Loyalty Stories 07: On the Quest for Value – Radek Hrachovec

This week on Antavo’s Loyalty Stories video podcast: we’re joined by Radek Hrachovec to explore the value and creativity in loyalty programs

Antavo’s cover for its Loyalty Stories video podcast with Radek Hrachovec

WHERE TO LISTEN:

On the seventh episode of the Loyalty Stories podcast, we are joined by Radek Hrachovec, Partner at Voxwise and Certified Loyalty Marketing Professional.

The interview for this podcast has been a valuable source for Antavo’s Global Customer Loyalty Report 2024. Make sure to download it for over 30 statistics on loyalty program trends. 

In today’s episode, we take a look at loyalty programs from Radek’s perspective. He highlights why Adidas’ loyalty program should be studied and also talks about the one that got away (think Czech automobile manufacturer). We also explore why the proliferation of the loyalty program industry makes people turn away rather than tune in, and why bringing creative ideas is the only way to set yourself apart from the competition.

Highlights from our conversation with Radek:

  • What is truly innovative about Adidas
  • Why program member activity is decreasing in general
  • What is the true purpose of loyalty programs
  • Why it’s a good idea to start out in the loyalty business

Learn more:

Podcast Transcription
Michelle

Welcome to Antavo Loyalty Stories. I’m Michelle Ellicott-Taylor, Head of Partnerships at Antavo. We have customers optimizing their loyalty campaigns, working with our loyalty platform. And we’re working with brands such as KFC, Benefit Cosmetics, and many more fashion and retail clients. In our Loyalty Stories series, we’re looking at trends in customer loyalty, and we’re talking with experts in this field.

So today our expert is Radek, who is from our partner Voxwise, who are professional loyalty specialists focusing on data and technology. Hi Radek, how are you today?

Radek

Hi. Excellent. I couldn’t sleep to be early on the podcast.

Michelle

Oh, well that’s great. That means you’re excited about it. So thanks so much for joining us today. It would be great if you could just give a little bit of an introduction to Voxwise and your background for our audience.

Radek

Yeah, so I’m in loyalty for quite a long time because I started almost 25 years ago. Being a student, so I’m not so old. And I had a nice career in retail company. For 12 years I was managing, I was launching, managing the loyalty program. And then I decided that I really would like to share my knowledge, my experience with others and I found a way to establish my consultancy career, so independent consultant and very suddenly I found two nice guys from Slovakia, Peter and Milan and we established Voxwise.

Because we are very different persons, I’m about loyalty, Milan is totally focused on data analytics and Peter is an expert in pricing. We did together a very nice trio. Now we are 40. We deliver solutions in Western Europe and Middle East and not only loyalty, but we very much focus on direct communication, implementing CDPs and helping companies to be more relevant in communication.

So that’s my story.

Michelle

That’s great. Thank you for the background. And I guess a great way to get to know someone is thinking about their thoughts around loyalty programs. So what’s your favourite loyalty program and why?

Radek

It’s changing every day. Of course, I’m loyalty nerd, so I’m part of every loyalty program I was introduced, I was passed by, but at the moment I can tell you that my really the most favorite loyalty program is Adidas. 

Adidas has, it’s a big brand global brand. And Adidas has something in the loyalty program which is not very common. And I would like to stress this out that they are brave enough to give points for sweat. So in the in their, of course, purchases, of course, activities, but very, let’s say, transactionally indirect activity like running, like doing workout, is absolutely not common in our world to give a reward for this non-transactional activity. 

And you can imagine that people run a lot and if they use the app they can accumulate, well, I can say significant value, it’s a value. And for the company to swallow the value of reward which was not created directly by spending money, is very interesting. 

And I think that this approach, diverse, this approach, change the behavior, which is one theme I really want to talk later, that our main intention should be to modify, to stimulate people to change behavior. So it’s Adidas and the last word about Adidas, they have in their statement, in their vision for a company, that they are about to have half a billion, 500 million members in the loyalty program very soon, and they are now, I think, more than 300 million. 

So they are marching towards that goal, which is, you know, it’s a global brand, but, hmm, half a billion valid contacts of your customers, it’s a big goal, and it shows that board management is determined. And that’s one topic I think the program is great. And I think also the company is really the challenger of Nike, which is undisputed Hegemon. Was it too long? It was too long.

Michelle

Yeah, no, that’s great. That’s great. No, it’s really interesting to hear about, especially with your expertise and I guess the amount of loyalty programs that you’re a part of and who’s front of mind for you. And I guess leading on from that, looking more specifically at the brands that you’ve worked with, what’s the work that you’re most proud of? And you can say the name of the client if you want or if you’re allowed. But yeah, can you share that with us?

