Loyalty Programs and Social Responsibility: A Conundrum

August 8, 2011 benevity

Last week I read “Leveraging Loyalty for Social Change”, written by Bryan Pearson, President of LoyaltyOne. These are the folks who run Canada’s Air Miles coalition loyalty program, among other things. Loyalty programs are definitely a powerful and relatively untapped venue to galvanize consumer engagement around social action and giving back.

Yet most loyalty programs today with “give back” options fall short of the mark for consumer relevance and impact. They lack empowered choice, personal relevance and authenticity. And if you look under the hood, there is a somewhat obtuse economic rationale: many loyalty programs rely significantly on “breakage” (abandonment or expiry of reward currency) to enhance profitability, and consequently are concerned that too much uptake on “giving back” redemption options will negatively impact program economics.

The article indirectly highlighted a key feature of why loyalty programs have succeeded and persist: empowered choice and personal relevance/resonance of rewards. As Mr. Pearson stated: “A strong program can move customers from simple behavioral loyalty (shopping at the same drugstore, for example) to full-on attitudinal or engagement loyalty”. This is certainly the goal of most engagement initiatives, whether targeting consumers or employees — to create an emotive connection that de-commoditizes and creates real or notional switching costs. Giving back and social action has great potential to connect with people in this fashion, providing savvy retailers/program providers with a great opportunity to create a win-win-win through increased sales, increased value of their reward currency, and increased donations to worthy causes.

But one must proceed with some caution in this area (as with all cause marketing initiatives): whether it is a retailer, an employer, a loyalty program provider or even the government, if one is going to purport to assist people in giving back, they had better be prepared to give the targeted constituency a meaningful seat at the table. This is even more important when the consumer or employee perceives (as they would rightly do in the loyalty program context) that it is effectively their money that is being invested.

So my confusion and (as a semi-reluctant collector of various reward currencies) frustration, is that these elements of empowered choice and targeted resonance are mostly completely missing in the majority of the social or cause initiatives that are pursued by loyalty program providers and retailers, including the program that the article was highlighting. Some are willing to convert a small portion of their points to limited donations to a handful of charities; others enable the reward currency to be transferred to causes (I’m sorry, but the local woman’s shelter that we support needs cash, not travel miles ; others — like the “wellness program” highlighted in the article — are somewhat poorly veiled attempts at increasing the purchasing volume of a product by promoting it around a social initiative).

As we’ve seen with our own eyes, these attributes of empowermentchoice and personal relevanceare proving key to any successful employee engagement strategy involving donations and volunteering in the workplace giving context, as well as with cause marketing initiatives that seek to connect with consumers around social responsibility and community investment. If you expand choice conveniently, you increase participation.

One of these days, a large coalition or retailer loyalty program is going to harness the true power of their program for social good (and business impact) and it needn’t be that fancy or elaborate. They will use a platform like Benevity to enable user-directed redemption of their reward currency for a receiptable donation to their cause(s) of choice, with or without matching funds from the retailer or other sponsors. You’ll be able to give to select individual causes, or to branded portfolios of causes under a social or geographic pillar created by the participating companies that align with their strategic focus areas and leverage their existing budgets. You’ll be able to use your reward currency to send a branded charitable gift card to someone else, letting the recipient choose the cause (while further extending the brand and social initiatives of the retailer/loyalty provider when they redeem the card on their site).

I am perhaps a subjective zealot, but that is a loyalty program that would get more attention than one featuring more iPods and toasters…

In addition to increasing the likelihood of an emotive connection with the brand or program, the additional psychographic and other segmentation data that would be generated as an offshoot would almost certainly improve the ROI on the program even without the halo effect of the CSR/CI piece. You will likely find that most companies would love to bring more of their philanthropic or CSR spend more directly to their stakeholders.

But here’s the rub I’m meandering toward: people like me would give all or a good chunk of the Air Miles or whatever other reward currency they received to their chosen charities in a heartbeat, instead of letting them expire. Yes, it would create a truly emotive/behavioural connection to the program and retailer; and yes, it might even create switching costs because I wouldn’t just be leaving the retailer, I’d be abandoning the cause they’re helping me support…

But until a choice is made for the list of “Doing Well By Doing Good” benefits cited above over a perceived risk of reduced breakage in their reward currency (since far more people would actually redeem if it could be seen to be doing something toward fulfilling their quest for meaning and sustainability) most cause initiatives that are entertained by loyalty program providers will fall far short of the mark in both social impact and collector resonance. Consumers have growing sophistication on all manner of topics and they (or some blogger) will sniff out “fauxlanthropy” eventually, whether it is strategically aligned with the company’s brand or not.

Selfishly, both as a consumer and a provider of technology enabling a better way, I hope it happens soon…

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