Loyalty Stories 24: Are Brands Pulling the Plug on Subscription Programs? – Adam Schaffer

Charlie

Welcome to Loyalty Stories, Antavo’s podcast on customer loyalty and loyalty programs. I’m Charlie Hawker, Partner Manager for UKI, Bendalux and Nordics. Antavo is a technology vendor that powers loyalty programs all over the world. We help various great businesses such as KFC and Benefit Cosmetics, as well as global automotive fashion companies and other amazing verticals. 

In this podcast, loyalty stories, we dive into the trends around customer loyalty and loyalty programs. We talk with industry experts around the world to pick their brain to learn what’s next for loyalty. Today’s guest is Adam Schaffer from Symbia Advisors. Hi Adam, how are you doing?

Adam

Very good, thanks. Nice to be on the podcast.

Charlie

Ah brilliant. First of all we’d like to just hear a bit about yourself and your company. Would you mind doing a brief introduction?

Adam

Sure, yeah. So I’m Adam of Symbia Advisors and we support clients globally with data-driven customer engagement and loyalty strategies.

Charlie

Fantastic, fantastic. Let’s dive straight into the question, shall we? So, easy one to kind of kick off with. So, what is your favorite loyalty program and why?

Adam

My favorite loyalty program, right. I would have to confess that I mean there’s an element of exclusivity to this one because it’s not your typical high street program, but I do really like American Express Membership Rewards.

Charlie

Okay, and why?

Adam

And the read good question the reason why is I know what I really like about it actually is the flexibility that it gives, so you’re earning a central currency, and I really value that ability to convert that central currency into multiple different currencies. So if you wanna burn on a hotel, or you wanna burn on an airline, you can choose where you’re gonna direct those currencies. And I’ve sent it to Qantas, I’ve sent it to BA, I’ve sent it to Singapore Airlines, and that’s just a really valuable kind of flexibility and choice the program gives. 

And I think those kinds of partnerships, I think as we go forwards, they’re going to be more and more important for programs to generate value because you’ve got to look for other sources of margin. Issuing your own proprietary points are going to get harder and harder to fund. 

And the more you can make partnerships with other third parties, the more you can bring more richness to your program. So it works for me, but I think it’s a great strategy as well for most brands.

Charlie

Yeah, no, that’s really interesting. And that kind of central currency, it’s so easy to understand and then use as a currency is just, yeah, remove some barriers to entry as well, doesn’t it? Cool, great. 

So we’re gonna dive in a little bit more into kind of you and your work and these sorts of things that you’ve done in your career. So what it, from your work, what’s the work that you’re most proud of and why? And you can share the name of the client, you can be vague if you can’t.

Adam

So I probably won’t share the name, yeah, but I think for me and I think probably for most advisors, the thing that you really value the most is long-term relationships. What I’m striving for, what I think a lot of us are striving for is to build a really trusted two-way relationship. There are quite a few clients I can think of in different sectors actually where I’ve worked with them over multiple years, five, six, seven years.

And you really get to build a strong element of two-way trust. And I think that translates into mutual benefit. You know, they’re obviously working with you, which is great. You’re supporting them to grow their business. You really see how their business evolves. You get to understand the challenges and help them work through the challenges. And yeah, that’s that, that for me is, you know, what, what you get up for in the morning. You get up to build trusted long-term mutually valuable relationships.

Charlie

Yeah, absolutely. And I think we’re a long time working, right? And if you’re not enjoying it, then it’s only going to be feel a bit longer. So I think if you love what you do and who you’re doing it with, I think that’s a really, really positive, positive thing for yourself and them.

Adam

Yeah, it becomes enjoyable, like you say, that’s the most important thing, the joy. Like if you’ve got someone who you like working with and they like working with you, and it’s fun, then what more can you ask for?

Charlie

Absolutely, yeah, I know it’s really, yeah, good, like that. So we’re gonna move, shift the conversation more specifically on to loyalty now. So, and we live in interesting times over the past, and I would say not just five years, but you know, the last 10 years or so. 

And we’ve gone through a lot of changes and we work in an industry that is very good with change and used to it, but kind of what do you think are the, kind of, the big changes in the loyalty industry in the recent years that rise to the top.

Adam

So I think if I think about the broad changes and I’ll probably dial back even a bit than the last couple of years, when I started out in the loyalty world, tech was expensive, and I started out in places like Nectar and Nectar’s value proposition was come to us because it’s all under one roof. 

