JUNE 2013

Bulking Up: The 2013 COLLOQUY Loyalty Census
Growth and Trends in U.S. Loyalty Program Activity

Jeff Berry Sr. Director, Knowledge Development and Application, LoyaltyOne Research Director, COLLOQUY

2.65 BILLION
That’s the number of U.S. loyalty program memberships in 2012 Learn why that incredible figure is both good and bad news for loyalty marketers, and how you can profitably respond to it

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Bulking Up: The 2013 COLLOQUY Loyalty Census
Growth and Trends in U.S. Loyalty Program Activity

Introduction
When our 2011 COLLOQUY Loyalty Census revealed that the number of loyalty-program memberships in the U.S. topped 2 billion in 2010, you could almost hear the sound of the industry doing a double-take. Now it’s time to listen for that sound again, because the loyalty tally leaped to 2.65 billion in 2012. Obviously, the loyalty industry is pumping up. And what fascinates us as much as half a billion of pure growth are the reasons behind this continued expansion. Back in 2000, COLLOQUY tallied 973 million memberships in our landmark program sizing study. By the time we published the 2009 COLLOQUY Loyalty Census, that figure had reached 1.8 billion memberships. In the 2011 Census, we noted that the rate of expansion was slowing when we saw only 16.3% growth between 2009 and the eye-popping 2 billion in 2011. But the slowdown was temporary. The current figure of 2.65 billion represents additional 26.7% growth. Where is this bulk coming from? Some of it results from natural growth, of course, as various existing programs attract more satisfied members, as the economy recovers slowly from recession, and as new programs are introduced (particularly from companies in verticals that haven’t traditionally run programs and are now joining the industry). But this significant level of growth raises some questions, questions that apply to programs old and new: • Are individual programs pumping iron (as they should be), building muscle and strength, like the hardbodies on the exercise-machine infomercials? • Or are some companies porking up like couch potatoes, content in gaining weight but unconcerned about the flab that’s afflicting them? • While other less-innovative companies are copying or trying to one-up what others are doing by putting their programs on steroids to fuel instant artificial body mass, which will eventually fade, leading to eventual performance decline some years down the line. Other factors contribute to a new half-a-billion, of course, but we as loyalty-marketing practitioners must ask ourselves these questions – and respond to them earnestly – in order to make a thriving industry even healthier. Here’s why we ponder the question: Even though the average number of loyalty programs per U.S. household has grown to 21.9 (up from 18.4 in 2010), only 9.5 of those memberships – less than half –are currently active. The takeaway: As the economy slowly breathes new life, loyalty programs have gained increased awareness, and many industries and specific programs are working on becoming even better. Let’s examine the details.

That’s the growth of U.S. loyalty program memberships 2010-2012 The noise in the industry is getting deafening. WHAT DO YOU DO TO BE HEARD? (Sorry for the shouting...)

26.7%

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I: Is Bigger Better? Do More Memberships Lead to Greater Customer Engagement?
As the economy improves and consumer confidence grows, consumers are starting to shop more, they’re exposed to more programs, and they’re likely more willing to try out new programs. The results of the 2013 COLLOQUY Loyalty Census bear this out. Membership numbers are rising across industry categories, signaling that there is both continued and growing industry investment and consumer interest in loyalty programs. Memberships wouldn’t be rising so quickly if consumers weren’t interested in building and benefiting from enhanced relationships with companies. As we see in Exhibit 1, industry growth has once again picked up its pace:

2.647 Billion
26.7% Growth

2.089 Billion 1.796 Billion 1.335 Billion 0.973 Billion
37.3% Growth 34.5% Growth 16.3% Growth

Exhibit 1 Total U.S. Loyalty Program Memberships, 2000-2012
Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census, 2009 COLLOQUY Loyalty Census, 2007 COLLOQUY Loyalty Census, 2000 COLLOQUY Sizing Study

00 2006 2008 2010 20

Since 2000, average growth is about 8.7% compounded.

The growth we see in these figures delivers good news to loyalty practitioners overall. After all, loyalty industry growth is a positive for both companies and consumers, who ideally see mutual benefit in the relationship. Reality: Strong overall growth can disguise potential underlying weakness in loyalty-marketing execution and effectiveness. In that regard, the almost-good news is that the number of active memberships (ones in which members have engaged at least once in the previous 12 months) has grown from about 958 million to 1.161 billion in the previous two years. Why is that almost-good news? Because even though programs are seeing overall increases in active participation, three points stand out: • The 21.2% rate of growth of active memberships from 2010 to 2012 lags behind the overall membership growth of 26.7%.

