Idm Loyalty Presentation 25.04.06 By Wanda Goldwag


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Loyalty Presentation to the Institute of Direct Marketing

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Idm Loyalty Presentation 25.04.06 By Wanda Goldwag

  1. 1. Loyalty Presentation for the Institute of Direct Marketing By Wanda Goldwag of Goldwag Empson and Otitoju
  2. 2. Agenda for 1st half  My background  Global trends  Customer ownership and what they expect  The Strategic situation  Loyalty schemes in general and what makes a good one 03/07/09 Goldwag Empson Otitoju 2
  3. 3. My background  Yves Rocher  Fidelity Unit Trust  Direct Marketing Agency WWAV  Thorn EMI  Thomas Cook  DM Agency Smith Bundy  AIR MILES  Smedvig Venture Capital, GEO and 6 others 03/07/09 Goldwag Empson Otitoju 3
  4. 4. Apparently, I’m now a Marketing Guru  “a revered instructor, mentor or pundit” The Chambers Dictionary  Someone who having made most of the mistakes possible, can give advice to others on how not to repeat them 03/07/09 Goldwag Empson Otitoju 4
  5. 5. My World Cu s to m A f f in it y Lo P ro ya l e r m a rk e ti C u s to t m g ra y me m ng e r s Lo y a l it y ty A f f in n s P a rtn e r R e la t io s h ip h ip s Ma rk e ti L o y a lt y ng w a rd Re ra m m D a ta R e la t ba io n s P ro g s s e e h ip m a rk m a rk e e ti t in ng g 03/07/09 Goldwag Empson Otitoju 5
  6. 6. The challenges I work on  Creating effective marketing programmes  Finding partners to work with  Difficulties in interpreting and analysing data  Segmenting customers  Making redemption work  Gaining real benefit from your loyalty scheme 03/07/09 Goldwag Empson Otitoju 6
  7. 7. Customer Global Strategy Expectations Trends Loyalty Schemes Customer The Internet Ownership Staff Quality 03/07/09 Goldwag Empson Otitoju 7
  8. 8. Global trends  Move from Mass Marketing to something much closer to one to one marketing  24/7 society  New channels of distribution – an alternative supplier is a click away  One company makes a change and it sets a new standard for all  I want it now 03/07/09 Goldwag Empson Otitoju 8
  9. 9. Customer Ownership  Battle between the product/ service owner and the retailer/ intermediary  The battle is being fought on the field of data 03/07/09 Goldwag Empson Otitoju 9
  10. 10. Customers expect  To be recognised  For us to remember what happened before and what stage they are at in a process  To be rewarded  To be kept in touch 03/07/09 Goldwag Empson Otitoju 10
  11. 11. Strategy should be to integrate  Retail  Call Centre  Internet  Interactive TV  WAP phones  Who knows what next ? 03/07/09 Goldwag Empson Otitoju 11
  12. 12. Communications strategy  At every point  Through every channel  Same data  Same offers  Perfect knowledge 03/07/09 Goldwag Empson Otitoju 12
  13. 13. Why, what is changing?  Far greater understanding on behalf of consumers of loyalty schemes  A great deal more one to one communication 03/07/09 Goldwag Empson Otitoju 13
  14. 14. Loyalty Schemes
  15. 15. What is happening in the market place?  Databases used to be flavour of the month  Now it is customer retention strategies and loyalty programmes 03/07/09 Goldwag Empson Otitoju 15
  16. 16. The beginning 03/07/09 Goldwag Empson Otitoju 16
  17. 17. Setting the scene  Millions of consumers already belong to and are committed to “their” loyalty scheme  Ensuring a place in the wallet or purse is becoming more difficult  Almost every major retailer and service company is already or has been approached to become a member of a loyalty scheme  There are real challenges in using the data collected  Business to Business loyalty schemes very fragmented 03/07/09 Goldwag Empson Otitoju 17
  18. 18. How did it start ?  American Airlines launched AAdvantage, the world’s first mileage-based frequent flyer programme in the 70’s  100 million people belong to at least one such scheme  50% of miles are earned on the ground, credit card spending and telephone calls are important 03/07/09 Goldwag Empson Otitoju 18
  19. 19. The rest is history 03/07/09 Goldwag Empson Otitoju 19
  20. 20. UK market for loyalty cards  27 million loyalty cards issued  Average home has at least 2  7% of homes have more than 20 03/07/09 Goldwag Empson Otitoju 20
  21. 21. “Share Of Wallet” is An Issue 03/07/09 Goldwag Empson Otitoju 21
  22. 22. What cards are in your wallet now? Lets have a show of hands!  Nectar  Tesco  Boots  AIR MILES 03/07/09 Goldwag Empson Otitoju 22
  23. 23. Who uses loyalty schemes? Carlson Loyalty Monitor 100 90 80 70 60 50 Aware 40 Active 30 20 10 0 16-24 25-34 35-44 45-54 55 plus 03/07/09 Goldwag Empson Otitoju 23
