Loyalty Truth

Anytime we review a loyalty or rewards program for our readers, we use the available facts as assumptions in a model that estimates the effectiveness of the program.

Because all customers are not the same, we normally create a customer profile based on spending patterns and objectives and project the earning velocity for those segments. As a result we are able to offer insights into the program’s customer value proposition and then bake in evaluation of the communication methods used to engage the customer and the extent to which data is used to deliver relevant and targeted offers.

A final factor in this methodology is to assess whether the program creates a defensible competitive advantage to the sponsor. In layman’s terms, we run the acid test of differentiation – does the program have unique and proprietary features or is it another example of “me-too”?

Recently we ran across the rewards program at FreeConference.com. Thinking that services like this were “liked” by smaller businesses on a budget and seeking to avoid higher-priced subscription based alternatives, we constructed a customer profile that assumed a take rate of just the two premium level service packages.

The math showed that collecting airline miles through the FreeConference.com Rewards program would result in a round trip domestic airline ticket after a mere 12 years of usage. Another point of criticism was that requiring the customer to put in a credit card in the midst of the sign-up process would hurt enrollment rates. This requirement has historically hurt take-rates, therefore our assessment.

Our final comment concerned the use of airline miles as a currency. The granddaddy of all rewards currencies still appeals to consumers, but no barrier exists to prevent competitive response, and miles are expensive on a unit basis relative to other currency options.

Taken together, we gave the program poor marks. To my delight, FreeConference.com CEO Chad Clawson wrote in to tell us our assessment was incorrect. Mr. Clawson informed us that Freeconference.com has a premium toll-free conferencing offer in which customers spend tens of thousands of dollars per month, meaning the customer profile FreeConference is seeking to engage and retain has a spending profile that generates earning velocity to an acceptable level.

Because these premium customers already have a credit card on file, enrollment in the reward as program is easy and the response rates have been “terrific” according to the company. Mr. Clawson pointed out that only paying premium customers are eligible to join the rewards program, and they have already provided a credit card number to establish their account. New premium customers enter a payment card as well therefore FreeConference is not asking for anything the customer is not already willing to give as part of the premium offering.

For as much as loyalty practitioners understand about loyalty programs, shared data from sponsors is hard to come by. The advantage for many of us working in the business is that we have an accumulated perspective based on the results of programs we have designed and helped to operate. There are surveys that help to round out our viewpoints, but attend an industry event and you’ll see that the slimmest part of every presentation covers program results.

It’s for that reason exactly that I was delighted to hear from Mr. Clawson and further pleased that he was willing to engage in a conversation to discuss his program in turn allowing us to “get it right” at Loyalty Truth. Mr. Clawson fairly asserted that “I can understand how, from the outside, the Loyalty Rewards program may not seem to make sense, but that is only because of a couple of factual errors.” From that point, we cleared up the factual assumptions leading to this post.

Loyalty Truth holds its ground on the use of airline miles as the chosen currency to support the program. The offer can be copied easily by a competitor, meaning the program could become table stakes at any moment. Also the airlines have a much publicized capacity issue which creates a perception among consumers that airline miles are difficult to redeem.

The bottom line is that the program is working for FreeConference.com. Corporate customers like to accumulate airline miles and we believe that several new initiatives will be introduced in the near term providing a relief valve to the capacity issue.

Our discussion with Mr. Clawson is one of the reasons we established Loyalty Truth and indicative of why we chose the name. I’m also delighted to have been named a member of the “Honest Blogger Club” in the process.

Something all of us who pound the keyboard and spin our opinions should remember that there is a perception about bloggers that many are crafted hastily with minimal research and little regard for the impact on third parties. To receive correction and “go dark” is the mark of an unreliable information source. To engage the conversation and make corrections earns entry into the Club.

I’m grateful for this interaction with FreeConference.com and hope to have more information to share about their program in the future. It would be great to know the size of the membership, the extent of revenues represented by members, and the delta between customers of similar profiles pre and post enrollment.

Most importantly, I’ve got a conference call to organize and know just where to go to continue to get the good quality service offered by FreeConference.com.