Latest / Talk Commerce / Revolutionizing Loyalty: The Future of Rewards Programs with Lin Dai
Transcript
- Brent Peterson (00:02.582) Welcome to this episode of Talk Commerce. Today I have Lin Dai. He's the CEO and co-founder of Super Logic. Lin, go ahead, do an introduction for yourself. Tell us your day-to-day role and maybe one of your passions in life. Lin Dai | Superlogic.com (00:17.506) Yeah, thanks for having me Brent. So like you said, I'm Lin Dai, the CEO co-founder for Superlogic. And at Superlogic, we build next generation rewards and loyalty platform for some of the world's biggest brands from American Express to Warner Music Group. My personal passion, you know, certainly you can tell if you can't tell already, I'm a points and miles nerd, but also a non points and miles related things. beginning as a learner of kitesurfing. Brent Peterson (00:51.926) Wow, kite surfing. And we talked about that year in Miami. So kite surfing is something you can do often. And I'm in Hawaii part-time anyway. So kite surfing is something not as prominent, more regular surfing, but also I have a house in Minnesota. So we do kite surfing, but also you can do kite surfing on the ice. And that's, I think even more exciting to see people going across the ice 50, 60 miles an hour. Lin Dai | Superlogic.com (01:13.821) Oh wow. Lin Dai | Superlogic.com (01:19.47) Wow, I've heard of snow kiting, right? Going down the mountain, the ski slope with a snow kite, but the ice kiting sounds exciting as well. Brent Peterson (01:28.85) Yeah, yeah, it's definitely, uh, and they do ice racing too on boats. There, if there's no snow, you can have an ice boat that it'll go, it, it look it up, but it'll go a hundred miles an hour across the ice. If it's clear, it's amazing and very dangerous. Anyways, we, we today we're going to talk about, uh, we're loyalty and I'm excited about this topic. Um, but before that you volunteered to be part of the free joke project. So all I'm going to do is tell you a joke. Lin Dai | Superlogic.com (01:43.774) Wow. Ha ha. Brent Peterson (01:57.694) and all you have to do is say, should this joke be free or do you think someday somebody should charge for it? So here we go. And this is a Halloween appropriate joke. What do witches put on their bagels? Scream cheese. Lin Dai | Superlogic.com (02:17.254) You know, I think this is a high caliber joke. You need to let it free into the world. So. Brent Peterson (02:23.766) All right. Yeah, well, it was very, yeah. It wasn't a lot of excitement in that joke, so I agree. All right, so let's move in. I'm not going to be. Lin Dai | Superlogic.com (02:33.862) But I felt like my five year old would enjoy it a lot. Brent Peterson (02:37.438) Absolutely, yeah. I don't know if there'd be a lot of loyalty to that joke though. It was just appropriate for the day. Anyways, let's talk about rewards. I'm also big on points and I have my Apple headphones here that I got with my reward points. So loyalty does work and especially, you know, I think loyalty, I don't know, did it start with the rewards points on airlines or I suppose, tell us a little bit of background on Maybe you'll tell us, give us a couple minutes update and where did reward points start and then where is it at now? Lin Dai | Superlogic.com (03:15.11) Yeah, I mean, if you want to go way back, you know, American, like department stores or stores like Betty Crocker and prior to Betty Crocker, you know, I think there are these general stores used to when you make purchases, they'll give you a stamped copper like piece of coin or something, right? That would, with their like brand on there. So if you collect enough of these, you can go back and you can redeem for some product. So that's how it started and that evolved into like much easier, like a paper stamp that you can basically like collect. And then the modern day points and miles scheme is kind of largely credit to American airline. I think it's in the 1980s, they came out with American airline miles program for how much you travel. You basically can start to digitally record it, right? It was on the companies. mainframe computer and they'll mail you a statement. And, you know, and then fast forward to today, just about every brand, you know, I think the stats I read was about 90% of the brands have some kind of a loyalty offering. Brent Peterson (04:32.478) Yeah, and that reminds me of Carlson Companies who had the... Kurt Carlson became a billionaire over his little stamps that he started, I think, in the 50s or something like that. So yeah, so it does go back a long time. It's much different today and there's different flavors and I think people don't necessarily put together the idea that your credit card reward points are really the same as some of those reward points that you get from that department store or e-commerce store now that I've really