Loyalty programs have been around forever. From coffee shops that give you the 11th cup free with a stamped card to airlines that reward frequent fliers, the concept of loyalty is a sound one — customers understand it and are motivated by rewards, and they increase their engagement with brands if there’s something in it for them.

CrowdTwist is an online take on that concept that aims to help companies create incentives for deeper engagement with their brand (and at the same time helps identify their most motivated fans and followers.  Socialistic caught up with the company’s co-founder, Irving Fain, to talk about why loyalty programs work, and how social media is changing the way that companies are seeing ROI and engagement.

Where did CrowdTwist come from and how did you come up with your rewards system?
CrowdTwist is a social loyalty and rewards platform that engages and activates a brand’s audience, wherever the brand is, both online or offline.

It really came from, initially, I met one of my partners while I was working at ClearChannel, in their online division. My partner was responsible for all the analytics there, and one of the things I was responsible for was our loyalty platform. And we were continually impressed on a month-by-month basis with the amount of engagement we got from our loyalty program. But we were equally continually disappointed with the way the program worked, its design, its integration, and most importantly, the subjective nature of what people needed to do to earn points. So we said: here’s a platform that does work but could be so much better. And at the same time my partner Josh had moved on to MTV, and he was talking at that point with a number of companies who were coming in with this problem, saying: “We have no way of differentiating who our real fans and supporters are and our broad email lists, our broad membership communities.”

Meaning who’s most engaged?
Yeah. One example that they’d given us – there was an artist that had a fan club that had something like 40,000 people who were members, and the idea was to get their best members, the best fans, early access to tickets. But what was happening was half the program was actually scalpers. And were taking the tickets and actually selling them.

The problem was, these guys had no way of differentiating who were the real fans and who were the actual scalpers. And so what we said to ourselves was, loyalty and loyalty programs have been working for decades, their brand engagement in and of itself has evolved significantly, it’s become much more cross-platform, and the definition of a transaction itself has really evolved, but loyalty platforms have not. And so we said, not only could we build a better platform than the one we were running at ClearChannel, but we could use that platform to drive actual brand engagement and sales, which would also, as a tangential benefit, help you uncover and differentiate who your real true advocates and your engaged users were, and who was just sort of hanging on.

There are so many companies now (including Foursquare and SCVNGR) that have game-ification, rewards and loyalty programs. Do you integrate with those, and how do you get people to care about rewards?
I think that while you hear a lot about loyalty, we sort of have a different approach to it, which is that we’re really kind of a meta-layer that sits above online and social. Meaning that while Foursquare is a platform unto itself, we’re kind of a product unto itself. We leverage Foursquare, as well as a number of other platforms and products that plug into the CrowdTwist system. …  We’re not trying to create another program to join – what we’re trying to say is, let’s unify all these disparate places where people are engaging with the brand, into a singular program.

A lot of people obviously criticize social media for not having a direct link to ROI. Obviously social media marketing works, but a Facebook “like” doesn’t necessarily connect to a purchase intention. Can rewards bridge that gap?
The trend that we’re going to see is movement further and further in the direction of, “show me the value that I’m receiving.”

Whether people see it or not, we’re still in the early days of social media. And not only are we in the early days, but look, new services are popping up. Foursquare’s relatively new, Twitter’s in a major resurgence, or major sort of growth phase, and the landscape is by no means mature. You know, in the way that we’ve been understanding and looking at online analytics, e-commerce analytics, now for over a decade. And I think that what you’re going to see is that the early days are sort of defined by, hey I’ve got to be there, you know, I’ve got to be on Facebook, I’ve got to be on Twitter, I’ve got to be on Foursquare, and people just sort of making sure their brand has a presence and a place where a critical mass of people are spending time.

Once you move past that stage, the next natural question is, what does being there actually mean? And I think what you’re starting to see is, executives we’ve talked to transitioning from saying, hey look I’ve got X hundreds of thousands or Y millions of people on my Facebook page, to trying to understand, what does that actually mean? How can I segment and understand the group of people that are there? How can I target the people that matter? Who are more impactful and important versus people who maybe just clicked “like” and moved on? And that’s actually, for us, a really critical focus. We spend a lot of time thinking about ROI. And the loyalty business is fundamentally built on ROI. Our goal is to say, what are the values of all these different actions that people are taking around your brand, and how can you encourage people to engage further, to share what they’re doing with the broader group to acquire new customers, and to ultimately and ideally drive new transactions as well?

Has the idea of engagement has changed at all with social media, and with loyalty rewards programs?
From a loyalty perspective, absolutely, hands down, everything has changed. And our company, CrowdTwist, is built on the premise that brand engagement has significantly evolved in the last decade but loyalty in and of itself has not. Loyalty views the customer engagement as a very singular, old-school loyalty, as a very singular moment. It’s where you buy an airline ticket, or you buy a hotel room. And I would never tell you that that’s not a very critical and important moment, you know, based on our ROI discussion, but the reality is that prior to that moment of purchase, and oftentimes far after that moment of purchase, people are creating value and points of engagement around the brands that are going completely unmeasured, unincentivized and unrewarded.

And in today’s world, those actions, or what you could say transactions, have a lot of value. Tweeting something out to your followers has value. Posting an experience on Facebook has value. Visiting a brand’s site every day and staying up to date has value. So loyalty itself has to evolve now, to mirror the way people are spending time with brands. So has the definition of engagement changed? I think the answer is absolutely, right? It’s become – it’s moved from what was brands talking at their customers to brands talking with their customers, engaging in dialogues. And I think again, the difficulty and one of the problems we’re trying to help people solve is understanding how it all fits together around a single user when conversations are happening in so many different places in so many different ways.