Radek

At Voxwise, we have our signature project, which is GoPas, but I have talked about GoPas a lot, so I will pick a different one. I’m really proud of our work in automotive. It’s a tough industry, because you, as an automobile brand, you face lots of challenges. First of all, you have dealers. Let’s look at traditional auto brand. And the brand is Skoda by the way, the Czech brand. You have dealers, you have tough relationship with them. 

You have indirect relationship to customers, but you need people to persuade to change their vehicle sometimes. Your ability on particular market is limited because there is only X and Y households who have a car and there are no new customers because they’re, especially in Western world, everybody adult, every adult has close to one car.

And the project was very ambitious. It is not running, it was not launched. And I’m very skeptical it will be anytime soon, because we finished the work just three months before COVID hit. So it was, you know, the decision to implement it, to launch it was, was just in the days when we faced that crisis. And for automobile industry, it is frightening what happened and what is happening, especially in Western Europe. 

So I think they will not find energy to launch it. But the main idea was to persuade consumers to lower the product life cycle because normal people, they tend to have their cars longer than before. It’s very uncomfortable for a producer, but because all the brands focused a lot on quality, so the vehicles can easily run them for 10 years without, you know, much compromises.

So for the brand it’s a challenge and we found the way how to give people enough reasons through loyalty program to change, to upgrade the vehicle within shorter time frame and even to sell it via channels for a second time. So I’m really proud of it. It’s not launched and probably will never be, but it’s something like closed loop.

Michelle

Okay, so it’s a great concept that’s there and just unfortunately because of the pandemic it was affected.

Radek

And it affected all the producers so much that they really are trying to find a way. And currently they face the EV revolution, so they are really in, let’s say, in the trouble, to be fair.

Michelle

Yeah, yeah, unfortunately. And I think that kind of, I don’t know, it’s associated with, obviously, I mentioned the pandemic there, but big changes that you’ve seen in the industry in recent years, like, what are the changes that have had an impact maybe from a positive and a negative perspective?

Radek

I see a change which doesn’t make me very happy. What, you know, currently almost everybody has or is planning to launch a loyalty program. So the proliferation, the really, the explosion of loyalty offerings is so vast that, and the schemes are so boring and copycats that it makes end users, our consumers, it makes them confused. 

Because when you are part of 10, 20 schemes, you simply don’t track the progress, you can’t consciously think about all the points, balances, all the rewards, all that. So it’s getting a mess. That’s a big change because really a lot of folks discovered that they simply have to somehow cater of their returning customers. So natural way was to introduce a loyalty program.

Michelle

Yeah, I think that’s interesting where you’re saying that we alluded to it earlier on as well, the number of loyalty programs that someone is a part of. I was talking to another partner, we were talking about the US and there’s some stats there that there’s an average of 16 to 17 loyalty programs that someone is a part of. So, I guess, like you’re saying, it’s hard for someone to keep track of all of those. There might be two or three key ones they’re keeping a track of.

Radek

Yeah, it’s very simple. People are capable to remember only seven items on the list. That’s a natural capacity we have. But through the websites, we registered to many other, lots of other programs, which we even don’t consider we are members of. So the proliferation is high and it’s great when I do surveys, when I do these loyalty health checkups, I ask customers from various sources of a client, do you remember that you, are you a member of loyalty program or not? 

Simple question, yes or not. And you know I’m asking members, people who sign up, who gave the consent and constantly about one third is not aware of it. They simply say, no, I’m not member of the loyalty program. So that’s a shame. Of course, every such a crisis has its winners. 

So the people who are brave enough, as I mentioned, Adidas, creative enough and can stand out of the crowd are winning, so it’s not a problem, it’s the trend.

Michelle

And it’s making sure that the people who are running the loyalty programs are making sure they are front of mind, so creating the right program for that person so they are aware that part of that So so what do you see then? I guess that’s been changes have been happening. What do you see as two main trends in naughty programs in the next couple of years?

Radek

It’s a good question because we are every year asked about trends for the future. So there is only so many trends. But I’ll start different. I’ll explain a different view. I think, and it’s connected what I said about proliferation. The need of creativity and being different will find that, the pressure will intensify. Because what I see and what many loyalty managers see is declining activity rate. It’s totally connected with the proliferation, with people spending less time lowering engagement, etc. 

So the activity is decreasing and how to ignite the activity and sales, etc. You can’t do it with old tools and with old offerings because they have all seen them. So I think that people will discover that there are creative ways how to organize the schemes. And that consumers are happy when they see something creative. Are simply, they are happy that somebody gave them, showed them extra mile, that there is, it was always in advertising that people admired or liked a nicely done advertisement and I think our industry follows the steps of advertising and we must be more creative. 

