#127: "The Loyalty Report 2021" with Bond Brand Loyalty

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: This episode is brought to you by Epsilon, and their award-winning People Cloud Loyalty Solution.

PAULA: I’m always delighted to have Epsilon on board as a sponsor, and particularly today as they were just named a leader in the Forrester Wave Loyalty Solutions Q2 2021 Report, with the top score in the current offering category.

PAULA: This report is designed to help you as marketeers find the perfect partner for your loyalty program.

PAULA: So to download your copy of the report, visit epsilon.com forward slash Let’s Talk Loyalty.

PAULA: Hello, and welcome to the latest episode of Let’s Talk Loyalty.

PAULA: Today, I’m joined by Phil Ruben, a veteran with more than 30 years experience in the loyalty industry.

PAULA: Now in his role as Executive Vice President of Bond Brand Loyalty, Phil joins me to discuss one of the longest standing, best known, and most trusted sources of insights in the loyalty industry.

PAULA: Known simply as The Loyalty Report, it features research with over 25,000 consumers in North America.

PAULA: And this year in 2021, it covers exciting topics such as a clear focus on share of wallet, their updated view on the drivers of loyal customer experiences, and my favorite current topic of all, the idea of brands being loyal to their customers before expecting loyalty from them.

PAULA: So with that introduction and background, I’d like to welcome Phil Ruben of Bond Brand Loyalty to Let’s Talk Loyalty.

PAULA: So Phil, please do tell me, what is your favorite loyalty statistic?

PHIL: My favorite loyalty statistic by far is one that I refer to as comp customer.

PHIL: Which is, think about the way retailers measure their performance.

PHIL: They measure it with a denominator of same store.

PHIL: So same store sales.

PHIL: We’re in the customer marketing business.

PHIL: Our challenge is to drive growth through customers, right?

PHIL: As Peter Drucker, the management consulting strategy guru said the purpose of a business is to create a customer.

PHIL: So the corollary to that, if you’re in the customer marketing and loyalty business is to extend the value of that customer.

PHIL: So comp customer is a very simple metric, but it’s one that’s way underutilized in our view.

PHIL: And it’s calculated very simple.

PHIL: It’s literally same customer sales period over period.

PAULA: Same.

PAULA: Yeah.

PHIL: So that would be comp customer sales.

PHIL: You can get into comp customer margin.

PHIL: You can get into comp customer engagement, activity, all kinds of things.

PHIL: It also allows you to easily build a loyalty P&L, which is to look at your net comp customer growth.

PHIL: So net incremental sales on a same customer basis, separating out acquisition or not.

PHIL: But typically you’d separate out acquisition, especially if you’re the person in the organization responsible for loyalty and retention.

PHIL: And if you look at net customer margin on a comp basis, you’re looking at the delta, the change, you’re over here.

PHIL: And then you can just take out program costs, reward costs, inclusive, and you can build a neat little P&L.

PHIL: So that’s my favorite metric, that’s my desert island metric for sure.

PAULA: Well, I really hope we never have to have a desert island metric, Phil, because that would be a little bit sad.

PAULA: But no, it’s very clever.

PAULA: So and not what I’ve heard of.

PAULA: So you’re absolutely right.

PAULA: It’s definitely underutilized.

PAULA: I haven’t worked, for example, in grocery or lots of sectors, of course.

PAULA: But yeah, it makes perfect sense.

PAULA: And again, even building those P&Ls, I think there’s probably a lot of us that don’t get enough practice or expertise or guidance in building a credible P&L, I think.

PAULA: So that’s really useful.

PAULA: So thank you for sharing that.

PAULA: And I suppose to give some context as to where all of this expertise is coming from.

PAULA: Let’s start at the beginning, Phil.

PAULA: How did you get into loyalty and tell us about your loyalty career to date?

PHIL: Well, it was sort of twofold, but it really goes back to a little bit of luck.

PHIL: In that, so this will explain why comp customer is one of my favorite metrics.

PHIL: I was a finance major undergrad.

PHIL: I went to work for the original Macy’s department stores in their executive training program back when it was still the original Macy’s.

PAULA: Beautiful.

PAULA: Yeah.

PHIL: Went back to graduate school.

PHIL: And with the idea, and this is sort of the second half of the 80s, right?

PHIL: Booming stock markets.

PHIL: And of course, being a finance undergrad, I wanted to be an investment banker.

PHIL: In graduate school, I became more interested.

PHIL: The more work I did both academically and professionally while I was in school, got me interested in marketing.

PHIL: And then there was a course that I took second semester, second year of graduate school that was bought, that was taught by this guy who came out of the University of Chicago.

PHIL: Which is a real quant finance school.

PHIL: But it was basically using quantitative financial models to explain market share.

PHIL: And out of that came the idea, all kinds of ideas that ultimately I applied to loyalty.

PHIL: But really, but simply put, I flew to Chicago to interview with Leo Burnett.

PHIL: At the time, they were the best advertising agency in the world.

PHIL: And my grandparents lived in Chicago, and they lived downtown.

PHIL: And if I flew Midway Airlines, they would pick me up because it was the close and convenient airport.

