Sunday conversation with David Kristal, CEO, Augeo Affinity Marketing

Since its start in 1999, Augeo Affinity Marketing has emerged as a leading company in loyalty marketing. The St. Paul-based company's client list spans across the globe and has a reported 40 percent compounded annual growth since 2007. Augeo builds programs for companies that aim to increase emotional engagement with customers and employees. Businesses using loyalty marketing may offer discounts or rewards points for frequent customers. But as data collection becomes a growing component of loyalty marketing, firms will have to beef up on security while making their offerings to customers more personalized, said CEO David Kristal. Here is an edited transcript of a recent conversation with Kristal.

Q: How can businesses know what kind of loyalty marketing platform is best for them, whether they are a mom-and-pop retailer or a bigger company?

A: It's less about the loyalty platform, and significantly more about what their objectives are. You need to deploy a solution that aligns with their business objectives. It's platform driven so it can evolve as their business evolves. And it has to be measurable, otherwise it'll feel good for a while and over time if it's not measurable, it won't sustain.

Q: How would you say the role of punch cards and discounts has changed or grown?

A: The way people perceive value has changed as rapidly as virtually any other change in the world of engagement. So it used to be that a discount in and of itself was special. But [now] we can all go online and search for discounts. So the way we engage has to probably include some form of a discount, and a number of other value-based considerations. And that's why a relationship that a brand has with a customer or their employee is so critical. At its core, it has to be built on trust, and then from there, everything can kind of be built on top of it.

Q: What is working well with card-linking, and what needs to be done better?

A: Historically, card-linking was essentially digital couponing … but discounting alone isn't a sustainable loyalty. So our premise with card linking is we want to transform what has historically been digital couponing into a loyalty-like solution for our participating merchants. That's the difference. There's a lot to that. That means that, for example, if you look at the industry coalition market, across the world, there are programs in Canada; there's air miles in the United Kingdom and other parts of Europe; there's Nectar; there's programs in Brazil and Australia and others that have noncompetitive retailers or merchants, working in a coalition system where they are able to continuously drive acquisition of customers, retention of customers, and deliver terrific value to their card holder base through an ongoing and sustainable loyalty marketing solution. And that's what we hope to bring in a different way, to the U.S. market space.

A: At any given time, [Augeo has] hundreds of millions of dollars in points. So from that standpoint, we're like a bank. And because of that, and not unlike many companies, we have intensified our investment in all aspects of security. And not just the protection of data but the information overall.

Q: Does it change the way you would go about structuring a rewards system, when you know there's a risk of fraud?

A: It doesn't change the structure. It can change certain aspects of the program itself. So for example … historically, you could redeem $50 in points for a fiscal gift card and we would ship that gift card to you. And even if you were a fraudster, we would eventually catch you stealing … there'd be a limit, because we're physically mailing them. … But when it's digital, you could come in with a whole bunch of fake accounts and start redeeming points. … You can be out many thousands of dollars if you don't have the right security provisions in place. So that's an example of, if we allow digital redemption of gift cards, we have different security parameters in place, which makes it a little less convenient for the individual, but it makes the program itself significantly more secure.

Q: What's changing or growing in the health and wellness sector?

A: When we think about health and wellness, it's as complicated as a sector we've seen, because the individual behaviors are very difficult to predict, and it's a moving target. And you think, what is it that motivates healthy behaviors, for you or for me? Or for seniors or someone who's perfectly well? Versus someone who is now sick and is motivated because they have no choice? One thing we've learned is that while many other sectors, whether it's in retail, distribution or home improvement, are really built around putting the consumer first, health and wellness is much more complicated than that.

A: I think it's going to be significantly more data-driven, where both businesses and artificial intelligence will play an increasing role. It will be increasingly digital. It will be more omnichannel in nature. And it will be more experiential in terms of the individual engagement.