Loyalty is so 20th century

I was recently involved in a project that involved the creation of a “status economy” on the web, i.e. a system in which businesses reward loyal users with stuff — a representation of increased status, better service, cash, etc. The parallel in the real world is the loyalty program, but the word “loyalty” seemed to imply a sort of exclusivity that is inconsistent with fluid and flexible world of web commerce and relationships. The web already has a variety of ways of displaying status, and the word “economy” more appropriately spoke to the web’s transactional nature.

Finding the right reward model

Still, loyalty programs provide a good basis for understanding the basic levers of incentives and rewards, so we looked at existing loyalty programs to see what they brought to the table.

  • The frequent flyer model — Participation -> richer experience — As a Premier Executive member of United Mileage Plus frequent flyer program, I can reserve exit row seats in advance, get a United representative on the phone quickly, and — best of all — board before the unwashed masses. The Ebay PowerSeller program is like this, from what I read here.
  • The credit card points model — Participation -> cash — Most credit card programs (and frequent flyer programs) tread outside the strictly status-oriented realm. In most, an accrued currency (“miles” or “points”) are exchanged for tangible goods (cash, flights, toasters, ShamWows). Amazon Associates, anyone?
  • The American Express model — Participation -> Manufactured exclusivity — “Membership has its privileges.” Amex marketing has taught us that simply using the card communicates a sense of status. There are many Internet translations of this. Invitation-only web services — Gmail, private torrent trackers, etc — use it as a way to predictably scale the system, but they also offer a certain cache to the users as representations of geek cred. The Yelp Elite Squad also appears to be more like this than like the PowerSeller program.

Leveraging status in the future

As the web becomes more vibrantly and dynamically social, concrete representations of status may become quite valuable (both to individuals and to businesses). The number of Facebook/LinkedIn friends you have, how often you successfully answer discussion forum questions, how many files you share, how many friends you pull in to a new service, or even how often you utilize online systems — all of these could be Internet versions of merit badges, airline frequent flier designations, etc.

At the same time, status seems to me to be a fairly tricky thing for businesses to trade on. As we all know, people’s behavior with regard to intangibles can be exceedingly difficult to predict, and this behavior will likely change as technology continues to reshape expectations and norms. As businesses try to incent their customers with status, or (a natural extension) to assign value to certain existing status representations, I can imagine that people may be offended, or take evasive action.

So, the big questions: Are there other best practices around implementing status/affiliate/loyalty economies on the web? Are there appropriate ways for businesses to leverage this? Where is all this is going?

4 Comments

sbr0
Yes, I know of one: "Now you can get cashback savings by using Live Search to find great deals on the products you want from the stores that you know and trust." http://search.live.com/cashback/howToUse
d4
''Be disloyal,'' a troll-like guru rants at a boy in ''Under the Garden,'' an autobiographical Greene short story of 1963. ''It's your duty to the human race. The human race needs to survive and it's the loyal man who dies first from anxiety or a bullet or overwork. If you have to earn a living, boy, and the price they make you pay is loyalty, be a double agent -- and never let either of the two sides know your real name. The same applies to women and God. They both respect a man they don't own, and they'll go on raising the price they are willing to offer. Didn't Christ say that very thing? Was the prodigal son loyal or the lost shilling or the strayed sheep?''
Doug LeMoine
Exactly, D4. It's like Greene's short story, "The Destructors:" "Chaos had advanced. The kitchen was a shambles of broken glass and china. The dining-room was stripped of parquet, the skirting was up, the door had been taken off its hinges, and the destroyers had moved up a floor. Streaks of light came in through the closed shutters where they worked with the seriousness of creators -- and destruction after all is a form of creation. A kind of imagination had seen this house as it had now become. Mike said, 'I've got to go home for dinner.'"
tm
On the other hand when "loyalty" programs get out of hand they are counter-productive. I've flown many hundreds of thousands of miles on United - in the past - but as their caste system (sorry... their "loyalty" program) became ever more elaborate I avoid flying United as much as possible. Sure, I'll never make it to the Plutonium Executive program but they've gone seriously overboard with it.

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