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• As seen in Exhibit 2, the percentage of active memberships in relation to total memberships slipped from 2010 to 2012, retreating from 46% to 44%. • And even though 46% active participation in 2010 was the highest level in the history of the COLLOQUY Loyalty Census, it’s still a fairly dismal number that should alarm program operators – especially considering the 2 percentage-point decline. These figures suggest that either new programs acquire members and can’t keep them engaged, or that both new and existing programs are failing to strike a chord with members. The ability to consume programs is a finite opportunity, and therefore more doesn’t mean better. Capturing share of mind is really about being unique and providing a superior experience.

Exhibit 2 Percentage of Active Memberships in U.S. Programs, 2006-2012
A “Deep Dive” Into Sliding Participation Rates

46.0% 43.8% 39.5% 44.0%

Change

2006 2008

Change

ip ive Act bersh m Me

20

06 s ip ive Act bersh m Me

20

08 s 10.9%

ip ive Act bersh m Me

010 2

s

5.0%
2008 2010

ip ive Act bersh m Me

012 2

s

Change

Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census, 2009 COLLOQUY Loyalty Census, 2007 COLLOQUY Loyalty Census, 2000 COLLOQUY Sizing Study • Active memberships weren't tracked in the 2000 Sizing Study, explaining why there's no growth figure moving into 2006

2010 2012

-4.3%

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What is suppressing active loyalty-program participation? Consider these factors: 1. Expanding numbers of individual programs. Certain sectors that have been largely inactive in running loyalty programs are waking up to the possibilities, recognizing and reacting to the value of customer loyalty programs and the benefits they can provide both to the sponsoring organizations and to their consumers. This is especially true in the umbrella Retail sector, where membership growth is largely attributable to newly launched programs based on innovations in real-time POS (point of sale) technology integration. Yet, new programs (and even redesigns of existing programs) are not necessarily better programs. Is this newness satisfying the customer need for value in return for their participation? Do the new programs differentiate themselves, once they’ve captured the attention of consumers? 2. Intensified competition. More programs mean more consumer choice, especially as competitors within sectors try to match each other’s loyalty initiatives. Consumers can choose to join many or all competitive programs, due to ease and access, to ascertain the real value of each in order to better inform their decision to select one over the others. 3. Muddled competition. Cookie-cutter programs can confuse and numb consumers. Many offerings look similar, with little differentiation in the marketplace. If a consumer joins three programs in a specific retail category, for instance, and all three programs offer the same value proposition, why would that consumer choose a specific outlet for any reasons other than price and convenience? 4. Investment in program-member acquisition outpacing program-member engagement and communication. Companies have made it easy to enroll in programs, but in many cases have not spent as much effort in building member relationships. If acquisition has been the focus of money, effort, and time investment over the last decade, it makes sense that acquisition (reflected in membership growth) would accelerate while engagement (reflected in active memberships) unfortunately declined. 5. Increasing wariness of use of personal data. Savvy customers understand that loyalty programs gather and utilize customer data to make marketing decisions. If programs are not crystal-clear in providing benefit to the customer in exchange for that information, and are not clear in their privacy policy, consumers can back off from participating. 6. The deafening “noise” level. To sum up the points above, the barrage of messaging and options is formidable. And the noise comes not just from loyalty programs. Add social media, mobile communications, traditional advertising, people tattooing ads on their backs – all together, it can be overwhelming. Knowing those obstacles, loyalty practitioners can take advantage of the overall growth of active loyalty program memberships and of the loyalty industry as a whole. Next, let’s explore the specifics of the 2013 COLLOQUY Loyalty Census.

That’s the drop in loyalty program active memberships 2010-2012 Hanging on at the edge of the cliff: What can you do to cling to engagement and retention?

4.3%

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II: Parsing the Numbers The 2013 COLLOQUY Loyalty Census by Major Sector
First, an overall look at trends in major sectors in the loyalty-marketing industry.

