digital content presents a win-win strategy
Digital content gives businesses the chance to burn points off their balance sheet, while offering the entire spectrum of loyalty program participants the opportunity to redeem points for merchandise in which they are interested or already purchasing on a regular basis.

In essence, instant digital rewards have bridged the gap between reality and perception. By making rewards instantly redeemable, businesses can give their customers the value that they seek: relevant rewards instantly and anywhere, loaded onto the devices they use in their everyday lives. Instant digital rewards, it seems, have created a new trend in loyalty programs: programs that work – for everyone.

Loyalty: Looking Forward
Featuring latest statistics and defining characteristics of various industry loyalty programs presented by the first club, “Loyalty: Looking Forward” can help program managers grasp emerging loyalty trends and their digitized, instant future. For more information, visit http://www.thefirstclub.net/en/white-papers

About the first club
the first club is the first global solutions provider to present a new, better, and more effective way to offer rewards and build loyalty by delivering relevant, digital content that is instantly gratifying to today’s consumers. the first club digital solutions can enhance loyalty, promotions, incentives and any type of rewards programs by offering the latest in premium content that will engage consumers worldwide, with attainable low-level rewards. Consumers can redeem rewards instantly to access the very latest in digital content in 12 languages, including millions of music tracks, mobile phone apps, games, eBooks, audio books, and soon casual games, digital magazines, movies and TV shows to engage with their favorite brands. the first club solutions are easily integrated into existing loyalty and reward programs, are cost-efficient and scalable to encourage low level reward redemption, increase customer loyalty and create additional revenues for brands. For more information, visit http://www.thefirstclub.net or http://www.thefirstclub.com.

SOURCE: the first club