We must focus on differentiation and that’s a challenge because when you are at time, when I’m talking to client, they constantly always every time ask me what does our competitors do good, or excellent, what can we copy and make it a little bit better? And my answer is forget them. 

What they do is irrelevant. We must differentiate, we must offer our customers something they would like to be part, they would like to participate. And it’s not the, exactly the same proposition, dual prices or whatever the nearest competitor is offering, I really think that creativity. 

And you ask for two trends, I would like to mention the search of value and for value. I mean that from two angles. First, customers, when they are part of so many loyalty schemes, they time to time ask themselves, is it worth it? You know, should I really show the card? Should I open the smartphone app and show the barcode to the cashier? 

Or should I really log in at the website? Is it worth it? Because when you are a normal customer and you don’t see any real value for months and maybe years, you simply don’t follow. So that’s the declining activity rate. And during the crisis or during the last years when the reward rate was by many companies lowered, I think many of them will discover that the effect on P&L was immediate and the effect on consumers was much long term, so it doesn’t happen overnight, but it is the steady decline. 

And because we are all in search of value, we need to get something, something tangible, not money. I’m not talking about money vouchers. I’m talking about something we can touch, maybe digitally, but something we can touch and what touches our heart and brain. So that’s the value. 

And the second angle is what I see that also management of companies and boards are going to ask tough questions. Because if the numbers of the cost of acquisition are rising, activity rate of the basis is declining, the actions to win back customers who are gone or are first time buyers are not very successful, then you as a manager responsible for the company profit, you ask tough questions whether, where is the value of what we do? 

And I do think that we have, in every company, there is tons of metrics. There is, you know, at the moment when, I don’t think I have experienced a company without Power BI or any, not analytical reporting tool. So at the moment, everybody knows the reports, the end results. 

But in these reports, what I see and what I experience, there is very hard to find the evidence. Because when somebody is asking you whether that activity brings and creates real value, so you have to deliver an evidence, you have to show something. And it’s not always the number. So I do see a trend, where when people are asking detailed question about how much does this particular activity increase revenue and profit and we need to answer that. We need to find a way and not to report activity rate and number of people in tier one and tier three. That’s not enough. The evidence of increasing loyalty.

That’s why we faced that topic in Voxwise for years. So we have the analytical capabilities. And we also introduce the general metric called net loyalty score, which I am talking about a lot. And I think that the industry needs some metric, which is like benchmark, which is comparable. And it is not an NPS, because NPS doesn’t talk about loyalty.

So sorry for long answer about the trends. I really think that only creativity saves us from being indifferent. And I do think that we have to reconsider giving value to our customers and presenting the value right way, which is the older communication part and delivering the value to shareholders. So really, having a real and not much disputable evidence that we are increasing loyalty at least in some customer segments.

Michelle

Yeah, I think there’s lots of really interesting things you’ve said there, like the creativity side demonstrating the value. Not everything is that transactional message and what’s the non-transactional way to create that emotional loyalty and that value with the brand. 

So there’s some really insightful things there. And some of the things you mentioned there, you touched on, I say reporting and BI and things. So I’m just thinking about as a loyalty consultant, when you’re talking with the brands about their strategy, you know, their focus, what are the considerations that you’re giving for the loyalty platform itself? Like, are you thinking about ease of use? Are you thinking about implementations? How customizable it is, the integrations? What are the, how omnichannel it is?

What are the considerations you’re seeing are, I guess, the most important here?

Radek

I can tell you the most important factor is versatility. It means how it is customizable. And I don’t care too much about easy integration because it will be done anyway. And the Antavo is, you can find many platforms who are simply in the way of technical capabilities for implementation on par. 

But what is exceptional when you can, when you are able to really use the creativity I was talking a lot about, and when the platform is so much customizable that you can simply run the scheme, which is not traditional points earn burn. That is, I think what, what stands out?

Michelle

Excellent, okay. And I think thinking about that and I guess advice you might be giving somebody. So we’ve been thinking about the brands and the trends but actually looking at somebody who’s maybe starting out in loyalty consultancy in their early 20s but they’re aspiring to be you know heading up this division or the director of loyalty within their company. 

What are the things that you would be advising them on that they should be thinking about for the success in that type of role?

Radek

First, I would say it’s a good choice. This industry is here for dozens of years. Because I saw the evolvement from 90s and I saw the boom of internet and tools, how to acquire customers through internet, and specifically Google and Facebook, now Meta. 

And I saw, I experienced that the industry was in depression, you know, because everybody was excited, you know, it’s so easy to get new customer and they only click away. And now, you know, the wheel turned back. And now the importance of retaining and having ability to retain customers for longer is such a valuable and I don’t think that this will change in the future suddenly, because really we as a society we are not growing a lot.