PAULA: Uh-huh.

PHIL: If I flew into O’Hare, I was on my own to get into this city.

PHIL: So of course, I flew into Midway.

PHIL: And really what happened is I flew this airline and fell in love with the experience with the customer experience, the culture, the spirit of Midway.

PHIL: And wrote a letter to them because there was no God hadn’t invented the internet or email for our purposes back then.

PAULA: Sure.

PHIL: Connected with John Take, who most recently was the CEO of Hertz and told him I wanted to come to work.

PHIL: I told him about my experience and I wanted to come to work for Midway.

PHIL: And coincidentally, they were creating this brand management structure in the marketing organization.

PAULA: Yeah.

PHIL: And one of the roles ended up, one of the roles was head of frequent flyer marketing.

PHIL: And this was 1989.

PHIL: There weren’t that many people to hire who had done that.

PHIL: So they took a chance on me because of my persistence.

PHIL: And it was an amazing experience.

PHIL: We grew the airline from $450 to $700 million in about, you know, less than a year and a half.

PAULA: My goodness.

PHIL: Yeah, back then there was a lot of innovation to do.

PHIL: And we were fortunate to have a pretty lean senior management structure.

PHIL: So it was really easy to get decisions made internally to do things.

PHIL: We were aggressive.

PHIL: John was aggressive.

PHIL: And it was super fun days.

PAULA: Sounds like the dream job, Phil.

PHIL: It was a dream job in a lot of ways, not a dream industry, because it led right up to the recession of 1990.

PHIL: Fuel prices doubled, interest, money, credit dried up, and we were undercapitalized.

PHIL: But it ultimately led to working with Mark Lasek and Peter Brennan at the Lasek Group and starting their office in Atlanta to work with Delta Airlines.

PHIL: And it really turned out to be a great springboard into the business of loyalty.

PAULA: Absolutely.

PAULA: And then how did Ordialogue come about?

PAULA: And I know that’s a very Irish pronunciation.

PAULA: My listeners in the UK will say Ordialogue.

PAULA: So I do get some teasing about that.

PAULA: But tell us about the agency that you founded, I think 15 years ago now, or maybe 16.

PAULA: So tell us the story of your own company.

PHIL: Yeah, thanks.

PHIL: I had joined a firm that wanted to get into the loyalty business.

PHIL: They were private equity funded and had raised a bunch of money on the thesis of doing such.

PHIL: But in reality, they weren’t really, it wasn’t the right infrastructure to create a loyalty business.

PHIL: And so I was, as part of that executive team and as shareholder in that company, and part of the leadership team, we were having some challenges, not on the loyalty side.

PHIL: We were building the loyalty side.

PHIL: There wasn’t a lot to work from, so we had to sort of create everything.

PHIL: The legacy business was in turnaround mode.

PHIL: And it really came down to, as a business, we really needed to focus on one thing.

PHIL: And that one thing wasn’t the new business that we were starting, that I was starting.

PHIL: It was this loyalty practice.

PHIL: So I was able to make a friendly deal to spin off this little group that I started.

PHIL: And that’s how we got started.

PHIL: And the name, our dialogue came from…

PHIL: Now, by this point, the internet actually was invented.

PHIL: And it occurred to me that fundamental to what we do is create a relevant dialogue between brands and customers.

PHIL: And so I bought the URL relevantdialogue.com, knowing that at some point I would have a use for it.

PHIL: And then when we formed the company, I let the team convince me that our dialogue sounded a little bit more interesting than relevant dialogue.

PHIL: Relevant dialogue became the blog, but the R always stood for relevant.

PAULA: I love it.

PAULA: And I never know how to name things or brand them, Phil.

PAULA: So, yeah, I probably would have gone with the literal relevant dialogue.

PAULA: So I love it.

PAULA: But our dialogue certainly has an extraordinary reputation up until, I guess, this time last year, I guess, when Bond Brand Loyalty actually bought out our dialogue.

PAULA: So you’re now executive vice president of Bond Brand Loyalty.

PAULA: So congratulations, extraordinary role.

PHIL: Thank you.

PHIL: It was a really interesting time.

PHIL: We literally closed our deal February 7th, 2020.

PAULA: Yeah.

PHIL: It was about more or less a month before everything shut down.

PHIL: Interesting time to complete a merger.

PHIL: But now, whatever, 15, almost 16 months post close, we’re well integrated and doing all kinds of things beyond the legacy our dialogue stuff.

PAULA: For sure.

PAULA: For sure.

PAULA: So with 30 odd years, I had to do the maths there quickly.

PAULA: 30 odd years of loyalty experience.

PAULA: I guess the main purpose of today’s call is to talk about the loyalty report.

PAULA: So this extraordinary piece of work that Bond has been publishing now for over a decade.

PAULA: I think this year’s report has a sample of over 25,000 North American consumers and more than 450 loyalty programs.

PAULA: So it is an extraordinary piece of work, extremely well respected.

PAULA: And I know you’ve made a lot of changes as well, Phil, first of all, in how the loyalty report is designed and built, probably to the point of the opening paragraph, which talks about the unprecedented year.

