Paula: Welcome to Let’s Talk Loyalty, an industry podcast for Loyalty Marketing Professionals.
Paula: I’m your host, Paula Thomas, and if you work in Loyalty Marketing, join me every week to learn the latest ideas from loyalty specialists around the world.
Paula: So welcome to episode 43 of Let’s Talk Loyalty.
Paula: And today, I’m delighted to be speaking to somebody who again has an incredible academic perspective on the whole world of loyalty.
Paula: So Dr.
Paula: David Cox is the CEO of Motivforce in the UK, which is a very well-known agency, specializing mainly in B2B loyalty marketing programs.
Paula: So David’s gonna talk us through some of the incredible case studies, and some of his clients, some of the results they’re seeing.
Paula: And also I wanted to acknowledge they’ve won some fantastic loyalty magazine awards recently.
Paula: So just want to acknowledge all of that.
Paula: And also there was some really interesting articles and ideas that David has written recently, talking about managing loyalty programs post-lockdown.
Paula: So first and foremost, without further ado, I’d like to welcome Dr.
Paula: David Cox to Let’s Talk Loyalty.
Dr David: Thanks Paula, it’s wonderful to be here.
Paula: Great stuff.
Paula: So I will also explain to guests, in fact, that you are in the UK, but there is an Australian accent coming through there.
Paula: So you are an Aussie originally, am I right?
Dr David: That is correct.
Dr David: So I spent most of my first 40 years in Australia, and then I moved across to the UK about 10 years ago to start up the Motivforce UK office.
Dr David: And that was primarily because we run global B2B programs, and that separates a little bit of what we do.
Dr David: And the UK was a good headquarters for us to look after the US and Europe as well.
Dr David: So I’ve been here for a little while now.
Paula: Great, excellent.
Paula: And I love the global perspective as well.
Paula: So fantastic to have that.
Paula: So before we get into any of your own kind of background, obviously I always start the show asking about your favorite loyalty statistics.
Paula: So Dr.
Paula: David Cox, what is your favorite loyalty statistic?
Dr David: That’s a really good question.
Dr David: And I did give some thought to this when I’ve reviewed your previous podcasts of what everybody’s favorite loyalty statistic is.
Dr David: And one of the ones that actually troubles me from time to time is what this concept of breakage, the number of points that just simply do not get redeemed in a program.
Dr David: And why this can be troubling is that we spend all of the time activating, recruiting, encouraging our customers to do the types of behaviors that we want them to do in the loyalty program, only to find that some of them will not go right through to the end, the process of redeeming for those important, those efforts, for those types of rewards.
Dr David: Now, clearly in a business environment, we tend to have less breakage than some of the B2C programs.
Dr David: And that is simply a factor of them earning, being able to earn far more points.
Dr David: You’re actually applying with a company’s money in making these purchasing decisions and are not constrained by your own economic means.
Dr David: But people still leave cash on the table.
Dr David: And when I say cash on the table, that’s the points, the value that you can redeem the hard and soft benefits that a program may operate.
Dr David: But some programs are recording up to 30%, which is troubling for some loyalty practitioners.
Dr David: And it is a really good proxy for us to work out whether there is that high level of engagement in a program if you’re still seeing large breakage amounts at the end of your reconciliation process.
Dr David: So it’s one that I often look at in a program and see whether the breakage is an element that causes us concern in a program.
Dr David: It’s a bit like getting a blood test, I suppose, and seeing how the health of the program is.
Paula: Absolutely.
Paula: So 30%, David, is that actually a consumer breakage that you would be seeing that, as you said, is something we should be concerned about?
Dr David: Between 25% and 30% is what some B2C programs are reporting.
Dr David: And we know that from some of our clients who run the consumer program as well.
Dr David: So we may run the B2B program.
Dr David: This happens in our cruise industry clients where we’re actually running a travel agent program to reward travel agents for selecting a particular cruise line and they earn points and they earn more points if they sell a higher level cruise and a higher level cabin, for example, a balcony or a penthouse suite, they would earn more points.
Dr David: And in a hyper competitive market where you have a customer walking into a travel agency and they’ve got the choice of 110 different cruise ships that all offer a relatively similar product.
Dr David: And this is where in B2B, loyalty is a really important element and it works really well in hyper competitive markets where you’ve got very similar products, low differentiation, very similar cost.
Dr David: And then you’ve got an intermediary such as a travel agent who actually can influence or highly influence the sales process.
Dr David: So they work really well when you can capture a core group and be able to mold what we call your ambassadorial behaviors.
Dr David: We take the profile of your ideal channel customer.
Dr David: We say to our cruise clients, what is the best profile of your best travel agent?
Dr David: And we reward everybody for trying to mirror those behaviors.
Dr David: So we see those particular programs really driving the return on investment and making a big difference to that organization.
Dr David: But at the same time, the cruise companies are also running frequent traveler programs for returning cruise guests.
Dr David: And some of them are tied up with some of the credit cards.
Dr David: And we can see when we talk to them that some of their breakage is 30, 25, 30, 33%, which is an alarming…
Dr David: Yeah, exactly.
Dr David: And it’s an alarming statistic the higher that gets.
Dr David: And I think it, as I said, it’s like a blood test.
Dr David: If it starts, think of it as your blood pressure.