And if you look around, even China is not growing. So all the acquisition tools which were focused and all the acquisition mantra, which is focused on new markets and new customers, is getting weaker and weaker. But all the techniques and the strategy how to keep existing customers getting stronger. 

So I think that this career can bring you very close to the board, to the board of the company in a very short time. So that’s my message. And for newbies in the industry and also for old dogs, I have one, I listened to Phil Shelper recently and he reminds me that one old truth which I’m constantly telling to my clients but I think we should remind it. 

The loyalty program has ability to stimulate people to change their behavior. All organizations around the scheme, around the communication, should follow that route that we are here, not to only maintain and retain a customer, but also to give him or her motivation and stimulation through the better reward to get. 

For example, to cross-sell, for example, to upgrades, for example, to discovering new categories. That is constantly forgotten and loyalty program, because the offering is inside the company’s proposition, they have the ability to change these desired behavior.

So let’s not forget it. So if you are starting, have it on the paper in front of you and then constantly remind yourself that there is ability to change the behavior, which is by the way, can happen via salesperson, can happen via big advertising campaigns. But the costs are extreme. 

If you imagine that that someone in the call center is calling a customer for, for and to selling a new category, which where average price is $25. Well, you have never paid this back. So the loyalty program is the hidden weapon for that.

Michelle

Yeah, that’s a great insight.

Radek

Thank you.

Michelle

And I think it’s really interesting what you said about how someone who’s working in loyalty that career growth is quite, let’s say fast because the board has the, the loyalty has the attention of the board into looking at this. So, yeah, that’s, that’s a very strong message. And just to lead on from that, when you’re working on assignments, it’s not always obviously the head of loyalty that’s involved. What other job titles are you seeing that are getting involved with these loyalty decisions? Like who’s driving that assignment? Is it head of digital, CRM?

Radek

Well, basically it’s CEO. The core team is always chief of marketing, chief of commercial. And of course the CEO, because really nowadays, I said it’s a shortcut to boardroom, but it’s really true. Nowadays CEOs are not only focused on production, you know, the production and logistics is something, it is done now, mostly. 

I’m not, I can’t generalize, of course, there are purely production factories who focus on that, but when you just look at current environment, really managing directors of companies are questioning the teams, whether they spent enough to retain the highly acquired customers. So that’s it, that’s so simple. CEO is the decision maker at the moment about loyalty schemes.

Michelle

That’s really interesting. Yeah.

Radek

It never happens before, never, never. Only airline industry in 80s and 90s was so focused on loyalty program from different perspective because the industry was completely changing their way of sell tickets etc.

Michelle

Excellent, okay and then we’re nearly there, time to wrap up but I’ve just got one last question for you, I know you’ve mentioned about some of the programs that you like really you know they’ve made an impact on you but everyone likes a bit of surprise and delight so is there something in loyalty that has surprised you that has been you know something that maybe you weren’t expecting I know. 

Radek

No. I will disappoint you now. 

Michelle

There’s obviously traditional and burn but is there anything that has surprised you yet?

Radek

I’ve seen so much, so I can’t tell you that I was shocked in recent years. I’m sorry.

Michelle

Okay, okay. No, no, but this is it. This is the honesty that we want from consultants. So yeah, thank you very much for that. And thank you so much for your time today, Radek. Really appreciated it and really enjoyed your company. 

There’s so many things you’ve shared there, but I really like what you discussed at the beginning really around Adidas and what they’re doing and the goals they have for the number of members they’re going to have in their loyalty program. That’s going to be a really interesting journey to watch.

Radek 

Exactly. Michelle, thank you very much. It was a real pleasure to talk to you and to have some time to share my voice, because I think that we are still a little bit underrated industry. We have to fight for our place on the sun and we have to honestly deliver these messages like creativity and being more open to new ideas. 

Because we have another enemy and it’s AI. All the people in managements are praying for bring me the AI which will solve all the problems. So after Google we have another counterpart.

Michelle

Something else is coming. Yeah, that’s been mentioned on a few of the calls. So it’d be interesting to see when we’re having, and when we’re launching these stories, the input people give on AI. 

But yeah, Radek, thank you so much. And thank you everyone for watching this and being a part of Loyalty Stories with Antavo. Wherever you see us, please give us a like on YouTube or LinkedIn and subscribe to our channel. And also come and visit us at antavo.com. to talk about how we can help you with your loyalty programs. 

And also thank you again Radek and please reach out to Voxwise if you need any help with building out your loyalty strategy. Thank you.

Radek 

Thank you

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