2. Consumer loyalty
Consumer dynamics are driving retailers to focus to loyalty as one of the key growth drivers
Retailers recognize the importance of loyalty, the best of them are way beyond loyalty cards
Although even loyalty cards programmes are not yet used to its full extent
Loyalty can be expanded to various dimensions
Social media is not a mere trend – companies have to position themselves rapidly
Today, Fortune 100 companies are already using social media to a large extent
Social Media may be used along the entire Marketing & Sales funnel
Better understanding of consumer is the first step to start building on loyalty
A.T. Kearney 43/02.2011/18736p 2
3. Consumer dynamics are driving retailers to focus to loyalty
as one of the key growth drivers
• Sustainability
• Price competition
• Internationalization
• Vertical • Private label
integration growth
2
Retail
Industry
Growing
conflict potential
and increasing
necessity for
• Concentration cooperation • Increasing price
(horizontal consciousness
integration) Consumer
• Cost pressure
Goods • Declining
1 Industry Consumer 3
brand loyalty
• Direct sales
• Hybrid consumer behavior
• Internationalization
• Stagnation of consu-
• Sustainability mer spendings (in
• Communization mature markets)
A.T. Kearney 43/02.2011/18736p 3
4. Retailers recognize the importance of loyalty, the best of
them are way beyond loyalty cards…
Loyalty stages of excellence:
Traditional Emerging Leading World class
• Discount cards with Technology Analytics Communication
immediate discounts Breakthrough Breakthrough Breakthrough
or points collection • Discount/reward based on
• Open membership cumulative purchases • Customers divided into
• Equal treatment, no based on spend segments
differentiation between • Basic consumer • Consumers are invited to
customers information exists and is co-create the offerings by
• No targeted mainly used for re-active two way communication
communication analysis • Targeted communication via social networks
• No information base on and offers for segment and • Variety of clubs based on
customer or individuals focused customer
• No customer segments • Add-on services like segmentation are
developed • No targeted banking services, travel & developed, joint events
communication yet tourism, mobile telephony and happenings are
developed etc. Developed organized
• Add-on services offered
beyond loyalty card
holders, yet they have
special bonuses
Two way
Discount cards Loyalty schemes Add-on services
communication
Continuous improvement
A.T. Kearney 43/02.2011/18736p 4
5. … although even loyalty cards programmes are not yet
used to its full extent
Importance of customer metrics1) Customer metric usage
Customer transaction metrics
% of retailers with Frequency
Customer behavior metrics
customer loyalty of data mining2)
programs
Number of in-store
transactions per store 93%
Less
Average in-store 29% than 3 years
transaction size 88% or never
No
Customer Every
Number of store 10%
86% Loyalty 1 - 3 years
visits
Program 37%
10% Quarterly or
Number of units Semiannually
74% 63%
perchased
% of customers involved Continious
in loyalty programs 63% Customer 51% or
Loyalty Monthly
Average time between Program
repeat customer visits 57%
Average amount of time
customers spend in store 36%
(1) % Participants answering “very important”
(2) Among retailers with a Customer Loyalty Program
Source: A.T. Kearney 2009 AERO Study
A.T. Kearney 43/02.2011/18736p 5
6. Tesco‘s Clubcard system is perceived as one of the leading
loyalty card systems in the world…
Tesco Clubcard Back-Up
Loyalty
“Currency“ Tier structure Redemption Ease of use Comments
concept
• Points are stored and • Easy: • Lately Tesco
built up. Four times a Vouchers can has invested
year the holder receives be spent in £150 mil. in the
a statement along with store on Clubcard
offers & vouchers to the shopping or • The program is
value of points they have used on
a great success
saved, linked to the Clubcard
Tesco factor due to its
purchasing history deals where
Clubcard formidable use
they are worth
1£ spend earns • Clubcard points can also of data
four times the
1 Clubcard be used to obtain
value • Cooperations
point discounted day trips and with external
magazines partner
• Customers can also get companies like
double points on special Eon
offers and receive one
point for every carrier
bag they reuse (UK only)
as part of Tesco's green
initiative
Source: A.T. Kearney, Tesco
A.T. Kearney 43/02.2011/18736p 6
7. …and consumer insight deriving from Clubcard represents
an excellent base for expansion of services and
geographies
Example
Usage of consumer insights as a primary capability for expansion:
1 Expansion into new consumer needs
• Insurance: Fortis, Tesco Bank
• Telecoms mobile: Tesco/O2 with over 2m UK