Dr David: If it starts getting over 30% or 33%, then we need to put it on some type of medication to make sure it comes down.
Paula: Fantastic.
Paula: So listen, I love all the insights and it’s great that you get B2C as well as B2B.
Paula: And before we get into talking about the awards and the clients and the programs you run, tell me a bit about how you’ve ended up with a PhD in Loyalty.
Paula: I think that’s extraordinary.
Dr David: Yeah, look, when I look back on the journey, I sometimes wonder how I got there as well.
Dr David: But I wrote my first incentive program back in 1992, which was for a company in Australia called TNT, which was a transport company, a courier company, which was sort of courier business.
Dr David: And I wrote an incentive program for businesses and for the sales team.
Dr David: And that allowed me to get involved in what I would call motivational marketing, trying to motivate customers to do a set of behaviors.
Dr David: And it was in the earlier stages of B2B loyalty in those particular stages.
Dr David: I mean, I was writing programs before the internet started.
Dr David: So all this digital communication is still a factor of doing mail outs.
Dr David: And then I left TNT late in the 90s and started another company, which focused on incentive and loyalty programs.
Dr David: And then I sold that in 2003.
Dr David: And then I decided, okay, I’ve done the big business, I’ve done the small business, I’ll become an academic.
Dr David: So I started a PhD in loyalty marketing.
Dr David: And my academic career, while I was hoping it might become full-time, only became part-time.
Dr David: And I ended up joining Flight Center to run some of their loyalty division.
Dr David: And then I left that in the late 2009, 2010, and then started Motivforce.
Dr David: And for the last 10 years, I’ve been doing that.
Dr David: But I’ve been able to blend the academic work that I did and the research I did for my PhD into practice.
Dr David: And that’s where it’s really exciting, having the ability to blend both.
Dr David: And my PhD did focus on what we call soft benefits in loyalty programs.
Dr David: And why this is important is that, I mean, a loyalty program has two components.
Dr David: It has hard benefits and soft benefits.
Dr David: Hard benefits are the points.
Dr David: That’s the economic benefit that you get in a program.
Dr David: The soft benefits though, are all of the things that’s the glue that makes you actually stay loyal.
Dr David: That’s the lounge upgrades.
Dr David: That’s the, you know, VIP telephone lines.
Dr David: That’s the, you know, in B2C, that’s when a flight falls over and you’re a platinum member and you know that you’re gonna be looked after before somebody who has a lower status.
Dr David: So I look at things like status, trust, you know, relationships, bonds, and look that if you could bring those into a program, the switching costs become so much higher.
Dr David: And the reason for that is, is that if you only focus on the hard benefits, it becomes a tit for tat race to see who gives the most points away, or who gives the bigger amount of hard benefits.
Dr David: And that is just simply a spiraling slip down to the bottom of delivering no return on investment.
Dr David: So how are you going to differentiate your program so it doesn’t have just, you know, a race to see who’s got the biggest pocket of money, and how are we really gonna drive loyalty by bringing in other elements that make people feel like they are brand ambassadors.
Dr David: And this segues nicely into things like net promoter scores and those types of engagement activities that helps us to have very loyal clients.
Dr David: It’s a little bit easier to identify that in B2C, a little more challenging when it’s B2B because of the number of different stakeholders that we have involved in our programs.
Dr David: Sometimes at the end of the day, B2B is the sum of a whole lot of individuals, but they are also influenced by owners and procurement and a whole lot of other people that might have some sort of role in challenging those particular behaviors.
Paula: Yeah.
Paula: So I’d love us to get an understanding of the programs you run, David.
Paula: So obviously I attended the Loyalty Magazine Awards online, as I know you did there, I think it was two weeks ago now.
Paula: Great experience.
Paula: I think we all enjoyed kind of partying virtually with each other.
Paula: And as you know, I’m a former judge for the Loyalty Magazine Awards.
Paula: Yeah, exactly.
Paula: So I had seen the IBM program specifically, and I know that IBM won the, sorry, IBM won the best B2B program again for the third year in a row, and also the best long-term loyalty program, which I think is extraordinary, because as I understand it, the best long-term loyalty program applies to B2C and B2B.
Paula: So for IBM to win that, that’s an extraordinary result.
Dr David: Yeah, look, we were absolutely over the moon.
Dr David: When we had won, particularly the long-term loyalty program.
Dr David: The IBM program started in 2000.
Dr David: It started off with just rewarding business partners, and we call business partners, resellers and distributors in Canada for completing education and quizzes about IBM.
Paula: Yes.
Dr David: Why in that forward 20 years now, we run the program in 131 countries across 14 languages, looking at the whole structure of what IBM does.
Dr David: And why this particular program is important.
Dr David: And I suppose one of the judges said that IBM owned this category, which we thought, wow, that’s a really good accolade.
Dr David: But IBM started, was one of the first companies to introduce online learning.
Dr David: I mean, in 2001, we were deploying online learning, and the Internet started in 1998 or 99, and we were doing it in multiple languages.
Dr David: In 2005, we deployed our first game.
Dr David: The word gamification was developed in 2007.
Dr David: So two years before we even came up with the concept, we were running a cricket game in India, because the challenge was that we had a lot of the Indian customers not engaging in the program and completing online learning.