  24. 24. What makes loyalty schemes ideal?  Customers identify themselves  Because people want rewards they are willing to give data  Offers and service can be tailored to the individual 03/07/09 Goldwag Empson Otitoju 24
  25. 25. What should a good scheme allow?  Highly targeted campaigns  Special Offers to distinct segments  Keep valuable customers  Develop better relationships with infrequent buyers  Not over service poor customers  People spending their points  Valuable rewards 03/07/09 Goldwag Empson Otitoju 25
  26. 26. My approach to segmentation  Segments developed to drive strategic marketing initiatives and communication- no point doing it for fun  Based on every scrap of data you can obtain, registration, behavioural, every transaction and communication, socio-demographic and 3rd party 03/07/09 Goldwag Empson Otitoju 26
  27. 27. Need to create this circle of information S e g m e n t a t io n A n a ly s is P e r s o n a lis e d En h a n c e d C o m m u n ic a t io n / C o m m u n ic a t io n / A c t iv it y T r a c k in g C u s to m e r S e r v ic e In s t a n t M I 03/07/09 Goldwag Empson Otitoju 27
  28. 28. Principals of Successful Segmentation •Relevant and sound data •Groups of homogeneous customers •Sufficiently distinct from each other statistically sound - Cluster Analysis 03/07/09 Goldwag Empson Otitoju 28
  30. 30. Customer Lifetime Value R e a c t iv a te A C T IV IT Y X M o t iv a te N u rtu r X T e r m in a te e X P r e d ic t iv X e M o d e llin g L IF E T IM E 03/07/09 Goldwag Empson Otitoju AIR MILES and the Flying Boat logo are trademarks of AIR MILES International Holdings N.V.AIR MILES awards are held and issued for use subject to AIR MILES Customer Terms and Conditions. 30
  31. 31. A word of warning about defining a valuable customer 03/07/09 Goldwag Empson Otitoju 31
  32. 32. What makes a customer valuable?  Volume  Spend  Frequency  Share of wallet  Satisfaction – willing to be an advocate  Combination of some or all of these 03/07/09 Goldwag Empson Otitoju 32
  33. 33. What works – some truisms  Customers are people  The majority of people don’t change their behaviour – a minority do and its normally dramatic  Those that benefit most join and remain active as they have the most to gain (normally ABC1’s) 03/07/09 Goldwag Empson Otitoju 33
  34. 34. So where do we start in rescuing an existing programme?  Understand what were the original objectives  Review the competitive landscape and if it has changed  Evaluate existing customers  Are they all important / profitable?  Research what matters to those you wish to retain 03/07/09 Goldwag Empson Otitoju 34
  35. 35. Why doesn’t everyone create their own loyalty programmes?  High original set up costs  Benefits of increased / shared communication channels  Need to share marketing and promotional costs  Requirement for fast redemption  Need for a wide range of rewards 03/07/09 Goldwag Empson Otitoju 35
  36. 36. Coalition Programmes 100 80 Cost of Awards %60 Available Budget 40 Ongoing Costs 20 Start Up Costs 0 Solo Programme Partnership Year 1 Costs Programme 03/07/09 Goldwag Empson Otitoju 36
  37. 37. Two challenges for you to discuss in the break  The consumer increasingly knows the value of their own personal data. To spend time giving that data they will expect something in return – what will you give?  How can you make a loyalty scheme more relevant than your competitors? 03/07/09 Goldwag Empson Otitoju 37
  38. 38. Agenda for 2nd half  A review of the Major UK schemes  What lessons can be learnt form Business to Business programmes  Predictions for the future 03/07/09 Goldwag Empson Otitoju 38
  39. 39. Major programmes – what is working and what is not?  Nectar  Tesco  Boots Advantage  AIR MILES 03/07/09 Goldwag Empson Otitoju 39
  40. 40. Nectar – Launch Poster 03/07/09 Goldwag Empson Otitoju 40
  41. 41. Nectar facts and figures  Largest programme in  7 out of 10 collectors the UK have redeemed their  Keith Mills did it again points for a reward  7000 retail outlets  Nectar has given back where the card can be over £650 million used to earn points worth of rewards  At least 17 sponsors  Up to 99 people can collect on one account 03/07/09 Goldwag Empson Otitoju 41
  42. 42. Nectar Sponsors  Sainsbury’s 2 points for a £1  BP 1 point per litre of fuel  American Express 2 points for a £1 plus 2 extra points if used with Nectar retailer  On line shop as well 03/07/09 Goldwag Empson Otitoju 42