550,000,000

Financial Services
130% Growth

450,000,000

Airline
46% Growth 350,000,000

Exhibit 3 Growth in Memberships, 2006-2010 Select Industry Sectors

Specialty Retail
109% Growth
Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census, 2009 COLLOQUY Loyalty Census, 2007 COLLOQUY Loyalty Census, • Percentages detail 2006-2012 overall growth

250,000,000

Hotel
73% Growth

Grocery
150,000,000 2006 2008 2010 2012 27% Growth

The Financial Services sector, which was unsurprisingly flat from 2008 to 2010, spiked in the past two years, in part because lenders are opening up credit as they bounce back from the recession. Hotels are seeing a bit of a surge as well, as somewhat better economic times make both business travel and discretionary travel more accessible – though, on the other hand, membership growth in frequent-flyer programs remains soft in the face of airline bankruptcies and mergers. Specialty Retail made a big jump in our 2011 Census, and continues its growth as new programs are launched and more private-label credit cards are employed. Grocery program memberships dipped slightly from 2010 to 2012, reflecting an already well-entrenched sector scaling back on its fuel-reward relationships. Exhibit 4 presents an overview of all major sectors and their growth rates over the previous two years:
Financial Services Specialty Store Airline Hotel Department Store Grocery Gaming Drug Store Mass Merchant

548.3 360.5 371.2 223.6 193.9 172.4 150.3 142.4 140.6 13% +45% +8% -1% +70% +26% +26% +14%

+28%

Exhibit 4: U.S. Loyalty Program Membership by Sector, 2012

39.5 26.5 25.3
Other

Car Rental & Cruise

+122%

Restaurant +171% Fuel & Convenience Store

-21% 252.3 +54%

Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census • Memberships expressed in millions • Percentages detail 2010-2012 incremental growth or decline • “Other” includes Coalition, Entertainment, Internet, Telecom, Cable, and others – including, for the first time, Daily Deals Programs

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Overall, who are the heavy hitters? In baseball terms, the batting order depicted in Exhibit 4 hasn’t changed all that much. Department Stores moved up a couple of spots, while Mass Merchants and Fuel/Convenience slipped down in the order. There also has been very little change in the balance of membership numbers in major verticals, as we see in Exhibit 5. Retail retains slight dominance, with percentages slipping from 2010 (in parentheses) only slightly. Overall figures for Retail and Travel & Hospitality are rising, but the figures for Financial Services and “Other” are rising faster.

Travel & Hospitality
Other

31% 21%
(2010: 20%)

9% (2010: 8%)

(2010: 32%)

Exhibit 5 U.S. Loyalty Program Memberships Percentage by Category, 2012

Financial Services Retail

39% (2010: 40%)

Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census • 2012 membership percentages (previous percentages in parentheses)

III: 2013 COLLOQUY Loyalty Census: Deeper Analysis by Sector Census Snapshot: Financial Loyalty Program Memberships, 2006 to 2012
Industry Sector
Financial Services

2006 Memberships
238,783,000

2008 Memberships
422,044,000

2010 Memberships
428,760,000

2012 Memberships
548,333,850

Growth '10 - '12
28%

Growth '06 - '12
130%

Growth Projection

Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census, 2009 COLLOQUY Loyalty Census, 2007 COLLOQUY Loyalty Census

Category: Financial Services A loyalty category largely in hiding during the Great Recession, Financial has blossomed again – in terms of loyalty programs, at least. The growth in this sector is driven largely by credit card portfolios added as the economy improves. As lenders open up more credit lines, consumers are returning to their cards to make purchases. And the overall growth in credit/debit purchases showcases increased consumer confidence. Another factor is the “Durbin Amendment” that gives the U.S. Federal Reserve the authority to regulate debit interchange fees – the fees were reduced to a base cap of 21 cents per transaction, which all but eliminated debit card only programs. Since prepaid cards are exempt from the Durbin Amendment, more Financial Institutions are focusing on selling prepaid cards that are usually not associated with a loyalty program.

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Our Prediction: Growth will continue as consumer confidence, and the economy in general, improve. The industry is rather sensitive, though, to banking regulations, economic fluctuations and changes in interest rates. Low interest rates and regulations squeeze banking margins; therefore, banks must concentrate on customer relationships and growing share of wallet, not just on new customer acquisition, to diversify their revenue streams. Additionally, we foresee an increased focus on mobile and online banking technology for banks to engage with customers in all ways possible. COLLOQUY continues to see promise in banks migrating to an Enterprise Loyalty strategy, in which customers are rewarded for their total relationships across the banks’ range of services. The good news is that some institutions are currently engaging in such approaches, at various levels, and we believe more are on the way.