Dr David: So we said, OK, what is the religion in India that we can make this program effective?
Dr David: So we gave every, we developed a cricket game where every time you completed an online learning, you weren’t a Nova.
Dr David: And for those who don’t know what those who are listening, who don’t know much about cricket, that’s six deliveries.
Dr David: And every time you got six deliveries, you could have an online batsman and you got runs.
Dr David: And the most prolific 11 resellers who scored the most runs joined the KYI IBM team and then earn more points.
Dr David: And we had people doing these modules at midnight.
Dr David: The modules went off the charts.
Dr David: I think that we went from doing like 200 to 11,000 by the time the first two weeks were completed.
Dr David: But this was back in 2005.
Dr David: So we’ve had a series of wonderful innovations in this program.
Dr David: We were the first program to introduce online badging, which allows people to use their social assets, Facebook, LinkedIn, if they achieve being an innovator or an ambassador.
Dr David: And they can use those things to emphasize their own employability post.
Dr David: Because it comes back to their LinkedIn profile, you can see that it’s enhancing your CV.
Dr David: And so we’re drawing now on this new paradigm of digital and communication and relationships to drive some of our participants even further.
Dr David: And I think when you look at the trajectory of that program, from where it started, from doing quick quizzes back in 2000 to now, 20 years later, still being innovative in what it does, it truly is a great program.
Dr David: And we’re very proud of it.
Dr David: And I think the Loyalty Magazine Awards sort of gave us that peer recognition.
Dr David: I know.
Dr David: Yeah, yeah.
Paula: Well done.
Paula: But I always do like David seeing global brands and local relevance.
Paula: And clearly that’s a collaboration between you and IBM.
Paula: And obviously there’s a great case study and a lot of trust there.
Paula: But the city I live in has a huge Indian population.
Paula: And certainly cricket is by default the language that everyone understands and speaks.
Paula: So to connect a loyalty program into something, as you said, it’s a religion.
Paula: So I think there’s a lot of simplicity but ingenuity that comes to a strategy like that.
Dr David: And likewise, I’m glad you’re focused in on the localization because in China we had a ping-pong game.
Dr David: Same sort of outcome, but it was a different execution.
Dr David: In Western Europe, we did it with a soccer game, a penalty shootout.
Dr David: So we did need to understand what was the religion in those particular geographies, and then customize what we still wanted to do.
Dr David: And I think that’s the secret from why IBM has been so successful, is that they do give us that latitude to get out and do something very locally for that.
Paula: Yes, yes.
Paula: And purely for my own amusement, I will mention that for the first time, I know who won the Premier League, because actually my partner supports Liverpool.
Paula: So sport is clearly a great uniter of all things, and loyalty and sport goes so well together.
Paula: I think they’re just intrinsically linked, so I love the way you’ve done that.
Dr David: Yeah, and look, it’s a good point in the respect that sport does allow you to do great gamification as well.
Dr David: It allows you to pull on those assets of team unity, bonding, a little bit of internal competition.
Dr David: You can choose an avatar and dress yourself in your favourite sporting colours.
Dr David: And people understand the rules.
Dr David: I mean, if I was to put a cricket game or a soccer game or a football game for Europe out there, people know what the goal is.
Dr David: They’ve got to get the ball in the net.
Dr David: So as long as you can build a business game around that, and whether you sell something, you get an extra five minutes time on the pitch, or whether you do an online learning and you get an extra element that allows you to continue to compete, then you’ve really got engagement.
Dr David: And then the high levels of that amongst the community that are participating in the program.
Paula: Absolutely.
Paula: And I know for a fact as well, having worked in plenty of corporates myself, is it drives the word of mouthpiece.
Paula: So as soon as somebody is excited about something, they will obviously talk to their colleagues around them.
Paula: So it becomes that kind of water cooler conversation and builds that virtuous circle.
Paula: So it’s a lovely idea.
Dr David: Absolutely.
Dr David: And if you do build assets within the program, they allow people to have comment boards and motivational boards and say, come on team, let’s do this.
Dr David: And we do see a lot of that as part of some of the assets you build amongst the games.
Dr David: Again, it’s much easier in B2B where you’ve got people in the same ecosystem, even in some of the same companies where you’ve got a little bit of internal communication and competition occurring.
Dr David: A little bit more challenging for the B2C folks because our customers aren’t so integrated and connected.
Dr David: You can have advisory panels and some of them have done it very well if you look at Flyer Talk and some of the elements around frequent Flyer programs, where they’ve done that particularly well.
Dr David: But some of the coalition programs, these assets they have to really work hard at because the ecosystem just doesn’t have high frequency and the sale cycle is a bit more of a challenge.
Dr David: Again, as I said earlier on, some of that’s constrained by your own economic means.
Dr David: If you had unlimited funds in your bank account, you could become highly engaged in all of the loyalty programs because your credit card would never stop being able to be used.
Dr David: But we don’t all have that, particularly the people who are involved in our programs.
Dr David: If you had unlimited funds, one might question why you’d belong to the loyalty program anyway.
Dr David: So you’ve probably not been a key component.
Dr David: In B2B, of course, the rewards and the transactions and the engagement is on steroids compared to some of the B2C programs.
Dr David: You’re using companies’ money.
