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Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
Future of Loyalty
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Future of Loyalty

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    • 1. What’s Next for Loyalty Programs? Turning Loyalty Data into a Strategic Asset Date: August 29, 2006 Time: 1pm Eastern Featuring:
    • 2. What’s Next for Loyalty Programs? Turning Loyalty Data into a Strategic Asset Luc Bondar Vice President, Loyalty Will Wittkopf Director, Decision Sciences Consulting
    • 3. <ul><li>Where’s are loyalty programs now? </li></ul><ul><li>What’s next for loyalty programs? </li></ul><ul><li>Getting started </li></ul><ul><li>Q+A </li></ul><ul><li>Get ready to blog! </li></ul><ul><li>Live Meeting Technical Assistance </li></ul><ul><ul><li>800-893-8779 or +1 971-544-3222 </li></ul></ul>Today’s agenda Moderator: Chris Helm, Executive Editor, Peppers &amp; Rogers Group
    • 4. <ul><li>Where are loyalty programs now? </li></ul>
    • 5. Loyal customers = Competitive advantage <ul><li>Fleeting Sources of Competitive Advantage: </li></ul><ul><li>Product expertise </li></ul><ul><li>Promotions and price specials </li></ul><ul><li>Service </li></ul><ul><li>Key people </li></ul><ul><li>Loyalty scheme ‘Earn and Burn’ </li></ul><ul><li>Loyal Customers represent your most potent, defensible, enduring competitive asset </li></ul>
    • 6. Customer expertise is the key <ul><li>A competitor needs your customer’s participation to duplicate your customer expertise </li></ul><ul><li>But “ customer expertise ” means </li></ul><ul><li>taking your customer’s point of view </li></ul><ul><li>And that means building customer trust </li></ul><ul><li>Loyalty Marketing gives you a way to learn what customers want. </li></ul><ul><li>They teach you over time via every interaction they have with you, </li></ul><ul><li>giving you a unique opportunity to build trust </li></ul><ul><li>via learned expertise, thus creating a ‘unique’ relationship. </li></ul>
    • 7. Loyalty today <ul><li>Rarely is there a concurrent focus on both </li></ul><ul><ul><li>Behavioral change </li></ul></ul><ul><ul><li>Attitudinal loyalty </li></ul></ul><ul><li>Myopic objectives? </li></ul>
    • 8. Common problems for loyalty programs <ul><li>The STRATEGY problem </li></ul><ul><ul><li>Seen as short-term fix for deeper problems </li></ul></ul><ul><ul><li>Ready, fire, aim! </li></ul></ul><ul><ul><li>What do we need our loyalty programs to do? </li></ul></ul><ul><ul><li>How do we measure and report? </li></ul></ul><ul><li>The INFORMATION problem </li></ul><ul><ul><li>Data gathered and used simply to run the program and NOT used to run the business </li></ul></ul><ul><ul><li>Understand the whole value and need of each customer </li></ul></ul><ul><li>The ADOPTION problem </li></ul><ul><ul><li>Many different players are involved in making loyalty a success </li></ul></ul><ul><ul><li>“ The best-designed loyalty program in the world will be a complete failure if it can’t be implemented by front line employees” </li></ul></ul>
    • 9. Is your data trapped in the marketing department? <ul><li>Are you using data simply to run the program? </li></ul><ul><ul><li>Sending out the same tired material </li></ul></ul><ul><ul><ul><li>Welcome packs, statements, catalogs </li></ul></ul></ul><ul><ul><li>Identifying customers, their transaction activity and value to simply to process their promotions activity and points earning/redemption </li></ul></ul><ul><ul><li>Shipping awards </li></ul></ul><ul><ul><li>Managing enquiries </li></ul></ul>
    • 10. What else could that data be doing for you? <ul><li>Think past short-term program operational needs and financial goals </li></ul><ul><li>Loyalty programs offer rich customer information </li></ul><ul><ul><li>Understand what makes your most valuable and most grow-able customers tick and how they engage with you </li></ul></ul><ul><ul><li>Tap into the power of predictive modeling </li></ul></ul><ul><ul><li>Engage in a timely, relevant and motivating dialogue with customers </li></ul></ul><ul><ul><li>Let customers tell you what they want, and then remember it </li></ul></ul>Collect data to build a better customer experience
    • 11. What else could that data be doing for you? <ul><li>Create strategic value outside of the immediate program </li></ul><ul><ul><li>More effective pricing strategies </li></ul></ul><ul><ul><li>Better targeted product mix and category management </li></ul></ul><ul><ul><li>More informed ranging and geographic location decisions </li></ul></ul><ul><ul><li>Smarter revenue management systems </li></ul></ul><ul><ul><li>More effective use of marketing spend outside of loyalty program </li></ul></ul><ul><ul><li>Linking best customers to engaged employees </li></ul></ul>Drive loyalty insight across the enterprise
    • 12. <ul><li>What’s next for loyalty programs? </li></ul>
    • 13. Solving problems <ul><li>Engage customers in 1to1 experiences </li></ul><ul><li>Re-define what success in loyalty means for your business </li></ul><ul><li>Take loyalty across the enterprise </li></ul>
