1. Loyalty 2.0
ICHEC
Stéphanie Duchemin
November 25th 2013

2. Agenda
1. Introduction The House of Marketing
2. What is customer loyalty?
3. Loyalty program set-up & examples
4. Trends & challenges
5. Loyalty 2.0: alternatives to loyalty programs
2

3. The House of Marketing
3

4. The 3 main services of The House of Marketing
Temporary Marketing
Support
Marketing Consultancy
Marketing Talent
Development
To bridge capacity &
competence gaps
To tackle strategic
marketing
challenges
To develop, coach &
train marketers on
the job
4

5. Question
What are your expectations of today?
5

6. Agenda
1. Introduction The House of Marketing
2. What is customer loyalty?
3. Loyalty program set-up & examples
4. Trends & challenges
5. Loyalty 2.0: alternatives to loyalty programs
6

7. To which brands are you loyal & why?
7

8. Customer loyalty is a behavioral and attitudinal tendency
to favor one brand over all others
“Customer loyalty is both a behavioral and attitudinal
tendency to favor one brand over all others, whether due to
satisfaction with the product or service, its convenience or
performance, or simply familiarity and comfort with the
brand.
Customer loyalty encourages consumers to shop more
consistently, spend a greater share of wallet, and feel
positive about a shopping experience, helping attract
consumers to familiar brands in the face of a competitive
environment.”
Source: PR Loyalty Solutions
8

9. To define customer loyalty a distinction has to be
made between behavioral and attitudinal loyalty
Behavioral loyalty
A customer who stays (repeat purchase, renew contract,…) is
often seen as a loyal customer
Be careful: This does not mean that these customers are loyal because they might leave
once the situation changes…
Attitudinal loyalty
Source: Klantenloyaliteit, Marnix Bügel
Commitment to continue using a product or service, despite
situational influences and marketing efforts of competitors,
is true loyalty.
9

10. DELIBERATIVE
CONFIRMERS
low
Consciously
reconfirming their
brand choice upon
purchase
Identifying with the
brand
INERT
RESIDENTS
Making the same
choice out of habit
Locked in or
switching is not
worth the effort
low
Involvement
CONVINCED
LOYALISTS
HABITUAL
USERS
high
Subjective axis: Perceived emotional, social, functional risk of
switching
Loyalty is driven by two dimensions: switching barriers &
involvement
high
Switching barriers
Objective axis: Perceived effort, cost, time to switch / frequency of
transaction
Source: THoM analysis of McKinsey Quarterly & Marketing NPV
10
Involvement drives
behavioral & attitudinal
loyalty
Switching barriers drive
behavioral loyalty

11. Illustration
Keep the switching barrier high to prevent the customer
from changing brands
• Nespresso’s coffee machine could only be filled
by Nespresso capsules, which were only
available online and in exclusive shops
• Consumers didn’t have the choice and were
attached to the brand
BUT:
• Douwe Egberts duplicated the capsules, which
can also be used in the Nespresso machines and
are available in the supermarkets
• Nespresso’s switching barriers decreased:
consumers can now easily switch between Nespresso and Douwe Egberts
• Nespresso will need to continue working on involvement
11

12. Illustration
Despite changes in regulation to lower the switching
barrier, find a way to keep the customer
Become Telenet iKing and
receive an iPhone 5 for only
€199 (€29 for iKong)
If you leave iKing within a
period of 24 months, you
need to pay the remaining
value of the iPhone to Telenet
12

13. Illustration
But... be aware of negative reactions from unsatisfied
customers
13

14. Question
Why do loyalty customers switch to another brand?
14

15. DELIBERATIVE
CONFIRMERS
CONVINCED
LOYALISTS
HABITUAL
USERS
INERT
RESIDENTS
low
high
low
Involvement
high
Subjective axis: Perceived emotional, social, functional risk of
switching
Exercise: Put the following brand logos on the right place in
the loyalty matrix and explain your positioning
Switching barriers
Objective axis: Perceived effort, cost, time to switch / frequency of
transaction
15

16. Be aware, brands can move throughout the framework
due to changing circumstances or consumers‟ perception
CONVINCED
LOYALISTS
Involvement
high
DELIBERATIVE
CONFIRMERS
INERT
RESIDENTS
low
high
low
HABITUAL
USERS
Switching barriers
16
True loyalty is the only
sustainable, long-term
competitive advantage for
business in today’s
multi-channeling world.

