Coverage of the 3rd Loyalty Summit at the Taj Lands End, Mumbai, Jan. 27–28, 2010

Sixteen hours of meditation can lead to a cornucopia of enlightenment, or so COLLOQUY’s intrepid conference participant Kelly Hlavinka has proven with her recent voyage to India’s 3rd Loyalty Summit in Mumbai. Sixteen hours of flight time to the conference—well worth it, she reports—and sixteen hours of return flight, part of which Kelly graciously spent in compiling this recap for our readers.

With the backdrop of India’s 60th Republic Day celebration—and the accompanying heightened security measures—I made the long journey to Mumbai to join India’s Loyalty Summit 2010, the third edition of this event. The conference theme was "Next Generation Loyalty," and it seems that this next generation is arriving not 16 hours from now, but as I write this.

Reading the Wall Street Journal the other morning over a cup of McDonald’s coffee—yes, McDonald’s, not Starbucks—I was struck but not surprised by the sales strides of the very chain that had just sold me the latte. The QSR’s 2009 Q4 comparable sales increased another 3.8% versus the same quarter in 2008, which in turn builds on their amazing 7.2% same-store sales growth the previous year (Q4 2008 versus Q4 2007).

In such a turbulent economy, that success should be revered, even though the turbulence itself is fueling a good portion of that growth. Like many other value brands, McDonald’s success in growing sales reflects customers struggling to stretch limited budgets a bit further with lower-priced options. And we see clear demonstrations of customers shifting hard-earned dollars to more affordable alternatives in the recent financial performance of Family Dollar, Walmart and Dunkin’ Donuts.

2009 is finally coming to a close and what better way to end than with a good set of predictions for the upcoming year in the loyalty industry. The loyalty landscape is sure to be as dynamic as it was in 2009 as we continue to adapt to the changing economic climate. I will narrow my focus down to three specific industries: financial services, retail and travel.

FINANCIAL SERVICES: credit and debit issuers will continue to reflect on how to evolve their loyalty program value propositions in a challenging regulatory environment. With high levels of negative public opinions of the banking industry, issuers will have to navigate carefully as they make changes to existing rewards programs.
Among forward-thinking banks, we may see a trend toward the simplification of the loyalty options they provide cardholders rather than the adoption of annual fees for reward cards.

For evidence of a powerful but overlooked source of opportunity in retail marketing, let’s eavesdrop on a bit of word-of-mouth conversation at a popular social-networking web site. "I don’t shop alone," notes a forum post. "I go with a friend (no kids or hubby). We each make out our own lists but shop together. We can bounce suggestions off of each other. We can stop each other when the other person is really not making a good deal."

What’s your guess as to which product category the poster is referring? And by extension, in which retail category customers most often engage in conversations with friends and family? Beauty and makeup? Products for the kids? Cool electronic gadgets?

The answer may surprise you: The Food and Grocery category is the number-one topic of retail Word-of-Mouth (WOM) conversations—as the above quote from the web site CouponMom.com can attest. Surprised? So were we. But COLLOQUY’s recent Word-of-Mouth (WOM) research, as published in our recent white paper The New Champion Customers revealed the number of surprising ways that retail customers are talking to friends and families about the Grocery category.

The travel industry pioneered the modern loyalty program. As first-movers, you have both the accolades – and the bruises – as constant reminders of what was started in 1981. Since travel loyalty programs were launched in another acute recession, it is fitting that this current recession should present another major turning point for the future state of airline and hotel loyalty strategies.

Clearly, strategic changes and sound management are paramount right now. But, what specific actions can you take to ensure that this period marks a positive turning point for your loyalty program?

In every way that matters, the select segment of customers that have chosen to engage in your loyalty program can help take the sting out of this economic crunch. The good news is that there is no industry that understands that better than the beleaguered travel sector. In fact, the lessons that airlines and hotels learned during the perfect storm of 2001 – 2003 should serve as a reminder for us now.

Here are three lessons that reinforce why your loyalty program members may be your best asset to create a competitive advantage when financial equilibrium returns:

Checking into one of my favorite hotels for business travel, I noticed a promotional counter placard making me an offer I couldn’t refuse. The "Mega Suites ’Dream Big’ Bonus" told me that by staying just four nights at any of the chain’s thousands of locations during an upcoming three-month period, I would earn 10,000 bonus points.

Now, I love a good deal just as much as any other consumer, but that’s not what made the offer impossible to refuse. I didn’t need to check my travel schedule to know that I was going to be spending far more than four nights with this chain during the promotional period. Was the offer going to change my behavior? Dream on.

