2. Contents
What is a loyalty programme?
Loyalty Success Factors
Introduction to Retail Loyalty Programmes
Loyalty Programme Structure Secrets
Loyalty Programme Promotions - Driving Sales
Loyalty Market
Summary
3.
4. What is a loyalty programme?
The systematic collection of customer data in return for rewards or
benefits, often used to give customer additional privileges or services to
best/loyal customers
Opportunities
• Understand customers
• Give discounts to best customers only
• Adjust real price for certain customers
• Use data to negotiate with partners
5. Loyalty Programme Options
Points
Earn points and redeem
for rewards
Good
-Offers control
-Customer understands
-Lower cost
Bad
- Points cost are knowledge
- Accrued liability
Discount
Immediate discount for
presenting card
Good
-Easy and instant
- No liability
Bad
- Discount has to be large
(+10%)
- No control
Privilege
Rebate
Reward spend over
time
Good
-Easy to manage
Bad
- Little control
- Easy to copy e.g.
stampcard
- Little emotional connection
Krisflyer
Earn points and redeem for rewards plus tiers of privilege
Bad
Good
- Low spend customer disillusion
-Privileges lead to loyalty
- Competitors can match
-Offers control
-Customer understands
6. What is a privilege program?
Tiers of benefits over and
above points for miles.
(SpiceJET)
7. Loyalty Programme Options
Coalition Model
Hybrid Model
VIP Privileges and private
sales for spend over 60000
Rebates for spend
over 12000
Lucky Chances for spend
Up to 12000
Single Owner
Coalition
8. Bank
Data
Nets & Credit
Data entry
Application Form
name
NRIC
email
mobile
age
family
122132
Customer card
122132
Marketing Planning &
Promotion tactics
Analysis services
Transaction
Database
Customers
9. Considering a programme?
Steps to launch
Planning
1. Feasibility audit
2. Customer research
3. Financial planning
4. Develop programme model
Implementation
1. Implementation – develop systems/communications
2. Launch
Management (operations)
10.
11. Balancing Loyalty Investment Against Return
Loyalty Programme is a cost
of learning about customers
Additional
Customer Profits
>
Loyalty Programme
Investment
+
Loyalty Promotions
Costs
12. Critical Success Factors for Customer Loyalty
Target
Audience
Degree of
Participation
Delivery of
rewards
Getting
Customers to
join
Brand
Positioning
Choice of
rewards
Liability
risk
Competitor
Strength
Customer
Loyalty
Drivers
Generosity
Investment
Cost
Sales
Focus
13. Redeem Program
Barcode card Hybred model
Instant privileges
Discounts for members
Birthday privileges
Points
14. How is it successful?
Getting
Customers to
Join
Easy – free
membership
Target
Audience
Regular shoppers
Degree of
Participation
High
Delivery of
Rewards –
rebate vouchers
(cash effectively)
Brand
Positioning
- for everyone
-Birthday treats
-Members only
Choice of
rewards
Choose from
whole store
Liability
Risk
High but also
High redemption
Competitor
Strength
n/a
Customer
Loyalty
Drivers
Use membership
To make offers
Generosity
Very generous
rebate up to 20%
Investment
Cost
High
Sales
Focus
Very High
15.
