Bill Hanifin
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I asked someone if they knew what a “one-percenter” was the other day. I had just watched a documentary on motorcycle gangs and the people interviewed in the film proudly referred to themselves as “one-percenters”. That same day, I received a much different answer to my question from someone who was vitally involved in the political debate over income inequality.
No matter which definition comes to mind first for you, it’s clear that a 1%er is an outlier, an anomaly, one that doesn’t fit the mold of the common man. It’s safe to say that the lifestyles of true one-percenters would be unfamiliar to most of us, even if for markedly contrasting reasons.
That said, are you surprised to learn that almost all of us are living the 1% loyalty lifestyle? Our entire industry, until recently, has been built on rewarding points which are accumulated and redeemed at a future point for prizes, rebates and other freebies. The benchmark for this deferred discount has been 1% for a very long time.
This legacy loyalty model is changing based on the demands of Millennials and other digitally connected consumers. Soon and very soon, you’ll see fewer of the traditional models that have been lovingly built “by Boomers for Boomers”.
Looking at one-percenters from a different angle, I have visited two different wine and spirit merchants in the past month, one in Florida and one in New York. During each visit I was invited to join their rewards program. When I asked about the benefits, I learned that one offered a 2% rebate for every $100 spend in store, while the other gave 3% back upon reaching the same threshold. No other perks were offered by either retailer.
My reaction to each invitation? I thought joining the programs was a waste of time. Let’s see, focus my spending for an expensive product with high profit margins with one retailer and earn just enough to put in the parking meter out front. The offer was evidence of why retailers should not even bother to create a loyalty or rewards program if they aren’t going to put some effort in to the design. It’s also a heads-up that programs based only on reward without recognition miss the mark.
The experience reminded me of how loyalty programs have to change. While I can say with conviction that programs centered on a 1% rebate have worked effectively over time, I also know there are many options for retailers to consider these days. Retailers have a high comfort level for discounts, and strong demand for more from consumers is fueling their fire to continue using this tested tactic.
An unusual perception of the underlying math of traditionally structured loyalty programs is held by many retailers and adds urgency to the need to change. While those 20-40% off sales are taken at time of purchase and don’t show as an expense item on an income statement, every penny of marketing expense related to a points based loyalty program is targeted like a bad guy in the cross-hairs of an assault rifle.
The comparison doesn’t seem fair, but no one said life would be fair. Perceptions are hard to change and therefore it is the job of loyalty marketers to use what they know best (data) and to put that knowledge to use to create new value propositions that will engage and delight the customers we serve.
If we do that, we can claim to be part of the loyalty marketing one-percenters.
