2014 customer loyalty asean conference: mike atkin
DESCRIPTION
Mike Atkin discusses global trends in customer loyalty marketing, using a case-study approach. Mike, the keynote speaker at the conference, is the Chairman of Customer Strategy Network.TRANSCRIPT
Mike Atkin
Chairman - Customer Strategy Network LLC.
Loyalty Marketing
Loyalty Marketing is the effort to
“identify, maintain, and increase the yield
from Best Customers
through long-term, interactive, value-added relationships.®”
Loyalty – Simple Definition
Driving Profitable Behaviour Change
What is Loyalty in Business ?
‘the ongoing process of engaging in co-operative and collaborative activities and programmes with immediate and end-user customers to create,
enhance mutual economic value at a reduced cost’
Sheth and Parvatiyar (1995)
The Customer Is In Control
Traditional marketing drives brand awareness but consumers are forming purchase decisions via digital channels
Today’s consumer depends on current customers to hear that your brand delivers
Customer Relationship Management
CRM is a system for managing a company’s interactions with current and
future customers. It involves using technology to organise, automate and
synchronise Sales, marketing, customer service, and technical support
Dictionary Definition
Successful Loyalty Marketing
The Right Message or Offer to
The Right Customer at
The Right Time in
The Right Media!
ADVANTAGES
• Collaborative – interactive
• Perpetual - learning
• Temporal – flexibility
• Why Programmes are failing – Global Research.
• Solutions for Improving Programme performance.
LEARN FROM GLOBAL MISTAKES!
Why Programmes Fail ! – Global Research
The Reasons for Failure !
• No clear strategy or set objectives
• Flat funding rate or no targeted bonuses
• Members restricted to payment options
• No Dialogue with Members
• Weak or No Soft Benefits
• Poor or Little Use of Data
• Cash or Discounts (transparent)
• Poor Communications
• Boring and Predictable
• Programme Costs
• Loyalty is not part of the Business Culture
Business Objectives.
The Recommendations !
• Discuss and Determine the Business Objectives.
• Discuss and Determine the Loyalty Objectives.
• Decide on the KPI’s
• Document and Communicate to the stakeholders
• Review and Revise regularly !
PLANNING TO CREATE AN EFFECTIVE PROGRAMME
Define The Business Objectives
Financial.
Customer.
Operational.
Marketing.
Plan - Short, Medium and Long –Term.
‘Is Loyalty in the Business Culture?’
PLANNING TO CREATE AN EFFECTIVE PROGRAMME
Best Practice - Enrollment Strategy
• Segmentation of Customers/Members
• Set Performance Criteria
• Monitor – Respond – Monitor
• Create Promotional Calendar
• Focus Marketing Spend
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Current Value
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Engage
Ignore
Up Sell
RetainActivate
Best Practice - Manage Customers
• Low value, modest potential but may grow
• Temporal bonusing and recalibrate
• Moderate value, great potential and prime for growth
• Invest aggressively
• Heavy use of communications & bonusing
• High value, modest to little potential except cross sell opportunity
• Must retain
• Soft benefits critical
• Invest wisely
• High value and potential, up sell to feature rich or service rich package
• Soft benefits strategy
• Invest, but do not over fund
• Mixed value, very low potential, strain on infrastructure with little
opportunity for incremental growth
• Starve out
• Save marketing expenses
Activate
Engage
Retain
Up Sell/Cross Sell
Ignore
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tia
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alu
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Current Value
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Engage
Ignore
Up Sell
RetainActivate
The reward strategy has to blend benefits to engage
REWARD STRATEGY
Spenders: With a loyalty scheme, I look for instant rewards or discounts
Savers: With a loyalty scheme I look to save up for something special with a higher value
South Africa
53% / 47%
Singapore
60% / 40%
Ireland
50% / 50%
Hong Kong
53% / 47%
“Spenders” and “Savers” are roughly equally split....