leaned into that. Tell us what you're doing to help that and how that has impacted their business and why a merchant should be looking at this if they don't already do it. Lin Dai | Superlogic.com (05:15.962) Yeah, so it's generally accepted because 90% of brands, you know, participate or offer a loyalty program or rewards program. Uh, it's pretty clear brands believe this drives additional customer engagement and ultimately additional purchase from that customer. Right. So, uh, or even as a defensive mechanism, you, your competitor has a really great program, you kind of have to have one now at the top, top tier, the best, uh, And most successful rewards programs are credit cards, airlines, hotels. So when you run a rewards program so well, your reward CRM is essentially the entire value of your company and sometimes even more. I'll give you an example. So the American Airlines loyalty program was actually appraised during the pandemic because they had to take out a loan against that. It was appraised to be worth about $31 billion. If you look up American Airlines stock today, I think it's trading somewhere between $8 to $9 billion. So essentially, they are being perceived as a very profitable and very well-run rewards program that happened to run a money-losing business of flying planes. So the challenges for some of the biggest rewards programs in the world is points accounting liability. So American Express is one of our investors and one of our clients. So American Express issues about more than $1 billion of new points every quarter. So when they give you 100 points, they have to track on their corporate balance sheet a dollar of liability. So that piles up very fast. And somebody like my dad that has like, you know, maybe 4,000 points, maybe don't remember to redeem them. So that piles up on the corporate books. So first and foremost, we develop technology to really help brands to actively kind of help give consumer opportunity to burn off those points. And if you go one tier down, every retailer has a rewards program and they have two issues, engagement and data. So Nike, I love Nike, but I can't tell you. Lin Dai | Superlogic.com (07:42.114) off the top of my head how many points I have in the Nike rewards program, right? So, so there's an engagement issue. I don't really think about it every day. Now the data issue is either even easier to understand. When I walk into Bloomingdale's and pick up a pair of Jordans, Nike doesn't know I made that purchase, right? So it's the data is obscured by a distributor. So if you think about channels, even in this digital age, We think it feels like everything we purchase is online. It's not about 80% of commerce is still done in traditional brick and mortar retailers, right? And a lot of is through distribute distribution channels that the brand doesn't have in control. So tying in digital data, which people are pretty good at capturing plus physical purchase data. And the third aspect of our lives now, for whatever your take is, you know, social media is a huge part of our lives, right? So, and for every brand, not only to measure digital purchase, but also physical purchase, but also be able to measure and also incentivize social interactions, super important. If American Airlines had their choice, they would say like, hey, every time I post a promotion, I would love my 100 million loyalty members to retweet that. And the easiest way technically is just like, say like, hey, retweet this and earn a hundred AA miles. But they can't afford to do that because we talk about the accounting liability. Retweeting something is not directly associated with a purchase. So you can't actually assign a value to say like, okay, 1% of purchase go back to you in points to you. Retweeting something, If American Airlines does this, it's going to cost them $100 million every time. So we basically designed, so there's a limitation to what can you do with a points and miles only currency. What we do is we build a system or hybrid system to integrate with existing programs or build brand new programs that has a hybrid points, but also digital badges. Lin Dai | Superlogic.com (10:07.266) essentially non fungible rewards that represent you completed a specific action. And by collecting the right combination, you unlock really big rewards. Uh, almost a little bit like, um, if you remember how McDonald used to do their monopoly promotion, right? So if you make certain purchases and now we can basically, um, group in, if you also take certain social actions, um, and then, or if you self report, purchase data, all of that can basically be rewarded with digital badges, which on their own has no accounting value, but combined with the right combination can unlock really big rewards and experiences. Brent Peterson (10:50.554) Yeah, that's real interesting. I've never put those two