The Backward World Of Loyalty: "I'd Like A VCR, A Wired Phone and a Plastic Loyalty Card, Please"

Todd Michaud spent years leading retail technology teams for Dunkin' Donuts and Baskin-Robbins and today serves as the VP of IT for a billion-dollar franchise restaurant company. He also runs Power Thinking Media, which helps restaurants and retailers with social and mobile challenges.

When it comes to loyalty, many retailers are stuck in the 1990s. Does anyone else find it funny that in a world where you can very easily have a video conference with your kids from a $500 tablet over free Wi-Fi from a random hotel, we're expected to keep a 3.3- x 2.2-inch piece of plastic in our wallets to get benefits from some of our favorite retailers? It's funny how technology can drive a blistering pace in some areas, but slow down to a crawl in others. Especially in an area—such as CRM—where the application of technology could directly impact a retailer's top and bottom lines.

The problem is that many of these retailers are still considering launching a card-based program. After all, in their mind it's, better than a Flock Of Seagulls-style haircut—I mean, punch card-based system. But if you asked these same marketers who are looking at these packages if they are carrying more than one of another retailer's loyalty card in their own wallet, they would say "no."

I believe the reason most retailers are stuck in a card-based approach is because there is no existing vendor in the stable that offers a comprehensive, technology-based up-to-date approach. Loyalty is not an extension of POS, nor is it an extension of your Web site development. And it is certainly not an extension of giftcard processing. Loyalty is a data-intense program that is as important as merchandising and should be treated in the same way. It is about mobile and geo-location, along with data-driven marketing and real-time offers at the POS. Loyalty is about leveraging technology to maximize your relationship with each customer.

Most retailers I speak with are looking to either launch a loyalty platform or completely rebuild their existing program. Because of the fragmented nature of the technology approaches currently in the value chain, these retailers look to reduce their complexity by leveraging a vendor they are already doing business with. After all, the last thing the CIO wants is to manage yet another vendor. So they reach out to their POS vendors, their digital agencies, their E-mail marketing vendors and their giftcard processors. Most of these companies have some form of a loyalty package available today.

But almost each one has a massive drawback. If you use your POS provider, that approach requires a ubiquitous platform throughout the chain—something that it is extremely rare. If you partner with your giftcard processor, you are going to find challenges when leveraging other data sets from inside (and outside) of your organizations to enrich your loyalty campaigns. It's much worse when retailers try to leverage their existing giftcards for loyalty. With this approach, retailers further burden their customers by forcing them to loan the retailer money (loading the card) to receive benefit. Talk about a barrier to entry!

Go with a digital agency, and you will quickly find that choosing a company largely focused on marketing and then asking that firm to take on an operational role (and manage systems that become mission critical) will mean asking the company to deliver services it is not designed to support. For those of you who have purchased a monthly a service from a professional services firm, you will know what I mean.

That is not to say that each of these vendors will not have an important role to play in the overall loyalty approach. That is not to say that each of these vendors will not have an important role to play in the overall loyalty approach; they will all play a critical part. My contention is that they are not currently set up to be successful in offering the entire package and here is why.

A great loyalty approach requires myriad functionality that is not readily available from the current technology providers, including:

  • A great campaign management system with the ability to:
    • Regionalize loyalty campaigns.
    • Allow franchisees to create their own campaigns.
    • Interact with internal systems such as store meta-databases and BI systems to enrich the campaigns and remove the requirement for duplicating data across several systems.
    • Interact with a creative system that provides a consistent look and feel across all platforms.
  • The ability to enrich the customer profile data with data from the major social networks.
  • The ability to load and redeem coupons electronically.
  • The ability to leverage geo-location services.
  • The ability to customize the program to interact with users how they want (via text, E-mail, mobile app, social network, etc.).

In a very informal survey of a few friends, all of them said they would much rather provide a retailer with a cell-phone number than carry around a piece of plastic (many said they have the clerk look up their loyalty account by providing their cell-phone number). There is an argument that says using the plastic card speeds up purchase transactions and, for high-volume shops such as restaurants, the few seconds saved by swiping a card can be significant. But for most retailers, the time to enter a phone number versus swipe a card will far outweigh the rate of adoption with their customers.

I would argue that a well-built loyalty package will really let each customer determine the best way to interact with the brand. Do they want to check-in on Foursquare or Facebook? No problem. Do they want to use your mobile app? Sure thing. Do they want to provide their phone number to the cashier or to a small device at checkout? Easy-peasy.

The other big factor is that loyalty programs and coupons (electronic and mobile) are rapidly starting to merge together. You may want to provide a customer with a bounce-back coupon after a purchase. You should be able to automatically "load" that coupon into that customer's loyalty account and then track its redemption when the coupon is used. This removes the need for customers to have to carry physical coupons or offers, while providing the retailer with valuable information about redemption of certain offers because each coupon would be unique.

Another important factor of the next generation of loyalty platforms will be the ability to interact with a purchase transaction in real time. Did an infrequent customer with a high Klout score just purchase a promotional item? What if you provided a "surprise and delight" discount (or free product/service/food) to that customer in hopes that her network of followers on the social networks will see a tweet about her great experience?

What do you think? If you disagree (or even, heaven forbid, agree), please comment below or send me a private message. Or check out the Twitter discussion on @todd_michaud.