The "Dream Big" Bonus was an offer the hotel chain should have refused. By making the bonus available to everyone, the chain incurs extra redemption liability while rewarding me for doing what my jam-packed travel schedule already calls for.

As marketers, we’re often too quick to toss mass-issued bonuses to all loyalty program members. Whether this practice results from infrastructure deficiencies, lack of imagination, or plain laziness, mass-promoted bonuses are merely a form of marketing pollution that costs money and doesn’t work. It’s time we took a hard look at bonuses. Are the right customers taking advantage of them?

Perhaps the most underdeveloped aspect of business-to-business (B2B) loyalty marketing initiatives is the soft benefit side of the equation—the special perks, pricing, access and treatment that turn impersonal small-business accounts into living, breathing loyal customers. In their consumer lives, small-business owners are used to the royal treatment: Business-class upgrades from their preferred airlines, concierge services from their credit card issuers and personal shopper services from their favorite retailers. But when it comes time to interact with their business’s suppliers, their only interactions are often limited to monthly invoices. Even when a B2B vendor operates a loyalty or some other type of customer recognition program, the soft benefit side of the value equation is often undeserved or ignored completely.

For those companies who do offer B2B soft benefits, what form do those benefits take? To answer this question, COLLOQUY analyzed 59 B2B loyalty programs in the Financial Services, Retail and Travel sectors that offered soft benefits and isolated 225 separate program benefits in order to make some broad categorizations of soft-benefit components. Here are 11 illustrative examples of the emerging recognition benefits found in the COLLOQUY investigation:

The Opening Bell of the New York Stock Exchange, once the exuberant signal of a day of robust and largely escalating financial activity, now sounds like a frantic alert. And when the trading day is over, the Closing Bell sounds like a clamorous alarm clock waking us from nightmares, but not rescuing us from them.

As disconcerting and glaring as the recent Wall Street meltdown has been, however, it was only one of the economic problems that have been mounting for some time now. On the way up: the Consumer Price Index has more than doubled to 5.4 percent over last year’s level. On the way down: Consumer confidence has plummeted to distressing lows. The Conference Board’s August US Customer Confidence Index at 56.9 was 40 points below its base-year 1985 level. Similarly, business indexes reveal fading corporate and CEO confidence levels.

And U.S. borders are hardly containing the problems of tightening credit and liquidity. In Canada, figures released by TNS Canadian Facts show that Canadian consumer confidence is mired at a multi-year low despite some recent upward bumps. And even the nascent China Consumer Confidence Index (CCCI) didn’t take long to dip to its lowest point in September.

At Enterprise Rent-A-Car, COLLOQUY’s Customer Diva experiences the next generation of mutual customer and employee satisfaction...

It’s easy to bandy about such facile clichés as "We invest in our employees" and "The front-line is our key to success." But those clichés are rarely translated into front-line experiences tangibly different to the typical consumer. My recent rental experience with Enterprise Rent-A-Car transcended simple good service and accomplished that difficult translation. The difference in their front-line culture was palpable. As I reflected on my experience, and as Iater spoke to the Enterprise corporate team, I was able to clearly see how those service distinctions result from an orchestrated customer experience strategy. Here’s one Customer Diva’s story.

Denver, Part I. Just having a car would have been good enough. Because of a short-notice meeting, I found myself at a Denver hotel needing a rental car reservation. That day, the companies I typically frequent had no stock. Neither did any of the others I tried—until I called Enterprise, which I’d never used before.

It finally happened. I filled my tank at the gas pumps of a membership-only discount retailer.

For my entire adult life, I’ve sworn by the majors—a BP, a Mobil, a Shell, a Texaco. Why? To be honest, I do it mostly because Dad filled up at those types of stations. They’re clean; they’re well-lit; they’re safe for his baby girl to fill up her car.

But I may have crossed over to the dark side. On a few of my recent Saturday treks to my local hypermarket, I started surreptitiously filling up. Since I was already shopping at the main store, I figured, why not go ahead and fill up? But, I didn’t establish a new fill-up habit right away without some angst … and a few obstacles. Given the uncustomary lines, I didn’t know how long a fill-up would take. Given that I must use the membership card for fueling, I needed to learn a new process.

But here’s the thing: switching really wasn’t so hard. It didn’t take so long. And, all it took was that first trial to get me filling up at the discounter once a month. Now, I often adjust my fueling pattern to fit in with my Saturday trek to the hectic hypermarket. And "Major GasCo" doesn’t seem to have missed me.