together and I've never really put together the fact that it does cost the industry so much. I always knew that there was a liability on your balance sheet, but I never equated it to that much. There's been a big stir in the industry with Delta Airlines and they've had to walk back their points and how you get to a level. Is there a negative? I mean, I guess there is a negative because we can point to Delta. Is there other potential negatives in terms of how you do your points? And, and was the negative in Delta only how you get to your next status level? Lin Dai | Superlogic.com (11:34.446) Yeah, you know, there's a there's a huge issue, right? So literally today, I think Senator Durbin are introducing kind of potential legislation to look at how corporations are devaluing their points. So the argument is, follow this is, if consumer were advertised that you make this purchase, and you receive certain rewards, and that's of a certain value, and later on, you change that value. does that lead, you know, that equate to like false advertising, right? And deceiving of consumers. So up to now, you know, uh, regulator haven't really, uh, regulated the redemption of points. Those are essentially the corporation's own kind of sandbox and their own central bank digital currency that they get to say, however, they want to inflate the value or change the program, right? terminal service that basically says we can change the program anytime we want. Uh, that's now having pretty large implications. The requirement to make diamond and I'm like 10 plus year diamond member on, on Delta, right? The requirement, the purchase requirement to, um, to reach diamond, even after, um, you know, the CEO walked back, some of the really stringent requirements, uh, is still really high. This year. Oh. I'll let you guess this year the requirement to make Delta diamond, the purchase requirement is $15,000 of spent. What do you think is to make it for next year to make 20, 25 diamond, how much you need to spend in 2024. Brent Peterson (13:19.682) I think this year is 20,000 because I'm not gonna hit diamond the last year was 15,000 and I made it But I know I'm not gonna yeah, I'm not gonna make it to 20 I think he walked it back to 28 or something didn't he 28,000 of spend. Yeah It started at 35 Lin Dai | Superlogic.com (13:24.858) Last year was 25, right. The 23 requirements. Lin Dai | Superlogic.com (13:31.358) 28, it started at 35, but it's still a, I mean, we're talking about almost a double from the last year's requirement to qualify, right? So that's a very large increase and potentially, in a certain way, I'm definitely, on most cases, say less regulation is fine, but certainly on this, nobody's protecting the consumer on this, right? So on... points redemption, potentially there need to be some oversight or at least the threatening of oversight for the corporations to be better kind of custodians of your points. Brent Peterson (14:15.63) Do you think that because Delta has really doubled down on their points and looking at their spend rather than just miles, I mean traditionally airlines would you get points via miles, Delta was the first one to tie those miles to spending. Does that show the importance of how much points are to the airline industry especially? Lin Dai | Superlogic.com (14:36.602) Yeah, absolutely. You know, it's, Delta is not the first one. So, and I think the entire airline industry is going to move to a spending model. So American airline already started this last year. It just, you know, the requirement is not so outrageous, right? So it's basically 200,000 miles to make the highest publicly available status. So that could be done through, you know, maybe between... $10,000 to $20,000 worth of flying or done by $200,000 of credit card spend. In the Delta's case, if I just have a basic tier two credit card on the Delta American Express, the platinum card, which I pay $250 a year for, I will have to spend... $560,000 a year on that credit card to qualify for a diamond versus on American airline, it's $200,000 spent, right? So, I think the trend is definitely kind of focusing on credit card based spending. That's a very risk-free, very profitable business for the airlines, because they have something that is... that is very desirable, right? Like we human really aspiration on a psychologically value the idea of sitting in a better chair or sitting in a free chair on a in a metal tube for eight hours. Because that leads to the idea of being in Hawaii, in Miami, in Paris, or whatever things that Lin Dai | Superlogic.com (16:24.966) Well, that is worth a lot more than getting cash back or other forms of reward. So companies like Citibank and American Express are basically negotiating deals with airlines to say, like, let's do a co-branded car and we will guarantee you, we'll pre-buy 10 million miles or 10 