Census Snapshot: Retail Loyalty Program Memberships, 2006 to 2012
Industry Sector
Grocery

2006 Memberships
135,493,000

2008 Memberships
153,323,000

2010 Memberships
173,720,000 98,100,000

2012 Memberships
172,420,500 142,400,000

Growth '10 - '12
-1% 45%

Growth '06 - '12
27% 78%

Growth Projection

Drug Store Department Store Specialty Retail Fuel & Convenience Mass Merchant

80,039,000

73,876,000

89,985,000

92,805,000

113,910,000

193,892,000

70%

115%

137,473,000

191,339,000

286,790,000

360,517,500

26%

162%

38,467,000 Not measured until 2008 481,457,000

40,420,000

31,874,400

25,284,000

-21%

-34%

124,800,000

129,700,000

140,600,000

8%

13%

Total

676,563,000

834,094,400

1,035,114,000

24%

115%

Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census, 2009 COLLOQUY Loyalty Census, 2007 COLLOQUY Loyalty Census • Mass Merchant growth figure indicates ’08-’12 growth

Category: Retail
Despite growth in program memberships, activation rates remained relatively flat, suggesting some staleness in the value propositions of retail loyalty programs. Private-label credit cards have been foundational in establishing loyalty programs and data sources, and now there is more opportunity for increasing member engagement and expanding the reward strategy with complementary benefits that are outside the store card. Snapshot Grocery

1%

2012 Memberships: 172.4 million (1% decline) This sector is already well-penetrated and highly competitive. The focus on fuel rewards as a core component of the value proposition is increasing. The overall focus must shift from acquiring new memberships to better engaging the customer base and driving repeat purchase behaviors. The addition of soft benefits (for example, general manager meet-and greets, member-only events, etc.) will drive engagement and differentiation.

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Snapshot Specialty Retail

26%
Snapshot Mass Merchant

2012 Memberships: 360.5 million (26% growth) Most new programs in this sector tend to be closed-loop programs that earn members discounts and cash-off rewards for future purchases. The growth here is driven primarily by private-label credit cards. Similar to the general Retail summary above, added value is required for this category, especially for those that are lower in average frequency or average transaction amount. 2012 Memberships: 140.6 million (8% growth) Memberships in mass-merchant programs have remained relatively flat, with most programs either being paid membership programs or centered around a credit card value proposition. Like many other merchant categories, there’s a need to look beyond their four walls and expand the overall value proposition to program members. 2012 Memberships: 142.4 million (45% growth) The biggest changes in the Drug Store category are centered around the increasing focus on wellness, and the loyalty programs being a catalyst for behavior change around healthy behaviors, education and prescriptions. The Walgreens launch of Balance Rewards in late summer accounts for most of this category’s growth. 2012 Memberships: 193.9 million (70% growth) Programs here continue to focus on in-store discounts. Most are closed-loop programs that reward members with discounts for more spend within the store. For high frequency, this program structure may continue to appeal to customers, similar to a punch card or “buy 5 and get 1 free” promotions. 2012 Memberships: 25.3 million (21% decline) Membership is declining significantly. Fuel programs are generally focused on either a private-label credit card or a co-brand card as the core of the value proposition, appealing to a narrower market (often fleet owners rather than individuals and families). Programs are beginning to include discounts at convenience stores, along with fuel discounts. But active membership rates remained relatively flat, suggesting some staleness in the value propositions. Our Prediction: Retail program memberships will experience continued growth, though we’re seeing the need for an injection of innovation. For example, the moderate growth in the Mass Merchant category has been driven more by store expansion than by fundamental program changes or innovative value propositions. Everyday spend categories would do well to blend soft benefits (either internally or via carefully selected partners) into their foundational earn-and-burn programs in order to drive member engagement with the program, as well as the sponsoring brand.

