Review of loyalty programme business economics and management using big data and tactical retail marketing management.
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More Related Content
Loyalty Programme Marketing
2. *What is a loyalty programme?
*Loyalty Success Factors
*Introduction to Retail Loyalty Programmes
*Loyalty Programme Structure Secrets
*Loyalty Programme Promotions - Driving Sales
*Loyalty Market
*Summary
4. *The systematic collection of customer data in return for rewards or
benefits, often used to give customer additional privileges or services
to best/loyal customers
Opportunities
• Understand customers
• Give discounts to best customers only
• Adjust real price for certain customers
• Use data to negotiate with partners
5. Points Discount Rebate
Earn points and redeem
for rewards
Good
-Offers control
-Customer understands
-Lower cost
Bad
- Points cost are knowledge
- Accrued liability
Immediate discount for
presenting card
Good
-Easy and instant
- No liability
Bad
- Discount has to be large
(+10%)
- No control
Reward spend over
time
Good
-Easy to manage
Bad
- Little control
- Easy to copy e.g.
stampcard
- Little emotional connection
Esso
Smiles
Jusco
Starbucks
KrisflyerPrivilege
Earn points and redeem for rewards plus tiers of privilege
Good
-Privileges lead to loyalty
-Offers control
-Customer understands
Bad
- Low spend customer disillusion
- Competitors can match
Cathay
Marco Polo
6. What is a privilege program?
Tiers of benefits over and
above points for miles.
7. CoalitionSingle Owner
Lucky Chances for spend
Up to $200
Rebates for spend
over $200
VIP Privileges and private
sales for spend over $1000
Hybrid ModelCoalition Model
Octopus
15. Target
Audience
Regular shoppers
Brand
Positioning
- for everyone
-Birthday treats
-Members only
Customer
Loyalty
Drivers
Use membership
To make offers
Degree of
Participation
High
Choice of
rewards
Choose from
whole store
Generosity
Very generous
rebate up to 20%
Delivery of
Rewards –
rebate vouchers
(cash effectively)
Liability
Risk
High but also
High redemption
Investment
Cost
High
Getting
Customers to
Join
Easy – free
membership
Competitor
Strength
n/a
Sales
Focus
Very High
17. 2
5 46
1
37
8
Data Collection
Sales Promotion
Integration
Loyalty Programme
Mechanics
Brand Extension
Clubs within
programme
FMCG
Partnerships
Value
Proposition
Investment
Ratio
18. Strategy
* Capture all data relevant to the customer relationship
Approach
* Use Loyalty cards to capture all customer transactions, point
redemptions, online transactions and calls to any touch-point
* Segment the data according to shopping behavior, lifestage,
lifestyle and other differentiating factors
Advantages
* Understanding of customer behavior, identify valuable
customers and communicate one to one with customers
creating a more personal relationship
Data Collection
RFM
Lifestyle Lifestage
Basket
Attitude
Shop
Habit
Geo
-Dem
Data Warehouse
Segmentation Engine
Segmented Promotion Marketing
Interest
1
19. Application form is the single
most important point of data
capture
a)Gather all data in form
b)Gather data incrementally
using electronic channels
Key Information
-Contact
-Age/Gender
-Family/No family
20. Today
Primary Retail Segmentation Approaches
* Recency, Frequency, Value (RFV): e.g High Value Frequent
Shoppers, Low Value Frequent Lapsed
* Lifestage: e.g. Young Adult, Young Family, Older Family, Empty
Nesters
* Lifestyle: e.g. Organic, Fast Food, Home Cooking, TV Diners, Ethnic
Dining based on basket
* Internet Shopping: e.g. Trial, Cautious Developing, EverythingData Collection
VisitVisitVisit
Frequency RecencyFrequency Value $
Recency , Frequency, Value Segmentation
1
Time
21. *Basket analysis to get shopper type
Health Conscious Price sensitive
Brown Rice
Brown Bread
Natural
Yogurt
Organic
Carrots
Low far milk
Eco-Washing
Powder
Lowest price
cola
No fresh items
Uses 2-1
offers
Basket <10
items
Lowest price
noodles
Cheapest
washing powder
large format
New organic
chocolate New large value
biscuits
Current
Basket
Recommended
46 other shopping types – tv dinners, deli divers, traditional,
ethnic explorers, meat feast, vegetarians etc
22. Chance
Strategy
* Develop a research proven value proposition for
the loyalty programme underpinned by loyalty
drivers
Approach
* Value proposition has emotional and practical appeal
and the Loyalty programme aims to deliver the
proposition in the customer experience.
Advantage
* Customer benefit is clear and in-line with a customer-
focused organization
* Boots research showed that customers see
programme as ‘more indulgent, different, generous
and offers better rewards’
Value Proposition
2
Savings
Privileges
25. Strategy
*Define the right loyalty programme mechanics to
minimize cost while driving customer loyalty.
Approach
*Points because it offers them greater control to
stimulate spend, but use in different ways.
*$1=1pts use points for rewards: voucher
redemption integrated with sales promotions.
Advantage
*Greater control while driving customer loyalty.