You know, we’ve got, We’ve got the analytics teams, we’ve got the software to run it, we’ve got the brand, the customers recognize the points, the plastic cards are in their hands. And it worked, the tools, the branding, the know-how, it was all there with a brand like Nectar. And the alternative was complicated and expensive and a tricky path to go down. And I think now a lot of things have happened. 

First of all, there’s a real awareness of the value of owning your own data and brands more and more see the value in not just owning the data, but using the data. And they don’t really want often a gatekeeper to be in control of that and of those insights. And I think there are also, really strong capabilities out there, like the Antavo platform and many others that fill different parts of that value chain, which make the tech much more affordable. 

I mean, you can piece together the stack that you need to do what you wanna do. And then I think with those two things, the recognition of the value of data and the flexibility and the cost of tech changing, that’s really supported a whole resurgence of proprietary programs. And then within those proprietary programs, different models like gamification and subscriptions and freemium models. 

Obviously, I would say you still need a dose of external strategic support to make sure you get it right. But certainly it’s helped brands to be much more self-sufficient and build their own engagement strategies much more dynamically than they used to be able to do.

Charlie

I think your point around needing external kind of council almost is kind of more important now because there’s so much choice and there is so many things that you could miss potentially. And I think it’s only good that the kind of the prices come down on these things, it means it’s accessible to many more brands, more people out there using it as an amazing kind of tactic when it comes to could it be marketing? Is it retention acquisition? All these sorts of things. 

I think loyalty has gone through a fantastic kind of evolution within that. And it’s positive, right? It’s created a lot of opportunities.

Adam

Yeah, yeah. Cause you know, with, I guess with power comes responsibility, you could say. In the olden days, you would hand over the power and the responsibility to a Nectar. And many brands still do and it works for them. And I’m, you know, I certainly wouldn’t like, you know, downplay the model. It’s a good model for those that want it. 

But when you bring the power under your own roof, and so I’m gonna do this myself, there’s more responsibility and more challenge to get it right. And so you have to piece it together in the right way.

Charlie

Yeah, and choice is only good. I think that’s an important thing to say. So I know there’s no kind of wrong decisions, but you can learn from decisions, right? And making that choice is the first step. So I think that’s great. 

So we kind of looked back and kind of in the present there, I’m gonna push you for kind of two fresh trends that you think are coming down the track in the next, it doesn’t have to be next 12 months, it could be the next couple of years, that sort of thing.

Adam

Yeah. So I think, you know, two things I think are very hot at the moment and they’re not kind of brand new, they’ve been around for a short while, but they’re certainly picking up steam and you’re seeing more take up of them as propositions. 

The first one is subscriptions and I kind of feel like we have to talk about subscriptions right there. They’re everywhere now, everything from you know Moonpig with greeting cards to food delivery to media and TV. 

Everyone seems to be coming up with a you know pay us a monthly fee and you’ll get some kind of ongoing benefit. So it’s not what you’d call brand new but I think what’s interesting is it feels like it’s taking off in a way that what you might call the traditional loyalty points program did a few years ago. 

And what I think happened there was there was this point in time where everybody was doing loyalty. It felt like you had to be doing loyalty, you had to be doing something. And so people would kind of rush out or brands, not people would would, brands would rush out these programs. 

And some of them would find that two, three years down the line, it was quite expensive for them, and they hadn’t really thought about the point, the economics of it, things like the points, pricing, the cost of rewards, what, what their fully rounded proposition was going to look like over a three, five, 10 year horizon, and they started to have to unwind things, because it seemed like a no-brainer at the time, but over time, the CFO fundamentally ends up wanting to pull the plug. 

And I wonder whether subscriptions could go down a similar route. And it’s even more alluring because the customer’s paying you money. So you think, how could we possibly lose here? The customer’s paying us $5.99 a month or whatever the number might be. This is an absolute no-brainer. But it would depend how much you’re giving out just because they’re paying you $5.99, doesn’t mean you’re not giving out more than that in value. 

So you’ve still got to do your planning, you’ve got to work out the economics of it, you’ve got to understand how these things work, not just in year one, but in year five and year 10, and what’s your kind of trajectory for rolling this proposition out, and make sure that you’re putting a sustainable thing out there into market. That’s gonna tick your specific objectives. So interesting times, be good to see how it plays out.

Charlie

And just to stick on kind of your first point for a second, a few kind of observations around, yeah, everyone doing loyalty and it being almost a very static model. It didn’t really, it couldn’t move. So if you wanted to update it or anything like that, you almost had to rip and replace it with another technology or something like that. And everything starts very simply and gets complicated and more complicated. 

