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How the Verizon Wireless 'Smart Rewards' Program Backfires, Erodes Customer Loyalty

For our family wireless service, we switched from AT&T to Verizon several years ago, and we've found them eager to provide reliable, high-quality service. So we've been loyal. A couple of months ago, I ran a price comparison and found that Verizon remains a superior value.   IStock_000019396853XSmall

So when Verizon launched their Smart Rewards program, I expected it would offer good value to its customers. Since we'd been customers for a few years, we started the program with over 100,000 points, and I spent a couple of hours trying to find a way to spend them for something we'd really enjoy. 

I was very disappointed. Most rewards require us to spend a substantial amount of our own cash. Freebies are very hard to access. And how come they can't let us convert even a small part of the points to paying off our bill, the way American Express does? Or maybe we could use it to get more data for special occasions?

So then I started searching to see what other people thought and found others equally miffed. In fact, the whole program is more geared to Verizon collecting data rather than rewarding customers. All of which contributes to their soaring profits. 

When rewarding our customers we have to look first at two big issues: 1) What benefits do our customers look to use to provide? 2) What values do we share with our customers? 

Ad Exchanger: Verizon Rewards Program Draws Customer Ire, Putting Mobile Data Sharing at Risk, 2015-Nov-5 by Allison Schiff

Many Verizon customers perceive that the company's Smart Rewards loyalty program – which, it should be noted, requires users opt in to be tracked for advertising purposes through Verizon Selects [emphasis added]– leaves much to be desired. As one Redditor commented in September, “It mostly exists to con you into buying things from partners at prices that aren’t particularly competitive.”...

It’s an aggressive move into digital ad monetization, a space typically populated by Facebook, Google, et al, and the opportunity for advertisers is clear. As Gartner research director Martin Kihn put it in a previous interview with AdExchanger, Verizon is creating “a mini-Facebook killer for mobile sales.”

For its part, Verizon is framing its intentions, as least to consumers, as a help-us-help-you sort of play. An email received by some Verizon subscribers in late October pointed to an explainer page claiming that the combination of the Verizon/AOL data sets “will help make marketing you see more personalized and useful to you across the devices and products you use.”...

All users start out with at least 10,000 points when they join, with the chance to win [emphasis added] additional points for doing fairly easy, run-of-the-mill stuff like paying bills, opting for electronic payments or upgrading devices. For example, participants can get 10 points for every dollar spent.

Although points can’t be applied to a phone bill [emphasis added], rewards run the gamut from the chance to enter sweepstakes to discounts off Verizon products, meals at local restaurants, travel and select merchandise.

Users can also put their points toward gift cards – say, 1,000 points in exchange for $10 off a $100 Denny’s gift card, meaning the customer is still responsible for shell out [emphasis added] $90 – or enter live auctions to win gift cards or merchandise.

The Motley Fool: Verizon Communications Inc. Earnings: Solid Wireless and FiOS Results Propel Shares Higher, 2015-Oct-20 by Joe Tenebruso

Verizon added 1.3 million new monthly wireless subscribers in the third quarter, which topped analyst expectations of only 1.1 million, according to Bloomberg. In addition, Verizon continues to show signs of strong customer loyalty, with its retail postpaid churn rate remaining low at 0.93%, a 7-basis point improvement from the year-ago quarter. That's impressive because it shows that Verizon is not only adding new customers, it's also doing an excellent job of keeping its existing customers....

More importantly, Verizon remains a cash-flow-generating machine. Even after adjusting for a non-reoccurring $2.4 billion gain related to the monetization of tower assets in the first quarter, operating cash flow increased to $26 billion in the first nine months of 2015, up from $23.2 billion during the same period of 2014. And adjusted free cash flow (excluding the tower sale) totaled $13.5 billion during the first three quarters of 2015, up from $10.5 billion in the year-ago period.