UK
Source: Avios
REWARD STRATEGY
The science of data....
Best Practice - Create and Enable Dialogue
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ValueRecognition, Reward,
Service, Access etc.
Information.Changes in Lifestyles, Preferences
Needs, Attitudes etc.
DATA DIALOGUE
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Customers
19
The microwave is
essential for me!
I love baking for
the whole family
I love exotic and
adventurous food
I have to stick to
a budget
I care about health
and the
environment
We like fish
on Fridays …
20
Lifestyles are built from “DNA profiles”
Miss Jones’s DNA Profile: a “time-poor, food-rich” customer – 25,000 products are used to
create a customer’s DNA
– we have a DNA profile for every
single customer
Ove
r-in
de
xin
gU
nd
er-
ind
exin
g
Dimensions
Turn transaction data into insightTransaction Data Customer DNA
Profile
Date Description Amount
09/02/2006 PAYPAL *QUEENOFQUEEN £10.19
09/02/2006 AMAZON £15.98
10/02/2006 Tesco £50.11
10/02/2006 BP £40.00
10/02/2006 Pizza Hut £25.00
11/02/2006 O'NEILS £15.68
13/02/2006 Sainsburys £12.41
13/02/2006 Clintons Cards £4.99
14/02/2006 Interflora £55.00
14/02/2006 Brula £65.55
15/02/2006 PAYPAL *SOCKSRUS £2.50
17/02/2006 GNER £70.00
Traditional
Loyalists
Mainstream
Time poor case rich
Flamboyant spenders
Value aware
Wallet on the web
Quality
classics
0.50
1.00
1.50
2.00
Brand Loyal
Traditional
Family
Orientated
Impulse
Prestige
Price
Sensitive
Convenienc
e
Technology
Comfort
=
Common language
A shared
understanding of
customers across the
network
retail banking
Visa EMEA Programmes Case Study
• Background.
– 250 million cardholders – 76 programmes.
– Reward programmes operated by acquirers, issuers and banks.
– Cash back, Merchandise and Travel reward options
– Merchant funded discounts – poorly promoted.
– Average participation only 32%
PROGRAMMES ARE NOT WORKING AND ARE A COST OF DOING BUSINESS!
• Visa EMEA Support
– Data
• Visa provide acquirers with cardholder transaction data for targeted offers.
• Cardholder lifestyle data is not collected
– Promotional Activity.
• Some in-store POS but limited to enrollment
• Few Programme websites and direct email activity.
• Visa Plan to add CSR Reward Options in 2014.
TOUCHPOINTS
• Background.
– Launched in 2007
– 520,000 Members
– Flat Funding Rate
– Merchant funded discounts – poorly promoted.
– Only 27% of Members are engaged/active
– HNW Customers are main redeemers
PROGRAMME IS NOT CREATING GROWTH OR DEFENDING ATTRITION!
• Solution
– Introduce Tiering by giving Tier points based on products used.
– Improve Rewards options for lower value customers to encourage redemptions
– Collect Lifestyle Data and Segment Members.
– Define Tactics and KPI’s for all segments
– Introduce Mobile Technology for Communications and Redemptions
– Introduce Social Network links
– Train Staff – Enhance Technology – Improve Customer Service !
Data Case Study
• Background.
– Boots UK Largest Pharmacy Chain
– 7.2m Advantage Card Members
– Collect Transaction and Lifestyle data
– Segment Members
– Targeted Communications
– Many Supplier Funded Offers
• L’Oreal Promotion
– Introducing new fragrance for females
– Target Market 18-15 year old females
– Boots identified 1.7m prospects
– Exclusive Boots/L’Oreal offer made
– Communicated via email and Member webpage
– RESULTS!
– 43% Member response!
– 34% Purchased the Offer!
THE TESCO STORY.