Dr David: The transactions can be hundreds a day.
Dr David: Some of them can be very large.
Dr David: In some of our programs, we have a cap of what you can earn due to some co-employment laws in some regions, but the cap is 100,000 US dollars.
Dr David: I mean, that’s just our program.
Dr David: If you belong to multiple in the sector, then you can start seeing that it’s phenomenal, the types of things that you’re trying to drive and the structures that you’re trying to drive in the program.
Paula: Well, there’s clearly a lot of people, you know, earning loyalty and driving loyalty and driving behavior.
Paula: That’s extraordinary.
Paula: And I wanted to talk then, David, you’ve written a couple of articles recently.
Paula: The first one, I love the title.
Paula: And then the second one, I even love the content more.
Paula: So I’d love to go through that.
Paula: So the title I loved of the first one purely because it rhymes, was Boomer Bust Loyalty as a Must.
Paula: So well done on a bit of rhyming there.
Paula: But the one I wanted to just go through is because it’s relevant actually for all listeners.
Paula: So as you know, David, we have a lot of B2C program directors all over the world listening to the show, as well as the B2B that you specialize in.
Paula: But five trends since Locktown.
Paula: I’d love to just talk through, just I suppose in summary, the ideas of what are you seeing that loyalty program managers and directors need to be thinking about now.
Paula: And I loved the positivity actually as well, because I think you mentioned a tsunami of pent up demand.
Paula: And I can certainly say here in Dubai, because thankfully we haven’t been personally affected economically in a bad way by COVID-19.
Paula: I’ve been out supporting the economy since I’ve been allowed to.
Paula: So I do agree with that, and I just hope that is what comes through.
Paula: But forgive me, five trends since lockdown, what are the things that you’re seeing that loyalty programs can and should be doing?
Dr David: This is the best time to be a loyalty marketer.
Dr David: And I always maintain that our phones and our emails ring off the hook in a downturn.
Dr David: I mean, it’s very hard to sell a program into any client when they’re making record profits and they really don’t have to invest.
Dr David: It’s a hard decision to get that across to the finance folks to sign off on it.
Dr David: However, in an environment where there is limited and soft demand and companies are fighting for every sale, we’re starting to see people go, I need the assets.
Dr David: I need something that is in market that’s gonna allow me to quickly activate and capture what weak demand is flowing through.
Dr David: And this is the time now to actually look at those assets.
Dr David: And if I look at the B2C, which is a very good example, I see the frequent flyer programs of airlines working over time at the moment.
Dr David: And it’s astounding that they are because their core product is not being used.
Dr David: If you think about nobody is flying, but each day I am getting email and offer and engagement and value propositions via the frequent flyer loyalty aspect of all of these programs.
Dr David: And they’re pushing you to the other types of business activities that will help generate revenue.
Dr David: Now, this is the best example of why in a downturn, when you consider the core product of airlines, nobody’s flying, half the fleets are grounded, but the frequent flyer program is working over time.
Dr David: So transport that to other sectors and other industries.
Dr David: You can see that you need this structure.
Dr David: You need to be able to reach your customers.
Dr David: You need to be able to talk to your customers.
Dr David: You need to keep them engaged.
Dr David: You need to make sure that your brand is top of mind so that when the floodgates hopefully back open again, people are still gonna have your brand, your product in mind when they start to consider a product in that category.
Dr David: The cruise industry is a good example.
Dr David: At the moment, nobody can cruise, but people will come back to cruising when, either a vaccine or some type of ability allows them to sail again.
Dr David: And people will come back and they’ll cruise.
Dr David: And again, we wanna make sure that travel agents have the brand of Royal Caribbean or Celebrity Cruises firmly in their head when a potential client walks through the door.
Dr David: And if you don’t have that, then you are losing out.
Dr David: You’re starting at the back of the grid in this race.
Dr David: And we’re now starting to see that this is the time to think about, have you got a great database?
Dr David: Have you got the engagement tools together?
Dr David: Are you talking the right message at the moment?
Dr David: There’s a lot of talk about making sure that we have some degree of empathy, some degree of looking at the values of what post-COVID-19 is going to be like.
Dr David: People are looking for some degree of security in the way of the brands that they deal with.
Dr David: And some of them, they could be thinking they’re gonna go out of business, which hopefully that’s not gonna be the case for sectors, but you’ve only got to hear the Chancellor, particularly in the UK and in other markets, saying not every company is gonna survive.
Dr David: But the best way you’re going to survive is to ensure that you keep your customer base engaged and intact in doing the types of behaviors that we want you to do, so that you can actually generate income for when some of these trading restrictions are lifted.
Dr David: So this is the time to start thinking about your program.
Dr David: This is the time to knuckle down and make it even better.
Dr David: And this is the time to work it hard.
Dr David: Lazy programs, as I say to clients, lazy programs don’t work for anybody.
Dr David: So this is the time to get it into the gym, really get it working so that it’s on steroids.
Dr David: We want this a fit and lean operation.
Dr David: We want everybody engaged in the program.
Dr David: And this is the time to really knuckle down to it.
Dr David: And we’re finding that that’s a key component that you need to do now so that you’re ready for when the business starts to come back.
Paula: And I can totally relate to that, David.
