For additional information contactLaura HewittDirector, Integrated Marketinglhewitt@carlson.comFebruary 2006

By the Loyalty Marketing TeamLoyalty without points addresses the issue of whether you can a) build customer loyalty

without relying on a points structure and b) have an effective relationship marketing program based on factors other than a primarily economic approach.

Early Point Program Adopters Had the AdvantageWhen traditional point programs came into full force, the easiest value proposition a

company could use against a competitor focused on their frequency program that offered points as a reward for purchases. This worked well for those early adopters, but at some point in the marketing lifecycle, most companies made their own points-based loyalty program. And, for the most part, the easiest first call for help with customer churn and share issues seemed to be to offer a points-based rewards program.

Loyalty Programs Without Points Meets the Needs of Many Business ModelsHowever, the reality is there are many companies with a business model that can’t

support the use of a points-based loyalty program to drive their business forward. Points, for these companies, do not make a lot of sense for various reasons, such as:

• Their customers do not maintain a frequent purchase cycle• The company’s product has a low margin• The customer’s average purchases are not high enough to deliver enough relevant value

back to make it meaningful for the customer• A return on investment just can’t be achieved through the various components that

make up the business proposition• Points don’t align with their brand image

Enter Loyalty Programs Without PointsEnter the loyalty program without points (non-points loyalty program). Keep in mind that

a points program should really be called a “rewards program” and therefore a “loyalty” program can, and should, take on multiple elements. Frankly, companies everywhere are using non-point loyalty efforts to drive their business objectives. So what can non-points programs do?

• Non-points programs act as a bridge between activity• Non-points programs can sometimes be elusive (i.e., a customer may not be aware of

the fact they are even in a program)

Point of View: Loyalty Without Points?

Moving the customer from an economic relationship to emotional engagement

© COPYRIGHT 2006 CARLSON MARKETING. ALL RIGHTS RESERVED.

• Non-points programs can maintain a contact stream between purchases—especially when there is a long purchase cycle, like buying a car

• Non-point programs are founded on good basic marketing techniques to a company’s existing customer base

• Non-points programs may take different shape (and should), but they all have the same overriding objective: Reduce customer churn, increase share of customer, enhance the brand, present a unified message to the customer.

Why We’re Big Fans of Loyalty Programs Without Points• They are founded on solid marketing tactics• They can be uniquely designed for each customer and client base• They are targeted typically to the current customer base versus prospects• They are just as effective at driving business objectives as a “rewards program

with points”• They require the same level of segmentation and analysis as a points initiative to ensure

the proper attention is being paid in the right place• They can contain an economic trigger• And most important, they are the means to driving authentic loyalty—authentic

loyalty can be the result of a non-points based program because you’re addressing the emotional triggers that create a deeper level of engagement, rather than what may start out as an economically driven relationship.

Think of it this way. A points program is an incentive. Non-points programs encompass all that you are and all that you do. A big difference. When you incent, you get a response. When you fail to incent, you get a response. When you are interested in building loyalty, you go about doing your business completely different than ever before. Never confuse any incentive program or rewards program with an activity that creates loyalty. It creates an induced response.

What is a Loyalty Program Without Points?Loyalty programs without points have a strong essence of one-to-one relationships and

are the means to driving that relationship. And with one-to-one comes a change in behavior which was the result of a change in emotion. Loyalty programs without points encompasses an array of options for a client to utilize and to design according to their business objectives. Examples of loyalty programs without points can be:

• Direct marketing contact strategies• Affinity programs• Customer appreciation programs

Usually the program is targeted to a current customer base and the customer may or may not know that he/she is actually involved in a program. The key components of a non-point based loyalty program include the usual suspects of:

• Customer database• Segmentation and modeling• Direct marketing • Offers• Measurement A contact strategy is built and these benefits are typically a part of the program:• Informational benefits• Promotional benefits• Experiential benefits• Lifestyle solutions benefits

The above benefits are executed through member sites, emails, direct mail, events, special offers and services of which the customer could take advantage. These benefits make up the value proposition, and while you can’t put a dollar value on some of the benefits that can be created, the customer can see the emotional benefit that can be derived. The difference is that while the customer may be making ongoing purchases, there is no point program being used to drive the economic loyalty. More emotional benefits are used to build the relationship and turn the customer into a brand advocate and move the relationship to engagement.

