Loyalty Program Refresher

1. Loyalty Program Refresher Time to update your loyalty program? Sallie Burnett sallie@customerinsightgroup.com

2. Sallie Burnett Strategist. Leader. Innovator. © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758 President of Customer Insight Group, Inc., a leading strategic relationship-marketing firm Digital marketing professor at prestigious Daniels College of Business 2009 Direct Marketer of the Year

3. Agenda • What is loyalty marketing? • Why is customer loyalty important • What can loyalty marketing do for your business? • How is customer loyalty marketing evolving? • Where is customer loyalty today? • 7 keys to building customer loyalty. • SOSTAC • Resources

4. What is Loyalty Marketing? Loyalty • Customer’s faithfulness; advocacy, devotion; constancy. Loyalty Marketing • Discipline of identifying and nurturing the yield of best customers through a long- term, reciprocity, value-added relationship. © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

5. Why is Customer Loyalty Important? 45% of sales are from existing customers. Cost 5X more to attract a new customer than to keep an existing one satisfied. 60-70% probability of selling an existing customer again. 5-20% probability of selling to a new prospect. © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

6. What can Loyalty Marketing Do for Your Business? GROW Grow and maintain the number of existing customers who purchase from you. FREQUENCY Increase number of times a customer makes a purchase. TRANSACTION SIZE Build transaction size by meeting more of the customers needs. PROFIT PER CUSTOMER Increase average value per customer through efficient marketing. © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

7. Where is Customer Loyalty Today?  CUSTOMER  More demanding, more choices  Trust is key to customer loyalty  Participation in loyalty programs increasing  COMMUNICATION  Irrelevant, impersonal messages  New customers/members are forgotten  No customer engagement plan  STRATEGY  Me too value proposition  Launch and put into “auto” drive  Measurement metrics not tied to strategy  INSIGHT  Manage defection, not migration  Data used to run program, not used to run the business  Customer relationships are “siloed” in the organization © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

8. 7 Keys to Building Customer Loyalty 1. Recognize and Reward Customer Loyalty 2. Proactively Manage Customer’s Lifecycle 3. Make a Great First Impression 4. Create at Customer Engagement Strategy 5. Show Brand Advocates the Love 6. Communicate. Communicate. Communicate 7. Practice Serendipity © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

10. 1. Recognize and Reward Customer Loyalty 34% 20% 13% 12% 10% 0% 5% 10% 15% 20% 25% 30% 35% 40% Providing exceptional 24/7 customer service Rewarding me for purchases, feedback and referrals Sending me exclusive and/or relevant offers and specials Providing personalized products, services Knowing me when I visit or call When consumers were asked about the best ways companies can gain their loyalty, the top choice for respondents was providing exceptional 24/7 service, followed by reward programs. Customers want to be rewarded for their loyalty. © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

11. 2. Proactively Manage Customer’s Lifecycle Value to the Customer ValuetotheOrganization Unqualified Customer Prospective Customer Advocate Customer Repeat Customer © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

12. 3. Make a Great First Impression 48% 40% 11% 1% 0% 10% 20% 30% 40% 50% 60% When I make my first purchase or begin service (first impression) Exceed my expectations in resolving an issue (service and experience) Before I buy or decide to do business with a company When I consider switching to a competitor First impression critical to winning customer loyalty and trust. Clickfox2012BrandLoyaltyStudy © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

13. 4. Create a Customer Engagement Strategy Companies who have profited from social media are twice as likely to have a FORMAL STRATEGY. BE SOCIAL DO SOCIAL MEDIA © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

14. Consumers Trust Friends, family, connections have greater influence. SourceNielsonGlobalTrustinAdvertisingSurvey,Q32011 Don’t Trust Much/ At All Trust Completely/ Somewhat 36% 41% 42% 46% 47% 47% 47% 50% 58% 70% 92% 64% 59% 58% 54% 53% 53% 53% 50% 42% 30% 8% Ads served in search engine results Ads before movies Ads on radio Ads in newspapers Ads on TV Brand sponsorships Ads in magazines Emails I signed up for Branded websites Consumer opinions posted online Recommendations from people I know © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

15. Engaged customers… • Recommend products, services or brand” (52% respondents) • Engaged customers are “more likely to convert more readily (31%) • Engaged customers “purchase regularly” (28%) • Engaged customers “less likely to switch supplier” (27%) • Engaged consumers are “more aware of product family” (28%) © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

16. MEASURE Measure success of program based on objectives including increased brand advocacy, referrals, and sales. ENGAGE BRAND ADVOCATES Create a formalized plan to recognize and reward desired behavior. IDENTIFY BRAND ADVOCATES Qualification of brand advocate can include the value to the organization as well as quantity and quality of posts, customer referrals, etc. 5. Show Brand Advocates the Love © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