17. Question
What should Q8 do to increase involvement & switching barriers?
17

18. 18

19. Loyalty is often confused with retention in terms of
objectives, tactics and target
Margin
Get!
Acquisition
Grow!
Keep!
Development
Get
(again)!
Retention
Win-back
Time
Loyalty
Retention management
•
•
•
•
•
Primary increasing switching barriers,
secondary increasing involvement
> Increasing behavioral
loyalty
Short term fix for churn reduction
Long term plan for retention
Focus on high and medium value
customers with high churn risk
Aims at reducing and preventing
churn through fixing the basics
Source: THoM analysis
Loyalty management
•
GET
GROW
•
•
KEEP
•
19
Increasing involvement by
understanding loyalty drivers
> Increasing behavioral
and attitudinal loyalty
Long term
Focus on customers with high
potential (customer lifetime value)
Aims at retaining and increasing
customer value through building
sustainable relationships

20. Agenda
1. Introduction The House of Marketing
2. What is Customer Loyalty?
3. Loyalty program set-up & examples
4. Trends & challenges
5. Loyalty 2.0: alternatives to loyalty programs
20

21. Question
Why do brands set up loyalty programs?
21

22. Question
Why do we register to loyalty programs?
22

23. Traditional loyalty programs can be ranked on 3 axes: the
reward-moment, required counteraction & customer
initiative
Reward-moment
Immediate
Transaction
based
Counteraction
1
Customer
initiative
Direct Adv
Program
Postponed
Not transaction
based
2
Relationship
Program
3
Savings
Program
No initiative
Direct discount
4
Initiative
Contest
Program
Advantage won
through contest
Source: Klantenloyaliteit, Marnix Bügel
23
Saving points for
gifts via
transaction
Service related &
other advantages
5
Event
Program
Event invitation
6
Customer Adv
Program
Saving points for
gifts via initiative

24. Direct advantage program
24

25. Relationship program
25

26. Savings program
26

27. Contest program

28. Event program

29. Customer advantage
program

30. Question
Why do customers opt out of loyalty programs?
30

31. Agenda
1. Introduction The House of Marketing
2. What is Customer Loyalty?
3. Loyalty program set-up & examples
4. Trends & challenges
5. Loyalty 2.0: alternatives to loyalty programs
31

32. Is building loyalty an utopia?
How to build loyalty?
60%
Improve customer
More relevant experience
products/services
Analyze customer needs
50%
Focus on CLV
Personalize Communication
Net Success
40%
Refine segmentation
Invest in employees
Create dialogue
30%
20%
Review pricing strategy
Reward with incentive
10%
Involve customers in
marketing projects
0%
0%
10%
Source: Yearly
#YMS2013 Marketing Survey 2013
20%
30%
40%
Usage
32
50%
60%
70%
80%
90%

33. 100% loyalty is out. Divided loyalty is in.
• Loyalty programs have become a commodity
“Your consumers are just
somebody else‟s
consumers
who occasionally buy
you”
Martin Hammer
33

34. Loyalty programs have become a commodity
Marketers should rethink the loyalty concept
34

35. Being enrolled in a loyalty program is a habit rather than
influential in purchase decisions
The average
Three-quarters of
households are enrolled
in at least one frequent
customer account.
Fewer than 20% of loyalty
household has
members say their memberships
signed up for no
are influential in purchasing
less than 18
decisions and only 33% of
memberships.
loyalty customers feel that
American households
are active in less than
50% of the programs
those programs are addressing
But ...
they have signed up
for.
Source: The power of points: Strategies for making loyalty programs work
35
Customer Strategist, Peppers&RogersGroup
their needs.

36. Illustration
Famous loyalty programs don‟t work anymore
• Loyalty scheme:
redeem points for rewards and prize draws
• Unique experience:
redeem points for Coca-Cola
merchandising, magazines, cosmetics, speakers,…
“We are making some changes to Coke Zone following a review of which parts of the site are
of most interest to people. What this review tells us is the vast majority of people visit Coke
Zone for news, competitions and the chance to win great prizes and experiences, rather than
to collect and redeem points in exchange for gifts like T-shirts and headphones.”
Statement Company Coca- Cola
36

37. Illustration
Frequent flyer programs are also under pressure
Situation






Limited increase of loyalty as business travellers have cards of all airlines
Rewards based on wrong metric: airmiles flown instead of amount spent
Only reward when it’s convenient for the airline (e.g. upgrading)
Slow reward redemption
Frustrated non-frequent flyers: lack of engagement
Lost status can destroy relationships
37

38. 100% loyalty is out. Divided loyalty is in.
• Loyalty programs have become a commodity
• The savvy shopper wants more, and he wants it now
38

39. Changing behavior of consumers
“the savvy shopper”
Better informed thanks to internet
Research & plan more deliberately
Increased switching behavior
Far more discriminating in choosing to
which brands to give their loyalty
Expect to be rewarded & recognized for
their loyalty
Want instant gratification, value &
relevance in every transaction
39