16. Loyalty Programme Structure Secrets
Data Collection
FMCG
Partnerships
8
Brand Extension
1
Value
Proposition
2
3
7
6 5
Loyalty Programme
Mechanics
4
Clubs within
programme
Sales Promotion
Integration
Investment
Ratio
17. Loyalty Programme Structure Secrets
1
Strategy
Capture all data relevant to the customer relationship
Data Collection
Lifestyle
Lifestage
RFM
Basket
Attitude
Shop
Habit
Geo
-Dem
Interest
Data Warehouse
Segmentation Engine
Segmented Promotion Marketing
Approach
Use Loyalty cards to capture all customer transactions,
point redemptions, online transactions and calls to any
touch-point
Segment the data according to shopping behavior,
lifestage, lifestyle and other differentiating factors
Advantages
Understanding of customer behavior, identify valuable
customers and communicate one to one with customers
creating a more personal relationship
18. Application form is the single
most important point of data
capture
a)Gather all data in form
b)Gather data incrementally
using electronic channels
Key Information
-Contact
-Age/Gender
-Family/No family
19. Loyalty Programme Structure Secrets
Primary Retail Segmentation Approaches
Recency, Frequency, Value (RFV): e.g High Value Frequent
1
Data Collection
Shoppers, Low Value Frequent Lapsed
Lifestage: e.g. Young Adult, Young Family, Older Family, Empty
Nesters
Lifestyle: e.g. Organic, Fast Food, Home Cooking, TV Diners, Ethnic
Dining based on basket
Internet Shopping: e.g. Trial, Cautious Developing, Everything
Recency , Frequency, Value Segmentation
Frequency
Visit
Recency
Frequency
Visit
Visit
Time
Value $
Today
20. Loyalty Programme Structure Secrets
Basket analysis to get shopper type
Price sensitive
Health Conscious
Low far milk
Natural
Yogurt
Eco-Washing
Powder
Basket <10
items
Lowest price
cola
Organic
Carrots
Brown Rice
Brown Bread
New organic
chocolate
Current
Basket
Lowest price
noodles
Uses 2-1
offers
New large value
biscuits
No fresh items
Cheapest
washing powder
large format
Recommended
46 other shopping types – tv dinners, daily divers, traditional,
ethnic explorers, meat feast, vegetarians etc
21. Loyalty Programme Structure Secrets
2
Value Proposition
Chance
Savings
Privileges
Strategy
Develop a research proven value
proposition for the loyalty programme
underpinned by loyalty drivers
Approach
Value proposition has emotional and practical
appeal and the Loyalty programme aims to
deliver the proposition in the customer
experience.
Advantage
Customer benefit is clear and in-line with a
customer-focused organization
Boots research showed that customers see
programme as ‘more indulgent, different,
generous and offers better rewards’
22. Loyalty Programme Structure Secrets
3
Loyalty Mechanics
Strategy
Define the right loyalty programme mechanics to
minimize cost while driving customer loyalty.
Approach
Points because it offers them greater control to
stimulate spend, but use in different ways.
$1=1pts use points for rewards: voucher
redemption integrated with sales promotions.
Advantage
Greater control while driving customer loyalty.
23. Lucky Chance Card
Easy to launch
No liability
Develop card mgt experience
Capture all details and transactions
Rebate Card
Reward only when customers hits
threshold spend . Tier rebates at
different reward levels
1200 get 60 (5%)
2400 get 240 (10%)
6000 get 900 (15%)
Rebate Card
& Privileges
& Target of 1
Layer on privileges for best
customers.
Target every customer with
individual statements.
24. Loyalty Programme Structure Secrets
4
Investment Ratio
Normally 1-3%
reward
Strategy
Understand investment margins to
determine reward investment and frequency
ratios for the market.
Approach
Average investment is between 1% - 3%.
Some retailers are offering under 1% to keep
cost down.
Advantage
Determining the right level of investment is
balanced against the rewards that motivate
loyalty drivers.
25.
26. Loyalty Programme Structure Secrets
4
Investment Ratio
Spend for 1pt
Value of 1pt
Total Store Sales
Sales on Card (80%)
100
1
1,00000
80000
Points Earned
800
Value Points Earned
800
Points Redeemed
400
Value Points Redeemed
400
Investment Ratio
0.4%
27. Reliance – opportunity to earn at hundreds
of retailers
Reliance card offers a chance to earn
with a large number of retailers in
India.
Comes in smartcard form or keyring
Reward rate can be chosen by
individual retailer .
A customer
consolidating their
spend across the
members could earn a
significant amount of
reward every month
28. Loyalty Programme Structure Secrets
5
Sales Promotion
Integration
Strategy
Data collected drives ALL marketing activity – it is not
operated in isolation.
