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In a recent keynote speech to the graduating class of Founder Institute – Barcelona, I talked about the traits that have served me best in my career as an entrepreneur.
The ability to innovate with scant resources – and constantly leaning on others for help.
The importance of networking in order to build potential and active partnerships.
The confidence to make many small bets, relying on judgement and diversification to ensure that overall, they pay off.
The ability to bring together complementary fields of experience to create profitable solutions based on innovative business models and modern technology.
As I reflected on the presentation footage, I decided I wanted to share these principles with the many loyalty professionals I’ve met building Currency Alliance over the last seven years.
These are the entrepreneurial traits which have served me best in my lifetime as an entrepreneur. They’re common traits to many successful businesspeople, but it’s worth considering how these skills can be applied to the unique set of challenges faced by the majority of loyalty teams.
Innovating with scant resources
In recent years, brands have invested more in loyalty. At many businesses, however, loyalty teams still attract relatively few resources compared to the ROI that loyalty can deliver when best-practices are observed.
Many of those best practices are highly capital-efficient – so the best entrepreneurial loyalty leaders have produced big successes from relatively little.
A few years ago, we interviewed Steve Hoban, who launched the Smart Shopper loyalty scheme for South Africa’s Pick ‘n’ Pay grocery chain back in 2011.
Smart Shopper started simple…
Initially it was a fairly simple points-only based scheme with 1% given on every swipe of the card. Such a simple program quickly revealed invaluable insight into the customer and opened a whole new channel of communication across email, SMS and good old post!
…but within a few years it had become South Africa’s leading loyalty program.
Crucially for loyalty teams today working with limited budgets, this was achieved primarily by using the business’ most valuable resource – its existing customer data – to curate and target offers.
It was not achieved with the help of expensive third-party companies, or with expensive or flashy developments. Back then, mobile apps were still in their infancy and a lot of companies were spending a lot of money on them without a clear business case. By the time Smart Shopper launched an app in 2013, the program had already enjoyed two years of growth.
Innovation is important (more on that below), and companies should allocate a certain amount of resource to cutting-edge technologies so that they are ready to capitalize at the right moment. But it is critical that things such as blockchain and the metaverse, which are currently of little use to loyalty programs, do not distract from opportunities to achieve more with the resources you already have to hand. Patience with the evolution of the metaverse will pay big loyalty dividends when your business has a clear view on how to be present in it, as the relevant technologies mature.
In addition to your data, distressed inventory – which would have been sold at a loss – remains one of the most powerful tools at the loyalty marketers’ disposal. Companies are now making even better use of all their inventory with the introduction of dynamic incentives.
Below, I’ll also talk in more detail about your partner network. Partnering with complementary brands compensates for a lack of internal resource by adding customer value that your own business could not afford to create independently. Partner offers, or issuing your partner’s currency, may come at a short-term direct cost, but they more than pay that cost back in creating customer value. And really, the only limit in growing your network of your loyalty partners is a modest amount of your time.
These lessons aren’t just valuable for loyalty teams; every professional in every business should make the most of their available resources.
But loyalty marketing in particular has always been an art of creating the highest perceived customer value with the most controlled possible investment.
Whether you’re a longstanding, well-funded loyalty team, or if you’re launching a new program, the resources immediately at your disposal are among the most powerful contributing factors to your success.
Networking within your business, and with loyalty partners
Loyalty marketers have to network in two circles.
One of those is with potential brand partners, but what’s less talked about is the equal importance of networking within your business.
Customers have a single view of your brand – whereas most brands’ loyalty, advertising, product, and customer service teams are siloed to some degree. This can produce conflicting and confusing customer experiences.
It’s now fairly widely accepted that loyalty and customer experience teams must be closely aligned, but there’s work still to do on bridging customer engagement disciplines. Heads of loyalty should take responsibility for extending their department’s reach into other business functions, including working towards the sharing of data and systems to produce a unified understanding of the customer.
The costs of not achieving this are plain to see. A few years ago, in an article on loyalty microservices, I talked about my terrible customer experiences with Brooks Brothers.
