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?

Doug LeMoine

Learn more

Subscribe to our mailing list and stay up to date on our latest thought leadership and learning opportunities.

Connect with us

Want to know how we can help your company drive real business progress?

Let’s talk

Stay up to date on our latest thought leadership and learning opportunities