8%
Snapshot Drug Store

45%
Snapshot Department Store

70%
Snapshot Fuel & Convenience Store

21%

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Census Snapshot: Travel & Hospitality Loyalty Program Memberships, 2006 to 2012
Industry Sector
Airline

2006 Memberships
254,435,000

2008 Memberships
277,410,000

2010 Memberships
324,900,000 176,800,000

2012 Memberships
371,200,000 223,550,000

Growth '10 - '12
14% 26%

Growth '06 - '12
46% 73%

Growth Projection

Hotel Cruise & Car Rental Gaming

129,463,000 Not measured until 2008 77,660,000

161,896,000

13,500,000

17,760,000

39,455,000

122%

192%

106,043,000

133,040,000

150,323,000

13%

94%

Restaurant

6,709,000

8,377,000

9,790,000

26,500,000

171%

295%

Total

468,267,000

567,226,000

662,290,000

811,028,000

22%

73%

Source: 2013 COLLOQUY Loyalty Census, 2011 COLLOQUY Loyalty Census, 2009 COLLOQUY Loyalty Census, 2007 COLLOQUY Loyalty Census • Cruise & Car Rental growth figure indicates ’08-’12 growth

Category: Travel and Hospitality
The overall number of memberships in Travel and Hospitality loyalty programs continues to grow steadily, up 22% from the 2011 COLLOQUY Loyalty Census. This compares to 17% growth from 2008 to 2010. We foresee overall steady growth of the category as a whole, despite the likelihood of flat to negative growth in certain sectors. Snapshot Airline 2012 Memberships: 371.2 million (14% growth) As predicted, membership growth rate here has softened slightly (the rate was 17% from 2008 to 2010). That said, Airlines remain the most significant contributor to loyalty membership numbers within the Travel and Hospitality category. One area of concern is the potential of turning away consumers with the recent introduction of additional fees for routine occurrences such as carry-on bags and in-flight coffee. They may be able to get away with these new fees for captured and mandated business travelers. However, those who have options may choose differently. To offset the sting of these new fees, perhaps the airlines can offer bonus miles, fee waivers or other benefits to select segments of their customers. 2012 Memberships: 39.5 million (122% growth) Car Rental saw a small but notable growth of membership, at 10%. Cruise programs cruised with growth of a whopping 266% because of the addition of figures unavailable in earlier editions of the Census. 2012 Memberships: 150.3 million (13% growth) A slow economy might be responsible for the continued decline in the growth rate (from 37% to 25% to 13% from 2008 to 2012). This sector is excellent at gathering customer data and converting it to actionable insight, though most of it is based on casino spend. Still, we’re seeing expansion of the data-gathering, beginning to include information from spend in related hotel properties and spend at retail partners.

14%

Snapshot Cruise & Car Rental

122%
Snapshot Gaming

13%

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Snapshot Hotel

26%

2012 Memberships: 223.5 million (26% growth) This sector is recovering more quickly than the economy, catching up after only slow growth during the recession (9% from 2008 to 2010). However, that growth may have peaked – which may be why many of the more established brands have begun reducing the value proposition offered to guests. Another option may be to provide additional soft benefits and options for ancillary revenues – similar to the airlines. 2012 Memberships: 26.5 million (171% growth) This sector is exploding as new programs (excuse us) come to the table. Growth from 2008 to 2010 was just 17%. Growth will continue with the evolution of the POS and table management systems that can be fully integrated into a loyalty management system. Our Prediction: A healthier economy is good news for the categories serving travelers. Still, we anticipate that the growth of program memberships in much of this sector will continue to lag behind Retail and Financial Services. For example, we expect continuing decline in frequent-flyer membership growth rate numbers with the upcoming merger of American and US Airways in fall 2013. And unfortunately, car rental programs have continued to coast along, with very little innovation for more than a decade. There is great opportunity for both cruise lines and car rental agencies to evolve their strategies and better connect with their best customers in order to drive frequency and choice. The star in Travel and Hospitality – and in the loyalty industry in general – will be the Restaurant sector. We anticipate continued meteoric growth within this category, for multi-location brands, as well as single-location restaurants via a “coalition-like” loyalty-management system provider.

