Points for purchases may represent valuable currency to the majority of Americans, especially in shaky economic times. But marketers, including credit card issuers targeting high-net-worth individuals (i.e., the rich), are moving away from such tangible gifts as loyalty program awards, even if they are keeping the points.
Aside from some programs that let them fly in vintage airplanes or take knife-throwing lessons in their own backyards, wealthy cardholders benefit from fewer restrictions on reward programs-no point expiration dates, no caps on annual participation in perks, no advance notice required for reward redemption, as well as no spending limits, says Lars Holmquist, executive vice president of business development and consulting at Enhancement Services Corp., Roswell, Ga.
ESC has created and maintains the loyalty features of three high-end card portfolios-the BMW Visa Signature card for drivers of the luxury German auto, BMW, which is marketed by BMW of North America LLC's BMW Bank; and two products distributed by private-banking units.
"High-end reward programs with experiential and customized rewards may be valued based upon long-term customer loyalty more than short-term changes in spending behavior," Holmquist says. "In addition, the overall customer profitability to the financial institution may be more important than the profitability associated with the card product alone."
A credit card with a status brand, in other words, may be just the tool with which to prop open a door into a wealthy consumer's banking relationships. For issuers aiming at mainstream consumer segments, the card program typically is the end-all, be-all of loyalty marketing and management.
"From an emotional-attachment perspective, the most effective rewards are those that provide benefits that signal the customer is valued and that his continued patronage is important to the company," says John Fleming, senior strategic consultant and global practice leader of customer engagement for the Gallup Organization, Princeton, N.J. "That may be one reason why frequent-flier programs, as opposed to frequent-buyer programs, have been relatively more successful."
In many ways, according to Fleming, frequent-flier programs provide members with entirely different experiences from those of regular customers. "Frequent fliers have special lines, often get upgraded, can access lounges," he says. "In short, they are offered a completely different airline."
A rewarding experience as opposed simply receipt of goods earned through loyalty points is "exponentially more important among high-value customers," he continues. "Everything must be near-perfect to generate engagement among high-value customers. They are pretty unforgiving."
Those high expectations are part of the reason why the most affluent and revenue-generating customers of nearly any loyalty program have mini service staffs at their disposal. These may include travel counselors, concierges and personal shoppers who know not only their inseams and allergies to synthetic fabrics, but the birthdays of members' mothers and the final-exam schedules of their stressed-out offspring in college. They might know the locations of best customers' second and third homes and the design themes of each.
Emotional loyalty also results from customized contacts and awards based on the individual cardholder's lifestyle or desire for anonymity, adventure, convenience or bragging rights. After all, the breadth of luxury amenities is boundless.
"The affluent like access, they like entertainment that speaks to them, they like recognition, and they like entree to things not offered to the mainstream customer," says Billy Payton, president of Brierley & Partners' retail practice in Dallas. "The affluent consumer wants to be educated."
Since the attacks of Sept. 11, 2001, wealthy folks are being less showy, maybe more selective about their purchases, but they are still spending their money. In response, Payton suggests loyalty marketers keep their ears to the ground, listening for trends-like manufacturers' removal of brand logos on $1,000 handbags. Rich women still want them and know they will be recognized for the luxury items they are in the social circles in which they travel, but they want to appear more sympathetic to national concerns about the economy and patriotism.
"A good loyalty program for the affluent provides content or tools for them to find the content" necessary to make educated purchases and life choices, Payton says.
With the emergence of the Internet, mobile telephones, and personal news services delivered to handheld data organizers, millions of consumers enter the marketplace with mindsets muddled by social issues that most didn't even consider as recently as five years ago, according to Payton. It makes sense that those consumers with the most to spend may need the most help in discerning what to buy and which items to avoid lest they be socially stigmatized for supporting child labor or unfair compensation for craftspeople in poor countries.
Widely regarded as the first customer-recognition program in the retail industry, Neiman Marcus's InCircle program, which includes the InCircle Platinum private-label card, aims to "provide a unique, differentiated program that complements the luxury lifestyle of our best clientele," says Jeffrey Netzer, vice president of customer programs.
InCircle members are more loyal to Neiman Marcus than nonmembers, according to Netzer, and they attribute their desire to shop at Neiman Marcus rather than other elite retailers to their appreciation for exceptional personal recognition.
"InCircle helps build and expand customer retention and plays an instrumental role in a customer's willingness to recommend Neiman Marcus as a shopping destination," he adds.
The program works, but not without a lot of effort, according to Netzer.
"Creating value for the affluent certainly takes a lot of time and energy," he says. "With the proliferation of so many consumer loyalty programs in the airline, banking and retail industries, it takes numerous resources to be able to offer products and services that are different."
Alliances and partnerships accomplish much of the program's differentiation. The 2002 program-InCircle awards change annually-offered travel by Virtuoso on private jets from Intrav and luxury cruise ships from Crystal Cruises. And three InCircle members have earned 2003 Cadillac CTS sedans.
These accommodations recognize wealthy consumers as best customers and often come to represent a brand all their own. The Neiman Marcus InCircle Platinum private-label card is just one example of the phenomenon. Others include American Express Co.'s $1,000-annual-fee Centurion card (also known as the Black card because of its color) and a few others, Payton notes. AmEx's black and Platinum cards have a long list of perks, including access to concierges to perform certain services for cardholders.
"Step back and take a look at the American Express black card," says Ali Raza, senior consultant with Speer & Associates, Atlanta. "It has tangible benefits over and above the Green card. Only n-number of people worldwide have it. It opens doors."
AmEx, of course, has long catered to the carriage trade. One marketing campaign the travel-and-entertainment giant did last year with holders of its Centurion and $395 Platinum cards is an example of innovative marketing to affluent customers. Letters mailed to this elite group promoted a collusion of benefits from AmEx and Saks Rewards, the proprietary loyalty scheme of Saks Inc.'s Saks Fifth Avenue department stores.
High-net-worth AmEx cardholders who also were frequent Saks customers received American Express Membership Rewards points and Saks Rewards every time they used a pre-registered Platinum or Centurion card for payment at Saks stores or the Saks Web site. Saks points doled out during the promotion period could be redeemed at the end of the year for Saks gift cards worth $200 to $800, depending on the total charged to AmEx cards at Saks in 2002. This award virtually guaranteed incremental sales at Saks during 2003.
"We're always looking to expand the benefits to our cardmembers," says an AmEx spokesperson. "We look for partners that can offer unique experiences. With Saks Rewards, we were able to give our customers something special with a luxury retailer."
Offering "something special" is a difficult proposition in the competitive worlds of retailing and credit cards. But for savvy marketers pursing the affluent customer, a timely and memorable reward can be just the thing to ensure continued customer loyalty.
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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