So I think within subscriptions, I think that will be something that will happen, naturally but probably quite a lot quicker than it did with original loyalty. What are your thoughts on that?

Adam

Yeah, well if you look at the kind of, I guess the granddaddy of subscriptions was Amazon Prime, this is the one that everybody kind of started to copy. And what’s interesting I think with Amazon Prime is although it’s in theory quite a complex proposition, you’ve got a lot of stuff in there, it’s not just about free deliveries, you’ve got media in there, you’ve got all kinds of benefits, Amazon only kind of, Amazon doesn’t try and do the massive cross sell on you.

It gets you in so that the proposition makes sense on any one of those things as a standalone thing and over time Amazon assume that you’re going to start using some of the other features and therefore they can gradually increase the price and they do that and you see in one market they start at a low entry point and over time in the market they slightly increase the price as you get more exposed to the proposition.

So you can add complexity and you can add functionality, but as with traditional loyalty, you’ve got to, it’s kind of how you market it as well. Just because the complexity is there doesn’t mean it’s complex. And just because it’s simple, just because the proposition is simple, doesn’t mean the customer thinks it’s simple. 

So they’re not, they don’t necessarily, simplicity doesn’t always translate through to simplicity of the value proposition and vice versa. There’s what you have and there’s how you market it and you need to match those two things.

Charlie

Yeah, no, that’s very interesting. Yeah, yeah. Oh, Amazon, every time they just, they did so many things well first time. I think, oh yeah. Yeah.

Adam

And they did plenty of like rubbish. I mean the Fire Stick who remembers the Fire Stick, you know, but We just that you know, they’re like, you know tuck it away and try again.

Charlie

Yeah, it’s great. I think, I think just on the slight tangent around kind of Amazon Prime, I think mine renews almost every first week of December so I could guarantee delivery for Christmas. So it’s like everyone’s panic buying just, they must have this massive, just in time for that, get that free delivery.

Adam

It renews just in time for the air. Yeah, second trend. So this is one of those ones where the grocers are doing it first as opposed to Amazon. And it’s the member pricing. So this used to be, yeah, so this was something that maybe like not even five years ago, it was a US thing. All the US grocers, and whenever you went on holiday to America.

You’d always have to join the program because basically you were paying more to shop in the supermarket if you didn’t just join the program. Everything was member pricing. 

And Tesco started the Club Card pricing. And everybody kind of looked at it and thought, that’s interesting. I mean, they’ve done this, they’ve taken this US idea and they’ve given it a go and it kind of seems to be working. And why didn’t we do what? Why are we not always done member pricing? And they kind of cross subsidized it a bit by lowering the club card issuance rate on the points. 

But obviously not all the things are pricing a Tesco Home brand they’re also supplier funded. So you know it’s interesting I think it’s hard to do from a tech perspective than just issuing one point per pound and to be able to manage the complexity of all those different offers is tricky and that’s why a lot of these ideas start with the grocers because they do have the capability and the know-how to do it, and manage that complexity. 

But I think it helps the brands become more targeted than just offering a flat points per pound rate. It still enables the partner funding from the FMCGs and I think when I went grocery, others tend to follow. So Sainsbury’s has already kind of partially copied the club card pricing with its Nectar pricing, although it does that through points rather than cash.

And I think we’ll see more and more brands have a look at it, but it’s like I say, it’s not as simple as saying Tesco does one point per pound. We should issue points per pound to actually do member pricing properly, you know, it’s a it’s a tricky thing.

Charlie

And I think it talks to your point around, get it simple for the consumer to understand. It can be very complex on the background, but if I’m just in Tesco, I’m saving versus someone that doesn’t have a Club Card, very simple mechanic. And they’re not looking whether it’s home brand or a branded product or something like that. 

So yeah, it’s a really interesting one. And I think we are, we’re in the age of someone go first and everyone else copy. I mean, we’ve probably always been in that world, but you see it in social media, TikTok releases a feature, Instagram will copy it. And exactly as you said, Tesco did it first and Nectar and Sainsbury’s are doing it as well. 

Adam

And it’s a really good way of making the customer feel like they’ve got value. How can I not join this program? I’m basically paying more if I don’t. And you don’t get that same feeling. Yes, if you don’t scan your club card, you might in the olden days, okay, I’m not earning my club card points, which was typically a good enough reason to scan because why wouldn’t you scan? 

I’m missing out on something if I don’t. This kind of turbo charges out. So I’m not just missing out on points. I’m actually paying more if I don’t scan my card. So you get a kind of scan rate benefit and an engagement benefit. So it makes a lot of sense. 

