Progressive Rewards Deliver Maximum Returns

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Progressive Rewards Deliver Maximum Returns

  1. 1. Progressive Rewards Deliver Maximum Returns Turning Loyalty Programs Into Profit Centers Amit Shankardass & Channing Rollo amitsha@clientlogic.com [email_address] www.clientlogic.com
  2. 2. <ul><li>Loyalty Concepts </li></ul><ul><li>Program Types </li></ul><ul><li>Operationalizing Loyalty CRM </li></ul><ul><li>Case Study Examples </li></ul>Agenda
  3. 3. The Problem U.S. enterprises spend more than $1.2 billion on customer loyalty programs that do not significantly increase profits . Companies must embrace a new generation of programs that broaden customer appeal and integrate with CRM . - Gartner
  4. 4. Importance of Customer Loyalty <ul><li>Increased longitudinal economic returns </li></ul><ul><li>Reflects the level of value a company delivers to customers </li></ul><ul><li>Enhanced reputation </li></ul>Beware the Satisfaction Trap Source: Gartner Optimize Yield (CRM) Revenue Cost
  5. 5. Customer Loyalty Hierarchy Source: Gartner
  6. 6. Types of Loyalty Programs
  7. 7. Loyalty Tool: Clubs <ul><li>Pros: </li></ul><ul><li>Target large interest group </li></ul><ul><li>Encourage purchasing behavior through bonuses and rewards </li></ul><ul><li>Provide steady, reliable revenue for company </li></ul><ul><li>Easily personalize customer interaction </li></ul><ul><li>Make loyalty convenient </li></ul><ul><li>Cons: </li></ul><ul><li>Limited product/service applicability </li></ul><ul><li>Non-exclusive merchandise </li></ul><ul><li>Require responsive customer care, fulfillment and CRM </li></ul><ul><li>Plans may mandate negative purchase option </li></ul>
  8. 8. Loyalty Tool: Continuity <ul><li>Pros: </li></ul><ul><li>Positive and flexible purchase option </li></ul><ul><li>Provide steady and reliable revenue for the company </li></ul><ul><li>Exclusive product offerings </li></ul><ul><li>Easily personalized for customer interaction </li></ul><ul><li>Allow customer to enjoy periodic opportunity to shop </li></ul><ul><li>Cons: </li></ul><ul><li>Target niche interest groups </li></ul><ul><li>Limited product/service applicability </li></ul><ul><li>Require highly responsive customer care, fulfillment and CRM </li></ul>
  9. 9. Loyalty Tool: Private Label Exclusive Rewards Program <ul><li>Pros: </li></ul><ul><li>Allow RFM targeting, segmenting and monitoring </li></ul><ul><li>Create brand loyalty </li></ul><ul><li>Ongoing communications allow familiarity, affinity and trust </li></ul><ul><li>Create an incentive to return </li></ul><ul><li>Ongoing return of value lessens the chance of defection </li></ul><ul><li>Cons: </li></ul><ul><li>Require extensive marketing and record keeping </li></ul><ul><li>Long-term costs to the company </li></ul><ul><li>Must be supported by effective CRM, or risk being seen as a bribe </li></ul>
  10. 10. Acquisition Tools: Coalition Programs, Coupons, Prizes <ul><li>Pros: </li></ul><ul><li>Drive customer traffic </li></ul><ul><li>Low-effort promotion </li></ul><ul><li>Broaden buyer spectrum </li></ul><ul><li>May assist in creating customer loyalty only if experience or product “delights” </li></ul><ul><li>Possible use for data collection and/or surveying </li></ul><ul><li>Cons: </li></ul><ul><li>One-time offers produce one-time shoppers </li></ul><ul><li>May attract primarily swing buyers </li></ul><ul><li>Spread thin customer attention and business across coalition merchants </li></ul><ul><li>Lack incentive for customers to remain vendor loyal </li></ul><ul><li>Increase market share only during promotion; may reduce gross revenues </li></ul><ul><li>Almost zero customer loyalty effect </li></ul>
  11. 11. Operationalizing Loyalty CRM
  12. 12. Segmentation is the Key Objectives High- Value Customers Samplers/Non-Loyal Moderate-Value Customers Conversion To High-Value Retention Reward Conversion To Moderate
  13. 13. Loyalty Functionality Source: Gartner
  14. 14. Required Components for CRM Marketing Database Customer Segmentation and Preferences Customer Data Collection Data Analysis Segmentation Value/Rank Objective Per Segment Technology (Channel & Infrastructure ) Channel Personalization Multi/Cross Channel Management Optimization Reporting Offer/Action Management Offer Analysis Customer Offer Design Channel Offer Design Offer Management
  15. 15. Case Study Examples
  16. 16. Case Study: Success With Retailer <ul><li>Client: </li></ul><ul><li>Marketer of premium consumer perishables and related gourmet products </li></ul><ul><li>Direct mail marketing, outbound telemarketing, member-get-member, etc. </li></ul><ul><li>Client Came to ClientLogic for: </li></ul><ul><li>The ability to target specific communications and offers to specific customers </li></ul><ul><li>Convert multiple systems into one customer view </li></ul><ul><li>Buyer’s Choice Continuity </li></ul><ul><ul><li>Represents 95% of client sales volume </li></ul></ul><ul><ul><li>Several different clubs </li></ul></ul><ul><ul><li>High member churn each year </li></ul></ul><ul><ul><li>Negative option for annual program </li></ul></ul><ul><li>Catalog </li></ul><ul><ul><li>One-time orders, 4th quarter peak </li></ul></ul>
  17. 17. Case Study: Customer Value Pyramid Total Revenue Customer Strategies Retention / Reward Call Center Routing Priority Call Handling Milestone Rewards Premium Loyalty Programs Conversion To Core Churn Reduction Pay Loyalty Program Up-Sells Cross-Sells Conversion To Moderate Recovery Programs Partnership Marketing List Rental $170MM (30%) $214MM (38%) $181MM (32%) Core Customers $1,000+ / 5% Samplers Up to $499 / 83% Moderate Shoppers $500-999 / 12%
  18. 18. Case Study: Churn Reduction <ul><li>Challenge </li></ul><ul><li>Critical business risk: out of business by 2007 </li></ul><ul><li>Customer churn at 39.2% per year and increasing by 5.7 points/year </li></ul><ul><li>Acquisition stable at 21.8% per year </li></ul><ul><li>Solution </li></ul><ul><li>Risk model to classify every customer into a group based on his/her risk for canceling account </li></ul><ul><li>Specialized training programs for CSR - Risk Handling Certifications </li></ul><ul><li>Route “high risk” customers to certified CSRs </li></ul><ul><li>Results </li></ul><ul><li>Churn decreased 1.1 points/year vs. increasing by 5.7 points/year (approximately $8MM annualized in saved revenue) </li></ul><ul><li>Identified behaviors of high-risk customers -- enabled client to develop alternative product offerings for migration and further stabilization </li></ul>
  19. 19. Conclusion <ul><li>Loyalty programs must be data-driven, sustainable, progressive in reward giving and brand-centered </li></ul><ul><li>Regardless of the loyalty program tool, segmentation is essential </li></ul><ul><li>All initiatives must be personal and communicative </li></ul>Optimize Yield (CRM) Revenue Cost
  20. 20. Progressive Rewards Deliver Maximum Returns Turning Loyalty Programs Into Profit Centers Amit Shankardass & Channing Rollo amitsha@clientlogic.com [email_address] www.clientlogic.com

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