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Loyalty World conference
London, September 2007

Loyalty - what comes next?

The loyalty market globally in both consumer and business-to-business programmes continues to grow and much of the new interest is in emerging markets. The growth of China and India is creating a huge new economic group of middle class and high net worth consumers. Developed markets in the USA, Canada and Europe are maturing and loyalty schemes that have been established, in some cases for decades, are now searching for new ideas and inspiration. It is the 'best of times and the worst of times' for consumer loyalty strategists as they seek to make sense of a potentially confusing and fast developing global market.

To put some of this into context the Wise Marketer thought that a good place to start seeking the answer would be the annual Terrapinn 'Loyalty World 2007' conference that took place in London in September.

This was a typically commercial and well-organised conference by Terrapinn (they do after all get enough practise!) that reviewed and debated many of the key challenges facing brands in the problem of how to engage with and understand 21^st century consumers in a world of oversupply and increasing technical complexity. If you had travelled half way round the globe to hear some of the leading schemes in consumer loyalty described in their current context by the people who run them then you broadly got what you came to hear. Between the quality presentations were some that had less impact, relevance or simply acted as brochure-ware for the presenters but that is the 'padding' in any large international conference in the commercial environment that has become the norm in the last few years.

The event attracted the major coalitions' and retailer-centric schemes' senior managers from Western developed markets. With the CEOs, directors and department heads of some of the largest global loyalty schemes attending and presenting, the conference could claim to have delivered on the registration blurb: "join the leaders in loyalty at Europe's premier customer retention forum".

Day One saw a fascinating contrast between a classic 'eyeballs' ATL marketer's view of the world when Mark Hall, Marketing Director of Toyota UK, discussed the rise of the Toyota brand to the #1 global car manufacturer position based on operational efficiency and brand quality with some research suggesting that the emotional linkage of customers to the brand still required focus but the popular 'net promoter' metric scores very high for the brand. This was an excellent example of brand growth to domination within the sector using traditional marketing techniques.

The agenda then placed Andrew Mann, Clubcard Director for Tesco, following the Toyota presentation with an outline of what has now become a global reference programme for a customer-centric, data-focused approach to growing a business. The book 'Scoring Points' is now in the 2^nd edition, the story is well told and how long before they make a film?

The Tesco Clubcard story is a text book example of the use of a data analysis approach (developed for Tesco originally by DunnHumby and which became so central to their success that they acquired a controlling interest in this independent supplier of data analysis service). The presentation by Mann was both professional and 'laid back' at the same time. The story is now well told and few new insights were offered. This does not mean that the message has lost its impact: Tesco Plc continues to power ahead in the UK market and is becoming a formidable global retailer. The statistics of the Clubcard programme are impressive: £100m per quarter handed back to customers in vouchers, 9m different versions of the Clubcard quarterly statement, 95% of vouchers issued get redeemed, 35% of coupons are redeemed, 10,000 customers per week advise Tesco that they are moving. Yet in the midst of these large numbers Mann reiterated that simplicity works, complexity does not. He also reinforced the message on 'trust': never, never, take the customer for granted, and never abuse their trust in your guardianship of their data.

The contrast between the success of Toyota, driven by classic ATL marketing, and Tesco, driven by best practice in customer insight, was evidence that the debate in this area of marketing still has some distance to run. What was especially interesting however was that when questioned about future developments for the Clubcard Andrew Mann stressed the need to continue focusing on the basics and downplaying any dramatic changes or evolution in the Clubcard scheme. This almost sounded like a company resting on its laurels and that does not sound like the competitive retail machine that has been developed at Tesco head office or the company that is proud to claim to be a 'leader not a follower'.

Whilst the audience absorbed these conflicting messages it had little time to reflect. Other presentations during the day included Nicolette Wuring from UPC focusing on the importance of trust in post-industrial consumer society; Chris Sedgwick from BP outlining the importance of ethics and environmental standards in BP (editor's note: a tough sell given their recent well reported problems in the USA); an interesting new initiative from Selektpoints in the private label market (curtailed by the speaker's urgent need to return to the Middle East where his wife was due to give birth!); and Rick Ferguson from Colloquy discussing some recent research that highlighted the fact that only 40% of consumer loyalty programmes in the USA are active.

Day Two featured a keynote presentation from Steve Gray, Chief Customer Officer of Loyalty Partner, Germany, talking on the theme of 'he who knows the customer wins in the end'. The statistics of the 'payback' loyalty scheme in the German market continue to impress: with 1 in 3 German families collecting 'payback' loyalty points, 15bn in euros issued, 90% of points redeemed, and with a high-profile sponsorship of the German Olympic Team this is now a world class and well-established example of the coalition loyalty approach. Steve Gray is CCO of Loyalty Partner and MD of the Emnos subsidiary that is playing the 'Dunnhumby' customer insight analysis role within the scheme. Based on this perspective his comments in responding to a question from the Day Two chair of the conference on the future direction of consumer loyalty schemes had the impact of informed insight. The future in his opinion would be based around growth, innovation in financial services, smarter data analysis and internationalisation of schemes.

Steve was followed in his presentation by Bryan Pearson, President and CEO of Air Miles Canada, which is probably on many measures one of the best established and most profitable for all stakeholders coalition loyalty programme globally. Another impressive array of statistics backed up the success claims of this program: 85% participation in Canada versus a USA average of 57% for loyalty programme; 2 in 3 consumers engaged; 100+ partners; and success case studies from RONA, Shell Canada, LCBO and Bank of Montreal.

The rest of Day Two was memorable for Michael Dwyer, CEO of Pigsback.com, telling the story of the 'Pigsback' online 'trusted' community rewarding members for their interaction with brands; and the highly innovative developments at the Turkish Garanti Bank, as energetically outlined by Asli Germen, their Senior VP Communications.

So, on the face of it, an informative conference, well organised and with some high quality presentations from leading loyalty marketers plus the inevitable 'padding presentations' from sponsors and consultants.

Well, maybe. What was missing for this writer however was anything new, leading edge or even downright risky. Where was the speaker for 'Wedge', a loyalty scheme that seeks to challenge scale and take loyalty back into local business? How are loyalty programmes going to play a role in the future corporate and social responsibility debate with which all CEOs of large corporations are now grappling? With Al Gore winning a Nobel prize for his work in raising the awareness of climate change and the huge task facing the planet how are behaviour change consumer schemes such as loyalty incentives going to play a part in addressing the challenge?

The 'Pigsback' story should really have been supported by more players talking about their experiences with programmes such as Friends Reunited, Facebook, Myspace and other online communities. This is where much action is now taking place and large numbers of people are engaging. Where this activity leads, how it can build sustainable business models, and what impact these seismic shifts will have on loyalty marketing is still work in progress. I was not expecting the answer at a conference such as Loyalty World but I was expecting the leading exponents to start hinting at what comes next for consumer loyalty schemes and hoping for illumination on the way forward.