  43. 43. Overview of the original Programme Collectors Contact Centre Sponsors Over 50% • 400 Employees of UK Households • 38,000 Contacts / Day en t S ta t em Joe gs Blog e P lace ode Mr. nywher P ostal C A 123 County, ts P oin 0 0000 0 Suppliers City, 0000 0 nsor S po bury’s 0000 0 Date 03 Sains ur y’s 0000 0 sb 1/ 03/0 03 S ain aycard 0000 0 1/ 03/0 03 Barcl aycard 0000 0 1/ 04/0 03 Barcl aycard 0000 0 04 /01/ Barcl hams 0000 1/03 en 05/0 03 Deb hams en 1/ 03/0 03 Deb hams en 1/ 04/0 03 Deb 1/ 05/0 • 40+ Types of Rewards • Rewards starting from Database just 500 pts 03/07/09 Goldwag Empson Otitoju 43
  44. 44. The bad and the ugly  Lost major sponsors  Nectar for Business Barclaycard and not as strong as Vodafone hoped for  Account handling of  A decision has been sponsors not taken not to sell the always a priority company yet 03/07/09 Goldwag Empson Otitoju 44
  45. 45. Tesco
  46. 46. Tesco clubcard facts and figures  Launched in 1995  One point for every  One of the UK’s £1 spent most popular  Over 6 million loyalty card unique coupon schemes variations in each  12 million active mailing cardholders 03/07/09 Goldwag Empson Otitoju 46
  47. 47. Partners  Powergen  Avis  Nationwide Autocentre  Johnson’s 03/07/09 Goldwag Empson Otitoju 47
  48. 48. The Good “Probably the main factor in Tesco’s success has been the commitment to use the data gained to drive the business. The real benefit of a loyalty scheme is the very rich data obtained on customer behaviour. This use of data has been the major difference between the Tesco scheme and other initiatives that were less successful.” Clive Humby
  49. 49. Comparing results We know how much money we give back to Clubcard customers, how much it costs to run the programme and what behaviour we get from those customers. We can estimate what behaviour we get from non-Clubcard customers through market research. Then we can look at the difference to work out whether customers with cards remain more loyal to Tesco
  50. 50. The bad and the ugly  You tell me?  Partners love them  Everyone raves about their use of data? 03/07/09 Goldwag Empson Otitoju 50
  51. 51. Boots 03/07/09 Goldwag Empson Otitoju 51
  52. 52. Boots advantage card  15 million card  94% of active users holders are female  4p for every £1  Cardholders on spent – the most average spend generous of the big double programmes  Almost always  Over 50% of UK asked for the card women hold a card when shopping 03/07/09 Goldwag Empson Otitoju 52
  53. 53. The bad and ugly  Very biased towards women  Not maximising how generous their scheme is to others 03/07/09 Goldwag Empson Otitoju 53
  54. 54. 03/07/09 Goldwag Empson Otitoju 54
  55. 55. AIR MILES around the world REWARDS THE LMN AME SPAIN MANAGEMENT AMTP UK LOYALTY GROUP NETHERLANDS MIDDLE EAST 1988 1992 1994 1996 2001 03/07/09 Goldwag Empson Otitoju 55
  56. 56. Clients  Royal Bank of Scotland in particular Nat West  Tesco  Shell  Southern Electric 03/07/09 Goldwag Empson Otitoju 56
  57. 57. The bad and the ugly  Up for sale or closure, because BA still don’t know what to do with it  When I left in May 2000 we made £25 million profit now its said to be £1.3 million  Travel offering much expanded – but now confusing 03/07/09 Goldwag Empson Otitoju 57
  58. 58. A quick look at some Individual retail programmes
  59. 59. WH Smith  Is the programmes still in existence?  Never asked for it in store  No obvious mention of it on the corporate web-site  No evidence that it is being used to drive marketing 03/07/09 Goldwag Empson Otitoju 59
  60. 60. Homebase  4 million cardholders  Said to have been debating if it should be kept going  Rarely asked for the card in store 03/07/09 Goldwag Empson Otitoju 60
  61. 61. What is going wrong generally  25% of all loyalty card holders do not use the points they have earned  People acquire cards but don’t carry them in their wallets  Difficult to maximise the benefits of the data gained  Difficult to differentiate – everyone has similar rewards and programmes 03/07/09 Goldwag Empson Otitoju 61
  62. 62. Harder to distinguish yourself 03/07/09 Goldwag Empson Otitoju 62
  63. 63. What is going wrong cont.  Some programmes loosing their way – but company is scared to close them down  When partners fall out – customers can be very badly served  Fears about who owns the customer e.g. when Air Miles swapped Sainsbury’s for Tesco’s  Loyalty schemes are not cheap to run costing an estimated 1 to 2% of the cost of the product 03/07/09 Goldwag Empson Otitoju 63
  64. 64. Business to Business Loyalty
  65. 65. Very major challenges  Is it ethical at all to give rewards to individuals for business decisions  Who should get the reward – particularly in medium to large companies  Often complex sales channels with manufacturers, wholesalers, dealers etc. 03/07/09 Goldwag Empson Otitoju 65
