Expert strategies for your loyalty program

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Information Services. All rights reserved.
Expert Strategies for your Loyalty
Program
Arun Krishnan
Accenture
www.linkedin.com/in/EmailArunKrish

1
In This Session
• Pursuing Loyalty: Current state of affairs
• Overview of SAP Loyalty Management Capabilities
• Leading practices to streamline an SAP CRM loyalty management
implementation
• Recommendations for a successful Loyalty management
implementation based on a Case Study implementation

2
What We’ll Cover
• Vision for Loyalty
• SAP Loyalty Management Overview
• A Loyalty Implementation Case Study
• 8 Leading Practices for your Loyalty Program
• Wrap-up

3
Customer Loyalty, critical to growth
• Customer Loyalty is one of Top 3 CMO priorities of Marketing
Strategy, in 2014 survey
 Source: Accenture 2013/ 2014 CMO Insights
 581 Marketing Executives across 11 Countries in 10 industries
76% 78% 80%
82%
84%
86%
88%
90%
Increasing sales to current customers
Acquiring new customers
Improving customer retention/loyalty
Using data and analytics to improve marketing impact
Improve trust/integrity in your brands & corporate image
Making more or better use of digital channels
Actively Managing the company's Corporate/brand reputation
Measuring return on marketing investment
Improving Customer Retention/ Loyalty

4
34%
36%
38%
40%
42%
44%
46%
Using technology to improve marketing impact
Making more or better use of digital channels
Using data and analytics to improve marketing impact
Measuring return on marketing investment
Improve trust/integrity in your brands & corporate image
Improve the effectiveness of marketing operations
Increasing sales to current customers
Responding to shifting customer demographics
Improving promotion effectiveness of marketing campaigns
Improving customer retention/loyalty
• Retaining Customer Loyalty is hard – a low #10 in terms of success
• Compared to 2 years ago, how difficult do you think it is to be
successful in these areas?
 Source: Accenture 2013/ 2014 CMO Insights
Yet, Loyalty remains elusive
Improving Customer Retention/ Loyalty

5
% of consumers who switched in
any industries as of 2009
Two in every three consumers
globally have switched companies
in at least one key industry sector
due to specific factors over the
past year. Our research shows a
year-on-year increase.
Participation (at least 1 program)Persuasion (much & very much)
While loyalty program adoption varies by
industry, less than half of participants maintain
that these programs will increase their
persuasion to stick with their provider
Loyalty programs efficiency is limited… …and switching remains high
59%
67% 69%
2007 2008 2009
Source; Accenture - Global Consumer Behavior & Satisfaction Survey, 2009
Life insurance providers
Utility companies
Cable/satellite TV providers
Fixed phone companies
Internet service providers
Hotels
Wireless companies
Airlines
Banks
Retailers
4%
5%
5%
6%
8%
9%
9%
9%
11%
22%
9%
12%
13%
15%
18%
18%
20%
21%
25%
45%
Percentage of total
sample base
% of consumers participating in loyalty
programs and implied provider ‘stickiness’
Yet, Loyalty remains elusive (ctd.)

6
“It’s a Marketing thing only” Everyone’s responsibility; orchestrated
by Marketing
From…
Covers all customer experience aspectsDriven by ‘points & rewards’
Focus on price/product promotions Include customer treatments & dialogue
…To
It is about retention It is about retention, profit, strategic
acquisition and win back
Holistic approach to drive customer valueShort-term approach to retain value
The vision for Loyalty needs to evolve
A different approach to managing Customer Loyalty is needed….

7
What We’ll Cover
• Wrap-up

8
Where does SAP Loyalty Management fit in?
 Significantly improved in SAP CRM 7.X
 A component of SAP CRM Marketing, integration to other SAP
Product suites
 Foundation for end to end Customer Experience
& Loyalty management
 Supports multiple channels: Mobile, Social media
 Extensive integration with Interaction center
 Allows advanced partner management
 Benefit and voucher handling
 Mixed Payment Capabilities Source: SAP

9
SAP Loyalty Management - Functional Overview
Source: SAP
Program management enables flexible design of the customer loyalty strategy enables
designing the status or tier management scheme, points management & expiration, and
tracking the various activities performed towards these statuses.

10
Source: SAP
Reward rules management enables design of offers and rules for a variety of industries.
The rule builder is used to manage program rules related to base miles earnings and tier
levels, as well as bonus offers related to seasonal marketing activities.

