Customer Loyalty
WINNING CUSTOMER LOYALTY IS THE KEY TO A WINNING CRM STRATEGY
By
Manju A. Thomas
Blesson M. Thomas

“Not all customers were created equal”

Customer Loyalty Programmes
 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

Some Bottom Facts
 Reduction of 5% of defective customers may result in 80%
increase in profitability
 60% to 80% of lost customers were satisfied
 90% of customers who love a company will repeat but only 30%
of customers who like the company will repeat
 20-40% of your customers bring 80% of your profits

 It costs a business about 5-10 times more to acquire a new
customer
 Current customers of yours spend 67% more than a new one
 According to the 2011 Colloquy Customer Loyalty Census, of the
$48 billion worth of perceived value in reward points and miles
distributed by American businesses annually, one-third goes
unredeemed by consumer

Types of Loyal Customers
Frequency of Purchases
+
+ -
High Latent
loyal loyal
Attachment
Spurious Low
loyal loyal
-

Need For Loyalty Programmes
•Reward them for being special
•Create jump in enrolments
•Create interest for current members
•New members getting attracted to
new offers

Loyalty Programme Options
 Points
 Discount
 Rebate
 Privilege

Setting Up Loyalty Programme
proposed by MARITZ

Step 1: Loyalty Situation Analysis
 What is my company’s long-term vision?
 What are our business goals and objectives?
 How do we conduct business (operationally) and how do we generate
profits?
 How do we capture customer data, and what data do we currently
capture?
 What are the market conditions that could affect my loyalty program,
including industry and competitor-related issues?
 How much brand recognition do we have in the market, and what type
of brand positioning do we promote?
 How many lines of businesses do I have, and how do they vary in
regards to business model, offerings, programs, and target customers?

Step 2: Data Gathering & Gap Analysis
 Data capture will include:
 Customer demographics, purchasing/activity levels
 How you segment customers and/or score their activities
 How you analyze profits, and any recency, frequency, and
monetary (RFM) value models you have built along various
lines of business.
 It may include communication channels, product profit
margins, channels of purchase

Step 3: Earnings Overview
 Identifying customers and lines of business that show
greater promise to generate the best profits
 An RFM earnings model would likely include:
 Recency of purchases
 Number of purchases
 The overall margin/$ of specific products purchased

Step 4: Potential Program Impact
 Identify potential cross-sell/up-sell, segment migration,
retention, and customer acquisition opportunities

Step 5: Loyalty Program Design
 Design a program that will include the structure, payout
levels, and reward recommendations that will drive the
desired behaviors of your best customer
 Essential loyalty reward program characteristics
 Quality offering, cash value, perceived value,
aspirational value, redemption choice, convenience,
relevance, unique, communication

Step 6: Estimate Your Program Investment
 Costs of research and strategy development, setup,
operations, project management, systems, support
services, communication, mailings, fulfillment, and
rewards

Step 7: ROI Model
 Measuring ROI should be an ongoing process, to ensure
your loyalty program is rewarding profitable behavior
 Projected incremental profit generated by the
recommended program
 Profit by line of business
 Profit detail by segment
 Your financial liability, with breakage (points never
redeemed by customer)

Step 8: Test the program
 Test it with a select number of existing customers and/or
focus groups
 Test phase allows to test your introduction method,
reward mix, payout structure, and communication
schedule and vehicles

Loyalty Programme Structure

Factors Affecting Success

6 POS Systems With Loyalty Program
Integration
 ERPLY
 Square
 Shopkeep
 Revel Systems
 Registroid
 RetailEdge

Traditional Loyalty
Programs
Vs
Modern Rewards
Programs

Plastic Reward Cards vs Mobile Phones
 Most loyalty programs require the business to print thousands of
plastic loyalty cards. This means the business must spend hundreds
or even thousands of dollars in upfront cost to launch their loyalty
program.
 Check-in based loyalty programs utilize guests’ mobile phones as
their loyalty cards, enabling guests to “check-in” anytime they’re at
your venue. Because you are utilizing your patrons’ phones as their
loyalty card, the start-up cost to launch a loyalty program is
dramatically reduced.