But there was a grocer in Australia that tried a very similar thing with, you know, Woolworths tried orange tickets and these orange tickets were kind of supply funded. But what they got wrong, the Tesco got right, is they didn’t have it on the everyday items. 

So what would happen is you’d get to check out and often your basket would not have any ticketed items in it. And what they ended up doing was kind of getting into this downward spiral a little bit of, well, if no one’s got an orange ticket, then no one’s going to scan the card. And if no one scans the card, then the FMCGs don’t want to fund any more orange tickets. 

And so there’s even less to likelyhood of it being in your basket and so on and so on. And they had to put the brakes on it very quickly and they turned it around and they, and since then they’ve been very successful with their program. But it’s, I think it’s a you know, it’s an interesting learning that you can look at, you know, a very well funded, very smart grocer that tries a strategy that can work on paper, but if you don’t, if you don’t execute well, can still lead you down a, you know, down a tricky path.

Charlie

Yeah, and especially when those everyday items, that’s where the frequency is of purchase, right? So it’s kind of, that’s where you learn all the data. And that’s what the massive advantage that these grocers have on a lot of other verticals and markets is that frequency of purchase and visit to stores, an opportunity to use points. Yeah, very interesting. So if we take those two trends, how do you think they evolve. We’ve touched a little bit on the subscription one but maybe more on the second.

Adam

I think people or brands will try. I guess you could sum it up as lots will try, some will succeed and the ones that don’t will probably walk away quietly and quietly sunset their programs and wish they hadn’t gone down what could be a very expensive journey. But the question of what’s the value of exchange to the customer will always be there.

Do I give them stored value? Do I give them something straight away? If I give them something straight away, is it cash? Is it points? Do I do it on exclusive items? Do I do it on everyday items? Is it funded by me? Is it funded by a brand? 

There’s so many different dimensions you can bring together for how you do these things. So I think we you know, everyone shops at Tesco kind of right? At least everyone knows about the Club Card proposition. So I think to that extent, everyone will be looking at it going, well, should we have a go? And I think we will see brands, especially like you say, brands with frequency, because that’s where it’s going to work best. 

Brands with frequency trying it. And if they get it right, then we’ll have it well into a new world where rather than everybody doing loyalty by solving plastic cards, they’ll just be member pricing everywhere. And I think digital capabilities enable it a lot more as well because you can, have it on your app, you can personalize the website for e-shopping. So we’ll definitely see more brands trying it I think.

Charlie

Very interesting. Yeah, I completely agree. It’s just one of those things that is going to be just take off massively. And as you say, some will some will really win and then others, it just won’t. It just won’t fit. So interesting. 

So how would a loyalty program, so a tech vendor such as Antavo, how can they support this? What are kind of the main features you’d be expecting from a technology?

Adam

It’s a good question. I think the integrations are very important. And by that, there’s two types of integrations. There’s the tech integrations, because I think what a lot of brands are going to be doing is building this kind of multi-tech stack. 

So they’re going to have a loyalty component that actually tracks the points and the member relationship and so on. But they’re going to have to have connections to their posts for things like member pricing if they go down that route.

If they want to do microcomms like we discussed earlier, micro segmentations, they’re going to need data science capabilities behind that to generate the insights and create the segmentations. They’re going to have to have personalization engines that drive out the recommendations based on previous behavioral tracking. That’s going to have to be in store as well as online. So they’ve got to track online behaviors. 

So each of these things potentially, requires different technologies that all need to play nicely together and all need to be able to be swapped out when they’re one from another. So having tech that easily is, you know, I think what did you call it, composable commerce before, you know, I think that’s going to be really important that the brand can compose their stack in the way that suits them best.

Charlie

Absolutely. And that kind of speaks to the ethos of Antava being that loyalty engine in the middle with the pipes to connect the data to the people that are best in class out there, specific technology. So I think it’s a really interesting one. 

I think it’s a good one, yeah, living by those integrations. And the next big thing is around the corner, right? And you’ve got to be ready to integrate with that.

Adam

You don’t know what it’s going to be. Yeah, for sure. And somebody will come along with an idea and they’ll say, well, you just plug it in here. And I’ve seen, you know, many times there’ll be a fantastic idea that, you know, a client, a brand wants to do, but the thing that’s stopping them is not the tech of the vendor that’s offering it. It’s their own internal stack when their own IT team is saying, well, you know, to be able to integrate this is going to cost however much, it’s going to take however long.