11
Source: SAP
Enables Partner management process including registration of new members by the
partner, handling of partnerships in the loyalty program, pricing of points for the partner,
partner billing and integration to Partner Channel Management (PCM).

12
Source: SAP
Enables flexible membership modelling for individual and corporate memberships.
Tracking of member tier history with manual or automated tier transitions. Tracking of
point balances including earnings, redemptions, expirations, and transfers.

13
Source: SAP
Enables transaction processing against program rules with a rules engine. Processing of
member activities through batch processing. Supports evaluating member tier processing
for potential changes against rules and manage points expiration based on inactivity

14
• Illustrative representation of the various CRM Loyalty Objects in
relation to each other
Source: SAP

15
• Loyalty Module supports multiple Membership Types
• 1 Member: 1 Membership, N Member: 1 Membership Supported
• Supports Individual and Business Membership Modeling

16
What We’ll Cover
• Wrap-up

17
The need for Loyalty Management
System Integrator’s role:
• SAP ECC Retail: Finance, HCM, CRM
• Peak team size of 200+ resources
• Partnered with SAP for Loyalty Mgmt.
Case Study Example
• Leader in Wholesale
• ~ 600 stores in 8 countries, 4 continents
• ~ $100 Billion in Annual Revenue
• > 80 Million Members
• > 45 M Memberships
• >150,000 employees
• Strategic decision to modernize the Membership management system
• Phased migration from antiquated AS/400 Platform to SAP CRM 7.0
EHP 2
• Pilot deployment to 12 warehouses in US and CA. Go-Live Fall 2014
• Full Deployment in USA and CA in 2015

18
Loyalty Implementation Case Study: Process Overview
1
Member
Sign-Up
Members Shop
at Warehouse
Rewards
are accrued2 3
Rewards
Redeemed4
Upgrade,
Downgrade,
Cancel, Renew
5 Partner Network
Referral
Terms &
Conditions
6
Targeted Offers
for Members
Multi Channel
Marketing
7
Loyalty
Program

19
Loyalty
Program
Loyalty Case Study: Mapped to CRM Objects
1
Member
Sign-Up
Members Shop
at Warehouse
Rewards
are accrued2 3
Rewards
Redeemed4
Upgrade,
Downgrade,
Cancel, Renew
5 Partner Network
Referral
Terms &
Conditions
6
Targeted Offers
for Members
Multi Channel
Marketing
7
Membership Point
Transactions
Reward
Rule Engine
Point
Redemption
Point
Account
Loyalty Program,
Campaign

20
Loyalty Case Study: Mapped to CRM Objects (ctd.)
1
Member
Sign-Up
Members Shop
at Warehouse
Rewards
are accrued2 3
Rewards
Redeemed4
Upgrade,
Downgrade,
Cancel, Renew
5 Partner Network
Referral
Terms &
Conditions
6
Targeted Offers
for Members
Multi Channel
Marketing
7
Loyalty
Program
Partners &
Partner Transactions
Member
Activities
Service
Contract
IC, Web Integration
API, Mobile, Social Media
Segmentation &
Campaigns

21
What We’ll Cover
• Wrap-up

22
8 Leading Practices for your Loyalty Program
Focus on acquiring data, not just repeat visits
Align Loyalty Experience to the Brand Value
Engage members with personalized content
Excel in delivering core Program Benefits
Harness the Partner network
Enable and Empower your Brand advocates
Increase Member Wallet Share
Reduce Marketing Costs
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

23
#1: Focus on acquiring data, not just repeat visits
• Design your Loyalty program to learn your Customer behavior:
distinguish your most profitable and least profitable customers
 Good Member and Membership data is a foundational
component for a successful Loyalty implementation
• Design your SAP CRM Master Data solution to “Start Clean &
Stay Clean”
 Profile Member, Membership data and lock in a data cleansing
strategy when exiting Blueprint phase
 Establish Data Cleansing Goals for each Mock Cutover Cycle.
Final Cleansing target to be attained by Cutover Rehearsal
 Establish a core Data Steward team upfront. Design, test, train
them on on-going data cleansing process. Accountable for
post go-live data cleansing and data quality dash boarding.
1