PAULA: And I know that is the probably most used term of 2020, 2021.

PAULA: But there’s no denying it.

PAULA: It is unprecedented time.

PAULA: So tell us about The Loyalty Report.

PAULA: When did you start getting involved with it?

PAULA: And tell us exactly what’s coming through.

PHIL: Well, the funny thing is that at our dialogue, before we became part of Bond, we always looked at The Loyalty Report as a great source of data.

PHIL: And we use the data and the insights to validate a lot of our views and approaches in the marketplace.

PHIL: So we’ve always had, and I think a lot of the industry, if you look at what’s out there, it is absolutely one of the reference points for the industry.

PHIL: And obviously part of what attracted us to Bond and Bond to our dialogue was aligned views, kind of an aligned view of the world.

PHIL: Especially Bond traditionally being Bond Brand Loyalty and that notion of connecting people to brands is a little bit different, not to overly analyze it, but loyalty is such an emotional thing.

PHIL: When you get down to it, it’s not a purely transactional state.

PHIL: Even though a lot of it is for a lot of brands and a lot of strategies out there, they’re very transactional.

PHIL: I’d like to say transactional loyalty drives neither loyalty or transactions.

PHIL: What we’re able to do this year, and my involvement initially was just to help Aaron Daphne and others scale the ability to share the insights with clients and partners and prospects, people who were interested in the report.

PHIL: That was just a natural way to look at it and think about how do we increase the value, what was an already valuable knowledge asset, to level it up, to make it more strategic at a CMO level relative to not just how loyalty programs perform, but also how the brand performs.

PHIL: And to think about things like the interaction of the relationship between the program and the brand, the brand and the program, and of course the customer’s relationships with both of those things, the brand and the program.

PHIL: And at the same time, recognize that, you mentioned 30 years for me, 40 years, since really the beginning of modern loyalty marketing, the changes that were taking place, even before the pandemic, really related to moving, to recognize the paramount importance of experiences over things.

PAULA: Yeah.

PHIL: And loyalty, at least for the leaders, the ones that we view, the companies and brands that we view as the loyalty leaders, especially globally, because that’s a lot of our business.

PHIL: That we needed to better reflect the experiential pieces, which were already there.

PHIL: We’d already established in the 2020 loyalty report that if you break down the drivers of loyalty, they were roughly set, well, there were 76% experiential and 24% transactional.

PHIL: Transactional being defined as traditional accrual and redemption, earn and burn.

PHIL: Points and free stuff.

PAULA: Yeah.

PHIL: And we wanted to refine that a little bit more.

PHIL: And we had developed this loyalty ecosystem in our dialogue with five drivers that had received.

PHIL: And we had done our own primary research to develop and validate that.

PHIL: So it just was sort of a natural convergence between that and this great 10-year longitudinal data set from TLR to combine those and embed those.

PHIL: And we had been, so basically we’re able to do that within the quantitative study that we deploy as one of the primary data collection vehicles for the TLR insights.

PHIL: And it was obviously an interesting time to go to field with the survey.

PHIL: Interestingly, the 2020 TLR study came out of market March 17, 2020.

PAULA: Oh my goodness.

PHIL: So it was this perfectly clean look at the world pre-COVID.

PAULA: Sure.

PHIL: And of course, we went to market to field the study towards the tail end for some countries, sort of when there was that proverbial light at the end of the tunnel.

PHIL: But obviously, there’s still a lot of large parts of the world that are far, far from back to being, quote unquote, open.

PHIL: Right?

PHIL: But so that was basically how that’s what led to the evolution of TLR.

PHIL: And we wanted to be respectful of everything that came before and preserve the ability for brands that had used the data year over year to be able to continue to do so, while at the same time layering in some of these new features and insights that we wanted to create.

PAULA: Yeah.

PAULA: Well, I mean, obviously, I talk a lot about my favorite loyalty statistics, and you’ve already shared yours.

PAULA: But I think you’re 76% experiential versus 24% transactional is going on my list of our favorite statistics, Phil, because that’s not what I’ve seen.

PAULA: That’s incredible.

PAULA: Three quarters is experiential and just one quarter on the transactional side.

PAULA: That’s really powerful.

PHIL: Well, especially when you think about the thousands and thousands of programs that are out there in the marketplace today and how many of them are still remarkably the same.

PHIL: They’re formulaic.

PHIL: You can check points, rewards.

PHIL: Some don’t go much further than that.

PHIL: And it’s not to say that that doesn’t matter.

PHIL: But when it’s 76, 24, roughly 80, 20 experiential.

PHIL: And that was a data point that a number of other folks, not just us, had pointed to 2020 as the year where experience was really going to overtake the traditional drivers of consumer choice.

PAULA: Sorry, go.

PAULA: No, I was literally going to pick up on exactly that, the drivers of loyalty, Phil, because you’ve mentioned there were five initially, and now they have expanded to seven.

PAULA: So I’d love you just to call out what, you know, in the Bond Loyalty Report, what are the seven drivers of loyalty that you’re seeing?