And so they end up not being able to innovate because it’s too complicated to plug something in. And I think that can be a killer sometimes. 

Charlie

Yeah, absolutely.

Adam

But then the other kind of integration is integration between programs. So, you know, you want your tech to play nicely together so that it can all, you can have all the different innovative components. But if you want to do partnerships, we spoke a bit earlier about partnerships being able to add value and richness to a program. 

Then you’ve got to be able to talk not only to your own technology but to your partner’s technology and you’ve got to be able to send value backwards and forwards. And so being able to have a technology capability that facilitates transfer of value between programs I think is also really important.

Charlie

Yes, that transfer of value, that’s an interesting one. I think that’s certainly something that’s coming more and more as well. Brilliant. Thank you very much. Go for it. Go for it.

Adam

There was one more actually, I had a third because the other I thought was just, you think about the tech stack, right, and the tech stack has these integrations and that’s good. But when it comes to innovation, I think it’s not just about the propositions that technology can offer, it’s also the propositions that you want to come up with and the ability to be able to turn those things on and off and trial new things in different areas.

So do I want to trial a subscription program, for example? Do I want to do that in a particular geographical location or in a particular sub-brand? Do I want to add a feature to an app and see what happens, add a bit of a gamification element? Trial member pricing for a particular line of stores or line of products. 

So that ability to kind of go in and compose different propositions for different target audiences and do proofs of concept or tests and learn things, I think is really important.

Charlie

Very interesting. You know, and almost be kind of a master of your own destiny as well, kind of learn what works and then double down on it and kind of really, yeah, really learn because like it doesn’t matter how many times you test something, not everything’s going to work. You’ve got to, you’ve got to learn what doesn’t work as much as what will. So I think that’s, that’s very good. Yeah.

Adam

Yeah, I mean the risk is you end up being a tinkerer, right? I would, you know, we turn this on, we turn that on, we turn this off, we turn that off and your program just zigzags all over the place and that’s not great. 

But if you’ve done it in a planned strategic way and you’re saying, right, we are going to try a new proposition in a particular area for a particular base of clients, if that works, we’re gonna do this next. You wanna make sure that what you’re putting in place is future-proofed, and that as you grow you can support that growth with richer features and richer comms and so on.

Charlie

Yeah, and it comes back to kind of how you set up those tests and those sorts of things, isn’t it? Like you would when you were back at school in science, you’d have your hypothesis, you do what you’re going to do, what the plan, the results and then the conclusion. And then you reiterate again. And it’s kind of it’s never been it’s never going to be more simple than that. 

But yeah, tinkering, you’re not going to get too far. As you mentioned before, like analysis paralysis is a big thing. So you have best to avoid that and really know where the value is.

Adam

Yeah, finding the value in your customers and in your proposition, I think, is really important. There’s a distribution of value in your customer base, and there’s all different ways you can offer value in a value exchange. And to match those two things up properly, in a way that works economically for them and for you, that’s the strategy side, that’s the planning side. That if you get it right, you’ve got something that can last for decades, If you get it wrong, it does a bit of a death spiral.

Charlie

Brilliant, no, I think, yeah, you’re completely right. Okay, that’s a wrap. Thank you for being here, really enjoyed that, that was fantastic. My favorite part was when you definitely mentioned around the what’s coming in the future, those two kind of big trends that you mentioned around, you know, subscriptions and the member pricing, how that will evolve. I think is gonna be really interesting because it will evolve at a real rate as well. I think that’s gonna be quite something to watch and kind of keep up with.

Adam 

Yeah, and they’re both tech enabled, right? Like you both, they’re not things that you can just tweak in your proposition or you can’t build it into your existing CRM. You need to do it, you know, you’ve got to, you need a revenue mechanism for subscriptions, you need a pricing mechanism, remember pricing. So we’re getting to the next level of, you know, loyalty evolution, I guess, if you call it.

Charlie

Yeah, loyalty evolution. Yeah, I like that. That’s the next level. Brilliant.

Adam

Yeah, in that diagram, you know, we’re standing up straighter and straighter.

Charlie 

On the keyboards. Have you seen the one that goes the other way? Great. 

So wherever you listen to us, be it a podcast platform, YouTube or LinkedIn, please like and subscribe to the channel. This way you’ll get notified about the next episode. Please visit Antavo to discover your next loyalty software. Antavo is a next-gen loyalty program technology vendor used by global companies like KFC, Benefit Cosmetics and other automotive and fashion companies around the world. 

Please also visit Adam’s website at Symbia Advisors. And thank you very much for listening. We’ll catch you next time.