24
#1: Start Clean: Data Conversion Approach
• Person data is prone to duplicates, obsolete contact information.
Leverage SAP MDG for Business Partner mastering.
• Leverage SAP Business Partner model. Same Person could be a
member in a Individual Membership (B2C) and a member in a
Corporate Membership (B2B)
 When de-duping pay attention to contact information mastering.
 What on-going business rule changes are needed in SAP CRM
to support new contact master
• Phased rollout = Implications to Legacy System when syncing
from SAP CRM to old data schema
 Case Study: 600 Locations in NA, Pilot deployment with 12
locations. Iterate & Learn.
1

25
#1: Start Clean: Data Conversion Approach
Legacy Extract SAP MDG SAP CRM
Excl. Inactive
> 5 Years
~85 M
Exclude Duplicate
members
~ 80 M
Total Legacy
Member Data
~120 M
Jim
Jim
Home Membership
#456
Acme Hardware
Membership
#789
Home Phone: 214-934-2341
Home Phone: 972-345-6321
DOB: 1-June-1986
Home Membership
#456
Acme Hardware
Membership
#789
Jim
Home Phone: 214-934-2341
DOB: 1-June-1986
MDM
De-dup
~80 M Members
~45 M Memberships
1

26
#1: Stay Clean: Data Maintenance Approach
• Integrate De-dup into the core Member maintenance process flow
across all channels: CRM, Web, Mobile
 Leverage SAP MDG or TREX for de-dup. Threshold driven,
• If de-dup threshold > 90%, prompt the member/ clerk to confirm
duplicate. If threshold < 80%, allow creation of a new member
• When de-dup threshold was between 80 – 90%: create cleansing
case and route to Data Steward for investigation.
 Manage by exception, but let the customer continue shopping
 Establish a core Data Steward team early on. Design and Test
the exception process. Accountable for post go-live quality.
• Consider the impact of de-duped members on integrating
systems/ partners.
 Identify impacts, develop system test cases for integration test
scenarios with de-duped members.
1

27
#1: Stay Clean: Ongoing Data Maintenance Approach
Web
Channel
SAP MDG or
TREX
SAP CRM
CRM UI
Mobile
Channel
Create
Cleansing
Case1
Route to
Data
Steward2
Data Steward
researches and
Merges Members3
Member Create/
Contact Change
Member Save in
CRM
De Dupe logic, records that
fail threshold are routed to
exception process
Exception Process
1

28
#1: Lessons Learned on Membership Capabilities
• Membership Type cannot be changed after initial selection.
• Membership has Assigned Members function but limited
attributes available, limited configurability
 Consider developing a Custom “Parties Involved” Assignment
block functionality using AET
• Membership has limited set of dates, consumed by SAP
 Consider developing a Custom “Dates” Assignment block
functionality using AET
• Member and Membership merge functionality: useful but does
not affect retro-active member activities or service contracts
• Staff a TREX expert. Plan on extensive performance tuning.
 Review transaction volume, system availability requirements
to determine Master-Slave TREX architecture
1

29
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

30
#2: Align Loyalty Experience to the Brand Value
• Customers perceive the Brand at every touch point
 Ensure common Customer experience across all channels:
In-Store, Point-of-Sale, Web, Mobile and Contact center
• Case Study: Primary channel was In-Store. CRM UI experience
had to be “simple and efficient” for the clerk serving member
• Problem: Out of the box UI was inadequate. Required the clerk to
click ~20 screens to ~45 screens (for simple to complex txns)
• Out-of the box options:
 IC LOY AGENT: Works on Interaction Center, works for simple
memberships. Basic member, membership update.
 LOYPRO: Ideal for super-users. Not recommended for
maintenance. Best suited for troubleshooting.
 Campaign Fast Recording: Ideal for simple memberships,
campaign response driven process flow
2

31
#2: Solving the User Experience Challenge
Guided Clerk Experience Integrated to IC_LOYAGENT
Member Information,
feeds TREX deduplication
Marketing
Permissions
2

32
#2: Solving the User Experience Challenge (Ctd.)
Marketing Campaign Integration
Up-sell Opportunity
Partner Integration:
Co-branded Credit Cards
Up-sell opportunity:
Membership Tier
2

33
#2: Solving the User Experience Challenge (Ctd.)
Pricing and Membership Sale
POS Integration for
payment collection
Reports and Other
Self service tools
2