PHIL: Sure.

PHIL: So the two new ones, which arguably were there before, and we think of them as foundational.

PHIL: And I say they were there before because they’re not new ideas and they’re things that I think we all as marketers would know.

PHIL: But they dialed up in importance.

PAULA: Yeah.

PHIL: And I don’t think they’ll go away.

PHIL: The first one being safety.

PAULA: Yeah.

PHIL: And safety, security, which is both physiological in light of the pandemic, but it’s also the security of your data.

PAULA: Of course.

PHIL: The security of your identity.

PHIL: There have been so many massive data breaches over the last few years, especially.

PHIL: They’ve probably always been there, but the last few years they’ve been identified as breaches.

PAULA: Yeah.

PHIL: Which relates to the importance of trust.

PHIL: And there’s been so much good research done by others, like Edelman, for example, really focused on the idea of trust.

PAULA: Yeah.

PHIL: So safety and security, we think, is just a foundational, non-negotiable.

PHIL: Regardless of your brand or your business, you have to be there.

PHIL: The other one is relevant communications.

PAULA: Okay.

PHIL: If you think back to the beginning of loyalty programs and why they were created, it was to get permission to track your customer base and create a database of customers so that you could target people behaviorally.

PHIL: And that’s never changed, even though I think a lot of people have still lost sight of that being critically important.

PHIL: But in the year 2021 and going forward, and this isn’t a new thing, that recognition and that willingness on the part of a consumer or a customer to sort of opt up, not just opt in, but opt up, and the implication of by opting in to membership, which isn’t opt up, I trust you as a brand and a company even more.

PHIL: And part of that trust is based on my willingness to share my data with you in return for you treating me as a better customer overall, giving me a better customer experience.

PHIL: Part of which is using the data to communicate with me in a relevant manner, so that I see that you’re using the data to be more relevant to me, which kind of goes back to a core definition of what loyalty marketing is, which simply, at least one person’s view is paying attention to customers and treating them accordingly.

PAULA: Yes, absolutely.

PHIL: Same way we want to treat people in our own relationships that have nothing to do with selling anything.

PHIL: And so those are the two foundational drivers.

PHIL: And then there’s five others that really reflect what we brought and what we had validated before.

PHIL: And they’re even more important.

PHIL: It starts with recognition.

PHIL: So, you know, which goes into personalization and relevance and remembering a customer, not just by name, but remembering something about them.

PAULA: Yeah.

PHIL: Number two, keeping them informed.

PHIL: So, educating them on how to get the most value in their interaction with the business and the brand.

PHIL: Number three, the financial driver of unlocking financial value.

PAULA: Yes.

PAULA: Yep.

PHIL: Number four, and what is really defined in this year’s data set as a super enabler, a critical, more powerful driver, and that is the driver of time.

PHIL: A number of years ago, we talked about time as the new loyalty currency.

PHIL: Both our dialogue and bond sort of came out with that.

PHIL: In parallel, coincidentally.

PAULA: Okay.

PHIL: 2016, 2017.

PHIL: It’s even more important now in part because of trends pre-COVID, but also in part because of how we all view time in light of what we’ve experienced the last 15 years.

PHIL: So time is the fourth of the other five.

PHIL: And then the fifth one is access.

PHIL: Which could be access to sort of unlocks in terms of exclusive offers, exclusive experiences, the proverbial unobtainium.

PHIL: It’s also access to the brand and it’s access to a community.

PAULA: Oh, nice.

PAULA: Yeah.

PAULA: Love that.

PAULA: Yeah.

PAULA: And just can I clarify the time one, Phil, because my direct assumption on that one is, you know, for a higher tier frequent flyer member, for example, certainly when I worked with British Airways, we had a dedicated team and you automatically skipped the call center queue as a gold member.

PAULA: So giving them time and superior service.

PAULA: So is that the kind of concept that you mean under that heading?

PHIL: Absolutely.

PHIL: It’s creating the most seamless, frictionless experiences as possible.

PHIL: Though there is also another dimension of time, which is more contextual, which is the idea that there are times where you shouldn’t rush.

PHIL: You’ve got to get sort of the right cadence of touches with a customer.

PHIL: You could think about it like you’re in a restaurant enjoying a leisurely meal, and you want to get the most out of the experience, and you don’t want to be rushed.

PAULA: Yes.

PHIL: Would be one.

PHIL: The other could be you’re a prospect for a business, and you don’t need to be reminded 47 times a day about how much value you can get from that business, right?

PHIL: So time is a little bit relative there.

PAULA: Yeah.

PAULA: You’ve reminded me of the title of a book I loved years ago.

PAULA: Nothing to do with loyalty, but it’s called In Praise of Slow.

PAULA: So, you know, slow experiences, you know, and certainly in a restaurant context, Phil, you know, I will go to certain restaurants if I know they don’t have a, you know, fast turnaround policy, and I can enjoy the whole evening as, I guess, a premium customer.

PHIL: Absolutely.

PHIL: And, you know, one of the things in terms of time in light of COVID, but again, this was before as well is as a business and a brand, you’ve got to show enough to your customers to make them believe that your brand is worthy of their time.