billion, however the math works out to reward all our customers. So, and by the way, credit card companies are taking on the banks are taking on the credit risk, right? If I don't pay my bill, Delta airline, American airline don't really care, right? So they already made their money on the miles. So that's becoming a very profitable part of the airline business model that all three airlines, I think, is going to go towards that direction. So for banks that do issue these cards, you know, there's need to be a balance between kind of managing the accounting liability part of this and also ensuring consumer engagement, right? So somebody like my dad who doesn't spend, you know, $100,000 a year on his credit card is just not going to earn enough points and miles to really make his experience worthwhile. What do you do to gamify or create engagement? that he can be participating in this economy, right? So we can, you know, the real world economy is already a very stark, like, you know, top 1% against the rest. We can't really let the points economy, which is really kind of birth out of the desire to engage all users to kind of following that too. So a lot of the software and technology and strategy we provide to companies is really around how do you engage all of your user base. Brent Peterson (18:22.71) Yeah, that's interesting. So talk about we've talked about airlines and I guess hotels are also part of that. But how does the average, average merchant but then even somebody like Target or Walmart, how do they participate in this same sort of points economy that the airlines seem to have really capitalized on? Lin Dai | Superlogic.com (18:44.774) Yeah, you know, it's just not, CVS technically have one of the largest rewards program. You just don't think about, cause it's not sexy, you know, think about buying my cough medicine and getting some points, right? So, and it doesn't really factor into my decision on do I stop by at a CVS or Walgreens, right? So when I make a purchase. So I think some of the ideas of, Airlines and hotels and credit card did a really good job creating aspirational value, things you really want to redeem. So first class seats to Europe, a five night stay at the Maldives. So these are all very aspirational. And some of these programs even created bigger experiential things. Marriott has a really great program called Marriott Moments, where if you have a million points you can redeem for. um, you know a culinary experience with you know, a celebrity chef or uh, F1 ticket packages, right? So things that don't even have anything to do with hotel stays. So uh, so that's something so like you know one of the ways we're doing so we operate uh SuperLogic Software powers the entire Warner Music Rewards program, right? So Warner Music is one of the top three major labels in the world, have hundreds on their platform. So one of the things we wanted to do is like, hey, we understand consumers are not going to buy 80 pieces of merch from your favorite band, right? So that's not realistic. So they're not really earning millions of points each year. So what we do is, hey, for a very small amount of points, if you did make a lot of purchases on concert tickets and engagements and whatever, great. You can be deep into these. like ticket packages or exclusive merch drops. But for the most user, we're talking about your earning, maybe a few dollar worth of points every month. We let you actually pull your points. So you can essentially actually into your points to win in a sweepstake to go maybe backstage. Lin Dai | Superlogic.com (21:08.466) to me, Michael Buble or go see front, you know, sit at front row to watch on the next Dua Lipa concert. So, so those are things kind of for a few points that otherwise would have set on the corporate accounting ledger. But and of no value to user you can actually enter and you know, one out of a few hundred people do win these really amazing prizes like ranging from like you know, very hard to get PlayStation 5s up to like kind of backstages experiences with major artists. So, so there are kind of innovative ways to for people to do that. And kind of the next generation, the newest version of the software we just wrote out for Warner Music actually allow you to collect different digital badges that shows off you are the biggest fan, right? So by following an artist on Spotify and listening to their song on the first day. you unlock certain kind of collectibles. And then if you collect the right combination, you unlock bigger rewards. So making a very kind of less transactional, but more engaged experience. Brent Peterson (22:23.338) Yeah, I think that's oftentimes what maybe as you get to smaller retailers, they don't think about the action part of it or the transaction. They look at it strictly as a transaction. They don't think at the engagement part and how