#514: A New World Order to Categorize Loyalty Business Models

This “Wiser Loyalty” podcast wraps up discussions during March that guest hosts Bill Hanifin and Aaron Dauphinee had about Loyalty Business Models.

Breaking away from the Proprietary/Player/Coalition nomenclature that has been used for years, Bill and Aaron redefine the Loyalty Business Model classifications based on a more customer centric view. They land on an approach that reflects the reality of the programs they have been observing in the market.

The Wiser Loyalty series showcases a theme each month based on the courses required to earn the Certified Loyalty Marketing Professional™ (CLMP™) designation, featuring the latest thinking on customer loyalty, backed up by market examples.

Next Month’s topic: Key Performance Indicators.

Show Notes:

1) ⁠⁠⁠⁠⁠⁠⁠Aaron Dauphinee⁠⁠⁠

2) ⁠⁠⁠⁠⁠⁠⁠Bill Hanifin⁠⁠⁠

3)  ⁠⁠⁠⁠⁠⁠The Wise Marketer 

Audio Transcript

Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the Founder and CEO of Let’s Talk Loyalty and also Loyalty TV. If you work in loyalty marketing, you can watch our video interviews every Thursday on www.loyalty.tv. And of course you can listen to our podcasts every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts around the world.

Today’s episode is part of The Wiser Loyalty Series, which is hosted by our partners, The Wise Marketer Group. The Wise Marketer Group is a media education and advisory services company providing resources for loyalty marketers through The Wise Marketer digital publication and the Loyalty Academy program that offers the certified loyalty marketing professional or CLMP designation.

I hope you enjoy this weekly podcast, The Wiser Loyalty Series, brought to you by Let’s Talk Loyalty and The Wise Marketer Group.

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Bill: Hello everyone. I’m Bill Hanifin, the CEO of The Wise Marketer Group, and I’m one of the two hosts of the Wiser Loyalty Series. Throughout this month, my co host Aaron Dauphinee and I have been exploring this month’s topic, which is the foundations of loyalty. Hello over there.

Aaron: Hi, how are you doing?

Bill: I’m good. I’m good. We’re in different parts of the same hemisphere, but apparently a vastly different outside conditions,

Aaron: Yeah, not to , throw Canada under the bus, but it’s cold up here today.

Bill: Exactly. So, listen, if you’ve joined us just at this point in the month, this is the 4th in a series for the month of March.

We’ve been covering throughout the month, the most foundational aspects of loyalty marketing, and we put elements of our course number 101, which is introduction to loyalty marketing and course 104, which is the loyalty program business models all from The Loyalty Academy. We’ve put this to the test. So we’ve taken some familiar concepts under the microscope and we’ve challenged some of the best practices that have qualified as, let’s just say strong opinions held closely for decades. And and so that’s, we’re going to carry that on today. We’re going to cap off the series with a conversation about loyalty business models. We’re going to go a little bit deeper. We’re going to try to end up with some sort of a categorization, maybe a new world order of models.

I’m not sure. And and we’ll reset that order. So it’s really going to be interesting. So Aaron I gotta tell you, I just finished I’ll say an arduous process of being a judge for the International Loyalty Awards. Just wrapped that up last week. But you know what? The effort was worth it because I got the chance to see some incredible programs, a big spectrum of programs, different models.

And what it taught me was, The nomenclature that’s been used for a long time doesn’t exactly reflect what we see in the market today. So how do you look at that? Do you see a need to look at things a little differently? Or is it all just the same? And we’re playing with terms.

Aaron: Yeah, I think it’s easy to get caught up in our jargon and on jargon in our industry, and I know I’ve said that before, but the reality is what we do need is a bit of a new baseline and what are the criterion in which we judge that new baseline, I think, is what we’re really getting to in the course of the conversations we’ve had over the last couple of weeks.

And they’re not just the last couple of weeks. We’ve been listening. You know, that’s our role in the industry is to hear the different terms, the different years constructs that are coming forward and try to make sense of it all. And that’s really what we’re aiming for in this series is to say we know we’re not going to be a hundred percent, right.

Well, we’re humble enough to know that, but we’re going to be darn close to making more sense of it all. And I think the biggest component to that is, is taking the way in which the original definitions of how a program model or business model for loyalty is defined around the construct of control.

