*What is a loyalty programme?
*Loyalty Success Factors
*Introduction to Retail Loyalty Programmes
*Loyalty Programme Struc...
*The systematic collection of customer data in return for rewards or
benefits, often used to give customer additional priv...
Points Discount Rebate
Earn points and redeem
for rewards
Good
-Offers control
-Customer understands
-Lower cost
Bad
- Poi...
What is a privilege program?
Tiers of benefits over and
above points for miles.
CoalitionSingle Owner
Lucky Chances for spend
Up to $200
Rebates for spend
over $200
VIP Privileges and private
sales for ...
Nets & Credit
Bank
Data
122132
Transaction
Database
Customers
Analysis services
Marketing Planning &
Promotion tactics
Dat...
Steps to launch
Planning
1.Feasibility audit
2.Customer research
3.Financial planning
4.Develop programme model
Implementa...
Loyalty Programme is a cost
of learning about customers
Additional
Customer Profits
Loyalty Programme
Investment
+
Loyalty...
Target
Audience
Brand
Positioning
Customer
Loyalty
Drivers
Degree of
Participation
Choice of
rewards
Generosity
Delivery o...
Jusco Program
*Barcode card
Hybred model
*Instant privileges
*Discounts for members
*Birthday privileges
*Points
Target
Audience
Regular shoppers
Brand
Positioning
- for everyone
-Birthday treats
-Members only
Customer
Loyalty
Drivers
...
2
5 46
1
37
8
Data Collection
Sales Promotion
Integration
Loyalty Programme
Mechanics
Brand Extension
Clubs within
program...
Strategy
* Capture all data relevant to the customer relationship
Approach
* Use Loyalty cards to capture all customer tra...
Application form is the single
most important point of data
capture
a)Gather all data in form
b)Gather data incrementally
...
Today
Primary Retail Segmentation Approaches
* Recency, Frequency, Value (RFV): e.g High Value Frequent
Shoppers, Low Valu...
*Basket analysis to get shopper type
Health Conscious Price sensitive
Brown Rice
Brown Bread
Natural
Yogurt
Organic
Carrot...
Chance
Strategy
* Develop a research proven value proposition for
the loyalty programme underpinned by loyalty
drivers
App...
+ points on top of everything else
Strategy
*Define the right loyalty programme mechanics to
minimize cost while driving customer loyalty.
Approach
*Points b...
Lucky Chance Card Rebate Card
Rebate Card
& Privileges
& Target of 1
Easy to launch
No liability
Develop card mgt experien...
Strategy
*Understand investment margins to
determine reward investment and frequency
ratios for the market.
Approach
*Aver...
Spend $1.25=1pt
Fill up $100 get 80pts
Fill up 4x $400 and earn enough
for a free coffee worth $5 (1.25%)
4
Investment Ratio
$1.00Spend for 1pt
$0.01Value of 1pt
$1,000Total Store Sales
$800Sales on Card (80%)
800Points Earned
$...
*Octopus card offers a chance to earn
with a large number of retailers in
Hong Kong – Watsons, 7-Eleven etc
*Comes in smar...
Strategy
* Data collected drives ALL marketing activity – it is not
operated in isolation.
Approach
* Use data to target s...
Strategy
*Develop Clubs within the loyalty program that use
knowledge gathered from grocery purchases
Approach
*Create Clu...
Specially organized kids
activities at Ikea
Strategy
*Extend brand using new services
Approach
*Develop strong own-brand products new non-
grocery services
*Leverage ...
1 2 3 4
5 Petrol
6 Utilities
Strategy
*Offer FMCG companies access to
customer knowledge.
Approach
*Offer FMCG brands that pay a fee
access to customer...
2
5 46
1
37
8
Data Collection
Sales Promotion
Integration
Loyalty Programme
Mechanics
Brand Extension
Clubs within
program...
1. Statements
2. Personal shopping lists
3. Geo-targeting
4. Events
5. Layered promotions
6. Regular communications
Strategy
* Use data collected to personalize
vouchers/coupon offers and upsell
Approach
* Statement types are personalized...
Strategy
*Use data collected to personalize
basket when repeat shopping
Approach
*Can make recommendations
based on basket...
Store Catchments
Store Competitor Store
Promotion Target Area
Strategy
• Store catchments areas in
overcrowded markets nee...
Strategy
*Most valuable customers are invited for store
evenings, where specially hosted events are
put on around themes s...
Strategy
• Offers attract interest and offer
incentives for immediate purchase
Approach
• Types of incentives
– 2.Personal...
Offer: Shop Online Offer: Mothers Day
Offer: WineOffer: DVD’s
Tips
• Weekly emails for grocery
but with different themes
e...
*Programmes offer opportunity to get to know
customer – that’s cost of knowledge that must be
recovered
*Opportunity comes...
Loyalty Programme Marketing
Loyalty Programme Marketing
Loyalty Programme Marketing
Loyalty Programme Marketing
Loyalty Programme Marketing
Loyalty Programme Marketing
Loyalty Programme Marketing
Loyalty Programme Marketing
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Loyalty Programme Marketing

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Review of loyalty programme business economics and management using big data and tactical retail marketing management.

Loyalty Programme Marketing

  1. 1. *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
  2. 2. *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
  3. 3. 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
  4. 4. What is a privilege program? Tiers of benefits over and above points for miles.
  5. 5. 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
  6. 6. 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
  7. 7. 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)
  8. 8. Loyalty Programme is a cost of learning about customers Additional Customer Profits Loyalty Programme Investment + Loyalty Promotions Costs >
  9. 9. 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
  10. 10. Jusco Program *Barcode card Hybred model *Instant privileges *Discounts for members *Birthday privileges *Points
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. *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
  17. 17. 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
  18. 18. + points on top of everything else
  19. 19. 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
  20. 20. 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.
  21. 21. 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
  22. 22. Spend $1.25=1pt Fill up $100 get 80pts Fill up 4x $400 and earn enough for a free coffee worth $5 (1.25%)
  23. 23. 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
  24. 24. *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
  25. 25. 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
  26. 26. 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
  27. 27. Specially organized kids activities at Ikea
  28. 28. 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
  29. 29. 1 2 3 4 5 Petrol 6 Utilities
  30. 30. 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
  31. 31. 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
  32. 32. 1. Statements 2. Personal shopping lists 3. Geo-targeting 4. Events 5. Layered promotions 6. Regular communications
  33. 33. 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
  34. 34. 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
  35. 35. 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
  36. 36. 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
  37. 37. 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
  38. 38. 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
  39. 39. *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

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