Paula: And regular listeners will know that I started my own loyalty career managing the O2 Priority Program in Ireland.
Paula: And it was 2008.
Paula: And to your point, it was exactly countercyclical.
Paula: And I remember just being so blown away by the vision of a leadership team going, this is the perfect time to invest because media is cheaper and literally nobody else is communicating.
Paula: So let’s do something extraordinary.
Paula: And it really served them well.
Paula: So I totally agree, now is the time to invest and clearly you’re already getting that experience coming through.
Paula: So that’s the first trend.
Paula: The second one I loved was called Generation Zoom has been born.
Paula: So I think we can all relate to that.
Paula: We’re recording on Zoom as we speak.
Paula: But tell me exactly what you see the connection between Zoom and Loyalty.
Dr David: Look, it’s a matter of us being able to use digital now to foster deeper connections.
Dr David: So previously we probably relied very much on one way communications or pushing stuff out that was flat.
Dr David: This is all about now us being able to still integrate without being face to face.
Dr David: So as this generation has come along now, we’re wanting to embrace these new interactive technologies.
Dr David: So some of the programs are going to need video concepts.
Dr David: Maybe you are going to have to interact with somebody that has this sort of second dimension because Zoom is so convenient to us.
Dr David: Rather than having live chat, maybe we’re not gonna have to have somebody who’s gonna be on the video aspect of it.
Dr David: Now it’s gonna be a live video chat as an extension to some of your call center communications.
Dr David: The way that we communicate now used to be by email.
Dr David: Now maybe it’s gonna be more an embedded video because we’re starting to get used to this type of multi-dimensional component.
Dr David: And again, making sure that’s far more mobile.
Dr David: Again, because people are very socially distant.
Dr David: So there’s a whole world of technologies that we probably thought were great before COVID-19 that have become now mainstream for us.
Dr David: That when we want to talk to our end users and our customers and programs, that we’re probably gonna have to consider as being more mainstream than we would have looked at previously.
Dr David: And we don’t see it changing because not everybody is allowed to go back to work now.
Dr David: And we don’t know when or what the new normal will be, whether everybody will go back to their traditional work environment or whether Zoom, and we use that in inverted commas, is now the new norm in being able to look at.
Dr David: Looking at AI technology as well, where we’re synthesizing a lot of this information and trying to make it far more efficient, engaging and interactive.
Dr David: And I think a lot of us loyalty practitioners looked at it and thought it was a nice to have.
Dr David: I see this becoming now far more mainstream and in some industries, it’s gonna be a zero sum game where you probably will need to do it because everybody else is using this as your way of communicating and engaging with your target market.
Dr David: And we see that starting to emerge.
Paula: Yeah.
Paula: And I think the point I picked up and I’ll make sure we link to your articles as well, David.
Paula: So the reason obviously that’s driving that is this whole need for community.
Paula: And for me, certainly when I’ve been talking digital strategy with programs over the last few years, it’s been mainly focused on, I suppose, the communication side.
Paula: So their social media strategy, making sure it was a mobile strategy.
Paula: So there was all of those elements and obviously email as communication.
Paula: So they’ve been around for a long time.
Paula: But again, for me, I am super excited about audio as a strategy, and I’m actively looking for case studies.
Paula: I know British Airways Executive Club did something with Alexa, for example.
Paula: So what does an audio strategy look like for Loyalty?
Paula: And I think you’re absolutely right about video.
Paula: So if we can engage our members on a video platform, my goodness, what an extraordinary way it is.
Paula: And again, they’re used to consuming it now.
Paula: So I think it’s a really good idea.
Dr David: Yeah, it’s hilarious that when we go to talk to some potential clients, and I suppose this is a worry that we still have, the number of clients that still feel threatened by embracing a social media content with their program, that they feel that they can’t control the conversation, that they don’t want things that they’re not happy about being in a forum that people are discussing.
Dr David: But what they don’t realize is that that is the power that you want to harness.
Dr David: You’re better off being an actor in that conversation and then molding the conversation and molding the outcome and showing how that you have a control of this, then trying to bury it.
Dr David: If you bury it, people are going to form forums elsewhere and still talk about you.
Dr David: You just won’t be invited to the party.
Dr David: So you’re better off being, as I said, an actor, the party host and get everybody to bring it to them because you’ve got the chance then to actually mold the outcome.
Dr David: And sadly, and you think that this is not the case in 2020, we still have people who don’t want to have engagement forums in a system where they can actually talk about you.
Dr David: And our focus has always been to move and embrace the idea of turning it around.
Paula: Okay, fantastic.
Paula: So that one makes perfect sense, as they all do.
Paula: The third point you made David was around the importance of a scientific approach to loyalty.
Paula: And again, regular listeners will know I’ve had a few academics, a few statisticians on the show recently.
Paula: And also this week, I have some management consulting people from Bain & Co.
Paula: I’m very excited about.
Paula: But tell me about, what are you seeing in terms of this scientific approach to loyalty from your perspective?
Dr David: Look, I think what you’ve picked up on there, Paula, really does show that evidence-based data, evidence-based statistics, deep dive analytics, is where we need to be.
Dr David: No more can we walk in and have gut feel.
Dr David: You know, those days are gone.
Dr David: Back when Chardonnay I think was still the vogue in the 1980s.