POS vs Online Dashboard
 Most traditional, card-based loyalty programs are connected to a
point-of-sale system installed at each store. These POS systems
enable each business to track customers’ rewards points. However,
these POS systems cost thousands of dollars to buy and maintain,
further increasing the cost of operating a loyalty program.
 Most check-in based loyalty programs are packaged with an online
dashboard that your business can access to update its loyalty
program and view reports on customer visits and rewards. These
dashboards are typically provided for free or for a minimal cost for
more advanced programs.

Printable Coupons vs Mobile Coupons
 Oftentimes, traditional loyalty programs deliver coupons and
rewards via a mailed coupon or through an email that the guest
must print out. These rewards require the guest to remember to save
the coupon and bring it with them when they next visit your store.
 Check-in based programs, which are typically tied to a guest’s
mobile phone, deliver coupons and rewards directly to your guests
phones. This provides guests with a 24/7 link to your business and
enables them to redeem their rewards whenever they have their
phone.

Social Media Integration
 Traditional loyalty programs are stuck in a silo. Only your business
knows when a guest earns a reward or visits your business.
 Check-in programs are social by nature. When your guests check-
in, they tell all of their friends they are visiting your business and
provide an inherent recommendation. This is a huge benefit to
businesses looking to expand their reach to new customers. Check-
ins on social networks like Foursquare and Facebook Places increase
your social media presence and help new customers discover your
business.

Golden rules of loyalty program
 Identify type of benefits
 Design programmes based on customer needs and aspirations
 Keep programmes fresh and updated
 Use technology to personalize benefits
 Seek constant feedback
 Reinvest regularly in refinement

Mobile Customer Loyalty Programs

Opt-in Programs
 Customers provide information about their preferences, likes,
dislikes, demographics, etc. and in return receive permission
based targeted and relevant messages of promotions/ deals/
events.

Loyalty Rewards
• Opt-in loyalty programs gives customers access to the best
offers/deals on products that interest them via mobile.
• Retailers can proactively send offers/incentives to the customer’s
mobile device - thus eliminating the need for membership cards.
• Mobilizing the physical card means - retailers can add location
based offers, customized coupons and a quick check-out
experience.
A loyalty reward mobile program can alert a
customer to any special offers when he checks-in

Mobile Coupons
Mobile coupons add interactivity, location and
real-time attributes to the traditional coupon. So
companies use mobile coupons in different ways.
Real-time redemption at the point of sale
where a customer gets a future coupon in
real-time.

Cross selling - Cross-company programs
 Cross-selling is the action or practice of selling among or
between established clients, markets, traders, etc. or the
action or practice of selling an additional product or
service to an existing customer
 Unlike the acquiring of new business, cross-selling
involves an element of risk that existing relationships with
the client could be disrupted
 For that reason, it is important to ensure that the
additional product or service being sold to the client or
clients enhances the value the client or clients get from
the organization

Example
 HiDesign giving away Promenade Discount for Gold Cards
 Payback Cards

Upselling
 Upselling is a sales technique whereby a seller induces
the customer to purchase more expensive items,
upgrades, or other add-ons in an attempt to make a
more profitable sale.
 Upselling usually involves marketing more profitable
services or products but can also be simply exposing the
customer to other options that were perhaps not
considered previously.

Examples
 Mercedes – Benz Loyalty Program

Co-creation Programmes
 Co-creation is the practice of product or service
development that is collaboratively executed by
developers and stakeholders together
 Starbucks has received over 67,500 responses for
their co-creation programme
 Food and Beverage ideas – new product and
product improvement
 Experience ideas – ordering and store atmosphere
 Involvement ideas – community and social
responsibility

Brand Communities
 Group of individuals united through
the consumption of your products
◦ Harley-Davidson’s “HOGs”
◦ Club Med’s “Gracious Members”
 Characteristics
◦ Communality – help and expect help
from others
◦ Brandfests are used to share history
◦ Keep consuming to stay connected