  66. 66. Need to manage disparate groups Wanda and co A wholesaler who My sales team A 3rd Party re-seller sells to Dealers 03/07/09 Goldwag Empson Otitoju 66
  67. 67. Very often a number of people are involved in the process The Finance Dept. Internal purchasing dept The end user 03/07/09 Goldwag Empson Otitoju 67
  68. 68. Arvin Meritor  Headquarters in Troy, Mich., U.S.,  ArvinMeritor is an $8 billion supplier to the global motor vehicle industry.  approximately 31,000 employees in 25 Countries 03/07/09 Goldwag Empson Otitoju 68
  69. 69. Arvin Meritor  Meritor is leading supplier of truck/tractor systems, modules, and components to the transportation industry.  They believe they are partner of choice when it comes to truck/tractor requirements – for OEMs, fleets of all sizes, and end-users. From spec’ing the right components, to product training, service assistance, support materials, or aftermarket parts – before and after-the- sale, they are there to support their dealers 03/07/09 Goldwag Empson Otitoju 69
  70. 70. Their 2006 reward programme Earn rewards every time you spec eligible products from Meritor. Each time you spec an eligible product, you earn Meritor Loyalty Points. The dollars you earn are loaded onto your Meritor Rewards card – a MasterCard™ stored-value card. 03/07/09 Goldwag Empson Otitoju 70
  71. 71. How acceptable are the rewards  You can redeem your points anywhere MasterCard is accepted – at over 28 million locations worldwide! Your purchases with the Meritor Rewards Card are processed like any credit card transaction. The cost of the purchase is deducted from your loyalty point balance. 03/07/09 Goldwag Empson Otitoju 71
  72. 72. How complex is the sale  All Dealer Principals, Dealer Sales Managers and Dealer Salespersons are encouraged to participate  Dealer Principals and Sales Managers may enroll more than one dealership; however, the individual Dealer Principal, Dealer Sales Manager and Dealer Salespersons responsible for selling Class 8 new trucks may enroll only once.  Sales Managers who also sell new trucks must decide whether to enroll as a Sales Manager or Salesperson. 03/07/09 Goldwag Empson Otitoju 72
  73. 73. Rewards for product knowledge  Avnet Partner Solutions, a distributor of servers and storage products for major manufacturers like Hewlett- Packard and IBM  Based in Tempe, Arizona, they have a points-based incentive program, SMART Rewards, for their channel partners 03/07/09 Goldwag Empson Otitoju 73
  74. 74. Avnet  They anticipated a tougher market  "Customers are making more informed technology purchases, and so [our resellers] have to be well-equipped to address market needs."  Decided to reward resellers for taking advantage of educational opportunities instead of for straight sales. 03/07/09 Goldwag Empson Otitoju 74
  75. 75. How it works?  Avnet channel partners earn points for business-building activities like attending Web seminars in which industry experts discuss market trends. Or they earn points for achieving certification and training on specific enterprise products.  It also rewards partners in an industry with long sales cycles—which can discourage reward programs. "We distill information coming from the suppliers and point partners to activities that will result in long- term benefits." 03/07/09 Goldwag Empson Otitoju 75
  76. 76. Nectar for Business  Aimed at small businesses. 3.5 million sole traders and small businesses in the UK  Points for everyday business purchases, from stationery and catering supplies to van hire and decorators' materials.  Sponsors include Viking Direct, ICI Dulux Decorator Centres, Brakes, EDF Energy, Hertz UK, HSS and Magnet Trade outlets. 03/07/09 Goldwag Empson Otitoju 76
  77. 77. Points can be redeemed for  The business or its staff, including computers and office equipment, cases of wine, flights to Paris and tickets for rugby matches  Points can also be redeemed for any of the existing consumer rewards provided by the original Nectar programme. 03/07/09 Goldwag Empson Otitoju 77
  78. 78. Predictions 03/07/09 Goldwag Empson Otitoju 78
  79. 79. Predictions  Some major programmes will close – saying that customers are no longer interested in loyalty  More companies will take the option that Virgin has and stop sending paper statements  New coalition programmes in the charity and savings area as well as even more niche programmes  Even greater use of technology – they will know when you are in store -someone will find a sensible way of doing the whole thing on mobile phones  A loyalty scheme will become a tradeable currency in some emerging country 03/07/09 Goldwag Empson Otitoju 79