To Sign Up or Not Sign Up?Does a customer actually sign up for a loyalty program without points? It depends. It

depends on how the program is positioned and what choices the company makes around whether or not to formalize this effort as a program or rather, to choose to make the effort more subtle to the customer-—a transparent effort appearing as though the company is just doing a great job of communicating. Keep in mind with privacy issues, companies usually are having customers sign up for a marketing effort under the guise of “news you can use.” However there are plenty of situations in which companies maintain a regular communication stream with their customer strictly from a push marketing effort that is well designed to provide contact at the right place, to the right person, at the right time.

Who’s Doing a Good Job With Non-Point Loyalty Programs?There are so many good examples of non-point loyalty programs. Companies who realize

their value proposition cannot subside on economic rewards alone will utilize a non-points kind of loyalty program to drive their business objectives of their current customers. In fact, most companies who have a current customer marketing plan could say that they have some form of a non-points initiative.

The examples we reference below come from multiple industries, but the common objective of all of them is to utilize planned marketing strategies without the influence of points to drive engagement to ultimately change the customers’ behavior.

Harley Davidson, probably the most well known for its affinity, has the HOG program (Harley Owners Group) which provides owners (for a fee) a series of benefits exclusive to them. From the glossy publication, to special offers to the events around the country, to the exclusive website.

Canon Copiers utilizes an ongoing newsletter and segmented promotional offer mailings to keep in front of their business customers. Customers sign up through the dealer channel and offers are personalized based on the dealer.

Volkswagen Club positions itself emotionally with vehicle owners by allowing them to tap into a community of other enthusiasts through a web-based chat room, newsletter and promotional offerings.

Sprint PCS’s old program called Clear Privilege was a good example of a non-points loyalty program. The program consisted of a twice yearly newsletter with an economic offering inside. In addition, PCS customers would receive multiple cross-sell mailings.

Schwans (in-home food delivery) has utilized a consistent contact strategy to keep their attrition down and increase share of customer. Elements include ongoing awareness offers and personalized mailings. In this situation, a non-points type of loyalty initiative is used for customers who are making purchases a couple of times a year to monthly.

Mercedes Benz extends their total ownership experience through a series of targeted and highly personalized contacts that include anniversary mailings, service mailings, an owners section within their site and surprise and delight mailings.

Sea Ray utilizes many elements to ensure that their name is in front of current owners. Elements include a Sea Ray glossy owners magazine, co-funded financial offers for a new boat purchase, dealer/Sea Ray sponsored cocktail parties for high value owners and a website with additional engagement activities.

Office Depot employs a strong non-points loyalty program with a direct marketing approach and heavy segmentation based on past purchasing in the B2B sector. These initiatives are often over-laid with periodic sweepstakes or event-based efforts that reinforce the relationship between Office Depot and the target audience. This program works because the benefits are

closely tied to the business needs and not personal, and the promotional efforts are tied to current purchasing activity to maintain freshness. Events provide a natural forum in which small business owners can network and extend business relationships for success.

Saturn loves its owners and expresses that feeling via a customer loyalty effort centered on access: access to an exclusive owners site and a customer magazine. As well, Saturn knows that its customers love each other, so they hosted a Saturn Homecoming event for owners to get together and mingle. Saturn’s non-point loyalty program bridges the gap between that first car purchase and the next car purchase, which could be as far off as four years.

Non-Points Loyalty Programs Have Value. Points Programs Have Value. They’re Simply Different Approaches to Achieve the Same Thing.

We believe in good relationship marketing techniques and the ability for those to drive customer engagement and a more one-to-one relationship to ultimately change the customer’s behavior and drive long-term commitment. Whether this is achieved through a points program or a loyalty program without points is completely reliant on the multiple factors that go into a company’s business model. Whatever the case, we know that companies have been successful utilizing a non-points approach to loyalty, and they provide customers with something of relevant value that can lead the way to building authentic loyalty and lifetime commitment from the customer.

Carlson MarketingRanked by Advertising Age magazine as the largest marketing services agency in the U.S., Carlson Marketing has an extensive global presence, with offi ces in Europe, Asia-Pacifi c, Canada and South America. The company understands that in today’s increasingly complex marketplace, one thing is clear: Relationships always drive business results.

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