40. 100% loyalty is out. Divided loyalty is in.
• Loyalty programs have become a commodity
• The savvy shopper wants more, and he wants it now
• Digital channels reshape the loyalty landscape
40

41. Social media like Facebook have become mainstream
Social media reach in Belgium
5.5 mio users
1.178.723 profiles
167.679 profiles*
46.243 profiles
Source: B.L.V.G Blog, June 2012
* Estimation end 2011
41

42. Illustration
United airlines “Optathlon” gives passengers the chance to
instantly win upgrades
• The app includes five games:
Legroom Legend , Linejump
Hero, Mileage Ace, Suitcase
Skyway & Airport Oasis.
• Playing the games just before a
flight gives you a chance for
instantly winning access to the
airlines Red Carpet Club, Premier
Line, Economy Plus or a 10% ecertificate. There’s also a chance to
win one million Mileage Plus miles
during game play at any time.
• All the games are dealing with the
realities and frustrations of airline
travel
42

43. Illustration
Converse All Stars: co-creation used as loyalty tool
Converse:
•
December 2011
•
Facebook application
•
Design own Converse
shoes and sell them
through friends on social
network and virtual store
•
Free pair of shoes when
enough pairs are sold
43

44. Mobile technology provides an answer to the changing
behavior of consumers
Consumers expect immediacy, relevance & convenience
Immediacy
Relevance
Convenience
Nectar
Using location-based services
to provide discount codes
directly
Hilton
Loyalty apps which give
customers immediate access
to booking info, let them
order room service, checkin/out, etc
Delhaize
Mobile shopping
Targeted & personalized
offers
Shop & collect, find stores, …
Source: THoM analysis
44

45. Illustration
“My Starbucks rewards” steps away from real currencies
Special features & in-store utilities
Mobile Card
Card
Balance
E-Gifts
Locationbased
Rewards
overview
45

46. Illustration
Qustomer: „the digital loyalty card of the future‟
46

47. Mobile
New technologies reduce frontier between loyalty & payment
Universal payment app
(Bancontact
Piloted ‘13, launch : ‘14)
Mobile wallet
(Sixdots, SEQR
Launch: ‘14)
Mobile wallet, excl Payment
(Passbook)
Universal loyalty App
(Qustomer, Fidme)
Dedicated payment app
(KBC PayMe, bpost bank)
Payment
Online payment
(Paypal, Ogone)
Loyalty
Cashier system incl loyalty
(e.g. Micro Concept)
Piggybacking loyalty scheme
(Freedelity, Fiselsys)
Debit & credit cards
Plastic cards
Multi retailer loyalty
cards
(e.g. Plus card,)
Stampcards
(e.g. Exki)
Size of bubble provides an estimate of adoption rate in BE (from mainstream to niche)
Dedicated
loyalty cards
(e.g. Fnac)

48. 100% loyalty is out. Divided loyalty is in.
• Loyalty programs have become a commodity
• The savvy shopper wants more, and he wants it now
• Digital channels reshape the loyalty landscape
• Forget “old school rules”: focus on light users and penetration
#YMS2013
48

49. Question
“It costs five times more to acquire a customer than to retain one”.
What do you think?
49

50. Answer: The statement is a myth
Advertising &
promotional
expenses
- Not only for inducing first time purchases, also for brand image
and awareness among current customers
- Promotions are often enjoyed by both new and current
customers
Diversity of
customer base in
terms of acquire
and retain costs
- Customer profitability is not evenly distributed.
- Often the most expensive customers to retain = those who
generate most profits
- desirable to competitors and receive attractive offers
- customers know this and expect a higher level of service
BUT
- Best customers outspent others by:
- 16 to 1 in retailing
- 13 to 1 in restaurants
- 12 to 1 in airlines
- 5 to 1 in hotels
- Satisfied customers spread more WOM
Source: www.ipsosloyalty.com
50

51. The combination of a penetration and a loyalty strategy is
necessary and asks for a dual marketing approach
Combined strategy and approach
Penetration growth
&
Existing customers might
buy the brand more often
New customers might
buy the brand
Mass Marketing
Loyalty growth
&
Reach all the buyers,
including the occasional,
light buyers and non-buyers
Target Marketing
Reach all the heavy
users
Most effective campaigns aim at new AND existing customers.
A company is successful when it targets light users AND heavy users.
51

52. Retention and loyalty initiatives will only boost business if
there is alignment with the business strategy and the
marketing strategy
Vision &
Business
objectives
Positioning
Sales
strategy
Penetration growth
Retention &
loyalty
strategy
&
New customers
Mass Marketing
Reach all potential targets
Loyalty growth
Existing customers
&
Target Marketing
Reach valuable clients