And when we talked about the four elements that come into that and really sort of lift them and bring forward the order of operations in terms of the importance of what the value is to the customer and what the net effect is to them as the first filter. And then the secondary filter being about, you know, who designed, who builds, who controls the other mechanics in place.

And they’re all important to, to take into consideration as you think about what you want to do as a brand and how you want to have a relationship with your customers. But for me, at the end of the day, there really is a spectrum and it’s, there’s a ton of different shades. And for us to be so myopic, to just be hardcore definitive of, you know, it must have this criteria and fits in here then the change, like, there’s a lot of different shades that, that exist and that’s okay.

And to see that innovation in our industry of figuring out what’s going to be a best benefit to the end customer and member of our program is the right thinking in my perspective of how we should look at defining the, these programs going forward. I don’t

know. I’ll give your thoughts.

Bill: That’s good. So,well, let me ask you another question then. So, remember, we had our, really, there were just three, there was the proprietary, it was the player, and it was a coalition model, but the proprietary model has changed a lot, right? We see some proprietary programs, just single brand. And then you were telling me you, you saw a distinction between the single brand and the multi brand more than just the fact that maybe you had you know, umbrella or ecosystem type programs like the Chalhoub group in the UAE, or, you know, there are many examples of that.

There are many shoe and fashion brands in the U. S., even the TJ Maxx group, for example. Right. Multiple brands under one corporate umbrella sharing a currency and so on. But how are you looking at even the proprietary model being different today?

Aaron: Yeah, I think the nuance for me is really that as if you think about the spectrum that’s there, a true proprietary program is really isolated to that one brand and thinking about the currency and the connections and interactions that they have with their customer base.

And that changes when you think about a conglomerate or a group of companies or a house of brands, if you will, that come together with their owned by one particular company or you know, a parent of some sort where there still is a set of customers that they want to have shop their multitude of brands.

And I think that’s the nuances is would have last thought that, Hey, a bunch of brands coming together. Starts to fit like a partnership model or even to some degree of coalition, because the third party quote unquote is the parent company. Well, I struggle with that. And what I would say is when you have a common owner that is very clearly looking at the end customer or set of members in their program or programs that can be proprietary, but it’s about them and getting what they have, and they’re not asking for help from any other set of brands outside of their ecosystem And that’s the nuance that I would say is now the proprietary is there’s two wings to it, right?

You’ve got the multi brand and you’ve got the solo brand and both still are in the same industry. Absolotely, yeah.. You’re on. And then there’s partnerships after that. And

Bill: So that’s, yeah. And that’s what I wanted to ask you. Did you see that magazine Fast company just published an article about partnerships in loyalty, which I thought was really interesting because we’re talking about it ourselves, but when a publication like that covers it, it’s gotta be a more visible trend to the consumer, I would think, but do you think partnerships and the partnership model is a, is it a sub category of some kind of proprietary or is it something altogether different?

Aaron: I think it’s something altogether different and you raise a good point of like Fast company bringing this forward to the mindset of the consumer. At the end of the day what we’re talking about here is definitions within our own industry, right? The consumer ultimately doesn’t care what we call about that. They don’t think about joining the XYZ brand coalition program or the XYZ proprietary program. That’s our terminology. What they’re joining is the XYZ program, right? That they’re getting some benefit with that particular brand that I’ve just named is XYZ as a point of example. And so me, the proprietary, if there’s two wings that kind of filter out in that, kind of portion of the spectrum partnerships has a multitude of different looks and feels to it.

You know, everything from just exchanging with another, the brand that has a different ownership structure that says, Hey, we want to give choice to the consumer. Let them pick between the two of us of which currency is best utility for them in which they get the most value and we’re okay with that earning cycle.

And we’ll just figure out the economics on the back end. But the point is, and the data structure and in terms of whom to share and all those other elements that we know are important. But the point being that the control point is now the, or the choice is maybe a better word for it. The choice is in the hands of the consumer.

And so if you start to think that out, then while that can look at, well, I just have a relationship between brand X and brand Y, or I go to the currency exchange and I participate with a bunch of brands and it’s, set up by a third party and runs it independently. But, you know, I’m still allowing the choice to be with the consumer or quite frankly, and we used to keep it under its own category outside coalitions separate.

I personally feel coalition falls underneath a partnership structure. It is a multitude of brands.

Bill: That’s a new idea.

Aaron: It’s different. It’s not that provocative, but maybe it is, as they say, but the point being, if you think about what the benefit is to the consumer, they’re able to earn at a higher velocity with a common currency.

