CardsNow in ASIA Jan/Feb 2007 issue, Volume 8 Number 1

Interview on Loyalty Programs:

 CNA: Card-based loyalty programmes prove to be seemingly effective in many markets. What contributes to these successes? Share with us your insights of the painstaking moments that led your company to where it is right now

Neissan Monadjem, C.E.O. E-Safetransfer S/A a Brazilian software solutions company with security and Loyalty applications.

 NM: Card Loyalty programs are almost as old as cards themselves. This fact alone shows why they have such wide-spread acceptance around the globe since the late 50s, and why they are presently used in the form of billions of miles, points and token collection and redeeming transactions, every day among millions of users in hundreds of countries. The form factor of an ISO 7816 card has already become an icon incorporated in the collective public culture as a valued token, one that has to be protected and carried in your wallet, much like the "clip" design factor has become an icon that expresses the "office" environment. The huge popularity of these cards has had a strong role in carrying marketing and loyalty programs, not only in spreading card loyalty programs around many geo-political markets, but also to make these programs top priority for global corporate players in distribution, retail, transport, banking, health and entertainment markets. This has in turn made its usage more popular, decreasing costs and turning card-based loyalty applications into solid, popular and robust players in the loyalty market. 

 E-Safetransfer's entry in this arena was in the year 1999 with the launching of I.R.L.A. (Internet Remote Load Application), the first Smart Card post issuance remote customization and loading software ever developed for the TIBC card platform. I.R.L.A. was first presented by VISA  Brazil as a charging device to reload VISA Cash / highway toll-booth payment cards. From Smart Card secure applications we moved to loyalty in 2002, when the company used it's extensive internet and Smart Card technology to develop its first loyalty project called HUT Cash (SESAMES Loyalty Award in 2003 at CARTES). Today the platform unites a pre-paid off-line card with loyalty functions, and has been in use at 16 Pizza Hut restaurants in Sao Paulo, a cosmopolitan city of 18 million people in the industrial heart of Brazil, where the US franchise network competes with thousands of local competitors.  In Sao Paulo alone, 3 million pizzas are sold per month! That original project after 3 years of investments, has lead to a new multi-vendor, multi-business loyalty product. It is called the "SmartLoyalty" System.    

CNA: There can be many parties involved in a simple loyalty programme. How do you go about making sure every party is contented with its role in the programme. Tell us what is the process of cooperation involved.

 NM: First: do not underestimate the value of your success with your internal loyalty key holders. You may be the owner, but your staff is the spirit of your business. Employees are usually forgotten, but they are also stakeholders in a loyalty program. One specific example in the service industry is the beauty salon with several branch stores. People are more loyal to the hair dresser than to the brand or institution he/she represents. Customers will follow their professional to another shop. In order to have a good success ratio in such a competitive service-oriented environment, these professionals have to be regarded as the program's first "internal" customer. If they do not get their points in exchange for performance, service quality, customer satisfaction, etc., they may "bomb" the loyalty program, to keep your customers loyal to themselves, as their private clients. So this is a typical case in which even before balancing the prize "quota" or cost/prize ratio amongst other parties (i.e.: clients, the company, partner brands such as hair and beauty parlor product promoters) you have to first balance the internal pressure you have in terms of the reality of the beauty parlor business. This simple concept can be applied to many other examples.  

 CNA: Consumers are still keen of loyalty programmes because there are some real rewards associated with it. Can these rewards be replaced with some non-materialistic benefits? Tell us more.

 NM: One has to keep in mind that it is not only a value-added benefit that counts. It is the specific benefit that enchants and inspires the right customer, and what really counts is the sequence of value x the value perception x the time or the amount of investment the client will have to make to get the points he or she wants. It is not a single variable; it is an equation. This is content, not technology. This is marketing, not product, and most of all it is something very different for each individual. I think that programs that do not turn this equation to their customers' benefit, will not succeed. Even worse: after launching their loyalty program they will eventually look at their meek result and think, "How can I get rid of this?!"

 CNA: If there is a particular region in the world where loyalty programmes are perceived as a devious scheme, how will you educate or include additional value-added benefits to increase receptiveness in that region?

 NM: Well, without mentioning names I have to take advantage of being in the Brazilian market. Some years ago a strong Smart Card-based loyalty program collapsed. After a couple of million cards, and considerable marketing effort, it was sad to see the negative public response. They had everything in place: competent management, key shareholders, banks, airlines, international petrol distributors, one of the main credit card issuers. Everything, from resources to competence. But one thing was missing: value perception from the client's side. People would have to be "loyal" to a certain chain of gas stations or shop immense amounts of construction material for years in order to get the few hundred of points to win an ice-cream or the tens of thousands of points to win an airline ticket! There was clearly an undervalued "point" designation system and the public lost interest. This alone damaged a lot of other programs with its negative impact, but also taught a lot of companies how to avoid the same mistakes. It was too late to repair that specific program, but on a smaller scale, adapting the prize value to different customers would have probably saved the program from total disaster.


 CNA: Share with us a unique attribute of a loyalty programme that makes your company stand taller than other competing programmes.

 NM: We like to say that there are programs that work well, and that when they do so it is usually a matter of having the right content using the proper software tools. Even then you still have to be able to use your software tools to its potential. Not every client has the human resources to do that. Maybe this is the reason why everyone knows that few loyalty products in the world using Smart Cards have been known to succeed. From those that do, an even smaller fraction are able to integrate the advantages of an off-line mean of payment that can work on-line upon request. But if you search for a real-world application, a case that has a proven success story, and one that does what it promises and brings the customer measurable results, that becomes a very rare success scenario. Try to find all of that and still look for more: a card that processes reward points in a single chip, at the same time allowing a simultaneous stored-value application. You are perhaps talking about less then a handful of options in the entire world. SmartLoyalty is perhaps the only one of those options that works from a middle-sized franchise food chain for example, to a large international corporation. This is the uniqueness of this tool. The commercial success it has obtained is the result of those characteristics, and that has a lot to do with our customers. To their requests and high standards we owe the identity, the DNA of SmartLoyalty. It is not an engineer's academic thesis on loyalty. It is an everyday tool, one that has been tailored by the market.