important that is as part of the program. And I guess even looking back to rewards from airline, the engagement was the miles, right? That's it is also part of the transaction. But, you know, as. We have a few minutes left here, but maybe talk a little bit about that engagement and how merchants could really engage their users just like Warner has engaged their users in terms of getting them to do something for the brand by getting points. Lin Dai | Superlogic.com (23:06.01) Yeah, so certainly rewarding your user, make them feel like they're earning as they spend with you or engage with you is a really great idea, right? But I think the idea of a points or miles only rewards format has gotten a little stale, right? So over the last 40 years, the landscape's different, competition's different when you're the only airline that offer these digital currencies and nobody else is... doing that, then you're certainly like standing out. But if everybody is doing that and, you know, your local drug store is doing that, and now people are being desensitized to really, and also, you know, people are hearing about how programs are devaluing their points, they're less and less interested in engage. So you have to figure out, programs have to really figure out how to personalize the rewards program experience, right? Engage with a specific user. If I really care about the warning example is like, If I really am a big Metallica fan and I don't care as much about like, let's say Pearl Jam, I have my path. So the rewards points, I can earn points, but I can also earn these physical, like digital like badges that actually can unlock rewards, but I'm getting a specific one for my favorite badge. Right. So those are kind of some of the newer ways to engage user. And then one step further, just a little bit of tease. Traditionally up to this point, all programs have done is a one-to-many marketing. As a program owner, like American Express, I go negotiate the best deal I can negotiate with 14 different vendors and I provide them to all my Planet of Car members. Well, I only care about two of those benefits, but I want one of those benefits, such as centering lounge access. Well, I want more of those. I want to be able to bring a guest, right? So, but I don't care about my Saks Fifth Avenue, $50 credit. So enabling, so our system also enabling a peer-to-peer engagement method, right? So if you have a hundred million user engaging with another hundred million user. Lin Dai | Superlogic.com (25:30.094) Now the engagement is like multiple votes. So we basically run the peer to peer based model on top of the traditional model. We see a 9x engagement, 9x increasing engagement. We're talking about in a normal program, people probably like interact four to five times a month. We're seeing 40 plus times like touch points. between users in this kind of new peer-to-peer model in these new next-gen rewards programs. Brent Peterson (26:07.062) That's good. I'm with you. It sounds like we're on the same page with, I don't care about my Saks Fifth Avenue credit, but I do want my Centurion Lounge access and or my Delta Sky Club lounge access, which I guess we get 15 visits now, instead of just 10. They rolled it. They rolled that back too. Lin Dai | Superlogic.com (26:26.942) Exactly. Wouldn't it be great if you're saying like, hey, there's two, you know, I'm probably don't need two of those visits. Um, but, um, Lynn, I would like to get your Saks Fifth Avenue credit. Can we swap? Brent Peterson (26:40.638) Yeah, that would be the ultimate if we could swap our digital credits, right, and have a digital credit marketplace. Maybe that's the next super logic idea. Lin Dai | Superlogic.com (26:50.166) So essentially that's actually what our software already does. So it actually enables a controlled peer-to-peer trading and engagement around benefits. Brent Peterson (27:02.31) Awesome. Good. Well, you know, we've already burnt through almost a half an hour. So Lynn, I as we close out the podcast, I give the guests an opportunity to do a shameless plug about anything they would like to plug. What would you like to promote today? Lin Dai | Superlogic.com (27:18.79) Yeah, just real quick, if everything I said sounds interesting to you, please visit us at superlogic.com and you can also follow me on social media at The Points Die. D-A-I is my last name, so I'm not The Points Guy, but I'm The Points Die. Brent Peterson (27:38.146) That's perfect. And I'll make sure I get all those into the show notes. Lynn, it's been a very enjoyable conversation. I wish you all the best in your kite surfing. I invite you in January to go to Minnesota to try kite surfing, or if you wanted the kite surf in Hawaii in January, it's always the same. Lin Dai | Superlogic.com (27:56.806) Amazing, I'd love to. So thank you, president. Brent Peterson (27:58.616) Thank you.