Loyalty Truth

In Part 1 of our review of the State of the Rewards Industry, we quoted 15th Century Italian politician and philosopher Niccolò Machiavelli, who once said:

“The promise given was a necessity of the past: the word broken is a necessity of the present.” That sums up the state of the loyalty marketing industry at present, rewards redemption in particular.

Here’s what we meant: The first generation of loyalty programs met the needs of brands seeking to influence customer behavior, and consumers were delighted by the promise of reward and recognition from their favorite brands. The reward offers that came with them were framed by travel, merchandise and gift card options and their delivery met a promise that was absolutely on target for the times.

But now things have changed.

Consumers are becoming tired of traditional approaches to rewards and are seeking new options. The new framework of an effective rewards offering, we define it as Rewards 3.0, includes key elements defined by transparency, liquidity, and availability. Blend these three concepts together in the proper proportions for your brand and reward redemption becomes part of the overall customer experience, not just another transaction. Taken to an even higher level, redeeming a rewards currency can be the gateway for transformational brand experiences, illustrating to the customer how a brand walks out its own promises.

The challenge to achieving this lofty goal is that CMO’s and other loyalty stakeholders are being asked to deliver more value to the customers they serve while controlling costs. Experiential rewards were thought to be the savior of many loyalty programs as recently as 5 years, but experience has shown they are effective in a narrow set of applications. Not only do they fail today on the liquidity and availability tests, they can also be expensive to organize. Not every brand can sponsor a celebrity concert in Central Park, nor would the idea match their brand identity.

Considering the rising cost pressures in the board room, and increasing attention being given to the billions of dollars in unredeemed points & miles sitting on corporate balance sheets, you can somewhat understand why thought leadership in the rewards arena has taken a back seat to budgetary concerns.

We’ve been on a search for market examples that hint at what Rewards 3.0 could look like and found Deluxe Rewards as an example of how innovative approach to rewards can unlock new drivers for customer behavior while managing cost and liability management.

Previously known as Destination Rewards before its acquisition by Deluxe Corporation, the company has been quietly executing on a patented “zero liability” rewards solution over its fifteen-year history. In this model, loyalty program members can rapidly accumulate points triggered by engagement behaviors and apply them towards premium merchandise, travel, and local offers that are price protected and steeply discounted for loyalty program members.

Product selection and price protection are important to the success of the model. Consumers often check the equivalent value of merchandise in loyalty programs and find they aren’t getting the value they deserve. If they are getting a good “trade value” with their points, the models or styles of merchandise might not be what they see when they visit their nearest mall.

The funding of the points themselves is carefully managed across a spectrum of options. Some points might truly create “zero liability” and can be used for participation in auctions, sweepstakes, or to gain access to exclusive services. Other point-types can be used alone or layered together to create a multi-tiered offer that translates to high-perceived value for the program member.

In the language of today’s loyalty marketing professional, Deluxe is offering a “Managed Liability” solution to corporate brands, effectively putting its stamp on a key aspect of Rewards 3.0. As Machiavelli said, the “word broken” is a “necessity of the present”. Breaking the old model of reward management is more than a necessity as not just Millennials, but the entire body of digitally enabled consumers are seeking reasons to participate with your brand.

These consumers are not so interested in playing the game of “first I give”, then “maybe, I get”. Managed liability models that offer truly good deals on items that consumers want to buy anyway, pass the transparency test. As long as the reward delivery is well-executed, consumers will also see the rewards as liquid and accessible.

The work Deluxe Rewards with Zero Liability loyalty models could change the way consumers view their loyalty currency. It could also open up new opportunity for brands to better manage the financial health of their loyalty programs. It might even revive the flagging rewards merchandise industry.

The concept of Rewards 3.0 will be significant if brands can change the perception of their loyalty currency with customers. More than ever, successful consumer marketing is grounded in a willingness to experiment, to test and learn. Taking a closer look at Managed Liability solutions makes sense if you are to be a vital part of the new generation of customer loyalty marketing.