17. 5. Show Brand Advocates the Love Low High Customer Satisfaction High Loyalty Brand Champion Significant value to influence Viral Loyalists Loyal and do tell Loyalist Loyal but don’t tell Mercenaries Switch based on price —little value created Antagonist Dissatisfied and tell others © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

18. 6. Communicate. Communicate. Communicate. 0% 10% 20% 30% 40% 50% 60% 70% 80% strongly agree somewhat agree neutral somewhat disagree strongly disagree Good Communication Drives Customer Satisfaction Satisfaction “Program” communications are relevant to me MaritzInsightstheLoyaltyReport2012 © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

19. 38% 62% 47% Modify purchases to maximize loyalty benefits. Loyalty programs make me more likely to continue doing business with a company. Modify when and where I shop to maximize loyalty benefits. Best Practice: Use contextual, relevant communications in the moment, when it matters and you will strengthen customer loyalty and reinforce customer satisfaction. 6. Communicate. Communicate. Communicate. © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

21. 7 Keys to Building Customer Loyalty 1. Recognize and Reward Customer Loyalty 2. Proactively Manage Customer’s Lifecycle 3. Make a Great First Impression 4. Create at Customer Engagement Strategy 5. Show Brand Advocates the Love 6. Communicate. Communicate. Communicate 7. Practice Serendipity © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

23. Depth of customer information Business Objectives Expand marketing channel with direct capabilities (“broad and shallow”) Build strong relationships with growth segments (“narrow and deep”) Collect data to be leveraged as a core business asset (“broad and deep”) No explicit strategy Continue to pursue defined initiatives  Provide direct, targeted messages and offers across customer base  Target all segments, with limited ability to target and tailor between segments  Collect customer data to make better decisions across the business  Target all segments, significant ability to target & tailor between and within segments  Develop strong relationships with most valuable segment(s)  Target growth segments only, significant ability to target and tailor between and within segments Low High Low High Breadthofcustomercoverage Developing Program Strategy © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

24. Expand marketing channel with direct capabilities Key areas of benefit Potential Types of impact Customer Segments Functions Limited data for all customers Growth segments Maintain segments Marketing Only • Improved efficiency of markdown spend through direct targeting and understanding of promo response “broad and shallow” Build strong relationships with growth segments Deeper data for select segments • Limited customer insights to drive core function business decisions • Increased customer loyalty (e.g., greater margin, improved cross sell, higher frequency of purchase) • Enhanced customer perceptions (e.g., affordable indulgences positioning) • Targeted levers (e.g., conversion, frequency, UPT, and markdown) “narrow and deep” Collect data to be leveraged as core business asset Robust data for all customers • Robust customer insights to drive core business decisions • Strategic decision support (e.g., segment assortment preference) • Strategic choice evaluation (e.g., impact of menu changes on core customer segments behavior) • Increased customer loyalty • Enhanced customer perceptions • Targeted levers “broad and deep” Growth segments Maintain segments Growth segments Maintain segments Marketing Distrib. Merch. Planning Buying Store Ops.Marketing Distrib. Merch. Planning Buying Store Ops. Strategy Options and Potential Impact © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

26. Key Economic Considerations Potential Execution ElementsProgram Type Key Economic Considerations Instant store discount “broad and shallow” Points based rewards “broad and deep” Segment specific propositions “narrow and deep” • Customers present card to receive in-store discounts automatically at POS • Markdown dollars distributed through card • “Swipe Sweepstakes” element to encourage consistent use of card • Mass consumer data insights to build tailored merchandising, pricing and promotional mix at store and customer level detail • Customers present card to accumulate points over time to be redeemed for tiered rewards • “Swipe Sweepstakes” element to encourage consistent use of card • Mass consumer data insights to build tailored merchandising, pricing and promotional mix at store and customer level detail • Select customer segments invited to participate in program that appeals to them • Brand distinctions leveraged against group for distinctive positioning and brand strength • Purchase response to tailored messages drives follow-up communications and determination of need for additional customer data detail • Highest participation • Low customer upside • Minimal incremental impact on UPTs, store trips and conversion • High participation • High free rider hurdle • Aspirational purchases to achieve rewards will provide gains in UPTs, store trips and conversion • High exit costs • Select participation • Greatest customer upside • Enhanced loyalty to drive per cap and margin • Strongest gains in conversion and UPTs • Minimal exit costs © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

27. Thank You! Sallie Burnett sallie@customerinsightgroup.com Twitter.com/sallieburnett LinkedIn.com/in/sallieburnett © Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758

28. Resources Social Media Library http://www.customerinsightgroup.com/loyaltyblog Infographics http://www.customerinsightgroup.com/loyalty-infograph SallieBurnett on Twitter http://twitter.com/sallieburnett LinkedIn Group http://linkd.in/LinkedInDiscussion Social Media Grader http://www.customerinsightgroup.com/marketinglibrary/social-media-grader White Papers & eBooks http://www.customerinsightgroup.com/white-papers