34
#2: Considerations for CRM User Experience
• Solution: enhance LOYAGENT UI with Guided Procedure
 Allowed consolidation of information from multiple assignment
blocks to single screen. Track transaction progress
 Integrate to POS/ Payment Gateway from CRM
 Sale of Memberships is not a standard scenario, requires
custom integration to either Sales or Service module
• Prototype CRM UI experience. Account for Performance.
 Leverage SAP RDS or equivalent accelerator from your SI to
“touch and feel” OOB experience during blueprinting
 Leverage UX tools like Axure, IRise to mockup Enhancement
specification
 Involve end-users in UI prototype and early System test
 Establish CRM UI Performance SLA & execute performance
test
2

35
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

36
#3: Engage members with personalized content
• Relevant communications directly impact customer satisfaction
• Members are 3X likely to share more when they trust the Program
Source: Bond Brand Loyalty Report 2014
3

37
#3: Approach to enable Member Relevant Marketing
• Step 1: Collect Customer Communication Preference
 Leverage the Marketing Permission Module to store opt-in, opt-
out information. Support contact data level only.
 Additional granularity required to store “Topics” of interest –
consider enhancement
 Address all channels to collect preference: CRM, Web, Mobile
• Step 2: Target Groups based on Preferred Medium and Topics
 Segmentation Builder includes filters that pull in Marketing
permissions, use to build segmentation basis. Update regularly.
• Step 3: Outbound communication based on channel
 Leverage API or Custom integration to deliver outbound
integration with 3rd Party Marketing Comms. Provider for services
such as Spam blacklisting etc.
3

38
SAP CRM
#3: Framework for Member Relevant Marketing
Gift Ideas
Vacation Ideas
Special
Weekend
Offers
1. Adrian Enrolls
as a Member
Online
In Store
2. Adrian tells us
what she cares
about
3. Marketing Activity
4. Adrian is contacted
through the channel that
she consented to be
contacted
5. Adrian responds to
marketing message
Marketing
Preference
Business Partner
Segmentation
CRM
Campaigns
Campaign
Feedback
3

39
#3: Framework for Member Relevant Marketing
Filter
Favorites
Attribute
Lists
Segmentation
Model
• Segmentation Leveraging Marketing Permissions
3

40
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

41
#4: Excel in delivering core Program Benefits
• Delivering Program Benefits are just table stakes
 Monetary Benefits: Discounts, Cash-back and Rebates
 Non-Monetary Benefits: Status, Personalized Experience,
Recognition from Brand
• Realized in SAP CRM through Point Account, Tiers and BRFPlus
 Leverage “Loyalty Attribute” Set in Product Master to define
Point Benefits per Product
 Sales order booked in CRM creates Member Activity. Member
activities are in turn processed by BRF Engine updating Point
Account Set, Tier
 Use Loyalty API, to post Member Activities if Sales tracked
externally
 2 Member activities per Item Sold for Point Calculation =
Performance concern (~32 M Member activity on Peak day).
4

42
#4: Approach for mapping Program benefits
TLOG* or Sales
Transactions
Sales Member
Activity
Processing
Engine
Point Update
Mem. Activity
Point Account
Posting
Rewards Issue
Tier Update
Rewards
Redemption
Rewards Accrual
Rewards Issue
Rewards Redemption
Members Receive
Rewards
SAP CRM*Loyalty Web Services
to post transactions ~16 M peak day
~16 M peak day
~4 M per month
~4 M per month
Members achieve
Tier “Status”
4

43
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

44
#5: Harness the Partner network
• Loyalty Partnership coalition programs expand the reach, acts
as a competitor defense to acquire your customers
 Benefit partnerships – Ex: Rental car earns Airline miles
 Referral partnerships – Ex: Members get Discounted Offerings
at participating Partner Vendors
• Out of the box SAP CRM Capabilities for Partner Processing
 Manage Partner Agreements, Partner Points, Partner
transaction posting through Web Service or LSMW
 Special Sales Transactions to Sell, Return Points with
Partners
 Integrated to Partner Channel Management solution: Partner
Manager, Brand Owner roles. Secured by Access Control
Engine (ACE)
5