PAULA: Yeah.

PAULA: Yeah.

PHIL: Because there’s so many, I mean, especially in the US but increasingly in a lot of places in the world, there are a myriad of brand choices to make, of course, for different things.

PAULA: Yeah.

PHIL: And you’ve got to choose which one’s worth your time, especially when you’re going to more deeply engage with that brand or business.

PAULA: Absolutely.

PAULA: Absolutely.

PAULA: And just in summary, so that’s the seven drivers and that’s super clear.

PAULA: So thanks for talking those through, Phil.

PAULA: I think my favorite evolution of the report, as I’ve just obviously been through the executive summary, was this whole idea of, first of all, starting to measure the sense of reciprocity, which I think is the term that’s used.

PAULA: So I think, as you’ve explained really well in the introduction, there are so many reasons to measure loyalty and how successful it is, but always bring from the brand’s perspective.

PAULA: And I’ve been talking about this because somebody quoted their favorite statistic that, you know, consumers believe that the purpose of a loyalty program is for the brand to demonstrate loyalty to them.

PAULA: But the vast majority of marketers think it’s exactly the opposite, like we’re, again, driving behavior change.

PAULA: So that’s an extraordinary evolution.

PAULA: How did that come through?

PHIL: So if you go back again to why do loyalty programs exist, the proposition or the quid pro quo, the reciprocity was always, we’re the brand, you’re the customer, prove your value to us, we’ll make your world a little bit better.

PHIL: Right?

PAULA: Yeah.

PHIL: And over time, we recognize, and this goes back to like the mid 2015, I think was when we first sort of laid this idea out, that recognizing the shifts that we observed in the marketplace, that was no longer sufficient.

PHIL: There are too many loyalty programs, too much homogeneity among those loyalty programs.

PHIL: So to really stand out and to really pay off the corporate strategy promise, especially to the investment community, oh, we’re a customer centric corporation, right?

PHIL: That you really had to recognize that customer loyalty starts with the brand showing loyalty to the customer, not the other way around.

PAULA: Brilliant.

PHIL: And that was a very provocative thing for us to go out and talk about in the marketplace six years ago.

PAULA: Totally.

PAULA: And I still think it is.

PAULA: So I’m really happy we’re having this discussion.

PHIL: Sadly, yes.

PHIL: That’s the madness of having done this for 30 years.

PAULA: Yeah.

PHIL: Come on.

PHIL: Let’s all get better because the better we all…

PHIL: Anyway.

PHIL: So what we were able to do in this year’s TLR was to actually establish the correlation.

PHIL: Number one, we established the correlation that when the customer feels the brand is loyal to them, not surprisingly, it makes them feel more loyal to the brand.

PAULA: Amazing.

PHIL: Shocking, right?

PAULA: I know.

PHIL: And the program does that in parallel.

PAULA: Yeah.

PHIL: But the real winners is when…

PHIL: And we also bring in marketers’ perspectives.

PHIL: So we did a marketer survey as well.

PHIL: And we identified, to your point a minute ago, the big divergence between marketers believing that they’re loyal to their customers and customers not believing that.

PAULA: Oh.

PHIL: And it’s…

PHIL: I forget the number, but it’s roughly 2 to 1.

PAULA: Yeah.

PHIL: In terms of that disconnect.

PAULA: Yes, it is a disconnect.

PAULA: Exactly what it is, Phil.

PAULA: Yeah.

PHIL: And then the other really cool thing relative to that sort of that notion of reciprocity.

PHIL: And we could talk like we could do a whole like hour just on the idea of reciprocity.

PHIL: But the other thing that I think is a big evolution in terms of the insights in this year’s TLR is we’ve taken that notion of reciprocity as a function of the seven loyalty drivers.

PHIL: And how they drive the business outcome, which is why we all do this.

PAULA: Of course.

PHIL: Of driving share a wallet.

PHIL: Which would also probably be in my top five.

PHIL: I’d be my top five loyalty.

PHIL: Metrics.

PHIL: Yeah.

PHIL: And we still track this metric that we’ve used before, overall satisfaction.

PHIL: But the problem with overall satisfaction, like the problem with Net Promoter Score and Reicheld’s.

PAULA: So many.

PAULA: Yeah.

PHIL: Let’s say it’s maybe a second best book, not the best book that he wrote, in my view, was The Loyalty Effect.

PHIL: Still probably the best book on loyalty marketing.

PHIL: But the problem with Net Promoter Score, the problem with overall satisfaction is, you can’t take that to the CFO.

PHIL: You need to be able to take that to the CFO.

PHIL: You need to be able to take that to your stakeholders, especially your investors.

PAULA: Yeah.

PHIL: And this goes back to as marketers, and this is a little bit of my finance perspective.

PHIL: But the ultimate question for those of us who do this kind of work, and it’s even more so for CMOs today, because CMOs are the C-level officer being held accountable for driving profitable growth, is how do you demonstrate that you are driving profitable organic growth from customers?

PHIL: One of the ways you do that is by growing share of wallet.