‘There will come a time when a
company's’ knowledge of its’
customers is more valuable that its’
products and services
Brian Woolf 1995
Tesco Case Study
• World’s 3rd largest grocer
– #1 market share in UK with 2,100 supermarkets
• Tesco Clubcard has over 11 Million active members who earn 1 pt./ £ spent and redeem through cash vouchers issued on a quarterly basis
• Clubcard has set the standard for data driven marketing in grocery and issues highly customized offers to its customers based on purchase history
• Clubcard has created “clubs within the club” to leverage customer interests (Food, Wine, Healthy Living, Baby) and deepen relationships by product category
• Members who join specific clubs can earn even more points and receive special benefits
Business Challenges• Tesco recognized that customers were easily translating point value as a 2% discount and
using vouchers to purchase items they would buy anyway
• Three challenges were presented for change:
– Financial leverage in rewards currency was diminished
– Members were not exhibiting incremental purchase behavior as desired
– Tesco reward partners were seeing limited benefit from the relationship
• Objectives included:
– Encourage Clubcard members to redeem for non -Tesco products
– Reduce in-store redemptions
– Add value to Reward Partner relationships
Process & Insights
Process Engaged
• Perform segmentation analysis of redemption data to compare in-store vs. catalogue channels by reward types to understand trends and compare to member research
• Review offers for merchandise and partner rewards & consider additional reward options with consideration for costs and partner marketing support
• Identify unique or underutilized opportunities with reward partners
Analytical Insights
• 83% of Members redeemed vouchers in-store with 68% for food purchase
• Catalogue redemptions were for lower value items (e.g. magazine subscriptions) than in-store redemptions
• Members surveyed liked voucher system and expressed interest matched with redemption partner willingness to expand relationship with Tesco
Recommendation & Results
Recommendations
• Retain vouchers strategy but add create a new set of non-food rewards offering higher value for the points (x4)
• Negotiate with specific partners to gain funding & promotional support
• Introduce offers for specific segments (e.g. Young Families), communicated by quarterly mailings and website
Results
• Significant increase in redemptions in-store for non-food items (e.g. White Goods, Electronics and Housewares & unexpected increase in sales of the above
• Overall a reduction in the value of in-store redemptions on food purchases
• Several reward partners (e.g. Marriott Hotels) have seen a 20%+ increase in redemptions
• Additional reward partner agreements are under negotiation
Clubcard Loyalty Analysis
Clubcard Charter•We would like to reassure you that your details are safe with us and will never be released to
companies outside the Tesco Group for their marketing purposes. We use your personal details
to send you your Clubcard Statement and any Vouchers you've earned, every three months.
We also use your details to send you offers and information on things which might interest you.
So, for instance, if you tell us that you're a vegetarian, we'll make sure you're not sent coupons
for meat products.
•Of course, if you've told us you don't want Tesco to send you any other offers and information,
we will only send you your Statement mailing. However, this means you could be missing out on
some of the major benefits of Clubcard, such as money-off coupons and exclusive offers.
•In addition, if you've requested not to be contacted for research, we promise we won't bother
you.
•If at any time you would like us to stop sending you mailings, please let us know and we will do
so immediately.
•We comply strictly with the terms of the Data Protection Act 1998.
British Airways – Executive Club.• Objectives
– Deliver a Personal, in journey experience to increase customer satisfaction
and loyalty to the Avios Brand
• The Tactic
– Analytics – identify the member activity, the journey, touchpoints and define
‘ideal moments’ !
– Deliver the right message, to the right customer, at the right time and in the
preferred format.
Example – Upgrades, Meet & Greet, Welcomes Aboard and Manage Customer
Relations for service failures (where applicable)
• Results
– 87% increase in messages delivered by SMS, Website and in person.