    • 14. <ul><li>Engage customers in 1to1 experiences </li></ul>
    • 15. Engage customers in 1to1 experiences <ul><li>Move past points ‘Earn &amp; Burn’ </li></ul><ul><li>Use the program to gain insight into different customer value and needs </li></ul><ul><ul><li>Which customers to target? </li></ul></ul><ul><ul><li>What do I need to do to learn what they want? </li></ul></ul><ul><ul><li>Which behaviours to target? </li></ul></ul><ul><ul><li>How much are they worth? </li></ul></ul><ul><li>Engage your customers in dialogue </li></ul><ul><ul><li>How do they interact with me? What are they telling me? </li></ul></ul><ul><ul><li>Am I relevant to them, at the right time and across the right channel? </li></ul></ul><ul><li>Treat different customers differently </li></ul><ul><ul><li>How do I deliver value to them the way they want it delivered ? </li></ul></ul>
    • 16. <ul><li>Loyalty program turns anonymous trips into opportunities for dialogue </li></ul><ul><li>Learned customer preferences, habits, needs </li></ul><ul><li>Created better experience for high-value traveler </li></ul><ul><ul><li>Deciding which types of wine to serve on certain routes and cabins </li></ul></ul><ul><ul><li>Which routes needed stations for nursing mothers </li></ul></ul><ul><ul><li>Knowing where most-valuable customers lived to avoid a potential mistake in locating a new station </li></ul></ul><ul><li>The results: </li></ul><ul><ul><li>Better customer experience </li></ul></ul><ul><ul><li>More loyalty customers </li></ul></ul><ul><ul><li>Positive business results </li></ul></ul>Engage customers in 1to1 experiences Using Loyalty Data To Drive Product Development
    • 17. Re-define success for loyalty
    • 18. Re-define success: Narrow view Loyalty program prompts purchase behavior change and incremental sales $ Incremental Sales $ Cost of Loyalty Program Behavior Change Engagement Preference Return Investment Learning from data $
    • 19. Re-define success: Broad view $ Incremental Sales $ Cost of Loyalty Program Behavior Change Engagement Preference Return Investment Referrals $ Customer Retention $ Lower Cost to Serve $ Loyalty program prompts purchase behavior change, incremental sales, and other customer related benefits and Success Metrics ® Learning from data $$$
    • 20. Re-define success: Very broad view $ Incremental Sales $ Cost of Loyalty Program Behavior Change Engagement Preference Return Investment Referrals $ Customer Retention $ Lower Cost to Serve $ Employee Retention $ Product Development $ <ul><li>Loyalty program prompts purchase behavior change, incremental sales, enhanced customer experience , and feedback </li></ul>Learning from data $$$$$
    • 21. International Airline Customer value model for new program enrollees to optimize marketing spend <ul><li>Challenge </li></ul><ul><li>Distinguish high- and low-value groups of frequent-flyer club members early in customer life cycle </li></ul><ul><li>Use identified differentiation to optimize marketing expenditures </li></ul><ul><li>Solution </li></ul><ul><li>Created a predictive model to separate new enrollees into high- and low-value groups </li></ul><ul><li>Sent high-potential members enhanced fulfillment kits </li></ul><ul><li>Less valuable members received a less expensive enrollment kit </li></ul><ul><li>Reorganized Service Center to route calls from valuable members to the most experienced service agents </li></ul><ul><li>Results </li></ul><ul><li>Total impact to the airline &gt; US$10MM </li></ul><ul><li>Significant incremental revenue and cost savings </li></ul><ul><li>Valuable by-product: Career path developed for customer service agents aligned with member value resulting in significantly reduced agent turnover </li></ul>The case for linking employees to customers
    • 22. Balancing long and short term (ROC SM ) Incremental Sales $ Cost of Loyalty Program (Investment) Behavior Change Engagement Preference Referrals $ Customer Retention $ Lower Cost to Serve $ Employee Retention $ Product Development $ Learning from data $ Short-term Incremental Sales Referrals Customer Retention Lower Cost to Serve Employee Retention Product Development Long -term $ $ $ $ $ $
    • 23. The case for revenue management integration <ul><li>MSI Example: </li></ul><ul><ul><li>Effects of capacity-driven service experiences on customer usage levels </li></ul></ul><ul><ul><li>Why Revenue Management Systems are Due for Change, Wangenheim and Bayon, 2006 Working paper </li></ul></ul><ul><li>4 years research, global airline </li></ul><ul><li>Revenue management in airlines is potentially flawed </li></ul><ul><li>Short-term revenue focus conflicts w/ long term value creation </li></ul><ul><ul><li>Downgrading gold customers results in significant loss in loyalty </li></ul></ul><ul><ul><li>Fly less often per quarter following downgrade </li></ul></ul><ul><li>How to resolve? </li></ul><ul><ul><li>Align service systems with loyalty to minimize risk of overbooking higher status customers and where overbooking occurs, ensure higher status customers are not downgraded </li></ul></ul>
