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Loyalty Trends Illuminate the Path to Managing Recovery after the Meltdown

The global economy is now seeing the light at the end of the tunnel of the worst economic recession since the Great Depression. The U.S. has experienced eleven recessions in the 58 years since World War II, indicating that recessions and downturns occur once every six years or so, and are a normal, and perhaps healthy, function of a free-market economy. But because this recession was predicted by the veritable collapse of the global financial system, fear of the unknown is far greater. No one knows if the normal rules of recovery even apply.

But now that the recovery has finally begun, will consumers revert to old habits, bust out their credit cards and start shopping again? Or are we at the beginning of a new era of consumer thrift?

Now more than ever, travel loyalty programs need to target their best customers. COLLOQUY's June 2009 "After the Meltdown" study has uncovered a significant shift away from travel programs and toward retail programs among U.S. consumers. On an individual level, travel programs saw the biggest decline in active participation, down 31 percent from 2007. The most likely culprit for this decline is the corresponding decline in travel and entertainment expenses by many companies in response to the recession. For many business road warriors, the heady days of earning elite status on multiple airlines, multiple hotels and multiple car rental companies is over Ã.‚¬" at least temporarily. In this environment, it's logical for travelers to consolidate their travel with one airline, hotel and car rental company to maximize their ability to earn elite status.

The upside
But it's not all doom and gloom. In one of the survey's most surprising results, Millennials, a group that is made up of 18-to 25 year-olds, viewed travel rewards programs more favorable than any other demographic segment, despite the fact that they typically have the weakest purchasing power in the travel category. As for consumers who participate in financial services reward programs, retail gift certificates, hotel rooms and airline travel are still the preferred rewards.

Because rewards program members are typically a brand's highest-value customers, their attitudes and behaviors regarding rewards programs may provide a glimpse into the future. If consumer attitudes toward reward program participation have changed dramatically for the worse, then we may take this change as a sign that the era of prolonged thrift is upon us.

However, this adversity presents opportunities for long-term gains in an industry that has successfully navigated storms of the past. Here's how we begin to rebuild.

Focus on best customers
As marketing budgets tighten, it becomes essential for loyalty marketers to identify and cultivate relationships with true best customers — those customers with either high current or high potential value. Only by focusing on the core loyalty metrics of retention and lift can you make your investment in loyalty pay out.

Avoid sweeping cuts
In a down economy, the temptation to make wholesale cuts in program value or communications is strong. COLLOQUY's survey results indicate, however, that your program members still value their preferred program communications channels and are critical only of the value and relevance they sometimes find lacking in your messages. Broad cuts, particularly in the direct channel, may backfire as your best customers turn to lower-priced competitors due to a perceived lack of attention from you.

Find and cultivate champion customers
Likelihood to recommend your brand or rewards program is one of the strongest indicators of customer loyalty you can enjoy. COLLOQUY's recent The New Champion Customers white paper revealed the connection between rewards program memberships and word-of-mouth champions, and this study reveals that those Champions are still heavily engaged with your program. Identify those Champion customers, build relationships with them, and encourage them to engage in positive word-of-mouth about your brand.

Target the Millennials
Young adults in COLLOQUY's survey display the broadest post-recession shift in favor of engagement with loyalty and rewards programs. This group is eager to join programs, to build relationships with their favorite brands and service providers, and to engage with you in new-media channels such as text messaging and social-networking platforms. If the flip-side of crisis is opportunity, then the current recession may provide a powerful opening for loyalty marketers to build sustainable loyalty with the next generation of American consumers.

As editorial director of COLLOQUY, Rick Ferguson is responsible for all COLLOQUY print and online publishing, educational and research projects. Under Rick's direction, the COLLOQUY magazine and web site provide a worldwide audience of 32,000+ subscribers with news, expert commentary, program summaries and research on all facets of loyalty marketing around the globe.
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