– Member satisfaction scoring increased by 14%
Best Practices – Loyalty Programme Technology
User-Friendly Web Interfaces for all Stakeholders
Administration CentreProgram Administration
Reporting CentreProgram- / Member
Performance Reporting
Business Intelligence
CentreBusiness Analysis
Member Web PortalSelf-Service Portal for
Members
Mobile App* / Tablet
AppMobile Features for Members
POS PortalWeb Portal for POS / Sales
Staff
• Accessed via Control Center by Program Managers
–Real-time results–Graphical representations–Drilldown & export results
• Key Performance Indicators–Program Registrations–Points Issued / Balances–Redemption by category–Top Earners / Redeemers
• Reporting for planning–Dashboards–ROI–Participation Rates–Promotions
• Closed-loop Reporting –Fulfillment Tracking–Shipment Status–Exceptions–Issue Management
On Demand Reporting.
Promotions instantly appear on the program website
Quickly implement promotions and campaigns to influence behavior based on changing market conditions
Self-Serve Bonus Offers.
Efficient & Effective Loyalty Programmes are Complex
37
So what makes the perfect programme?
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Simple Proposition
Simple compelling collection and redemption proposition
Data Usage
As much relevant data captured and used from day 1
Simple Mechanic
Collect via a card, key fob or digitally
Supplier funding
Opportunities built in to boost earn and insight
Constant visibility
The scheme remains front of mind not just on day 1 but beyond
Redemption offers
Simple redemption mechanics across all channels
Savers Offer
Drives visits, send and limits liability
Staff engagement
Sustained buy in across all levels in the business
Small Hurdles
To filter out indiscriminate joiners
Source: Loyalty Report 6, Avios,and desk research
Savers Offers
In-store and digital earn offers over a relevant range
Multi Partner
Partners enable incremental earn, redemption & data
Simple Mechanic
Single collection card for collection and redemption
CSN Strategic Planning Methodology
Business Objectives
Customer Voice
Data Analysis
Lifecycle Value Chain
Program Model
Choices
Customer Value
Proposition
Comm Plan
Financial Model
Execution Plan
Operations
Pilot / Testing
Measure / Evaluate
Continuous Improvement:
Customer Engagement,
Usage & Retention
Situation / Implication Analysis
Product Use Case UnderstandingPrimary Research, Attitudinal Surveys
Information RequestSegmentation, Scoring, Modeling
Map Customer behavior &segments to each stage
Message, Channel, FrequencyCreative treatments
Determine optimal modelSolus, Merchant, Coalition, Social
Hard & Soft benefitsOffers, Promotions, Premiums
Budget forecastReturn on InvestmentLiability projection
Tactical blueprint for launchEnrollment, Rewards, MerchantsProgram Rules, T & C’s
Operational alignmentTechnology SelectionProcessing, WebCustomer Care
Identify test marketsLaunch support & logistics
Tools to evaluate program results& make needed adjustments
Loyality Check: 10 Point Plan for Programme Enhancement
1. Have your objectives shifted? How should strategy evolve?
2. What external factors impact strategy? Competition, governmental?
3. Is your programme profitable & can you measure it?
4. How can you reduce operating costs?
5. Can you better manage unredeemed point value on the balance sheet?
6. How do you convert data into a valuable asset to deliver more value to your program members?
7. What should you do about social networks, location based marketing, and other digital channels?
8. Do you need to upgrade your technology platform? How should you go about the process & navigate the vendor world?
9. Are your members tired of the same old rewards offers? How do you add excitement to merchandise, gift card and travel?
10. Have you looked at your programme through the lens of the customer?
Thoughts for the Future
Loyalty programs remain an excellent tool to create and maintain customer preference and to collect data invisible from your competitors, but a new wave of innovation is
demanded by the market
No business executive ever woke up in the middle of the night and said “I must have a loyalty program”. It was their business problem that interrupted a good night’s rest.
Identifying objectives leads to the best strategic solution
View your Loyalty program as part of a broader Customer Strategy and your “hammer” will change into a Swiss Army Knife
If Technology Enables then Imagination Wins,
There are no “paper champions”
Don’t just launch, measure consistently & manage to success
Thank you
Wrap-Up & Questions
www.customerstrategynetwork.com