    • 24. Take loyalty across the enterprise
    • 25. Take loyalty across the enterprise <ul><li>Two ways to view “Enterprise Loyalty” </li></ul><ul><ul><li>Loyalty Program as Multi-product </li></ul></ul><ul><ul><li>Loyalty Program as a Customer Insight Machine </li></ul></ul><ul><li>How can you use the data generated by a loyalty program to improve the effectiveness and efficiency of other areas of your business? </li></ul><ul><li>Find the points of intersection across your business </li></ul><ul><ul><li>Step out of the silo and see your program and your data as assets that can be used more strategically </li></ul></ul><ul><ul><li>Insights will only become visible when you view the data through different lenses </li></ul></ul><ul><li>Don’t have to boil the ocean </li></ul><ul><ul><li>Start with one area of the enterprise and move outward </li></ul></ul><ul><li>Engage organizational partners in this alignment process </li></ul>
    • 26. The case of Global Oil <ul><li>Problem: </li></ul><ul><li>Price Sensitivity </li></ul><ul><li>Simple economics: When price goes up, demand goes down </li></ul><ul><li>Which customers are most sensitive to price fluctuations? </li></ul><ul><li>What can be done to mitigate the effect? </li></ul><ul><li>Solution: </li></ul><ul><li>Leverage Loyalty Data </li></ul><ul><li>Anonymous fill-ups turn into opportunity for dialogue with best customers </li></ul><ul><ul><li>Where are they buying fuel? </li></ul></ul><ul><ul><li>How often? How much? </li></ul></ul><ul><ul><li>What kind (regular, high-octane, diesel)? </li></ul></ul><ul><li>Understand whose consumption patterns change the most after a price increase </li></ul><ul><li>Focus on high-value customers </li></ul>
    • 27. The case of Global Oil <ul><li>Future Steps </li></ul><ul><li>More dialogue: Understand needs of price-sensitive customers </li></ul><ul><li>Develop strategies to address them </li></ul><ul><li>Use loyalty program as a communications channel for targeted treatments </li></ul><ul><li>Lessons Learned </li></ul><ul><li>Loyalty program data can be used to solve broader business problems. </li></ul><ul><li>Customer-centric view holds the key. </li></ul><ul><li>See people in the economic exchange. </li></ul>
    • 28. Take loyalty across the enterprise <ul><li>Challenge </li></ul><ul><li>Majority of customers are one-time cruisers </li></ul><ul><li>Traditionally, focused on acquisition, very product focused </li></ul><ul><li>Know that customers take cruises for different reasons, but how to take action on that knowledge? </li></ul><ul><li>Solution </li></ul><ul><li>Took a loyalty-based approach </li></ul><ul><li>Created mechanism to track on-board and port visit choices </li></ul><ul><li>Developed database providing central view of the customer </li></ul><ul><li>Used program as a mechanism for increased dialogue with customers </li></ul>Luxury Cruise Line
    • 29. Take loyalty across the enterprise Results <ul><li>Increased prospects (number and quality) </li></ul><ul><li>Increased repeat bookings </li></ul><ul><li>Customer comments in newsletters and brochures </li></ul><ul><li>Regional alumni events </li></ul>Leveraged current cruise customers to share their positive experiences Currently Launching <ul><li>Mediterranean Cruises Feature: </li></ul><ul><li>Photography </li></ul><ul><li>History, Archaeology, and Literature </li></ul><ul><li>Food and Wine </li></ul>Created “Circle of Interest” guided experiences <ul><li>Improved customer experience </li></ul><ul><li>Simplified the menu of choices </li></ul><ul><li>Increased add-on revenue </li></ul><ul><li>Wine tasting, history classes on-board, visits to vineyards </li></ul><ul><li>Classical music classes on-board, port visits to symphonies and operas </li></ul>Developed spotlight cruises with programs to tie on-board experience to port locale Benefits Examples Initiatives
    • 30. &nbsp;
    • 31. <ul><li>Getting started </li></ul>
    • 32. Getting started <ul><li>Use your data to understand your customers and what they want </li></ul><ul><ul><li>Wants, needs, channels, value </li></ul></ul><ul><li>Re-define what success looks like </li></ul><ul><ul><li>Consider the longer-term and the wider use of data </li></ul></ul><ul><li>Seek to align data across the enterprise </li></ul><ul><ul><li>Look for points of intersection that will yield sustainable value </li></ul></ul><ul><li>Don’t wait </li></ul><ul><ul><li>Your competitors have already begun this process </li></ul></ul>
    • 33. Questions &amp; Answers Luc Bondar Vice President, Loyalty Will Wittkopf Director, Decision Sciences Consulting
    • 34. To obtain a PDF copy of today’s slide deck: [email_address] Extended Q+A on the 1to1 Blog www.1to1media.com/weblog For more information: Luc Bondar – [email_address] Will Wittkopf – [email_address]

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