Loyalty Truth

A few thoughts on challenges facing an industry entering adulthood.

Loyalty Marketing has its own two-edged sword to contend with. The collection of customer data is essential to delivering offers and promotions that influence purchase decisions, but the spotlight on responsible management and protection of this same data is intensifying as the industry matures.

For technology suppliers, it is no longer enough to have the most powerful bonus engine or coolest looking web template for customer service. To serve just about any client of substance, suppliers these days have to comply with data protection standards and have certifications that are problematic to obtain and expensive for the organization to preserve. SAS 70 audits and PCI certifications are just two examples.

As marketers, we can’t be cavalier about collection of transaction and personal data. Data theft and misuse will be the “Swine Flu” of Marketing if we are not diligent, forward looking and eminently respectful of customer information. Publicized data thefts have been oriented to private label and other credit card issuers, but that doesn’t mean the bad guys aren’t chipping away at loyalty program firewalls as we speak. The hacker’s dream is as much to demonstrate power and create inconvenience as it is to reap profits, and we have to anticipate the myriad of possible attacks and associated risk that will threaten our customer’s confidence and our corporate reputation.

While building Fort Knox around our data, we also have to keep in mind that it is only given to us by customers in the first place in expectation of receiving better service, higher recognition, and to save money as a result. Wasn’t that your implied promise when you asked for survey participation? If we don’t commit to intelligently use the data we collect, and in a manner that is evident to the customer, we should pledge to purge our storage drives on a regular basis.

The taxman continues to sniff around our industry as well. There are recurring initiatives to treat points earned or rewards redeemed as taxable income. Fortunately, the talk doesn’t get very far, but with the current administration in Washington, don’t bet against it coming up with more support over the next 3 years.

We also have to be aware of consumer privacy concerns as we test out new technologies to communicate with our program members. There is little evidence through research that consumers are willing to be “tracked” by an RFID device embedded in the loyalty card in order to trigger proximity-based offers. Credit card issuers and credit scoring bureaus are already factoring in the patronage of specific business types into their risk models. Will this level of scrutiny dissolve the marriage between mobile payment and loyalty before the ceremony is complete?

A recent study by the Annenburg School of Communication at University of Pennsylvania punctuated the idea. 63% of respondents reported that their surfing history should be deleted right away. Overall, consumers were less interested in targeted marketing pitches than previously believed.

As the Loyalty Marketing industry passes through adolescence, it is bound to encounter growing pains. In sharing these issues, I hope to stimulate some conversation around the solutions. Send me your thoughts…