45
#5: Framework for enabling a Partner Network
Co-Branded
Credit Card
SAP CRM
Membership
Change Web
Service
Membership
change in CRM
Airline
Partner
Miles Activity Web
Service: Posts
Reward Mem, Activity
SAP BW
Partner
Program
Effectiveness
Referral Partnerships
Membership
Change Web
Service
Member
Enrollment
Details
5

46
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

47
#6: Future Growth requires a Social media strategy
• Growth Segment #1: Millennials (aged 20 – 34) outnumber Baby
Boomers. Social recognition is a critical differentiator
• Growth Segment #2: Hispanics ~53M, 17% population, Fastest
growing. ~2 X more socially engaged
Source: Bond Brand Loyalty Report 2014
6

48
#6: Enable and Empower your Brand advocates
• Enable your Members to share Program Benefits
 Allow social sharing of badges and recognition: > 90%
Customers trust recommendations from friends and family
• Design your Program to seek and iterate on member feedback
 Co-creation with members: Leading Coffee Shop Brand
received > 67,000 ideas on new Food & Beverage ideas,
Experience ideas, Involvement ideas
• Out of the Box SAP CRM capabilities:
 Social Media Users Assignment block in Accounts, Contact
overview from EHP3: capture social media account info.
 Social Media Integration enhancement to Interaction Center:
retrieve posts, reply to posts, sentiment analysis, follow-up
actions
6

49
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

50
#7: Increase Member Wallet Share
• Strategy #1: Improve Margin by Pricing Analysis
 Integrate CRM Sales transaction to a Pricing and Margin
analysis solution such as Vendavo, PROS
 Implement closed feedback loop process to incorporate
outcomes from pricing analysis to drive monetary benefits
 Drive Product bundling decisions through margin analysis
• Strategy #2: Predictive Analytics to propose offerings
 Leverage HANA Based Predictive modeling for offer generation
 RTOM Capabilities within SAP CRM:
 Rules based, integrated with Campaign Management
 Integrated with Interaction Center. Also in Hybris.
 Output available through API, integrate into outbound offers
7

51
#7: Closed Feedback Loop Analytics Led Process7
SAP CRM
Sales Order
Reward
Accrual
Campaign
Pricing Master Product Master
Real Time Offer Management
(SAP HANA or CRM)
Pricing and Margin Management
System (Vendavo)
Sales Order
History
Offer recommendations
from Basket Analysis
Sales Order History,
Discounting data
Product Bundling
Recommendations
Discount %, Rebate %,
Cash Back %

52
1
2
3
4
5
6
7
8
Foundational
Capability
Acquire, Defend
and Thrive
Improve
Bottom line

53
#8: Reduce Marketing Costs
• Costs 5X to acquire a new Customer over existing
• 60 – 70% probability to sell to existing customer vs. 5 -20% for a
Prospect
• Developing predictive analytics to define customer churn
segments and develop target segments
 For example skip:
 Customers who will buy anyway
 Customers who will not buy anyway
 Customer who will leave if triggered
 Customers below a certain response score
• SAP delivers Predictive Analytics on HANA, Integrated to SAP
Hybris platform.
8

54
What We’ll Cover
• Wrap-up

55
Where to Find More Information
• http://www.accenture.com/us-en/Pages/insight-cmo-digital-
transformation-summary.aspx
 Accenture CMO 2013/ 2014 Insights
• http://info.bondbrandloyalty.com/the-2014-loyalty-report-us
 Bond Brand Loyalty Report 2014
• 1250732 - Loyalty Mgmt SAP CRM 7.0 SP01: Customizing
Documentation
 OSS note that details documentation for Customizing activities
for loyalty management, use in-lieu of Best Practice

56
Key Points to Take Home
1. Invest in converting and maintaining pristine Business Partner
2. Member experience is paramount: consider all channels for UX
3. Leverage Permission marketing and targeting capabilities to
deliver member relevant communication
4. Use Member Activities, BRF and Loyalty engine to calculate,
issue and redeem Member benefits
5. Expand member benefits through Loyalty partner management
capabilities
6. Embrace and excel social media integration with CRM
7. Leverage pricing analysis, RTOM to increase wallet share
8. Exploit SAP HANA Predictive analytics capability to save costs

57
Your Turn!
How to contact me:
Arun Krishnan
a.krishnan@accenture.com
@ArunKrisTweets
Please remember to complete your session evaluation

58
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SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or
an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective
companies. Wellesley Information Services is neither owned nor controlled by SAP SE.

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