Approach
Use data to target sales promotion activity
Lifestage, Shopping Habits, Location
Always offer loyal customers something extra!
Target sales promotions by customer segment – mass
marketing costs have been greatly reduced.
Advantage
Greater ROI from all marketing activities
29. Loyalty Programme Structure Secrets
6
Clubs within
Programme
Strategy
Develop Clubs within the loyalty program that use
knowledge gathered from grocery purchases
Approach
Create Clubs for key interest groups where product
marketing efforts can be targeted and incremental
purchase is easy to stimulate
Advantages
Create greater relevance for Club members and reduce
cost of generating incremental spend
30. 7
7
Brand Extension
Strategy
Extend brand using new services
Approach
Develop strong own-brand products new nongrocery services
Leverage grocery database to offer re-branded
services
Advantages
More reward earning/redeeming opportunities
More data from partners and greater marketing
reach
31.
32. Loyalty Programme Structure Secrets
8
FMCG Partnerships
Grocery Retailer
Customer
Strategy
Offer FMCG companies access to
customer knowledge.
Approach
Offer FMCG brands that pay a fee
access to customer knowledge that
allows the brand to plan promotions
that reach the correct target audience.
Advantages
Stronger offers to the right audience
create better returns.
33. Loyalty Programme Structure Secrets
Data Collection
FMCG
Partnerships
8
Brand Extension
1
Value
Proposition
2
3
7
6 5
Loyalty Programme
Mechanics
4
Clubs within
programme
Sales Promotion
Integration
Investment
Ratio
36. Loyalty Programme Promotions - Driving Sales
1. Statements - online/offline
Strategy
Use data collected to personalize vouchers/coupon offers and upsell
Approach
Statement types are personalized based on shopping habits
RFV
Lifestage
Shopper type
Lifestyle
Shopper Type models
Advantages
Increased response rates compared to standard
90% to vouchers
30% to cross-sell/upsell
37. Loyalty Programme Promotions - Driving Sales
2. Shopping lists – online/kisoks
Strategy
Use data collected to personalize basket when repeat shopping
Approach
Can make recommendations based on basket
Slip in the up-sell offers
Advantages
Personalization offers a tested formula for increasing response/redemption rates
38. Loyalty Programme Promotions - Driving Sales
3. Geo-marketing
Strategy
• Store catchments areas in
overcrowded markets need to be
defended from competitors
Approach
• Use loyalty program data to run
targeted promotions on areas of
highest competition
Advantages
• Powerful threat defense only for
customers in risky areas
Store
Competitor Store
Store Catchments
Promotion Target Area
39. Loyalty Programme Promotions - Driving Sales
4. Events/Product Sampling
Noodle Sampling Events are a regular
features for Reliance One Members
Strategy
Most valuable customers are invited for store
evenings, where specially hosted events are
put on around themes such as Noodle,Coffee
and cheese.
Approach
High quality store presentation and grocery
expertise allow retailers to create a conducive
environment for offering high end grocery
products
Advantages
Meet and reward the best customers in
person, while extending sense of privilege that
is popular in all markets.
40. Loyalty Programme Promotions - Driving Sales
5. Layered promotions
Strategy
• Offers attract interest and offer
incentives for immediate purchase
Approach
• Types of incentives
–
–
–
–
2.Personalised shopping list
3. Rebate type vouchers
4. member prices
5. Free gifts
Advantages
• Customers see lots of opportunity
to participate – right offer for right
person
41. Loyalty Programme Promotions - Driving Sales
6. Regular communications
Tips
• Weekly emails for grocery
but with different themes
each week
• Offers are rotated
• Messages are
personalized
• All Opt in email
42. Programmes offer opportunity to get to know
customer – that’s cost of knowledge that must be
recovered
Opportunity comes from using the data – to drive
more spend - personal shopping lists
Customers enjoy being part of programmes if they get
privileges of whatever value therefore work hard to
give them value