53. 100% loyalty is out. Divided loyalty is in.
• Loyalty programs have become a commodity
• The savvy shopper wants more, and he wants it now
• Digital channels reshape the loyalty landscape
• Forget “old school rules”: focus on light users and penetration
Loyalty 2.0: working
on tailored customer
experiences
#YMS2013
53

54. Illustration
Of course, tailored customer experience is more than a
creative campaign
Creativity works but it doesn’t
mean the customer won’t buy
the competitor’s product
Keep in mind that obtaining 100% loyalty is difficult today.
Make sure your brand is at least part of the customer’s basket of brands
54

55. Agenda
1. Introduction The House of Marketing
2. What is Customer Loyalty?
3. Loyalty program set-up & examples
4. Trends & challenges
5. Loyalty 2.0: alternatives to loyalty programs
55

56. These trends have changed the loyalty space
From today’s loyalty…
To next generation loyalty
 Programs only focused on in-program
transaction data to reward target
customers (purchase/earn/redeem)
▪ Loyalty extends beyond purchasing, and
rewards behavior across the customer
decision journey: focus on interaction
▪ Diversify away from currency: increasing focus
on customer experience
 One size fits all
▪ Customized: personalized offers, differentiated
▪ Programs reach customers through
▪ Channel ubiquity – loyalty is conveniently
traditional channels: a program
website, call centers, email or mail
experiences & relevant rewards
present wherever and across multiple vehicles
▪ Social media & mobile as powerful loyalty
generators : engage customers through new
media
Relentless focus on the consumer, fueled by data and powered by a remarkable customer
experience will enable true attitudinal loyalty
Source: THoM analysis

57. What do we mean by customer experience?
CE =
The total set of elements, from product to price/value
perception to channel interactions…
… from promises to execution to messaging
…that determine a customer’s satisfaction
…and therefore drive value
What I get
=
What I expect
Source: THoM analysis
57
How I feel

58. Different stages of the consumer decision journey have
impact on customer experience & loyalty behavior
Pre-purchase
Research
Awareness
Evaluate
Advocacy
Loyalty
Use (service)
Post-purchase
Buy
Purchase
Capture data at all
touchpoints
Source: THoM analysis
58
Datamining &
analysis
Use insights to
learn & adapt

59. Pre-purchase
Illustration
Ikea‟s sleep like a princess contest
Engaging loyalty members and raising awareness
DESCRIPTION
• Ikea ran a Facebook competition which
was only open to loyalty card holders
• Users had to upload a photo of a friend
who was having a nap
• Then Facebook users voted for the best
picture
• Prize = a bed worth up to £1,500
Results:
• 44,000 YouTube views
• 13,650 Facebook visitors
• Almost 4,000 new fans
Source: Six awesome examples of Facebook campaigns by Ikea
59

60. Pre-purchase
Post-Purchase
Illustration
Booking.com reminds review writers of previous holidays
DESCRIPTION
Booking.com sends a mail one year
after writing a review to remind the
customer of a previous holiday and
to advertize new accommodations
Source: www.booking.com
60

61. Purchase
Post-purchase
Illustration
At The Ritz-Carlton Hotel, Ladies and Gentlemen are serving
Ladies and Gentlemen
DESCRIPTION
• Employees are empowered to
create unique, memorable and
personal experiences for our
guests
• Employees note all the
preferences of the guests and
fulfill these, even if the guest
doesn’t ask it explicitly
• Each employee has a budget to
serve the customer in any way he
likes
• Employees are also treated like
ladies and gentlemen
Source: www.corporate.ritzcarlton.com
61

62. Post-purchase
Illustration
Telenet „Verwenbrigade‟
Creating advocates with surprise & delight
DESCRIPTION
Telenet looked on Twitter for
customers who were having a bad
day and surprised them with a nice
gift, a voucher to rent a movie with
Telenet Digital TV.
Source: https://twitter.com/Verwenbrigade.com
62

63. Post-purchase
Illustration
Spanair “Unexpected Luggage”
Increase WOM & Customer Satisfaction
DESCRIPTION
• Spanair gave Christmas Gifts to all the
passengers of the last flight that arrived
at midnight before Christmas.
Results:
• 100.000 views in 48 hours
• 7.000 people shared it on Facebook &
Twitter
• 600.000 viewings in 12 days & Presence
in the international media
• +13 Mio people received our greetings
Source: http://www.youtube.com/watch?v=F-Fk2hpdrdU
63

64. Purchase
Post-purchase
Illustration
KLM: Meet & Seat on Twitter/LinkedIn
•
February 2012
•
Meat & Seat initiative
•
Link booking to
Facebook/LinkedIn
•
Select seat based on
most interesting profiles
Source: Trendwaching.com
64

65. Question
Any questions?
65

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