Dr David: So we’ve sort of left a lot of that behind.
Dr David: But I think if I look back at the content of the podcasts previously that you’ve covered, we can see that there are a number of different areas that you can focus on.
Dr David: And depending on where your program is B2B or B2C, you can use different types of data that’s really going to justify.
Dr David: But I think the important part is is that we are looking at the types of behaviors we need to mold.
Dr David: Therefore, we need to be able to measure those behaviors and be quite scientific about what we need to do to change them.
Dr David: And only when it’s all measurable, then can we put it into an ROI box and serve it back to this concerning finance folks who are going to say, yes, this is a worthwhile investment for the company.
Dr David: Us marketers always, because we’re working at it, always know what the great benefits are of loyalty.
Dr David: There’s a whole industry out there that proved this.
Dr David: But we do have a challenge with the finance teams continually, that when they look at where the expenses are in the business, they always feel that this is one of the areas that they could chop.
Dr David: And maybe they want to get rid of the program, but they might reduce the number of points that are available or the number of behaviors that you want to do or the areas that you want to roll out to.
Dr David: So it’s absolutely critical for us as an industry to ensure that we continue to embrace this paradigm moving forward of ensuring that we have the evidence-based data, the evidence-based return on investment metrics to be able to serve this up and ensure that everybody’s singing off the same hymn sheet.
Dr David: And it’s a great segue into another one of my topics, because I know when we had the Epsilis team on the other, Epsis guys on the other day, which I love the content, it blends beautifully.
Dr David: And they were talking about what happens in B2C, where they’ve got a return on loyalty and some of the metrics that they use work for B2C.
Dr David: At the same time, some of the ones that don’t work for B2C work beautifully in B2B.
Dr David: For example, we do use cohort analysis.
Dr David: We do compare people who are in the program to similar profile propensity matched firms who are not.
Dr David: Because the one thing that we have that the B2C guys don’t is that we’ve got the ability to have invite-only programs.
Dr David: We can choose who comes in and who comes out, and who is not in the program.
Dr David: We can choose it by country, by region, by tier, by size of distributor, because they’re closed programs.
Dr David: So that by default allows us to create a control group.
Dr David: And the only way then that we’re able to see what is occurring in our loyalty programs is to pick two firms, one in the program and one not in the program, both having the same influence of above and below marketing activity that’s out there in the market, both to the same economic conditions, both targeting the same types of customers.
Dr David: But one of them is in our program, so they’re on the loyalty drug and one is not.
Dr David: And only then can you, like a true medical experiment, can you actually predict what the difference is in the performance of those two firms.
Dr David: Now, we use that metric, the cohort analysis, quite religiously in B2B, because again, we can create the control group.
Dr David: But again, we would not get very far down the track if that wasn’t pure data, pure deep dive analytics that we’re able to show exactly what is happening in that environment and then be able to serve that up to our stakeholders.
Dr David: They just wouldn’t want to invest in the program, if that’s the case.
Paula: Okay, so the principle of self-selection, which was the issue identified by Ellipsis, essentially doesn’t apply in B2B, is what you’re saying.
Dr David: Well, it’s less of a problem.
Dr David: I’m sure there may be some B2C programs that have control groups and allow you to do that.
Dr David: But we don’t have self-selection.
Dr David: It is invite only.
Dr David: We’ve already selected who’s coming into the program.
Dr David: For example, if I was looking at IBM or some of our IT clients, we don’t invite the exclusive distributors in.
Dr David: There’s no point in inviting them into the loyalty program when the only product they’re going to sell is IBM.
Dr David: So it’s a false return.
Dr David: We target tier two unmanaged accounts who what we call are brand agnostic.
Dr David: So they can sell multiple brands.
Dr David: They can sell Hewlett-Packard, they can sell Dell, they can sell IBM, they can sell Lenovo.
Dr David: A good example to a lot of your listeners might be the cruise industry.
Dr David: We target a travel agent who can sell everything.
Dr David: They can sell airlines, hotels, cruise companies, because they’re all the competitors.
Dr David: That’s where they work, they work purely effectively.
Dr David: But if Royal Caribbean had its own exclusive travel agent, we wouldn’t invite them into the program because they’re going to sell Royal Caribbean anyway.
Dr David: There’s no point in having them as part of the loyalty program.
Dr David: So you’re right.
Dr David: The self-selection is not so much of an issue where we have in our programs because we get to invite from our database who’s going to join the program.
Paula: Wonderful, wonderful.
Paula: Okay, so that’s the scientific approach to loyalty.
Paula: We have two more, David.
Paula: The fourth one, I think, might be my favorite, which is well-being above all.
Paula: And again, regular listeners will know my nickname in Ireland is Positive Paula.
Paula: So when you start talking about all these lovely positive values, like compassion and selflessness and all of that, I love it.
Paula: And I think that’s what most loyalty marketeers want to be.
Paula: You know, it’s like we have that level of integrity in terms of our work.
Paula: So clearly this is something you see being, I guess, magnified by COVID-19.
Dr David: Absolutely.
Dr David: And I’m seeing this from I’ll start with the B2C angle because I’m on the receiving end of a lot of companies trying to achieve this.
Dr David: Some of them are doing it very well.