PHIL: One of the ways you measure that is through the customer metric.

PHIL: Which gets to what we see, but again, it’s from a very small percentage of companies out there, where you actually hear a CFO or a CEO on a quarterly earnings report, actually talk about those kinds of metrics to the investment community.

PHIL: And it’s an underdeveloped area, a huge opportunity to really sort of bring this notion of customer marketing or loyalty marketing even more to the forefront, which is where it’s come.

PHIL: But it’s certainly amidst all the other marketing bright, shiny objects.

PHIL: I still feel like after 40 years, we don’t quite get the respect we should.

PHIL: We should for the work that we do.

PAULA: Well, thank you, Phil, because I constantly feel that.

PAULA: And I’m like, am I the only one who’s feeling hard done by?

PAULA: So listeners, yes, we’re all feeling it.

PAULA: So don’t worry.

PAULA: If Phil’s got it, we definitely all have it.

PAULA: So I’ll pick up on a couple of things that you mentioned there.

PAULA: First of all, just on the homogeneity, if I’m pronouncing it correctly, I always do love to see North American statistics, just because again, the market is so mature.

PAULA: So average number of memberships I see in the report is at 16.7.

PAULA: Average number of active memberships is 7.4.

PAULA: So already a huge divergence, and I’m sure that’s probably come through in all of your previous reports.

PAULA: But yeah, the whole concept of share of wallet is something I’m hearing coming up now in a lot of conversations.

PAULA: I think in the past it was all around that kind of emotional piece that we talked about before and experiences.

PAULA: But now it is about share of wallet because, you know, ultimately that’s where the opportunities lie.

PHIL: Yeah, and the data points you just mentioned, the 7.4 and the 60, those are upticks.

PHIL: Those are notable upticks from years prior.

PHIL: Now, whether those will revert back to the mean, we won’t know for at least another year or two.

PHIL: But what they reflect, and I think this is where share of wallet for this year becomes a critical metric, is the fact that there was so much customer volatility because of the pandemic.

PAULA: Of course.

PAULA: Yeah.

PHIL: And again, I think that’s one of those things where there was a certain level of cognitive dissonance buyers remorse, even among loyal, locked in customers, locked in being in air quotes.

PAULA: Yeah.

PHIL: But so many habits and so much inertia was disrupted because of the pandemic, literally because certain stores were just…

PHIL: Macy’s was closed.

PHIL: They closed all their stores in March, for example.

PAULA: Yeah.

PHIL: And what that led to was consumers being forced to try new brands, to do business, whether it was going to a different grocery store because they had paper towels and toilet paper or because they couldn’t go to their favorite restaurant, so they were shifting to ordering food to be delivered and they could only get whatever those factors were, led to a significant, whether it was the most we’ve ever seen, I don’t know, but depending on whose day they look at, 30 to 40% of customers tried new brands and switched.

PHIL: Two thirds were, the majority tried new brands, 30% switched and didn’t go back.

PHIL: The question becomes going forward.

PHIL: And I think this is where the insights in TLR are so powerful this year.

PHIL: Is because we don’t know whether those customers are gonna come back.

PHIL: And more importantly, because not everybody’s delivering the same caliber experience.

PHIL: If somebody goes and they’re forced to try a new brand and they have a good experience, it’s gonna be that much harder to win them back.

PAULA: Yeah.

PHIL: And it’s also gonna be that much more incumbent on the brand that they were new to, to do what they need to do to retain them.

PHIL: So it really feels like we’re on the cusp of this sort of new intense battle for the share of customer that we, that you as a brand, you as a business think you deserve, but you can’t play the same cards that have been played for the last 35, 40 years and expect to win going forward.

PHIL: And I think that’s particularly true, and this is one of the areas we dive deep in in TLR.

PHIL: It’s especially true among the younger consumers.

PAULA: Yes.

PHIL: Absolutely.

PHIL: But also older affluent.

PAULA: Yeah.

PHIL: Because they have the ability to be that.

PHIL: They’re just as discretionary, and they have a lot of things in common, which is just another really interesting area.

PHIL: I mean, it’s a fascinating time to be doing this kind of work right now.

PAULA: It is.

PAULA: And you’ve reminded me of something, one of your statistics that I pulled out, which I really hadn’t seen here, certainly.

PAULA: And it’s on the payment side, actually, and that within Gen Z, 57% of them are using this buy now pay later.

PAULA: So, I mean, that’s an extraordinary, apparently maybe a new hygiene factor.

PAULA: If you want a loyal Gen Z customer, maybe you have to provide that payment functionality, which wouldn’t have even been on my radar before in terms of a driver of business with a customer segment.

PHIL: Yeah, it is really interesting.

PHIL: You know, a friend of mine, Michael Rouse, he used to be the general manager of American Express Loyalty and membership rewards, and then went on to work for Klarna.

PHIL: He used to love to wave a credit card at a conference and talk about this is 1950s technology.

PAULA: Yeah.

PHIL: Right?

PHIL: And that business hasn’t radically evolved in more years than the loyalty business hasn’t evolved.

