Customer loyalty programs are investments that produce economic returns – they work and some work better than others. Customer loyalty, what it is and how it’s delivered, is being disrupted – as it seems is everything else.

The disruption in New Zealand is real, but it’s economic rather than digital.

  • Firstly - the big coalitions (lots of companies in a single loyalty program), are waging war for territory. Fly Buys, Air New Zealand’s Airpoints, Smart Fuel and Qantas Points are all hunting for the same partners (and Air New Zealand would seem to be winning). Right now the going is very good for companies signing with these programs as they're spending a lot promoting their partners and the points offerings are richer than they’ve ever been and likely ever will be again.

  • Secondly - what customers want now is being framed by the best they’ve received from Netflix or Uber and traditional points and prizes based customer loyalty programs haven’t kept pace. They’ve taken an economic battering around the world as customers fall out of love with them with retail led coalitions the most heavily hit (airline led coalitions are strong by comparison). The fact that retailers are investing less in their programs as margins are squeezed and banks are closing theirs as the regulator cuts the funding mechanism is accelerating the decline of one size fits all points and prizes program.

  • Finally – all the evidence suggests that there’s more upside at less cost for companies if they deliver both an easy, enjoyable customer experience and integrate it with a tailored customer loyalty program. We don’t yet know how much better a return on investment such a slick experience might provide because no one’s yet achieved it.

The smart money would be on enterprises cracking the code on making it easy and enjoyable for their customers to do business with them and then crafting a loyalty program to match. The only real example of this strategy in play might be Amazon (excellent customer experience according to some) with their Prime loyalty program. In keeping with the global trend, Prime doesn’t have points or prizes and is tailored around Amazon. It counts 50% of all USA households as members who each pay to be members - $50 a year.

Perhaps Amazon is the acid test – how to design a loyalty program so good that 50% of your customers would sign up and pay for the privilege.

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