Dr David: When they talk about how we’re looking after you, this is the way that we’re changing our business.
Dr David: This is how we’re going to do it.
Dr David: And some are doing it far better than others.
Dr David: I mean, if you look at the airline industry, you’ve got some who are making it very difficult for people to get refunds.
Dr David: They’re making it very difficult to engage with the company.
Dr David: They’re making it very difficult to continue being a loyal customer.
Dr David: And if you read some of the forums, you think, my God, these people are never going to fly with that airline again.
Dr David: Likewise, you’ve got others who are making a far more positive approach in being able to say, this is how business is going to be.
Dr David: This is how we’re going to look after you.
Dr David: This is, you know, you’re still our number one asset.
Dr David: And this is how we’re going to take it forward.
Dr David: The same thing happens in B2B.
Dr David: They want to see, you know, some of the steps that we’re doing to make doing business easier.
Dr David: They want to make sure that they’re aligning their business with the company that actually is caring.
Dr David: So whether it be changing the reward redemption options to take charities and help, because we are seeing in a time of crisis, particularly in B2B programs, people redeeming their points for some of the charities to help people through this particular environment.
Dr David: Looking at people, the way they communicate about sustainability, making it easier with business trading conditions.
Dr David: And we’re seeing some of that as well, where they’ve got increased trading terms and flexible ways to put orders together.
Dr David: And it’s an emotional connection with our customers to drive those behaviors even further.
Dr David: The people in the programs don’t want to just hear about it.
Dr David: They want to see you doing things.
Dr David: That’s going to be more important.
Dr David: It comes back to a concept that we talk about in academia called control theory.
Dr David: And it means that if you give the right information and the regular communication, and you give them information around it, people feel they’ve got better control of their own environment.
Dr David: And at the moment, we have a lot of turbulence.
Dr David: And I love using this example, and sometimes I talk to my students.
Dr David: I say, imagine, again, I’ll use something that most of the listeners might understand.
Dr David: We’re on a flight and it’s circling around Heathrow, which is not an uncommon thing pre-COVID-19.
Dr David: And it continues to circle and continues to circle.
Dr David: Now, the anxiety level of everybody on the flight continues to increase when they don’t know why you’re circling.
Dr David: Why is there a delay?
Dr David: What’s the scenario?
Dr David: People have got meetings to get to, they’ve got family engagements, they’re going to the theatre, whatever it may be.
Dr David: Take another flight where they’re in the same holding pattern, but the captain is providing regular updates, two or three minutes on what is happening, why this delay is occurring, we hope to get something soon.
Dr David: He still might not have a control over when he’s going to land the flight, but the anxiety level, it dramatically reduces on the flight, because people feel like they’ve got some information to make sense of the environment that they’re in.
Dr David: Now, if we take that and put that back into this now chaotic business environment, with restrictions on trade, we need to make sure that we’re giving people in our loyalty programs the same degree of control over their small world.
Dr David: How can I place an order?
Dr David: How is somebody going to look after me?
Dr David: If the customer cancels, and I’m an intermediary being a travel agent or somebody else, how can I look after them?
Dr David: Are they going to lose their money or not?
Dr David: So we have a whole world of companies that have to be empathetic, but also back it up with actions.
Dr David: And they’re the ones that we’re starting to see.
Dr David: And why that’s important, Paula, is I don’t believe that post-COVID-19 that will go away.
Dr David: I think people will start to feel that that becomes a regular business practice.
Dr David: And we’re going to see that being built in some of the programs as we move forward.
Paula: Yeah.
Paula: And like lots of these trends, I think we’ve all said it, in fact, David, it’s not that these didn’t exist before COVID-19.
Paula: It’s just that they were all fast-tracked.
Paula: They’ve become magnified.
Paula: And as you said, they’re not going away.
Paula: So all of a sudden, we have to deal with these literally right now.
Paula: So I think it’s an extremely good point.
Paula: And the final one, then, as we start to wrap up, David, the title of this trend, you called it Mind the Gap.
Paula: And there’s a lovely story there that I didn’t hear before.
Paula: So maybe you tell listeners the story of this trend of Mind the Gap as a positive change.
Dr David: Yeah, look, it’s all about finding the voice that expresses the purposeful engagement.
Dr David: And, you know, it’s an important element.
Dr David: Again, it ties a little bit back to what I said earlier on that grand gestures, you know, need to be supported by actions and putting it together.
Dr David: And the story, if you wanted to go on to it, is about the London Underground and Embankment Station.
Dr David: There’s a story of this lady called Margaret McCollum who asked the Tube Platform Guard what happened to the voice with Mind the Gap when it’s gone.
Dr David: And the man in the yellow jacket hasn’t even noticed that the analog announcement has been replaced by a computerized voice.
Dr David: And with tears in her eyes, Margaret explains that the voice behind Mind the Gap was that of her husband.
Dr David: And that when she would miss him, she’d come to the Tube Station to hear his voice and find a little comfort.
Dr David: Now, that obviously touched the transport of London quite deeply.
Dr David: So, you know, they got another recording of her husband’s voice delivered to Margaret’s home so that she could still feel that degree of empathy with the product.
Dr David: Now, that sort of example sort of drives the need to…
Dr David: Again, it’s not a grand gesture.
