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Loyalty, rewards and the test of time

July 24, 2013 by Bryan Pearson — President, LoyaltyOne

When it comes to measuring their program effectiveness, loyalty marketers tend to rely on what I like to call the big EAR: earnings, activation and redemption rates. But recent research out of Canada may be turning those measures on their own collective ear.

The study, by researchers at Environics Research Group, Laval University and Queen’s School of Business (including my own former marketing professor, Ken Wong), investigated the variables that enabled a program to award the fastest. They created an algorithm they call “time to reward” to determine how long it would take different loyalty programs to deliver a $100 benefit.

The results, detailed in the report “Reframing the Conversation on Loyalty Programs in Canada,” showed that programs differ greatly. For instance, it would take three months to earn $100 in travel rewards from the AIR MILES Reward Program, but almost 49 months through WestJet Rewards. The researchers even created an online tool so consumers can see which Canadian loyalty programs earn rewards fastest.

Other highlights of the research’s findings:

• Coalition loyalty programs earn travel rewards fastest. Canada’s largest coalition loyalty reward programs– AIR MILES and Aeroplan – are the speediest among the coalitions.
• Retailer or bank-issued credit cards tend to result in the fastest reward times for cash and merchandise. The Target RBC Mastercard delivered $100 in cash equivalents in two months.
• Annual fees and other costs can, in some cases, be so high that member cannot earn enough points to offset the cost of membership. In other words, a reward is never really earned.
• The ability to double-dip (earning points on a loyalty card and its affiliated credit card) greatly reduces reward times. For example, by using the American Express AIR MILES Reserve credit card, members can see a travel reward in one month, versus three months through the AIR MILES program alone.

With each Canadian household enrolled in 8.2 loyalty programs today, the need for loyalty marketers to underscore their relevance is crucial. If we do not deliver a timely benefit to consumers – one that is equal to the value of their personal information and commitment – we risk our card being left in the bedroom drawer.

However, if we supplement the standard metrics of EAR with the measure of time, we may find ourselves testing our true value to customers.

About Bryan Pearson

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