Snapshot Restaurant

171%

Category: Other
Growth in the variety of industries gathered here varied widely from 2010 to 2012. For example, Coalition (with such programs as UPromise) decreased by 5%, while Telecom & Cable was up by 34% and Internet was up by almost 47%. The “Daily Deals” category is new to the 2013 Census. Several programs in this category are still in their infancy, and they therefore focus mostly on acquiring new members. Snapshot Entertainment 2012 Memberships: 30.5 million (35% Growth) Covering a variety of venues from movie theaters to amusement parks, the Entertainment industry employs loyalty initiatives to create ongoing frequency in an increasingly diverse segment. Consumers' entertainment options are expanding exponentially, and the strategy for this industry is to earn choice by developing habit. Entertainment companies also have the opportunity to create unique experiences and incredible surprise and delight through the use of their own properties. 2012 Memberships: 2.6 million (34% growth) Growth here is likely due to increase in membership among existing players. Active participation rates, however, tend to be low due to less-than-ideal value propositions that aren’t very appealing to the majority of program members. Some organizations in this category have begun establishing partnerships that offer additional soft benefits or discounts for transactions with select partners. This strategy is necessary in subscription-based service models. 2012 Memberships: 102.3 million (47% growth) Growth here is particularly high, and likely due to the launch of new programs. However, rates of active participation here tend to be low, especially in sites that don’t drive frequent visits or transactions.

35%

Snapshot Telecom & Cable

34%

Snapshot Internet

47%

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Snapshot Coalition

15%

2012 Memberships: 40.4 million (15% decline) Coalition in the U.S. still has not taken hold as it has in Canada, the U.K., Germany and other countries. This decline suggests saturation and/or lack of innovation in this sector. This leads to the opportunity for a new break-out leader to emerge. In the meantime, we believe extended and innovative partnerships among brands will begin to have a positive impact on the marketplace. Our Prediction: The Daily Deals category is at a crossroads. The category in general has seen its heyday, with many companies having closed their doors. The remaining companies must determine how to deliver relevance to customers and sustained value to merchants. Similarly, the low level of active memberships in the other disparate industries in this grouping demonstrates that many programs are still in their infancy and focusing on acquisition. Now they must turn attention to growing activity and engagement among best customers and leverage data to customize experience based on customer preferences.

IV: Muscle, Flab and Steroids Lessons From the 2013 COLLOQUY Loyalty Census
Of course, we cheer the companies that put muscle and power in their programs. Still, we have to wonder how many brands have stood in front of the mirror lately and taken a hard look at the front and back of their loyalty programs. While industry innovators are whipping their brand loyalty into shape, other programs are not as strong as they could be. Then again, what program couldn’t stand a bit more exercise? With that in mind, we suggest a bit of coaching for developing active, satisfied members. • Build Muscle. Strong programs rely on innovation and delivering relevant value propositions. ~ Innovation. As both opportunities increase and competition intensifies, program practitioners must become more innovative. In addition to relying on your internal creativity, watch new programs, which can pave the way to more engagement and more growth in years to come. As well, learn from verticals other than your own. Ironically, with more participation and more programs comes more opportunity to learn from fellow practitioners. Among the trends we’re seeing: + Increasing use of loyalty programs to catalyze behavioral change and consumer education. See “Case Study: Balance Rewards” for an example. + Rewarding for behaviors (not just financial transactions) – for example, for social media activity. + Increasing use of soft benefits (such as recognition and special access) in everyday spend categories, which normally concentrate on hard benefits (such as cashback and redemption). + And on the other side, more “utilitarian everyday rewards,” such as discounts and account credits, particularly in Financial programs. + Mobile access to program information, point levels, etc., via apps. + Status matching – for example, granting a member elite status if that member has elite status in a competitor’s program.

Case Study: Balance Rewards
The Balance Rewards program introduced recently by Walgreen’s combines a traditional in-store rewards program with a wellness program. It also provides access to devices and apps for tracking exercise progress and venues for engaging with a community of members for support. The program has been a large success since its launch in late summer 2012.

