Paradigm Shift: The Changing Face of Loyalty


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Paradigm Shift: The Changing Face of Loyalty

  1. 1.
  2. 2. How…<br /><ul><li> Disintermediation
  3. 3. Socialization
  4. 4. Gamification
  5. 5. Monetization</li></ul>are changing the face of loyalty marketing*<br />* and how these forces together drive today’s<br />key trends in customer engagement<br />Howard Schneider<br />MetznerlSchneider Associates<br />
  6. 6. Disintermediation<br />
  7. 7. One of the biggest words I know<br />the elimination of an intermediary in a transaction between two parties<br />
  8. 8. Disintermediation and loyalty<br />The history of loyalty programs is the story of disintermediation<br /><ul><li> In 1981, 95% of all airline tickets were sold by travel agents
  9. 9. Airlines did not know their customers by name
  10. 10. AAdvantage was launched as a promotional tool to get customers to identify themselves…NOT as a reward program
  11. 11. Travel, hospitality, car rental companies established direct relationships with their customers
  12. 12. Banks and some retailers, who had transactional data, soon followed
  13. 13. Retail, restaurant and others jumped in as technology and cost permitted</li></ul>Loyalty programs turn 30 this year!<br />
  14. 14. Indirect distribution models<br />Today, some of the fastest growing categories for loyalty programs are those with indirect distribution models<br />Media companies, studios, manufacturers, CPG companies are turning to loyalty and engagement programs to create one-to-one customer relationships for the first time.<br />
  15. 15. Engaging entertainment fans<br />“350 million customers…and we don’t know any of them by name.”<br /><ul><li>Indirect distribution: exhibitors, iTunes, Amazon, cable, b’cast, satellite
  16. 16. Customers not interested in studio “brand”
  17. 17. Incredible diversity of product means no natural common denominator</li></ul>Warner Bros. solution: WB Insider Rewards<br /><ul><li>A common program platform with different skins for different interests
  18. 18. Rewards interactions and transactions
  19. 19. Allows fans to customize their experience
  20. 20. Tracks, incents, rewards behavior across multiple touchpoints</li></li></ul><li>Engaging entertainment fans<br />WB Insider Rewards looks one way to action movie fanboys<br />…and very different to classic movie aficianados<br />
  21. 21. Disintermediation and loyalty<br />Loyalty programs have both driven, and been driven by, disintermediation. It is a trend that continues to accelerate, and it means:<br /><ul><li> More industries are launching loyalty programs
  22. 22. Marketing efficiency continues to increase
  23. 23. Measurability and accountability continue to spread, into categories accustomed to less-precise metrics</li></ul>Look for more loyalty and customer engagement programs from marketers who are new to the world<br />of direct customer relationships.<br />
  24. 24. Monetization<br />
  25. 25. Money talks<br />In a business plan, “monetization” means, “how do we make any money from this great idea?” In loyalty programs, it means, “how do we accurately and cost-effectively reward customers according to their value?”<br />Early loyalty programs – and many still today – use proxies for value:<br /><ul><li> Miles
  26. 26. Segments / visits
  27. 27. Hotel nights / rental days</li></ul>The use of proxies led to:<br /><ul><li> Poor economics for marketers
  28. 28. Rewarding past, not future, behavior
  29. 29. Rewarding without clear value metric
  30. 30. Unhappy customers
  31. 31. Decreasing reward availability
  32. 32. Blackouts and restrictions
  33. 33. Higher cost to redeem</li></li></ul><li>“If only we could really reward customer value”<br />The availability and cost of sophisticated technology forced the use of proxies. Today, programs are limited only by vision. <br />The first major airline program to be based directly on customer spend is Virgin America’s Elevate – a program that has changed the way frequent flier programs work.<br />Elevate is a revenue-managed program<br />that delivers better economics to the<br />airline, more control and a better<br />experience for the guest.<br />When was the last time you tried to redeem miles on a legacy air carrier?<br />
  34. 34. As easy as “supply and demand”<br />As easy as “supply and demand”<br />Elevate is the first revenue-managed program of its kind that provides choice, value, and a dynamic approach to enhance ROI. <br />15 Days Advance<br />Higher ROS<br />Lower ROS<br />14 Days Advance<br />Near Parity<br />Near Parity<br />
  35. 35. More than just a reward program. It’s an experience. <br />
  36. 36. Monetization and loyalty<br />Southwest, the largest US domestic carrier,<br />has adopted Virgin America’s program<br />design. As has JetBlue.<br /><ul><li> Industries with available data, like supermarkets, have used actual customer spending for years
  37. 37. Other categories are actively exploring how to use the revenue-management model for their loyalty programs</li></ul>Look for more loyalty and customer engagement programs to deliver incentives, rewards and value based on precise knowledge of customer value.<br />
  38. 38. Socialization<br />
  39. 39. “What are we doing in social media?” - every CEO in the world<br />Every emerging media tool or channel has a lifecycle, something like this:<br /><ul><li> Novelty
  40. 40. Skepticism
  41. 41. Infatuation
  42. 42. Evangelism
  43. 43. Overuse / misuse
  44. 44. Disenchantment