PHIL: And so, you know, you see companies like Alliance Data Systems buying bread.

PHIL: You see a lot of innovation around new cards that actually have traditional credit, but also have, you know, traditional credit or Revolve offers value propositions, but also adding in a buy now pay later.

PHIL: And you look at businesses like Peloton, who’ve had exponential growth because of their deal with a firm.

PHIL: It really is changing the landscape.

PHIL: It’s democratizing access to more than anything.

PHIL: It’s creating open to buy for consumers that’s driving demand.

PHIL: And, you know, between that and all the pent up demand from COVID, there’s a lot of business at stake these days.

PAULA: You’re right.

PAULA: Yeah.

PAULA: And again, I mean, I’m very familiar with the concept of the convergence of payments and loyalty.

PAULA: But in my head, that was always just the functional piece, not the delayed payment, you know, this whole payment plan concept.

PAULA: So really love to see that coming through.

PAULA: And we’re not going to get to do justice, Phil, to everything in this report, just because it’s so extensive, even the executive summary.

PAULA: I want to pull out a couple of my favorites in terms of the brands that are coming through.

PAULA: What I also want to thank you for is giving me a prospect list for podcast interviews.

PAULA: So I now have three times 13, so 39 less.

PAULA: I’ve only had one or two of them on the show, Phil.

PAULA: So, well, certainly 39 brands that are coming out as best in class.

PAULA: So I love the fact that you are kind of identifying the leading loyalty businesses in all of these kind of core categories.

PAULA: So my favorite, I think, just came out as one of the first, which was the Adidas Creators Club.

PAULA: So I don’t know if you’ve worked with that one, but I just love the whole concept of community and scores very highly on this key point that we talked about that the brand is loyal to me.

PHIL: Yes, I couldn’t have asked you to pick a better example.

PAULA: Oh, we agree.

PHIL: So we’ve done a lot of work in that category.

PHIL: With the two global leaders and I’ll just say, we’ve had good times with the Swoosh and we love the three stripes as well, even more so.

PHIL: It’s a fascinating and great example of innovation and innovation in terms of loyalty proposition, paying the proper homage to a point based system, but not in a purely transactional way.

PHIL: And one of the things we identify in TLR, both for credit cards and for omni-tender or non-tender loyalty propositions, and this isn’t a new idea.

PHIL: Another publication came out with this a couple years ago, and they were promoting an event, I think, and they said, if you’re not rethinking your loyalty program and proposition, you’re in the minority.

PHIL: And so we’re seeing a lot of that, and I think what Adidas or Adidas has done with Graders Club is look at the marketplace, look at, certainly look at Nike, which is one of the most valuable brands in the world and the dominant player size-wise in that business, with a long legacy around membership through what was originally Nike Plus and became Nike Membership.

PHIL: And Nike is insidiously non-transactional.

PAULA: Of course.

PHIL: You know, membership is a very soft benefit type of proposition, but it’s missing, going back to the loyalty drivers, it’s missing on that core driver of recognition.

PHIL: And this also plug another chapter in our loyalty report, because we did one on tiers.

PHIL: But what Creators Club has done so exceptionally well are a couple of things.

PHIL: Number one, the integration with the Adidas brand and what the Adidas brand represents is pitch perfect.

PHIL: Number two, they use points as a mechanism for the brand and for customers, for members to keep score so that their value is known.

PHIL: And then the tiers allow Adidas to recognize the value of members.

PHIL: And they do this with a rich set of benefits that are not about getting free stuff and they’re not about getting discounts.

PHIL: They’re all about how do you get the most from Adidas through Creators Club as the mechanism.

PHIL: And so, terrific organization.

PHIL: And if you look, and this is public, if you look at the Adidas corporate site, they have a strategy.

PHIL: And it’s explicitly shared on their website.

PHIL: Their strategy is to dominate the game.

PAULA: Yeah.

PHIL: Through being centered around the customer.

PHIL: And Creators Club is clearly the mechanism, the enabler to do that.

PAULA: Yeah.

PHIL: And they’d be a great guest on your show.

PHIL: And happy to help there, Paula, just to do a little plug.

PAULA: Okay.

PAULA: Well, the sooner the better, as far as I’m concerned, Phil.

PAULA: So we will take that one offline.

PAULA: But what a beautiful story.

PAULA: And thank you for articulating it, because again, I haven’t explored.

PAULA: In fact, anything in that space, you know, so really to see a brand that’s so committed and coming through in your report as Best in Class.

PAULA: So very, very impressive work from Adidas.

PAULA: And to pick up on the point that you mentioned as well about the tiers, because actually this did surprise me, I would say, Phil, because, you know, as far as I’m aware, Starbucks Rewards, for example, took away tiers a couple of years ago, I think literally just two years ago.

PAULA: And my understanding was that was in an effort to simplify the program.

PAULA: But coming through very clearly, I think the quote that I saw in the summary was three out of five members would do more business if given access to an enhanced tier.

PAULA: And they do feel a sense of reciprocity, that word again, a multiple of nearly three times as much, 2.9.

PHIL: Yeah, it, you know, again, kind of go back to the definition.

