Few things make this blog worth the time I dedicate and the risks I take to (hopefully) keep it fresh and somewhat controversial than when it spurs dialogue and discussion. Hence I was delighted when Yair Panet, former Head of Poker Playtech turned consultant and entrepreneur, contacted me and wanted to contribute with some thoughts relating to a previous post of mine. Obviously I was more than willing to oblige. So here are Yair’s words, they are definitely worth reading. Any comments I  have will be posted in the comments section.
If you think the illustration sucks that’s on me though.

Yair Panet:

[intlink id=”748″ type=”post”]A recent post[/intlink] on this blog gave me some food for thought on an issue which gets overlooked at times – loyalty plans. Loyalty plans are an essential marketing tool for many businesses. Airlines, credit card companies and even restaurants have been using them for ages to increase the lifetime spend of a customer. The main purpose of loyalty plans is to automate the retention process and give the customer goals to reach and rewards to reap.

The difference between loyalty plans and rakeback is debatable. During my days in iPoker I was presented with this question many times, and I always gave the same answer: “you can call any reward rakeback, since you are giving back something based on the rake a player generated”. Yet I am still a strong believer that the right loyalty plan in inherently different (just as a first deposit bonus is not rakeback). Many cardrooms view loyalty plans as an alternative to rakeback, especially those in networks which don’t allow rakeback. They usually miss the point and just decrease their margin without increasing loyalty (many times fighting themselves a price war).

So what is the difference? Firstly Rakeback is linear. You will get the same % whether your MGR is $5 or $5,000. Secondly rakeback simplifies the rewarding process, thus making the price war easy as can be. Thirdly it limits the rewards to cash only, taking away any segmentation of prizes and players. Basically It’s the same as if airlines would remove their loyalty plans and start fighting on price only.

So what is the right loyalty plan? It shouldn’t be % focused. The business question which loyalty plans should answer is not “how much % should I give players who rake X?”. It should be “What is the most relevant reward for players who rake X and how do I reward their loyalty”. Making sure that players who rake $1000 a month get a better % than players who rake $20 a month doesn’t require too much thought. Finding a reward for players who rake $20 a month which is relevant for them (and not having them chase a $5 bonus which they will never get) while maintaining happy high-raking players is the issue. The $20 MGR players need other incentives. Many times these are players who come from a different product (Sports usually) who want to dabble in poker. The loyalty plan should reward them for their efforts, and cash isn’t the way.

So what is the right reward? Good question. It depends on the cardroom’s DNA and the player segment in question. Some players will be much happier to access restricted freerolls rather than getting a few bucks. Others will want access to land based tickets in the store. Others want only cash. There is no definite answer, but thought (and a huge data sample) is required to pinpoint the loyalty plan.

This is a guest blog by Yair Panet. Yair is the CEO of TierX, a social marketing platform, and an independent online gaming consultant. You can follow Yair on twitter here.