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Five ways to build a consumer-first loyalty program

Derrick Fung is chief executive officer of Drop, a free mobile rewards app. He is the former CEO and founder of Tunezy.

With a few high-profile breakups of loyalty programs in recent months, and companies such as Aeroplan moving toward launching their own programs by 2020, consumers might be left wondering how these shakeups will affect their ability to collect and use their points.

While these industry changes are recent, skepticism of loyalty programs has been growing among consumers for some time, especially for millennials. Complaints about lack of variety and quality of products or rewards are frequent, with only 12 per cent of members feeling as though they're getting a better "deal" than consumers who aren't enrolled. With sudden plan-reversal announcements, it's no surprise that loyalty programs continue to lose trust with their members.

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While the industry's recent performance gives consumers a reason to pause, it also highlights how it can take steps to improve. By focusing on moving the industry toward a consumer-first model, programs have the potential to offer members a unique and targeted experience that is catered to the modern consumer. The loyalty programs of the future should prioritize five key features in order to successfully embrace a consumer-first experience:

Technology: Rewards programs must innovate to offer their consumers the digital-focused experience they want and expect. The days of weighing down your wallet with an ever-growing bundle of rewards cards are gone, and the need for a purely digital experience, where everything is stored in one place (your smartphone) has arrived. Consumers should be able to learn about targeted offers, earn points and seamlessly redeem them in real time with ease. Currently, only 24 per cent of loyalty programs allow for mobile redemption, which is unacceptable in today's digital era.

Transparency: With the advent of social media, a negative reaction to a poor consumer experience can travel quickly. An approach that embraces transparency and open communication can help loyalty companies win back credibility with their customers. Whether it's providing all the details of the program up front, or painting a clearer picture of how the program makes money, consumers demand transparency more than ever and it will be important for programs to reflect this.

Customization: With the amount of data that programs are able to collect about the consumer, there's no excuse not to provide a personalized loyalty program. With a digitally focused program, consumers' habits, behaviours, likes and dislikes can all be tracked and stored to improve each member's experience. Consumers who opt into such programs want to feel as though they're getting something that's both unique and relevant to their specific needs, rather than a one-size-fits-all program. Tailor rewards and offers to your customers' individual preferences so they feel that they can make better use of their points.

Convenience: This is the new currency. Consumers don't have the time to scroll through a long list of offerings that aren't specific to their tastes and behaviours; nor do they have the time to cut coupons or fish through their purse to find the right loyalty card for the right retailer. They want access to a fast, simple and efficient experience that lives in one place. Whether it's the ability to seamlessly earn points without a physical loyalty card or the ability to redeem points with the swipe of a finger, now more than ever it's important to offer a program that is simple to use. Without simplicity, programs will lose the attention of millennial consumers.

Open-mindedness: The traditional way to operate a "coalition loyalty program" is changing – and it's changing quickly. Gone are the days in which point-of-sale integration is the only way to obtain consumer spend data. The current generation of consumers (millennials) is living and spending completely differently from the boomer generation, and programs need to be open-minded to adapt. Programs need to be built fundamentally different, with technology as the underlying mechanism to help it quickly shift as consumer tastes and preferences evolve. Everything from breakage to points expiry to data governance needs to be both re-examined and reimagined to build a program for the future.

The loyalty industry is shifting in a seismic way. In a world in which consumers can decide to disengage with a product or service with a snap of fingers, companies in the loyalty industry must take a consumer-first approach to everything it does. The average Canadian household is a member of more than 10 loyalty programs; and our neighbours in the United Statesare members of just unless than 30 programs a household. It is more important than ever to cut through the noise and refocus the industry on what really matters: loyalty to consumers.

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