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
- 8. Nets & Credit Bank Data 122132 Transaction Database Customers Analysis services Marketing Planning & Promotion tactics Data entry 122132 name email mobile Application Form age family NRIC 122132 name email mobile age family NRIC Customer card
- 9. Steps to launch Planning 1.Feasibility audit 2.Customer research 3.Financial planning 4.Develop programme model Implementation 1.Implementation – develop systems/communications 2.Launch Management (operations)
- 11. Loyalty Programme is a cost of learning about customers Additional Customer Profits Loyalty Programme Investment + Loyalty Promotions Costs >
- 12. Target Audience Brand Positioning Customer Loyalty Drivers Degree of Participation Choice of rewards Generosity Delivery of rewards Liability risk Investment Cost Getting Customers to join Competitor Strength Sales Focus
- 13. Jusco Program *Barcode card Hybred model *Instant privileges *Discounts for members *Birthday privileges *Points
- 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
- 23. + points on top of everything else
- 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
- 33. Specially organized kids activities at Ikea
- 34. Strategy *Extend brand using new services Approach *Develop strong own-brand products new non- grocery services *Leverage grocery database to offer re-branded services Advantages *More reward earning/redeeming opportunities *More data from partners and greater marketing reach Brand Extension 7
- 35. 1 2 3 4 5 Petrol 6 Utilities
- 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 5 46 1 37 8 Data Collection Sales Promotion Integration Loyalty Programme Mechanics Brand Extension Clubs within programme FMCG Partnerships Value Proposition Investment Ratio
- 39. 1. Statements 2. Personal shopping lists 3. Geo-targeting 4. Events 5. Layered promotions 6. Regular communications
- 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