Building a Community
Community
1. Use a newsletter to share news about customers
2. Develop an online forum for customers to stay in touch
3. Organize annual events “by invitation” for VIP customers
4. Facilitate picture / story sharing
5. Help customers help each other
6. Give a name to the community

Loyalty Programme Promotion
 Geo marketing

Events

Regular Communication
 Weekly emails with different themes
 Personalized
 Rotating offers

Four Ways to Turn CRM into Customer Loyalty
 Satisfaction does not equal Loyalty
 if you are thirsty and I give you a Diet Pepsi, while it may “satisfy” your
thirst, your true loyalty may still be to Diet Coke
 Know your Best Customers
 system of scoring customers based on both current profitability and
future growth potential
 Treat Different Customers Differently
 grow those with the greatest future potential
 Understand and Use Marketing ROI
 focus on clear, highly targeted and measurable solutions that clearly
show the returns that they produce

TESCO

 The Tesco Loyalty Card is one of the most exciting and interesting marketing tales
of this generation. Tesco’s have gained the reputation as sophisticated loyalty
scheme marketers
 In 1995 Tesco introduced their Tesco Club card
 The Tesco Club card has become the world’s most successful retail loyalty
scheme
 Tesco Clubcard holders benefit when shopping at Tesco as they receive 1 point
for every £1 they spend, and double points on special offers

 These points are stored and built up and 4 times a year the holder receives
vouchers to the value of points they have saved
 Vouchers can be spent in store on shopping or used on Club card Deals where
they are worth 4 times the value
 They are also entitled to free access to the Clubcard clubs which include: wine,
baby and toddler, healthy food, food and Christmas clubs
 There are over 150 loyalty schemes within the UK, which equates to the
circulation of over 40 million cards

 For Tesco the benefits they give to the customers ensures that they can micro-
segment customers by lifestyle habits, including individual personality traits from
analysis of the contents of each grocery cart
 They can then target them with newsletters and other personalized information
along with a variety of other marketing programmes
 There are over four million variations of its quarterly customer mailing to ensure
that its discounts and offers are tailored specifically for the customer

Case Study : Cashing In on Customer Loyalty

 Casino company Harrah's Entertainment Inc. has had great success in targeting
"low-rollers" in recent years
 By 2002, the company posted more than $4 billion in revenue, $235 million in net
income and a streak of 16 straight quarters of "same-store" revenue growth
 In 1997, it implemented a loyalty program called Total Gold, which was a
frequent-player program
 Total Gold player cards recorded customer activity at various points of sale-
including slot machines, restaurants, and shops. Soon, the database contained
millions of transactions and valuable information about customer preferences
and spending habit

 Statistical analysis revealed that the best customers were not the "high-
rollers" so coveted by the rest of the industry.
 In fact, the best customers turned out to be slot-playing middle-aged folks
or retired teachers, bankers, and doctors with time and discretionary
income.
 They did not necessarily stay at a hotel, but often visited a casino just for
the evening.
 Surveys of these customers told Harrah's that they visited casinos primarily
because of the intense anticipation and excitement of gambling itself.

 It developed quantitative models to predict lifetime value of these
customers and used them to centre marketing and service-delivery
programs on increasing customer loyalty
 In an indication of success in capturing greater wallet-share, the programs
dramatically increased the amount of cross-market (multiple property)
play. This grew from 13 percent in 1997 to 23 percent in 2000.

Will 2013 Be The Year of Loyalty Programs
 During the past year, several mobile loyalty programs sprang up to
entice small business owners with limited resources to create low-cost
programs to reward frequent customers for purchases
 These programs, such as LevelUp, Pirq, and Belly, allow business owners to
tailor loyalty programs to their specific business needs
 All the big brands that have existing reward programs are purchased-
based or reward for purchases.
 Now they are starting to recognize that they need a digital layer that sits
on top of these programs to reward customers for all of the actions that
are taking place, whether it’s when they’re on social media or on the
brand’s site

???
The big question will be
whether consumers are
willing to simply hand
over their identity to
every business for added
benefits and rewards –