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3.19.2012

The "Addictive" Currency Called POINTS on a Shopping Portal or Club

There used to be only two entities that can legally print currency:
The Government
and Posts

Yes, posts, because stamps are currency.

But in today's world, in many economies
every Tom, Dick, and Harry can actually print money in the form of "loyalty points" or "miles."

Do you, or someone you know, actually prefer one airline over another because of the frequent flier programme and its benefits?

Of course you do!

And what about shopping portals?

I have quite a number of friends and acquaintances who have recently openly told me that they would search for books on amazon.co.jp but make the actual purchase on Rakuten. The reason being that they can use the points they collect on a Rakuten purchase for other things they may buy. In other words, when I book my hotel through Rakuten Travel and collect points on the site, I can then use the said points on my purchase of say, books.

The beauty and "addiction" or loyalty towards shopping at Rakuten is thus created by the diverse application of the points, making them more like currency and less like loyalty points.

I make this distinction because "loyalty points" are just that - points that reward me for my loyalty towards a particular shop or brand. Whereas currency is something that allows me to make purchases across brands and shops.

"Make your money work for you" sounds like an advertisement for an investment site, but currency on portals does just that.

I spend $200 on accommodation on my business trip, collect 20 points, and I use that for my next purchase of the $18 book... and so on. So, a part of the $200 I spent on my hotel comes back to work for me so that I can buy my book for $16 cash and collect points on that!

In essence, the thinking is very much what drives network businesses - if you are going to spend $800 a month on cosmetics anyway, do you want to give it all to Shiseido who won't give you anything for that money other than a few free samples, or do you want to spend it on Amway/Nuskin/Forever Living Products/(fill in the blank with your choice of network brand) and get XX% of it back in the form of cash? (Of course, with network businesses, you get bonuses for people in your group, but let's not get into that here.)

Everyone talks about or has heard about and most engage in some form of CRM (customer relationship management) and customer retention activity. Perhaps the most common is to create a loyalty scheme in the form of points accumulation to encourage repeat purchases.

In the brick and mortar world, I now carry a card case that is about 2 inches thick full of plastic loyalty cards given to me from almost everywhere I shop - the supermarket, pharmacy, donut shop, shoe shop, shoe repair shop, dry cleaners, coffee shop, restaurant, petrol station, and even the local taxi company!

In February, my birthday month, my physical mailbox and email in box is bursting with invitations to go and shop at a discount or to earn double or triple points; or receive a free birthday gift.

But sadly, more often than not, I have points and cards expiring before they do anything but create more rubbish in this world.

However, when the points become currency, I use them up without fail and they keep me loyal to Rakuten over amazon and other shops.

Sometimes, there are associations between Rakuten and shops that I don't quite understand.

One such example is Domino Pizzas and Rakuten. I can not only make my purchases online at domino's site, where my favourite orders are stored on memory and require me to only make one click to place the order for 4 items (a basil sauce pizza, fried potatoes, fried chicken, and oolong tea), but I can now pay via Rakutan and accumulate Rakuten Points for my Domino's purchase. I am not sure how Domino's benefits, but it is nice that I can accumulate more points on Rakuten.

Perhaps, as in the case with CCC (Culture Convenience Club; a.k.a. Tsutaya) and its affiliation marketing package, Domino's is given access to or the right to have promotional email sent to a certain profile of or the entire universe of Rakuten users.

But from a consumer perspective, another way to earn Rakuten points is a welcome event.

And thus, my loyalty towards Rakuten is increasing as with many other Japanese consumers who regularly shop online.

But if this is the case, does this mean that many brands and shops should just drop their uniquely branded loyalty schemes and join an "alliance" the way the airlines have gone? Will there be more groups that enable consumers to apply their miles across brands like "Star Alliance" and "One World" in other categories?

As I mentioned before, the CCC alliance is just that. Built around Japan's version of Block Busters, Tsutaya, its T card is accepted at a wide range of retail outlets including Family Mart convenience stores, Doutor Coffee shops, Autobacks automobile parts and accessories chain, petrol stations, and so on. Tsutaya claims that 2 out of every 3 Japanese consumer has a T card and until 2010, it restricted the privilege of joining its alliance to one brand per product category for the lovely sum of something around a commitment to spend $1 million per annum as a minimum on marketing fees with CCC, either in the form of coupons generated at the cash register, email blitz, or advertisement. It has since opened its doors to anyone who wants to spend money with them and is growing its network.

Lawsons is following suit by expanding its alliance network to petrol stations and other retailers as well who will put points on your Lawsons Card at the cash register as you pay.

Credit card companies have long offered loyalty points but theirs need to be redeemed physically in the form of vouchers to send for or gift items that are usually very unattractive. (Who needs another Disney face towel?) I believe the key to successful point management is to allow the consumer to redeem them easily at the time of transaction.

CCC actually made wonderful use of the accumulated points by asking its members to donate the points as case equivalents to the disaster relief efforts after the 3.11 Great East Japan Earthquake. Members were allowed to give up their points as a donation that CCC made on their behalf. This resulted in 372,834 donations amounting to 169,406,643 points which became 169,406,643yen!

If this is not a prime example of points becoming currency, then what is?

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