Target Loyalty Card Users with Demand Indexing

Our Mission… Advancing Professional Standards in Category Management
CMA
Association for Category Development Professionals
Loyalty Card Marketing with Demand
Indexing
Targeting through the integration of Demand Indexing into Loyalty Card
Marketing Initiatives
Presented by: Eric Togneri, Principal at the CMA and Neri Consulting

CMA
Speaker Introduction
• Eric Togneri has held sales, shopper marketing, and
category management leadership positions at L'Oreal and
led Wyeth Consumer Healthcare's Drug Channel for cat dev
• He currently is a principal and strategic advisor for the CMA,
the largest trade association for the discipline of category
management and a Sr. Consultant for NERI
• The CMA currently counts among it’s membership a broad
base of category management, sales, trade and brand
marketing members spanning manufacturing, retail and
educational institution

CMA
About CPG CatNet

CMA
Loyalty Marketing initiatives take many forms
• There are frequent-buyer programs, frequent-flier programs,
frequent-player cards and frequent-dining coupons
• There are points-at-the-pump schemes, turkey giveaways at
Thanksgiving, along with $100 copper roasters in which to
cook them
• Donations to charities for people who use their Starbucks
loyalty card to buy coffee.
Source: CIO - Insight

CMA
Loyalty Cards are a critical part of the
marketing mix
• More than 75 percent of consumers now have at least one
loyalty card according to Jupiter Research
• The number of people with two or more is estimated to be
one-third of the shopping population
• Surveys by information technology analysts Gartner Inc.,
Forrester Research Inc. and META Group Inc. suggest the
data-for-dollars explosion is showing no signs of letting up
anytime soon
• According to Gartner analyst Adam Sarner, U.S. companies
spend more than $1.2 billion on customer loyalty programs

CMA
Loyalty Cards in the modern marketplace
• Loyalty cards and prizes have always been, first and
foremost, a cheap way for businesses large and small to
start tracking their customers' shopping habits
• Customers consider themselves entitled to special
treatment, a marketplace psychology spawned in the 1970s
by the airline industry's invention of frequent-flier miles
• Says Brian Woolf, president of the Retail Strategy Center in
Greenville, S.C., and author of Loyalty Marketing: The
Second Act, "Loyalty programs are now an essential part of
the marketing mix”
Source: CIO - Insight

CMA
Learnings from the annual Category
Management Conference
• The next generation of category management will be driven
by…
– “Focus on linking category management with frequent shopper
marketing”
– “Link segment marketing with category management”
– “Link Category Management with Local Marketing”
• “Need efficiencies plus local marketing”
• “Need to understand how you compete in each local market
(lower level of aggregation than metro areas)”
• “Must create category management team member who adjusts
strategy and tactics to the local market level”
Source: Robert Blattsburg

CMA
Loyalty Cards Programs cross channels

CMA
How are these cards being utilized?
• Price of admission to receive in store discounts
• Collection of data on consumer purchase behavior
• Marketing programs
– Register receipt discounts
• Bounce backs
• Affinity purchases
– Purchase level incentives
• i.e. Buy $50 this month and get $10 off your next purchase
– Customized Direct Mail Programs
• i.e. Consumer will receive coupons in the mail based upon their past
purchase behavior

CMA
So how do we forge ahead to the next
generation in Loyalty Card Marketing?
Integrating Demand Indexing
Into Loyalty Card Marketing Initiatives

CMA
What do loyalty cards tell us about shoppers?
Some or all of the following…
• Where they live
– How much their house is worth
– Their income
• Contact information
– E-mail
– Phone
• Their age
• How many in their household
• Presence of kids
• Shopping preferences

CMA
What is demand indexing?
• Data sources, like Spectra, can tell us certain
things about a brands’ consumers
– Age
– Household income
– Ethnicity
– Presence of children
– Hobbies/interests
– Purchase levels
– Affinities

CMA
This leads us to a demand index…
• This information can allow us to look at a brand and
determine what the demand index (mean or
average) should be at the consumer, market and
overall levels
• So how does this lead us to insights…
Let’s say Ashley fits the profile of an average
Maybelline Great Lash consumer. And we know
that the average Great Lash shopper purchases
$20 worth of Great Lash per year in Ashley’s
market. If Ashley purchases $15 per year she
under indexes, if $25 she over indexes.
Meet Ashley
Maybelline Great Lash is a registered trademark of L’Oreal

CMA
So, how does this work with loyalty cards?
• Since many of the same data points that are
collected through loyalty cards (purchase behavior,
demographics, geography, etc.) we can…
– Identify loyalty card holders that look like a particular
brand or category consumer
– Compare that consumer to their brand or category
purchase behavior
– Determine the index level
– And create programs to target specific consumers based
upon our brand or category objectives

CMA
Why is this an improvement over current
approaches?
• The vast majority of current loyalty card marketing
initiatives are delivering un-targeted price discounts
• This strategy rewards…
– Price chasers
• The fair-weather friends of the CPG industry
• You can keep them through heavy promotions, but they are just
as easily swayed to purchase alternatives
• A high investment for those who will not be with the brand for the
long haul
– Pantry loaders
• Skewed toward loyal consumers
• Traded down on a price per equivalized unit

CMA
Affinity programs are often inefficient
• Affinity programs deliver incentives to consumers
that are both positively and negatively indexing
• An example would be a targeted coupon program
that provides a discount on salty snacks to
consumers who purchase carbonated beverages
– If a consumer already purchases both on each shopping
trip, the discount did not provide an incentive (i.e. we
gave money away)
– We could have gone directly after the consumer that is
not purchasing both and “should be”

CMA
So why are the under indexing not purchasing?
• There is no way to know for certain…
• But, the more these individuals can receive brand
communications directly -- whether they are price
or education or some other combination – there is
an increased chance that incentives will lead to
purchases and ultimately loyalty

CMA
What are the experts saying…
Stephan G. Kouzomis, Faculty and Staff Member, University of
Louisville’s College of Business
• Consumer buying patterns in today's world are somewhat
not as good as our parent's or grandparent's were!
• One of the keys to loyalty marketing is knowing your target
consumer and then your converted shopper. In some retail
businesses, indexing may be possible, if the index can
incorporate the differences in market share of the retailer; its
image, and importance of and reasons for a premium loyal
buyer.
• Better indexing processes may be a vehicle for customer
service call-ins, and associate service levels at outlet
Source:

CMA
What are the experts saying…
Lisa Bradner, Senior Analyst, Forrester Research
• I think all of us applaud CPG channels getting smarter about to
whom, where and when they apply discounts--targeting those
offers vs. simply subsidizing everyone's purchases makes a lot of
sense. The interesting question in loyalty is always--do you give
your best price to your best customers--who probably would have
bought anyhow--or do you use it to entice potential customers?
While using data modeling to identify likely customers who aren't
is a core best practice, retailers and brands need to make sure
that they don't spend so much time chasing new customers that
they forget to show proper appreciation to their current
customers. Good loyalty programs should always balance these
two.
Source:

CMA
Thanks you for your time!
Eric Togneri, Principal for the CMA…

Target Loyalty Card Users with Demand Indexing

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