They do not care fundamentally that it’s operated by a 3rd party or has a 3rd party brand that they may see with a bunch of brands in behind participating. At the end of the day, they just know that they can go to a number of different places and buy products and services to receive a common currency to me, that’s a flavor of a partnership. It’s just the design and build something differently. So, so if I sum up what my spectrum looks like, it’s, you know, there’s proprietary and there’s partnership 1 and 2 in terms of big foundational elements. And then there’s flavors within each of these that now fall into place across the spectrum.

And there will be more like, we just talked about maybe, three to five, like three or four differences and innovation will come and there’ll be different shades of these types of programs that cross through. But I think the defining factor going forward between those two foundation elements is really do I choose to play on my own or do I choose to play with others?

You know, me with me or we, me with we, I guess is how I describe it.

Bill: Right. So one last question for you and we’ll wrap it up. So a lot of people would also slice and say, well, do you have a currency model program or non currency program? So they consider that to be a model. I think from what I’m hearing you say, it’s not a model.

It’s a feature of it’s a part of the construct of any of these individual models. Right?

Aaron: Yeah, no, for sure. Like if I think about Amazon Prime, fundamentally they are keeping their own ecosystem in terms of how they reward and necessarily have a primary currency per se, and I know we won’t get into the question of whether Prime is a large program, it’s a customer program for sure.

And that’s, this is my point of where we get, we stumble up on our own feet sometimes with these definitions, but if we look at what the end benefit is to the customer, it’s, hey, I can receive benefits. Whether there’s currency or not from a brand. And if it’s within only for that relationship that I have with the brand or that brand’s ownership of other brands, then that’s proprietary.

If it’s we know with that brand and another brand include one other, two other, three others. Well, that looks more like a partnership to me. And I think if we keep it simple, as opposed to trying to get clever and, you know, be like consultants where we make up terms sometimes just for the sake of being provocative.

Like that’s not, here with you and I, we’re trying to make simple, trying to make simplicity of this so that you know, we all can have a understanding of, you know, if I’m building a program, what do I want it to look like? And what do I want the customer loyalty proposition to be for my customer for my members at the end of the day?

That’s going to be of most value to them.

Bill: That’s almost like looking at the animal kingdom and then creating categories and then trying to fit the animals that you observe into the categories you’ve already created. That’s what we’ve been doing for a long time. Oh, yeah. And now what you’re saying really is, why don’t we observe the animals?

Let’s look at the programs that are out there and the way they’re running, the way they’re built, the way they’re constructed, organized all that. And then. Let’s just call that what it is.

Aaron: Yeah, it’s called segmentation, Bill. That’s what it’s called. It’s literally allowing the data to tell us what is there and then putting labels on it as opposed to pre describing the labels and making things fit in.

You nailed it. And that’s our industry.

Bill: That’s great. That’s great. Alright, that wraps up. I think a really nice four segment discussion of loyalty models this month. It was a lot of fun. We learned a lot. I think we actually made progress and created a little bit of new thought in the process. So anybody that’s listened through these four pieces has been the participant in this discovery of some new thought new wording, maybe new way to look at the business, but what’s on tap for next month, Aaron.

Aaron: So next step, we’re going to take on some key success factors. Pardon me. That’s tough for me. It’s one of our courses that we have about eight or 10 things that we talk about, and we’re going to take on a snippet of those when we’ll cover them all, but we’ll cover some of them.

Bill: That’s great. All right. That’ll be a lot of fun. Thanks everybody for joining us here at The Wiser Marketer. Give Let’s Talk Loyalty as much attention as you can, because Paula Thomas is always gathering up some fantastic guests, and we appreciate her giving us the opportunity to do these short shows. We hope it’s educational, it’s helpful for everybody, and we’ll see you back here next time.

Paula: This show is sponsored by Wise Marketer group, publisher of The Wise Marketer, the premier digital customer loyalty marketing resource for industry relevant news, insights and research. Wise Marketer Group also offers loyalty education and training globally through its Loyalty Academy, which has certified nearly 900 marketers and executives in 49 countries as certified loyalty marketing professionals.

For global coverage of customer engagement and loyalty,check out thewisemarketer.com and become a wiser marketer or subscriber. Learn more about global loyalty education for individuals or corporate training programs at loyaltyacademy.org.

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