The company hammered me with irrelevant messaging, including offers which were only usable in the USA, despite the fact I told them I lived in Spain. It was clear they had no memory of my 30-year relationship with the brand – and in 2020, it was one of the first businesses to go bankrupt during covid-19, while more digitally-savvy retailers fared better.
This situation is not uncommon; many brands are still forced to send out messages from between two and five different legacy systems, based on partial sets of data, stored across multiple databases.
Companies have been striving to get all their customer data in one CRM or CDP for a decade, but that end-state may never be realized. Some have succeeded, but most have failed. A compromise is to allow data to be spread across databases, but to get the actionable data that enables insights and predictive marketing into a common repository.
So fixing these problems – as with implementing any organizational change – depends on making a lot of friends, and winning the necessary trust for the entire organization to move forward with change.
That’s also true when you need to win budget and backing to support your strategy.
Loyalty departments have not always had easy relationships with CFOs and CEOs. That’s partly because the most important KPI – customer lifetime value – is hard to measure in terms of ROI, because it’s built up across countless touchpoints, engagements and transactions over many years. That makes it hard to attribute specific achievements to specific portions of investment budget.
It’s also because loyalty marketing is a specialised discipline, poorly understood by non-practitioners. As a result, C-suites and boards of directors may value less meaningful metrics, such as your total membership size.
C-suites may also dislike the appearance of high upfront investment in adopting new technology solutions. Program operating costs may account for 60% of the total operational cost of many enterprise-class loyalty programs. I believe those indirect costs could fall to 25% by replacing legacy systems with best-in-class microservices.
So, you’ll need to invest time in helping your chief executive, your chief financial officer, and the wider leadership to understand exactly how these things affect the long-term profitability of your business. Controlling and eliminating indirect cost will help to further build trust in your strategy and win further buy-in, but it’s down to the loyalty leaders to start the conversation and lead the charge.
If you’ve worked in loyalty for some years, you may already be a skilled networker. Most brands that have pursued collaborations have needed to nurture new potential partnerships for months (or years) before the two businesses were able to identify the best way to go to market together. Today, the process of external partnerships can be greatly accelerated by implementing those partnerships via Currency Alliance’s loyalty marketplace – but within your business, those networking skills remain as crucial as ever.
You may not be able to win backing today for everything you want to do. But you will need to lean on your friendships across the business to win the budget and trust needed to ensure your team succeeds.
Making a lot of small bets, and accumulating wisdom
This chart shows the relative size of the wins and losses I’ve made over the years as entrepreneur and investor in early stage companies. There are marginally more losses than wins, but overall I’ve profited by betting on innovation and good teams. Three out of the 18 listed investments produced significant returns. I hope among the four remaining companies in my portfolio, there might be one or two big winners.
These wins and losses come partly down to luck. But the fact that I’ve profited overall comes from judgement that is based on considerable experience, spreading the bets across a large portfolio, and the invaluable insights gained from the bets that didn’t pay off.
I would suggest a lot of small bets which don’t pay off are a mark of a successful business – because it is proof that the company is taking risks.
Google’s social network, Google Plus, was a total failure, and Google Glass, the augmented reality glasses, were at least 10 years too early (which Google probably knew at the time). Microsoft gave up on its mobile phones after several lacklustre years.
The same applies in loyalty. American Express, one of the largest issuers of loyalty points, launched a coalition program in the USA last decade called Plenti. There are lots of opinions on why Plenti failed, but I believe the fundamental problem was implementing a business model that had worked for Air Miles and Payback in many other countries, but represented too little value for consumers in a market like the USA. The business model was known to work, but the market context led to a costly mistake.
These are high-profile, publicly visible failures, but most of yours would only be known internally. Sometimes it is hard to test small; you have to burn the ships and fully commit. But most things can be tested small with low risk. The point is that success in business depends on many factors: the idea, the business model, the team, the timing, etc. Sometimes most factors will be in your favor and all you need to do is change one aspect to see a break-out success. This is typically called a ‘pivot.’ Tweaking the business based on data insight and experience is exactly what successful entrepreneurs do, and the same goes for loyalty marketers. But if you don’t try to break things, you don’t get the data to make informed decisions and evolve.
