Perhaps we just don't understand

So, there's this program that creates a venue for upscale brands to offer product to consumers. You buy these brands with points, and you get the opportunity to get the "best of the best"--the leading names in electronics, personal accessories, home goods, and so forth.

For the longest time, everything works great. The brands get to offer their product to an audience that can appreciate them. The point system is somewhat blind, and as a result the brand sells the product at close to MSRP or at least Minimum Advertised Price (MAP).

And the program provider is happy too, because they create a strong tie to their members, promoting loyalty and reinforcing their own brand as something "exclusive" and "unique". Everybody's overjoyed. Things are good.

But then there are Storm Clouds. First, the consumer stops earning points at the levels they once did. But despite that, there are billions of points sitting on the program sponsor's balance sheet. So many billions, in fact, that there becomes an edict from the Ivory Tower--"get rid of these points--they're clogging up our financial return and may cause investors to ditch our stock."

So, the team that put all this together starts looking for options. And there are hundreds of them--from lowering how many points it takes to get item X to seeking partnerships with other merchandise options, like gift cards. But it's not enough-those billions sit there.

Finally, they go to the Big Kahuna--the largest online retailer on earth, and make a deal. Now, all that Brand Equity they so assiduously nurtured is torn asunder by a single decision. Now, all those brands that spent time (and not a little money) cultivating their equity have to watch as every competitor they face in the market gets access to those program participants for FREE.

And it's not just the competition--it's the unauthorized retailers that have found ways to secure inventory outside the brands' distribution network and offer it at sharp discounts. Those entities used to be outside the program looking in--now they have a seat at the table just like everyone else.

Maybe we just don't understand. Maybe those billions of points were so important, so much a drag on the balance sheet that something this drastic HAD to be done. Maybe the notion of Brand Equity is quaint in the Internet Age, where everything is available all the time.

But what was once a venue for upscale brands sharing their message with upscale consumers is now a free-for-all. And it's a shame...


Pete