Swift Exchange’s April 2012 LoyaltyPulse Survey

Press Release Press Release

5/3/2012

Loyalty Executives Say Program Liability and Costs Are Their #1 Challenge – Greater Collaboration Between Merchants and Providers Needed

This is a “Wake-Up Call” for the Transformation of the Loyalty Industry

Managing reward liability and its spiraling costs has become the single largest challenge for the reward industry, making the need for collaboration between reward providers and merchants greater than ever, according to a new survey from Swift Exchange, an innovator in the facilitation of global commerce.

“Modern-day loyalty programs have reached the limits of their current technology and methodology,” said Richard Postrel, Chief Executive Officer and Founder of Swift Exchange. “Fundamental macro-economic issues must be addressed in order to advance this industry into the next generation.  What we are seeing is an industry that is ripe for transformation. This is a wake-up call for the entire reward and loyalty industry.”

The Swift Exchange LoyaltyPulse Survey April 2012 was conducted at last week’s Freddie Awards, at which Swift Exchange received a Freddie Award for its sponsorship.  The Freddie Awards, launched in 1988, are widely recognized by frequent flyers and travel industry executives as the preeminent honor for frequent travel programs.

When asked how they would rate the challenge of managing liability and program costs in today’s environment, virtually half of respondents (49%) said managing costs has become “very challenging,” while 38% believe managing costs have definitely become “more challenging.”  When asked to assess the current state of collaboration between reward providers and merchants, 58% of respondents said they saw a “much greater” need for collaboration.

Views on collaboration were echoed in a notably strong appetite for more flexible reward currencies, with 47% deeming greater utility to be “very important.”  Surprisingly, 82% do not yet recognize currency utility to be a core service.  “Clearly the lack of recognition of the impact of utility and customer satisfaction is the single greatest disconnect that the loyalty industry must address and solve.”

Among the subset of respondents who identified themselves as reward providers, when asked to select three options from a longer list of things they would most like to change about their loyalty programs, two-thirds of respondents indentified the need for expanding strategic relationships, followed by better differentiation (24%) and expanded redemption capabilities (19%).

“Existing technology and methodologies are preventing reward providers from overcoming the limitations they face,” said Mr. Postrel.  “Under the current model, expanding relationships and boosting differentiation are severely constrained.”

“The new Swift Exchange LoyaltyPulse Survey highlights what we’ve been consistently observing for a long time,” said Nancy Gordon, chief operating officer of Swift Exchange.  “It also brings to light the unprecedented frustration experienced by all industry constituents – consumers, merchants and reward providers alike.  The bottom line is that there is a crying need for a new model that transforms the conventional approach to liquidity, transparency and usability of reward points and miles.”

Asked to rate the typical loyalty program’s effectiveness at customer retention, a combined 67% responded with either an “acceptable” or “low” rating.  When asked to rank the industry on its success at customer acquisition, a combined 73% responded with either an “acceptable” or “low” rating.

“I can’t help but wonder the degree to which responses in the ‘acceptable’ range reflect complacency when it comes to retention and acquisition,” Ms. Gordon said.   “The fact is, too many loyalty programs simply disappear from members’ radar screens, and for good reason.”

Mobile marketing, meanwhile, is seen as resoundingly important to the longer-term success of the loyalty industry, according to executives surveyed.  More than half (53%) view the mobile platform as a “very important” element of loyalty marketing.

Attendees at the Freddies event were also asked about proposed changes on the accounting front, specifically the development of a single, comprehensive revenue recognition model between FASB and IASB being considered for adoption in 2015.

Surprisingly, 43% have not yet studied the proposed changes in detail.  “The proposed model will have a material impact on all reward providers, who will have to significantly change how they account and reserve for their programs,” said Mr. Postrel.  “The impact of change for legacy issuers could be highly disruptive, while having a far lower impact on newer and smaller entrants,” observed Mr. Postrel.

“This is an urgent wake-up call for the entire rewards and loyalty industry.”

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