Dr David: It’s a matter of being able to penetrate through and drive behaviour.
Dr David: Now, if we start thinking about their loyalty programs, what are the types of gestures that we can now do to make it important for our customers?
Dr David: And we’re in weak demand, so we need every one of them to be driven.
Dr David: We need every one of them to have that connection.
Dr David: And if it just means something like the Underground, indeed in London, it’s a really good example of how you can reach through and ensure that you reach that connection.
Paula: Love it.
Paula: And again, listeners around the world who haven’t been to London or on the London Underground mightn’t be familiar with the Mind the Gap, which is so synonymous.
Paula: So, you know, it is a term that immediately everybody recognizes from London Transport.
Paula: So, yeah, very sad to think about that man’s voice being replaced by a computer.
Paula: So, yeah, it’s a really good story.
Dr David: Look, I suppose it’s a segue into something a little bit more a lesson for all of us is that we, as loyalty practitioners, sometimes we will embrace technology for efficiencies and remove the human touch out of it.
Dr David: There’s this, you know, an AI has that challenge as well.
Dr David: You know, that, you know, I spoke earlier on about maybe having video link to live chat.
Dr David: But again, if we move to an AI where you get this sort of, you know, voice that sits there and removes some of the personality out of it, then we’re not necessarily moving, you know, into this higher level of engagement, which is where I think post-COVID-19 we’re going to be.
Dr David: And I suppose that’s what this article is all about, is that, you know, we’ve taken people into a different business environment and they’re getting used to interacting in a certain way.
Dr David: So how can we harness those trends and assets, build them into our programs, because we’ve now educated them to use these applications during this particular downturn.
Dr David: And I think it’s a good challenge for us.
Paula: It certainly is.
Paula: And my own example, actually, just this weekend, David, and you talk about AI.
Paula: And I certainly went out.
Paula: And again, probably because I’m at home a bit more, I went out and bought a voice assistant for the house here.
Paula: And I suddenly now feel like I don’t want to go to a screen to Google anything.
Paula: Like I literally don’t want to pick up my mobile phone and I don’t want to turn on the laptop.
Paula: Anything I want to know, I now ask Alexa.
Paula: And I’m finding it super exciting.
Paula: Now, maybe that will die down.
Paula: But to your point about connection, and I fundamentally have said this many times now, voice is the most intimate form of human connection.
Paula: And really, it’s the connection that people are craving.
Paula: So I think you’re absolutely right.
Paula: That woman missing her husband’s voice and the video and audio tools that we’ve been talking about.
Paula: I think there’s a lot of really good lessons there.
Paula: And again, they apply to both B2B and B2C.
Dr David: Absolutely.
Dr David: And I think, as I said earlier on, these are the elements that we need to try and harness.
Dr David: And that’s a good challenge for us moving forward to make sure our programs are far more engaging.
Paula: Yeah, well, I think you said it earlier, David, and I’ll wrap up with this from my side, that it’s a great time to be a loyalty marketeer.
Paula: So certainly from my side, there’s endless opportunity and certainly love all of the positivity and ideas coming through from you.
Paula: So is there anything else that you wanted to touch on before we wrap up?
Dr David: No, I think we’ve probably covered most of it, Paula.
Dr David: I suppose one element that for those who are thinking of a B2B loyalty program and some people are talking about, this is a patch, is that I often say to our clients, just running a program out because somebody else has done one is an absolute recipe for disaster.
Dr David: What you need to do is sit back and think, what really do you want this program to achieve in 12 months’ time?
Dr David: And I say to them when I sit in their boardrooms, I go, you tell me what’s going to make you famous.
Dr David: If I was to buy a case of Cristal Champagne, because it’s on your budget, and we’re all going to open up and drink it, it’s because you’ve become a celebrity.
Dr David: What does celebrity look like for you?
Dr David: Tell me what fame in 12 months looks like for you.
Dr David: Because once you articulate that, that is the program that you’re going to have to deploy.
Dr David: And once you have those objectives and what fame is going to look like, then we can start.
Dr David: But the worry I have around COVID-19, and that comes back to the very first point about investing in a program, is that just because somebody else has got it, think clearly about what you want to do before rushing it out.
Dr David: And if you’re trying to copy somebody else’s program, they should have gone through this process and chosen the right program for their business.
Dr David: And that includes their balance sheet and a whole lot of scenarios that won’t be transportable to you.
Dr David: You can still put a great program together, but go through the process so it suits you, your business and your customers.
Paula: Wonderful.
Paula: Well, listen, I’ll happily share a case of Crystal with you anytime.
Paula: I just want to say from Let’s Talk Loyalty, Dr.
Paula: David Cox, thank you so much.
Dr David: Thanks, Paula.
Dr David: It has been a pleasure.
Dr David: I’ve really enjoyed it.
Dr David: Thank you.
Paula: This show is sponsored by The Wise Marketeer, the world’s most popular source of loyalty marketing news, insights and research.
Paula: The Wise Marketeer also offers loyalty marketing training both online and in workshops around the world through its Loyalty Academy, which has already certified over 150 executives in 18 countries as certified loyalty marketing professionals.
Paula: For more information, check out www.thewisemarketeer.com and www.loyaltyacademy.org Thanks so much for listening to this episode of Let’s Talk Loyalty.
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