I had my 6 year and 8 year old take the quiz that Weekly Reader had on-line. They really enjoyed it and then started using their points in this virtual room they could use. The part i really like is that they have some really good printable coupons for places we eat all the time.

I am going to tell all my friends to try it. Free offers are always something we can use.

Here is the link www.uboost.com.

With regards to your book example, like you said, all things being equal (the book itself, cost, shipping time), something needs to make one merchant stand out from the other. If one had a loyalty program and one didn’t, the decision would be easy. Look at B&N vs. Borders today. Borders barely has an online program while B&N is well established, even in the world of the Amazon. But Borders will be launching a new site soon so we’ll see what happens for all of those merchants.

Good points. As I think further, the context of the transaction seems to dictate the appropriate value.

Your point about the airline reward program bene’s of early boarding, upgrades, etc… is a good one to dissect. In that model, since the frequent flyer (in most cases) is not paying for the ticket, but flying on business — those types of bene’s are important. On the other hand, if you are buying a new book on the web, and you know every book seller has the same exact hard-cover, and they all use the same shipping companies — and since it is your dollar, going with the seller who offers you a cash-discount or expedited shipping would be more significant.

In the coalition programs, my sense is they rely far-too heavily on the breakage model. In other words, they offer 5% back, but generally pay you your reward after you reach $25.00. That means you have to spend $500 to get your first reward. If the avg. online purchase is $40, that means you need to make 13 purchases before getting a reward. Few, if any, consumers will be so diligent to stick with a program like that and the breakage is incredibly high.

That is why keeping the reward process simple is so critical online. Instead of giving 5% after $500 — giving 1% after EVERY sale seems to be far more attractive to buyers.

Brian

Finding rewards that influence decision making is the holy grail in Loyalty Marketing. The problem is it is different for everyone. What might influence me might not influence you. I’ve actually done some experimenting in this area with differentiated rewards based on behavior. Unfortunately the technology wasn’t far enough along to do what we wanted but conceptually we came up with some interesting program structures.

But to answer your question, the rewards don’t necessarily need to be large financially, they need to be something the consumer will value and work for. Imagine offering something that doesn’t have a high cost financially but is scarce or hard to get. From an airline standpoint, giving me early boarding, preferential seating, access to the emergency exit row, etc. are all things that make me work hard to achieve an enhanced status on the airline.

I agree that for some people airline miles aren’t something people want to work hard for as they are too difficult to redeem. As a frequent business traveler, I still value the rewards and will remember to use my frequent flier number to get the miles because they provide me some other benefits as well. But I haven’t had an airline miles card for a very long time. I am partial to the American Express Membership Rewards Program as I like the flexibility it offers with my rewards. I hate that there is a membership fee but I definitely get the value back in the end.

What do you think?

Evan

What level do you think the rewards need to be at to influence decision making and still remain profitable for the seller?

My experience in airline frequent flyer programs (AAdvantage) and just viewing the Discover Card reward program indicates 2% is the level a retailer can accept (blended average 2%; so it could be a straight 2% like Discover OR it could be 10% with 80% breakage like an airline).

I also believe the other “value” for the consumer is the simplicity of the program.

Although I have been an AAdvantage member for over 25 years, I no longer actively use my AAdvantage Citi card nor do I select AA as my primary carrier. The flight restrictions and load factors for redeeming awards became ridiculous two years ago and I have never gone back.

On the other hand, I have a Chase Card which awards me cash back automatically on each of my cc statements — I don’t need to request anything. I use that card all the time now.

Thoughts?

Brian

Regarding your comment about coalition programs, I have personally seen very good results with repeat buyers in a coalition program but can admit that some have not delivered on the original expectations. I think a big reason comes back to one comment I made which is the reward the consumer gets. If they don’t value the reward enough they won’t go out of their way to pursue the reward. I’m not familiar with rewardsHere so can’t comment on the strategy you used.

And while I am a big fan of the coalition approach, I can also agree that some individual programs can be a better approach if the brand/merchant is strong enough. The caveat in coalition programs is the consumer builds allegiance to the program and the reward and not the merchant. At that point the merchant needs to participate even to be in the consideration set of available merchants. They pick from merchants on the site - they don’t shop with a specific merchant because they are in the program. As a merchant, they still need to offer great product selection, prices, and customer service or the reward will still be meaningless.

Evan (Principal, Loyalty Marketers, LLC)

(Sorry I don’t know your name!). And sorry if I over stretched with my assumptions about your experience — I guess I’m showing my frustration from hearing so many traditional loyalty experts knocking online loyalty programs.

I am pleasantly surprised to see your confidence in coalition programs driving repeat shopping patterns. My experience is they tend to flame-out very quickly and the retention rates drop off dramatically after the first purchase. We ran our own site called rewardsHere.com which listed all the sellers in our online loyalty program. We promoted the site heavily but found that non-prompted use (e.g. not prompted through a link in an ongoing email) was almost non-existent. The depth of product offerings for rewardsHere.com (very broad) and the established relationships with at least one seller on the site and simple, immediate rewards, seemed to point to a large opportunity.

But buyer use fell far short of our goal to the point that we decided to shutter the service. We have since spoken with past employees of other coalition sites and have found this is a consistent drop-off pattern. Maybe we spoke with the wrong people and killed rewardsHere.com too quickly?

In terms of my stat on buyers returning to Google rather than returning directly to a seller’s site — that’s public data which Google publishes. The repeat usage for buyers choosing to start a repeat purchase cycle on Google and clicking an Adwords link to find their “next” purchase is incredibly high.

I wish it weren’t so. I wish that once a buyer found a good seller, they would book-mark the seller’s site and return to make repeat purchases without going back to Google. But the public stats from Google decimate that argument and show it is simply not happening.

Google owns the “toll-booth” position and charges sellers for access to buyers. If you read through Google’s reports, they point out that repeat usage by consumers is very, very high.

The bigger issue I have found is traditional marketers use “traditional” Lifetime-value ROI measures with a false-assumption that a “new” online buyer will convert to a repeat buyer at rates equivalent to those seen in their traditional direct marketing models. Not one seller I have ever spoken with actually can show that kind of repeat buyer behavior — even though they all have it built into their model. Very troubling indeed.

Brian