Loyalty and Achieving X Ray Vision

There is a scene in Daniel Suarez’s book Daemon where one of the main characters hacks into a security network for the video feed and puts it up on his heads up display glasses.  The result is the equivalent of X-Ray vision.  In fact in some ways the result is better than the X-Ray vision we have dreamed of since Superman Comic Books because the feed from the security system may provide better view angles and could include sound.  Technology often produces the futuristic things we imagine in ways we never could have imagined.

We can now deposit checks into our checking accounts by taking pictures of them with our phones.  Our phones can translate for us, navigate for us, and perform many other tasks that not long ago were only comic book dreams.  The pace of this innovation is accelerating with incredible new tools introduced every day.  We have been dreaming about time saving tools that free us from mundane tasks ever since the first home of the future exhibit at the world’s fair. 

Anything helping us buy stuff has to be on the top of the list because commerce is driving this innovation.  Here in the US, we spend $450 billion a year on groceries at 65,000 grocery stores – so I am guessing that even though we are all tired of predictions of refrigerators that make our shopping lists for us – I bet there are many people out there working to build tools to take the pain out of the weekly trip to the grocery store.  Just like with the X-Ray vision in the book, I am guessing the solution will not come from the place we expect.  In fact, I think all of the parts are in place for system that would build my grocery list for me and at the same time increase my loyalty to a brand by 10x.  Very simply it would mine my supermarket loyalty card database and:

1. Suggest my shopping list for me
2. Organize the list by store lay out
3. Suggest things that I don’t usually buy
4. Suggest recipes from the ingredients I usually buy
5. Offer savings…

It is the home of the future system without having to have a PC in my refrigerator and scan every item in my pantry.  Properly executed, I would never shop at another store. 

This same scenario exists in just about every business.  I have to think that the businesses that give back data to their customers and give them the tools to manage that data more effectively will break out of the pack because their customers will be more loyal and they will get a dramatically increased share of their customer’s business.

Loyalty Love On the Decline

Done right, loyalty programs do a great deal to drive revenue.  Doing them right is much easier when the inventory of loyalty love is on the rise.  Frequent flier miles that can never be redeemed can even damage customer relationships.  When building a loyalty program it all seems quite easy.  Set aside some inventory, in the airline example this would be seats, and increase the inventory a bit each year to keep up with the increasing number of loyalty customers and their increasing expectations and you are all set.  This all comes to an unhappy end when the number of loyalty customers continues to rise, or worse accelerates, at the same time the inventory of awards contracts.

This is exactly what is happening right now with the airlines.  The airlines have reduced their capacity by paring back schedules and parking planes.  The people flying are mostly those that always fly -- those in the loyalty programs.  This means fewer reward tickets, fewer upgrades, and eventually, structural changes to loyalty programs.  My main airline just increase the highest level from 40,000 miles to 75,000 miles -- ouch.

We see the same thing happen to partner programs.  While on the upswing there is plenty of loyalty love to spread around.  In this case the loyalty love usually comes in the form of leads (opportunities for new business).  When in a recession the flow of leads goes down and the focus on leads by partners goes up.  Expectations up plus delivery down equals unhappy partners.  Here are three things to do about it:

1. Invest what you have in the right place:  As painful as it may seem, the airlines are doing the right thing.  They know they do not have the capacity to make everyone happy, and they are going to make sure the reduced number of happy people are the right ones.
2. Add new features and benefits:  There are always things that can be added to fill the gap.  Soft benefits are not as good as hard benefits -- but better than nothing.  As above, these new benefits have to go to the right places.
3. Engage to grab market share:  Vendor and partner both want to grow out of the cycle -- which in a down market means take market share.  Since this investment is being made anyway -- make the most of it by working closely with key partners to drive increased revenue for both entities.

Yes all of this means we have to pedal faster in a down market.  It is worth it however because the potential gains are tremendous.