Loyalty Mechanics
3
26. Lucky Chance Card Rebate Card
Rebate Card
& Privileges
& Target of 1
Easy to launch
No liability
Develop card mgt experience
Capture all details and transactions
Reward only when customers hits
threshold spend . Tier rebates at
different reward levels
$200 get $10 (5%)
$400 get $40 (10%)
$1000 get $150 (15%)
Layer on privileges for best
customers.
Target every customer with
individual statements.
27. Strategy
*Understand investment margins to
determine reward investment and frequency
ratios for the market.
Approach
*Average investment is between 1% - 3%.
Some retailers are offering under 1% to
keep cost down.
Advantage
*Determining the right level of investment is
balanced against the rewards that motivate
loyalty drivers.
Investment Ratio
4
Normally 1-3%
reward
28. Spend $1.25=1pt
Fill up $100 get 80pts
Fill up 4x $400 and earn enough
for a free coffee worth $5 (1.25%)
29. 4
Investment Ratio
$1.00Spend for 1pt
$0.01Value of 1pt
$1,000Total Store Sales
$800Sales on Card (80%)
800Points Earned
$8.00Value Points Earned
400Points Redeemed
$4Value Points Redeemed
0.50%Investment Ratio
30. *Octopus card offers a chance to earn
with a large number of retailers in
Hong Kong – Watsons, 7-Eleven etc
*Comes in smartcard form or keyring
*Reward rate can be chosen by
individual retailer
* At Wellcome, for example, one point is
earned for every HK400
* Watsons 0.5% per dollar amount of sale
A customer consolidating their spend across
the members could earn a significant amount
of reward $ every month
31. Strategy
* Data collected drives ALL marketing activity – it is not
operated in isolation.
Approach
* Use data to target sales promotion activity
* Lifestage, Shopping Habits, Location
* Always offer loyal customers something extra!
* Target sales promotions by customer segment – mass
marketing costs have been greatly reduced.
Advantage
* Greater ROI from all marketing activities
Sales Promotion
Integration
5
32. Strategy
*Develop Clubs within the loyalty program that use
knowledge gathered from grocery purchases
Approach
*Create Clubs for key interest groups where product
marketing efforts can be targeted and incremental
purchase is easy to stimulate
Advantages
*Create greater relevance for Club members and
reduce cost of generating incremental spend
Clubs within
Programme
6
36. Strategy
*Offer FMCG companies access to
customer knowledge.
Approach
*Offer FMCG brands that pay a fee
access to customer knowledge that
allows the brand to plan promotions
that reach the correct target audience.
Advantages
*Stronger offers to the right audience
create better returns.
FMCG Partnerships
8
Customer
Grocery Retailer
37. 2
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8
Data Collection
Sales Promotion
Integration
Loyalty Programme
Mechanics
Brand Extension
Clubs within
programme
FMCG
Partnerships
Value
Proposition
Investment
Ratio
40. Strategy
* Use data collected to personalize
vouchers/coupon offers and upsell
Approach
* Statement types are personalized based
on shopping habits
* RFV
* Lifestage
* Shopper type
* Lifestyle
* Shopper Type models
Advantages
* Increased response rates compared to
standard
* 90% to vouchers
* 30% to cross-sell/upsell
Example Loyalty Statement
1. Statements - online/offline
41. Strategy
*Use data collected to personalize
basket when repeat shopping
Approach
*Can make recommendations
based on basket
*Slip in the up-sell offers
Advantages
*Personalization offers a tested
formula for increasing
response/redemption rates
Online Shopping Basket
2. Shopping lists – online/kisoks
42. Store Catchments
Store Competitor Store
Promotion Target Area
Strategy
• Store catchments areas in
overcrowded markets need to be
defended from competitors
Approach
• Use loyalty program data to run
targeted promotions on areas of
highest competition
Advantages
• Powerful threat defense only for
customers in risky areas
3. Geo-marketing
43. Strategy
*Most valuable customers are invited for store
evenings, where specially hosted events are
put on around themes such as wine and
cheese.
Approach
*High quality store presentation and grocery
expertise allow retailers to create a conducive
environment for offering high end grocery
products
Advantages
*Meet and reward the best customers in
person, while extending sense of privilege
that is popular in all markets.
Wine Tasting Events are a regular
features for Wine Club Members
4. Events
44. Strategy
• Offers attract interest and offer
incentives for immediate purchase
Approach
• Types of incentives
– 2.Personalised shopping list
– 3. Rebate type vouchers
– 4. member prices
– 5. Free gifts
Advantages
• Customers see lots of opportunity
to participate – right offer for right
person
Loyalty Programme Promotions - Driving Sales
5. Layered promotions
45. Offer: Shop Online Offer: Mothers Day
Offer: WineOffer: DVD’s
Tips
• Weekly emails for grocery
but with different themes
each week
• Offers are rotated
• Messages are
personalised
• All Opt in email
Loyalty Programme Promotions - Driving Sales
6. Regular communications
47. *Programmes offer opportunity to get to know
customer – that’s cost of knowledge that must be
recovered
*Opportunity comes from using the data – to drive
more spend - personal shopping lists
*Customers enjoy being part of programmes if they
get privileges of whatever value therefore work
hard to give them value