Likewise, something that may be working well for you today could cease to resonate with customers in 1-5 years’ time. This is why healthy businesses undertake scenario gaming to anticipate what might happen if market conditions change. The greatest leaders and the most money made over time has come from companies that try to disrupt themselves. They find weaknesses, exploit them, and get even stronger in the process.
I co-founded Currency Alliance seven years ago based on two bets.
First, I believe 95% of companies are not relevant enough to their customers to ever get more than about 30% of total customers to join their standalone loyalty program. That means they have little idea who 70%+ of their customers are, and that they don’t have the tools, data, or permission to keep in touch with the majority of their customers. The easiest way for a company to achieve majority participation is to add everyday earn and redemption partners, or simply to offer your customers whatever loyalty currency they want.
This might be the currency from Air France/KLM Flying Blue, Marriott Bonvoy or any other airline or hotel group, points from Coca-Cola, or points from coalition programs, or from an aspirational brand like Nike or Red Bull. The cost of issuing the points a customer really wants is trivial compared to the value of getting customers engaged.
My second bet was that in the future, loyalty points would be considered an asset class, which could be earned, redeemed, or exchanged nearly as easily as fiat currency like US Dollars, or the Euro. I estimate that there are over $500B worth of loyalty points in circulation in the world. That value needs to have more liquidity, so customers can use it to meet their personal objectives.
Of course in 2015, there was no API-first technology platform like Currency Alliance that made transacting in loyalty points easy or low cost. And for this vision to materialize, there needed to be a platform that allowed brands to manage their loyalty partnerships at scale.
If United Airlines is going to have thousands of real partners so their MileagePlus members can earn several times per week, they can’t continue managing partners with email and spreadsheets. They need a powerful, cloud-based management portal that facilitates partner discovery, contracting, reporting, reconciliation, and settlement.
Today’s and tomorrow’s successes in loyalty will come from engaging less-frequent customers in loyalty programs, and figuring out which of them have the potential to spend a lot more with your brand. That will require entrepreneurial loyalty leaders to make a lot of small bets – on new tactics or partnerships in new business categories, in order to appeal to a far wider range of customers.
Not all of these bets will succeed – which is why it’s critical you learn from your successes and your mistakes.
One of the best lessons I ever learned was from my grandfather, when I was 16 years old. He told me that I had to accelerate the pace at which I gained experience, so that I could make better decisions earlier on in my career, and have plenty of time left to benefit from the wisdom I collected along the way.
Adding new loyalty partnerships becomes a virtuous circle, as the experience and the data that you collect along the way helps to inform your partner strategy. Being able to do this is critical to future-proofing your loyalty program’s success – but for greatest effectiveness, you’ll also need to make some small bets on your loyalty technology platform.
One of the key benefits of software microservices is that they allow businesses to make small bets on specific improvements – rather than putting all their eggs in one basket, by trying to replace an entire monolithic legacy platform in one go.
This is precisely what Currency Alliance was built for. You can integrate your existing system with the Currency Alliance platform with only a few days of development time, at no upfront cost, and use it to extend the capability of your existing systems. Currency Alliance is like a thin layer of cloud-based technology that sits in front of ageing legacy systems, to breathe new life and lots of agility into them.
That can allow you to make further small, safe bets, as you use the platform to connect with new loyalty partners in a matter of hours and try new engagement techniques without ongoing IT involvement.
Melia Hotels, Air France/KLM, AirAsia, Qatar Airways, and Air Arabia are just some of the brands already collaborating in Currency Alliance’s loyalty marketplace, alongside many other brands in entertainment, retail, utilities and travel. This offers many opportunities to make safe ‘bets’ on new partnerships, and extend the appeal of your loyalty programs to more customers.
Every business, and every professional, must continually evolve beyond the safe and familiar achievements that got them to where they are today. We must all move forward. There are no wins – and huge risks – that come from trying to be the entrepreneur who stood still.
This article was first published by Currency Alliance. Permission to use has been granted by the publisher.