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Case Study: Crossover Rewards
A partnership between Delta Air Lines and Starwood Hotel Group, Crossover Rewards provides Delta SkyMiles members immediate and fully-reciprocal membership in the Starwood Preferred Guest program. The partnership presents members with a complete travel experience – a great place to stay, and a points-accumulation benefit when traveling there. Since its inception, Starwood reports the program has signed a record number of new memberships, all taking advantage of the ability to combine two travel accounts into a single program. Within the first few weeks of the partnership, Delta had also seen a boost in both acquisition and lift. Regular overseas travelers – a particularly high-valued segment for Delta – are proving to be the most consistent and promising participants of this successful program. Focusing on program-membership acquisition makes sense for newer programs and for sectors that are new to the idea of loyalty programs. But such a focus also leaves missed opportunities for leveraging existing customers to drive returns. The cost of acquisition remains higher than the cost of engaging existing customers (or members), so there is opportunity for companies to see higher returns by driving such engagement. Take a lesson from those leading the way by taking a well-balanced approach, applying resources to both retention and recruitment, and insuring the health of both. • Reject “Steroids.” The metaphorical steroids we’re referring to result in the artificial body mass created by injecting alien substances into your body. In loyalty terms, make the program your own. Determine why your customers came to you in the first place and build your program around fulfilling their unique needs and communicating and delivering your unique solutions. Don’t copy the competitors. Learn from them, and learn from the programs in other verticals, as well. But avoid the “artificial stimulants.” The bottom line: Investing in new membership at the expense of current top-tier redeemers is not a good plan moving forward. Revitalizing membership engagement remains the key to industry strength. We expect the entire loyalty industry to grow, on average, in the years to come. But those companies that study the data and take the overall message to heart will be the ones to finish first in terms of growth, and will make the most of the economic comeback. As with all exercise programs, developing an efficient loyalty program requires dedication and stamina. And no dumbbells. + Partnerships. See “Case Study: Crossover Rewards” for an example of an innovative partnership. ~ Relevance. More and more companies are seeing the value of offering loyalty programs and – more importantly – the value of tracking, reporting and drawing actionable insights from customer data. • Trim Flab. Larger membership scrolls may impress the press and the C-suite, but once you analyze the data and see the deeper numbers, pure growth may not be as compelling as it first seems. Identifying your best customers and concentrating your resources on them will keep your program and your ROI fit and trim.

Appendix: Methodology
In 2000, 2006, 2008, 2010 and 2012, COLLOQUY undertook a comprehensive review of loyalty program memberships. To compile our figures, we researched websites, press releases, annual reports and third-party publications to estimate the total number of adults belonging to each program by market. When no data were available, we attempted to get it by phoning and/or emailing the company in question, most often using our existing subscriber database. When new programs were brought to our attention, we added them to the compiled list and attempted to quantify membership through primary research. We continue to encourage feedback from membership program operators and other industry experts as we diligently pursue the most reliable information available.

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Bulking Up: The 2013 COLLOQUY Loyalty Census
Growth and Trends in U.S. Loyalty Program Activity

The Author
As Sr. Director of Knowledge Development and Application (KDA) at LoyaltyOne and as COLLOQUY's Research Director, Jeff Berry manages research initiatives while cultivating business partnerships in the U.S. marketplace. With more than 15 years of experience in loyalty marketing, analytics and customer engagement, Berry ensures LoyaltyOne’s positioning as a thought leader in the loyalty industry. Berry’s background in client management, business development and consulting in both the B2B and B2C spaces makes him well-suited for his role as the leader of KDA for LoyaltyOne.

About COLLOQUY
COLLOQUY comprises a collection of publishing, education and research resources devoted to the global loyalty marketing industry. COLLOQUY has served the loyalty marketing industry since 1990 with more than 45,000 global subscribers. Its research division develops consumer and B2B studies and white papers, and COLLOQUY provides educational services through workshops, webinars and speeches worldwide. www.colloquy.com

About LoyaltyOne
LoyaltyOne is a global leader in the design and implementation of coalition loyalty programs, customer analytics and loyalty services for Fortune 1000 clients around the world. LoyaltyOne’s unparalleled track record delivering sustained business performance improvement for clients stems from its unique combination of hands-on practitioner experience and continuous thought leadership. LoyaltyOne has more than 20 years’ history leveraging data-driven insights to develop and operate some of the world’s most effective loyalty programs and customer-centric solutions. These include the AIR MILES Reward Program, North America’s premier coalition loyalty program, and a working partnership with Latin America’s leading coalition program, dotz. LoyaltyOne is also the owner of COLLOQUY. LoyaltyOne is an Alliance Data company. For more information, visit www.loyalty.com.

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©2013 LoyaltyOne US, Inc. All rights reserved. Permission to reprint may be granted upon specific request. COLLOQUY is a trademark of Alliance Data Systems Corporation used under license by LoyaltyOne US, Inc., an Alliance Data Systems Company.