subscribers
• Telecoms Internet service provider: Tesco/
Cable & Wireless
2 Development of a leading online channel
• 1994: Tesco enters online retail
• 2000: Tesco.com formally launched, largest online retailer in the UK (in 2008/9,
1.9bn£ in sales i.e. around 5% of UK sales, 5% EBIT)
• 2010: m-commerce site, used by 4% of online orders by year-end 2010
Consumer 3 US market entry with new format, Fresh & Easy
insights
• Leverage of consumer insights expertise and fresh/
cool-distribution/logistics operations knowledge
• 550m$ in revenue achieved in 3 years, more than
100 stores, gap to break-even remains due to heavy
promotions to stimulate growth, lack of scale
Source: A.T. Kearney research
A.T. Kearney 43/02.2011/18736p 7
8. Loyalty can be expanded to various dimensions
Overall loyalty scheme: Client example
Customer segments Assortment
• Demographic (children, seniors…) • Premium private label brands with tradition
• Regular loyalty offers with
points collection for attractive
pieces of assortment, card
holders have additional
advantages
• Lifestyle (healthy living…) Loyalty card
increases
reward but
not a
Channels serving particular prerequisite Additional services
segments
• Grocery internet • Travel, combined with
segment clubs
• Financial services,
mobile telephony
• Premium stores on premium locations
formed in clubs
Constant communication, one and two-way supports the overall scheme
A.T. Kearney 43/02.2011/18736p 8
9. Introduction to Social Media
Social media is not a mere trend – companies have to
position themselves rapidly!
Social media today
Social media "Stats" Global social media landscape
14 mn Germans
already have a
Profile on a Social In Jan 2010 more than 25 mn
Network Facebook user have visited
the site via a mobile device
Worldwide 588 mn
are using Social
Networks/Tools Facebook gains 700
thsd. more members
each day
6000 Tweeds per
minute on Twitter
More than 3 mn images In Germany, 2.4 mn
are uploaded daily on people are using Micro
Blogging Services
Flickr …and a lot more – in Germany
~175 social networks
Source: Deloitte "2009 Tribalization of Business Study", A.T. Kearney
Flowtown; Seitwert; A.T. Kearney Analysis
A.T. Kearney 43/02.2011/18736p 9
10. Today, Fortune 100 companies are already using social
media to a large extent
Usage of social media among Fortune 100 companies
(usage of Twitter, Facebook, Youtube and Blogs)
Usage of social media …at least one of them …all of them
(in %) (in %) (in %)
65
79 Global 20
54
50
33
86 US 28
88 Europe 15
Twitter Facebook Youtube Blog
50 Asia 25
Ø number of
accounts per 4.2 2.1 1.6 4.2
company
…usually companies have more than one account per social network
Source: The Global Social Media Check-up (January 2010); A.T. Kearney
A.T. Kearney 43/02.2011/18736p 10
11. Social Media may be used along the entire Marketing &
Sales funnel
Forms of social media usage along the funnel
Brand management Sales CRM
Conside- Satis-facti
Awareness Interest Selection Loyalty Advocacy
ration on
Targeting Viral marketing Seeding Social media monitoring
Social video News Feeds Micro-blogging
advertising Augmented reality Social network analysis
Presence page Social bookmarks
Embedded storefront
Widgets Social network Blogging User community
In-game fanpage Embedded online store
advertising features
Social search Engagement Video hyperlink ads Crowd sourcing/ voting
Sponsored stories advertising Social shopping Self-service Tweet-ups
Blogging Branded community Referral campaign
Cause-driven communities Evangelist communities communities
Source: SocialRep, A.T. Kearney
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12. Managing the Brand in Social Media
By blogging about fashion news, Otto improves its image
as fashion expert
Blogging: Otto’s Two For Fashion Example
Two fashion
addicts reporting
about fashion in
New York, Berlin
and Hamburg
Topics around
trends, people and
events, including
videos
Commenting on
blogs and news
Source: Two for Fashion; A.T. Kearney
A.T. Kearney 43/02.2011/18736p 12
13. Better understanding of consumer is the first step to start
building on loyalty
Way forward in loyalty:
Understand your Strengthen your core Increase loyalty and
consumer business expand
• Set the infrastructure for • Optimize your existing • Detect spending patterns
data collection and mining offerings
• Based on detected
• Invest in analytics • Prepare target offerings spending patterns
capabilities investigate expanding
• Introduce/strengthen 2-way opportunities
• Understand spending habits communication
• Expand the offering and
• Perform tailor made • Increase traffic and basket services
consumer segmentation size
• Attract consumer base to
expanded offerings and
services
Thank you!
A.T. Kearney 43/02.2011/18736p 13
