How do Loyalty Programs [un]work?

January 18th 2022

Every store or retail chain strives to achieve pure customer loyalty. But the methods in their essence have not changed significantly, the author says. In the era of mobile applications, illiquid points remain illiquid, no one canceled the arbitrariness of retail, he says. LiqBon™ is a unified token into which you can transfer your points, miles, and other rewards provided by retail chains, stores, and airlines. The author says the major retail market players are not ready for "loyalty reward roaming" service today. Nevertheless, Liquid Bonus™ has tremendous potential for the fragmented post-covid market with millions of smaller retailers and re-emerging regional manufacturers.

@julik
Juli

expert in IT, telecom and security, author of a patent and three startups.. sometimes I share my thoughts with community

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Loyalty Games

Discount and loyalty programs were invented more than one century ago. Once upon a time, customers were given metal tokens and stamps issued by a different shop. In those distant times, people lived settled and traveled, at best, on horseback. They were going, by modern standards, not on a trip, but rather on a walk.

Since then, a lot has happened. But the want to stimulate sales, and ideally, to tie the buyer to the retailer, has remained.

And, oddly enough, the methods in their essence have not changed significantly. Every store or retail chain strives to achieve pure customer loyalty.

So they spend extraordinary amounts of money on developing CRM and loyalty programs, making changes to IT systems and cash desks, issuing plastic cards, mobile applications, and distributing them among customers, forgetting that

such systems work great just in case no one else is doing it and become a real disaster for customers as soon as every retailer starts doing roughly the same...

or almost every retailer because not everyone has enough resources to implement complex and expensive IT systems.

The sophisticated reader will probably notice that the era of plastic cards is already in the past. And today, everyone has a mobile to store numerous loyalty card numbers, and many retailers have already abandoned cards altogether and switched to mobile numbers and applications.

Yes, this is true.

The point «issuing plastic cards and distributing them among buyers» is rapidly disappearing from the long list of necessary, and the user experience is becoming much more successful.

But in the era of mobile applications, illiquid points remain illiquid, no one canceled the arbitrariness of retail, and the accumulated bonus points continue to be revoked or depreciated at the command of «the boss of the whole loyalty» of the retail chain or airline.

The «loyalty» turned out to be bizarre. It seemed that retail built the system in the buyer's interests, who would stay with the store, chain, or airline in gratitude for the special treatment.

But the result is we wanted the best, yet it turned out as always. Once feeling a donkey carrot, the buyer turned away from the offered gingerbread of points and miles while gravitating towards promotions with the money-up rule.

The idea behind the Liquid Bonus™

The idea of the “Liquid Bonus” as the unified token into which you can transfer your points, miles, and other rewards provided by retail chains, stores, and airlines, has appeared instantly.

But it took a long time to find a solution that would not become another partnership or coalition of several sellers. You can come up with a new elegant solution that will bring success and money but will not change the essence. This time, my goal was not common for a business innovator.

For the Liquid Bonus™ to become attractive to buyers and retail chains, it must be truly global, i.e., it shall work not only with the majority of sellers but also be widely accepted in different countries.

This tool should not interfere with the process already established by retailers or loyalty coalitions for their loyal customers. And it should not share any customer data accumulated in the loyalty program of an individual retail chain or loyalty program.

At the same time, I thought, LiqBon™ must ensure trustful relationships between the participants in the system, even if initially they have no trust in each other at all and even some are direct competitors.

By joining such a system, retailers and manufacturers would be able to expand the capabilities of their CRM systems while eliminating the worst drawback of existing loyalty programs - the periodic expropriation of accumulated loyalty points and miles.

But it turned to be that the major retail market players are not ready for "loyalty reward roaming" service today.

Well, this is old news for me. Many years ago, when the author worked for the emerging mobile telecommunications industry, telecom operators did not want "to share their subscribers and profits with competitors" either.

But later on, the network and international roaming appeared, which in some places began to generate even better revenues than intranet telco services. So I am strongly sure there is more to come!

Do you believe in the idea of a “loyalty reward roaming” service?

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How do Loyalty Programs [un]work?

@julik
Juli

The idea behind the Liquid Bonus™

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How do Loyalty Programs [un]work?

@julikJuli

The idea behind the Liquid Bonus™

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@julik
Juli