PHIL: If loyalty marketing is understood or accepted to be how a company, how a business and a brand pays attention to customers and treats them accordingly.

PAULA: Yeah.

PHIL: And you can’t treat every customer exactly this, with the same value, nor should you.

PHIL: Economics, economic logic defies that.

PAULA: Yeah.

PHIL: You’ve got to be able to, and this is what Adidas has done at scale with their tier structure and just the mechanics of Creators Club, is to show customers that they know how valuable they are.

PHIL: And Nike doesn’t do that.

PHIL: They don’t do that at scale.

PHIL: Years ago, when we actually, our first year at our dialogue, we were fortunate enough to win the business from Nordstrom to redesign what was the original Nordstrom Awards Program, which was no tiers.

PAULA: Yes.

PHIL: Tender only.

PHIL: And Nordstrom was this company, legendary, right?

PAULA: Yes, of course.

PHIL: Every customer, every customer on the floor in the store is valuable and should get this exemplary Nordstrom service.

PAULA: Right.

PHIL: Which was great.

PHIL: But, you know, the law of finance says, at a certain point, you can’t do that for every customer.

PAULA: Yeah.

PHIL: And so we helped them go from no tiers to four tiers.

PHIL: And not according to us, according to other more highly paid consultants, whose name I will not reveal.

PHIL: They identified that that new program created a billion dollars worth of incremental value for that business.

PHIL: I can say this because this was more than 10 years ago.

PAULA: Of course.

PHIL: But the value of tiers is well known, especially if you think about the importance of experience versus transactional richness.

PAULA: Yeah.

PHIL: We see it in the airline industry, even though the airline industry shows some challenges in the report relative to tiers.

PHIL: And people view, we got different perspective from airline members about tiers.

PHIL: I think a lot of that has to do with the sample, and it has to do with people not traveling as much in COVID.

PHIL: But we also saw the hotels and the airline companies come out at the very beginning of COVID and say, wait, wait, wait, we know you can’t travel or you’re not going to travel.

PHIL: We’re going to protect your status.

PHIL: Why?

PHIL: Not because you’re getting more free flights and hotel rooms, because you’re getting a better experience through that status.

PAULA: OK, well, you’ve convinced me, Phil.

PAULA: I’ll put that back up on my level on the respect spectrum.

PAULA: So thank you for clarifying that.

PAULA: There’s way too much to go through in full detail, Phil.

PAULA: What else would you like to cover now?

PAULA: What’s your, I suppose, favorite insight from all of the incredible amount of work that you’ve put into it?

PAULA: And, you know, as I said, a showcase of 39 extraordinary brands coming through.

PAULA: What’s your favorite learning with this year’s loyalty report?

PHIL: I have to go back to the way that the seven drivers lead to the outcome of share of wallet.

PHIL: Is gets way beyond some of the traditional metrics we’ve used as an industry in terms of success.

PHIL: And because that share of wallet is measurable.

PAULA: Yeah.

PHIL: And because it will resonate with the most important people in the company, organizationally.

PHIL: I’ll just suck up to the CFOs of the world a little bit.

PHIL: But as a client CEO of a very successful company once said, and he was a financier, this was responding to a presentation.

PHIL: He said, if the answer is not money, you need to rephrase the question.

PAULA: Brilliant.

PHIL: And that’s the scorecard of business.

PHIL: That’s how companies get valued.

PHIL: And that’s how they drive a higher valuation is through the ability to demonstrably better manage customer, develop and manage customer relationships.

PAULA: Yeah.

PHIL: So that would be my my exciting takeaway.

PAULA: I love it.

PAULA: I love it.

PAULA: It’s all about share of wallet, Phil, my goodness.

PAULA: So the final question, of course, then, is how can listeners access the report?

PHIL: So the report will be available is available now actually on on the bond website.

PAULA: Yeah.

PHIL: bondbrandloyalty.com.

PAULA: Fantastic.

PAULA: Yeah.

PHIL: It’ll be prominently featured and there’ll be the ability to download the very same exact summary that you’ve read through and ask somebody good questions about.

PAULA: Enjoy.

PAULA: No problem.

PAULA: My goodness.

PAULA: Yeah.

PAULA: Yeah.

PAULA: And again, so that executive summary freely available to anyone and everyone.

PAULA: And to your point earlier, again, it’s not because you’re in Bond now that it’s the reference point.

PAULA: I do think this is almost the Bible of the industry or certainly one of them.

PAULA: So I’m thrilled to have early access to it, to learn so much from you today.

PAULA: And yeah, I just want to say, I hope we can continue the conversation.

PAULA: So Phil Ruben, executive vice president of Bond Brand Loyalty.

PAULA: Thank you so much from Let’s Talk Loyalty.

PHIL: Thank you, Paul.

PHIL: It’s great to be with 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 through its Loyalty Academy, which has already certified over 170 executives in 20 countries as certified loyalty marketing professionals.

PAULA: For more information, check out thewisemarketeer.com and loyaltyacademy.org.

PAULA: Thanks so much for listening to this episode of Let’s Talk Loyalty.

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