Imagine this: Your competition's new loyalty program is a big success. Sales says some of your customers are already switching over, to get in on the rewards. You can see your share shrinking.

Should you launch your own program? Maybe not, if your definition of loyalty program is:
• The all-too-familiar "earn points for purchases, then redeem them for merchandise items, gift cards or other rewards."
• Or the been-there-done-that "show this card and get a discount every time you buy."
Because the biggest problem with loyalty programs today isn't that your competition has one. Instead, it's that everyone seems to have one.

According to Colloquy, participation in loyalty programs has jumped 19% in the U.S. since 2007, and over two-thirds of all U.S. consumers report that they still participate actively in at least one reward program. When it seems like most marketers have a loyalty program, and most customers participate in one or more, the perceived value of all the programs is diminished.

How do you break away from me-too loyalty marketing? Start by asking:
1. What does it mean - how do you define and measure loyalty for your brand? It could be simple preference or willingness to advocate to your brand to friends. Or it may be a harder measure, like maintaining or increasing share or purchase frequency. Then ask yourself: Can a conventional points or card program really achieve these objectives?

2. What's the right balance between value and excitement in a loyalty program? Conventional points and card programs need to offer an array of gift cards, digital cameras, discounts, etc. because they need to assure obvious value to a wide range of customer tastes. But they also need a way to differentiate from all the other programs offering the same things - unique items and services and exciting experiences, even if their appeal is specialized or its quantities limited. American Express does it by offering members concierge service to find gifts and hard-to-get event tickets. And the Chicago Tribune ChicagoPoints program all kinds of ways to earn rewards points: survey completion, trivia questions...even for correctly answering questions stories in the newspaper.

3. Can a program member generate enough revenue to support a program with meaningful rewards? This is a big problem for low-ticket CPG products, where annual revenue per customer is small. Tropicana may have solved it by using OPM - other people's money - in a Juicy Rewards program that offers high perceived valued savings on partners' products and services: TaylorMade golf clubs, Adidas shoes, Coleman camping supplies, Norwegian Cruise Lines and more. In this program, Tropicana supplies the communications/distribution network, and partners supplies the rewards.

But a true breakthrough will come from realizing that there's more to "loyalty" than "bribes," and that relevance is more important than rewards. The ultimate example of this comes from Nieman Marcus, where customer service, limited membership and soft rewards (exclusive services) are the foundation of a loyalty program. This is a perfect fit for rDialogue's definition of true loyalty marketing: Rewards are just a starting point, and the "the real value of loyalty programs lies in their ability to engage customers and enable relationship marketing. This is where executing marketing activities based on customer data creates marketing excellence, not simply program excellence."