  45. 45. Sooo last year</li></ul>Eventually, each finds its optimal role in an ever-evolving mix of media, strategies and tactics.<br />Today’s social and mobile media are uniquely suited to play a major role in loyalty and customer engagement. Social media are an important tool for disintermediation and delivery of customized value and relevance.<br />
  46. 46. Why would I “like” a fabric softener?<br />
  47. 47. A sleeper strategy helps Downy and Macy’s clean up<br />Event marketing, demonstration-chic, comedy, advertising, and the most basic of DM tactics: customer acquisition, all enabled by Facebook and Twitter. Voila: a CPG company now has a database, while Macy’s boosts January White Sale traffic.<br />
  48. 48. And the results?<br />Now, a CPG brand can begin building direct relationships and fostering loyalty.<br />
  49. 49. Finding the “needles in a haystack” brand devotees<br />Sears and Kmart launched the fastest-growing loyalty program in history – over 60 million customers joined shopyourwayrewards in the first year!<br />The program lets Sears track members’ spending and deliver targeted information and offers to drive and reward transactional behavior. But these great old American brands wanted to get members involved in a personal way.<br />
  50. 50. Driving social participation, not just transactions<br />The program rewards social activity, like joining Sears and Kmart branded communities, sharing reviews, uploading photos.<br />
  51. 51. Social media turn a sweepstakes into a sharefest<br />Email, in-store promotion, social media combine for the biggest video upload sweeps ever for a retailer:<br /><ul><li> 45k entries
  52. 52. 5.7mm views</li></ul>This promotion built awareness of and participation in the SYWR program, and reinforced the value of points.<br />
  53. 53. Socialization and loyalty<br />Social strategies, while not always driving immediate sales, measurably help marketers achieve:<br /><ul><li> Increased awareness of and participation in programs
  54. 54. Invaluable WOM
  55. 55. Identification of brand fanatics</li></ul>Social media are a fait accompli, and play a role in virtually every successful loyalty program today.<br />
  56. 56. Gamification<br />
  57. 57. Reality IS broken<br />Games aren’t a panacea for our broken world, or our marketing and customer loyalty challenges. But they sure can help engage customers.<br />As loyalty programs have become ubiquitous, they have lost some of their power to motivate behavior and differentiate brands.<br />There is an increasing need, driven by both marketplace psychographics and program economics, to reward non-transactional behavior.<br />…and you may ask yourself: “You said programs should be based on revenue. Now you say programs should reward non-transactional behavior. WTF?”<br />
  58. 58. The economic challenge<br />It IS challenging to cost-effectively reward non-transactional behavior. But that doesn’t mean it is impossible to value and reward non-purchase interactions.<br /><ul><li>Establish a point structure that allows for small earnings and small rewards for interactions, and more meaningful earnings and rewards for sales
  59. 59. Use a separate earnings and rewards scale to incent and recognize non-transactional, but still valuable behavior</li></li></ul><li>Enter, the psychology and mechanics of gaming<br />Marketers increasingly want to reward interactions like:<br /><ul><li>Posting a review
  60. 60. Sharing something with a friend
  61. 61. Answering a survey
  62. 62. Posting a photo, video or comment
  63. 63. Visiting a website, watching a trailer or demo
  64. 64. Downloading a ringtone, trailer, link or instructional video</li></ul>Game constructs can reward these activities with virtual rewards:<br /><ul><li> Recognition for achievement and participation
  65. 65. Bragging rights
  66. 66. Reinforcement
  67. 67. Badges, stars, leader boards, graphics, enhancements</li></li></ul><li>Games in the air…<br />Virgin America’s onboard entertainment (which can be uniquely optimized by Elevate members) offers onboard games, chat and competition between passengers and, sometimes, even between planes in the air and guests in the terminal. The guests on the winning plane are greeted as heroes by the gate staff.<br />Terminal Takeover is a geo-based check-in game, with a leaderboard in the terminal to track guests’ progress.<br />
  68. 68. …on the road…<br />Subaru allows owners to “reward themselves” and get recognition for longtime loyal ownership, and for identifying their lifestyles and interests<br />
  69. 69. …and online<br />Members earn points for purchases,<br />credits for activities<br />Rewards are listed in separate catalogues — points can be redeemed for merchandise; credits cashed in for virtual or digital rewards such as avatars —ringtones, wallpapers, exclusive video clips or music<br />
  70. 70. Gamification and loyalty<br />Innovative applications are emerging, technology platforms that can add gaming elements to conventional program websites.<br /><ul><li>More fun, greater variety for customers
  71. 71. More ways to engage on the customer’s own terms
  72. 72. More economic leverage for marketers with more ways to reward behavior without giving away the store</li></ul>Even legacy brands and well-established categories will increasingly incorporate gaming tactics to make their programs fun and engaging.<br />
  73. 73. Disintermediation, Monetization,Socialization and Gamification<br />
  74. 74. Thank you!<br />Howard Schneider<br />Metzner l Schneider Associates<br />