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Loyalty 2.0 ichec 25.11.2013
This document provides an agenda for a presentation on customer loyalty given by Stéphanie Duchemin on November 25th, 2013. The agenda covers an introduction to The House of Marketing, definitions of customer loyalty, examples of loyalty program set-ups, trends and challenges in loyalty programs, and alternatives to traditional loyalty programs referred to as "Loyalty 2.0". Between agenda items, the presentation includes questions for attendees and illustrations of loyalty program examples.
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Loyalty 2.0 ichec 25.11.2013
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- 2. Agenda 1. Introduction TheHouse of Marketing 2. What is customer loyalty? 3. Loyalty program set-up & examples 4. Trends & challenges 5. Loyalty 2.0: alternatives to loyalty programs 2
- 3. The House ofMarketing 3
- 4. The 3 mainservices of The House of Marketing Temporary Marketing Support Marketing Consultancy Marketing Talent Development To bridge capacity & competence gaps To tackle strategic marketing challenges To develop, coach & train marketers on the job 4
- 5. Question What are yourexpectations of today? 5
- 6. Agenda 1. Introduction TheHouse of Marketing 2. What is customer loyalty? 3. Loyalty program set-up & examples 4. Trends & challenges 5. Loyalty 2.0: alternatives to loyalty programs 6
- 7. To which brandsare you loyal & why? 7
- 8. Customer loyalty isa behavioral and attitudinal tendency to favor one brand over all others “Customer loyalty is both a behavioral and attitudinal tendency to favor one brand over all others, whether due to satisfaction with the product or service, its convenience or performance, or simply familiarity and comfort with the brand. Customer loyalty encourages consumers to shop more consistently, spend a greater share of wallet, and feel positive about a shopping experience, helping attract consumers to familiar brands in the face of a competitive environment.” Source: PR Loyalty Solutions 8
- 9. To define customerloyalty a distinction has to be made between behavioral and attitudinal loyalty Behavioral loyalty A customer who stays (repeat purchase, renew contract,…) is often seen as a loyal customer Be careful: This does not mean that these customers are loyal because they might leave once the situation changes… Attitudinal loyalty Source: Klantenloyaliteit, Marnix Bügel Commitment to continue using a product or service, despite situational influences and marketing efforts of competitors, is true loyalty. 9
- 10. DELIBERATIVE CONFIRMERS low Consciously reconfirming their brand choiceupon purchase Identifying with the brand INERT RESIDENTS Making the same choice out of habit Locked in or switching is not worth the effort low Involvement CONVINCED LOYALISTS HABITUAL USERS high Subjective axis: Perceived emotional, social, functional risk of switching Loyalty is driven by two dimensions: switching barriers & involvement high Switching barriers Objective axis: Perceived effort, cost, time to switch / frequency of transaction Source: THoM analysis of McKinsey Quarterly & Marketing NPV 10 Involvement drives behavioral & attitudinal loyalty Switching barriers drive behavioral loyalty
- 11. Illustration Keep the switchingbarrier high to prevent the customer from changing brands • Nespresso’s coffee machine could only be filled by Nespresso capsules, which were only available online and in exclusive shops • Consumers didn’t have the choice and were attached to the brand BUT: • Douwe Egberts duplicated the capsules, which can also be used in the Nespresso machines and are available in the supermarkets • Nespresso’s switching barriers decreased: consumers can now easily switch between Nespresso and Douwe Egberts • Nespresso will need to continue working on involvement 11
- 12. Illustration Despite changes inregulation to lower the switching barrier, find a way to keep the customer Become Telenet iKing and receive an iPhone 5 for only €199 (€29 for iKong) If you leave iKing within a period of 24 months, you need to pay the remaining value of the iPhone to Telenet 12
- 13. Illustration But... be awareof negative reactions from unsatisfied customers 13
- 14. Question Why do loyaltycustomers switch to another brand? 14
- 15. DELIBERATIVE CONFIRMERS CONVINCED LOYALISTS HABITUAL USERS INERT RESIDENTS low high low Involvement high Subjective axis: Perceivedemotional, social, functional risk of switching Exercise: Put the following brand logos on the right place in the loyalty matrix and explain your positioning Switching barriers Objective axis: Perceived effort, cost, time to switch / frequency of transaction 15
- 16. Be aware, brandscan move throughout the framework due to changing circumstances or consumers‟ perception CONVINCED LOYALISTS Involvement high DELIBERATIVE CONFIRMERS INERT RESIDENTS low high low HABITUAL USERS Switching barriers 16 True loyalty is the only sustainable, long-term competitive advantage for business in today’s multi-channeling world.
- 17. Question What should Q8do to increase involvement & switching barriers? 17
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- 19. Loyalty is oftenconfused with retention in terms of objectives, tactics and target Margin Get! Acquisition Grow! Keep! Development Get (again)! Retention Win-back Time Loyalty Retention management • • • • • Primary increasing switching barriers, secondary increasing involvement > Increasing behavioral loyalty Short term fix for churn reduction Long term plan for retention Focus on high and medium value customers with high churn risk Aims at reducing and preventing churn through fixing the basics Source: THoM analysis Loyalty management • GET GROW • • KEEP • 19 Increasing involvement by understanding loyalty drivers > Increasing behavioral and attitudinal loyalty Long term Focus on customers with high potential (customer lifetime value) Aims at retaining and increasing customer value through building sustainable relationships
- 20. Agenda 1. Introduction TheHouse of Marketing 2. What is Customer Loyalty? 3. Loyalty program set-up & examples 4. Trends & challenges 5. Loyalty 2.0: alternatives to loyalty programs 20
- 21. Question Why do brandsset up loyalty programs? 21
- 22. Question Why do weregister to loyalty programs? 22
- 23. Traditional loyalty programscan be ranked on 3 axes: the reward-moment, required counteraction & customer initiative Reward-moment Immediate Transaction based Counteraction 1 Customer initiative Direct Adv Program Postponed Not transaction based 2 Relationship Program 3 Savings Program No initiative Direct discount 4 Initiative Contest Program Advantage won through contest Source: Klantenloyaliteit, Marnix Bügel 23 Saving points for gifts via transaction Service related & other advantages 5 Event Program Event invitation 6 Customer Adv Program Saving points for gifts via initiative
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- 30. Question Why do customersopt out of loyalty programs? 30
- 31. Agenda 1. Introduction TheHouse of Marketing 2. What is Customer Loyalty? 3. Loyalty program set-up & examples 4. Trends & challenges 5. Loyalty 2.0: alternatives to loyalty programs 31
- 32. Is building loyaltyan utopia? How to build loyalty? 60% Improve customer More relevant experience products/services Analyze customer needs 50% Focus on CLV Personalize Communication Net Success 40% Refine segmentation Invest in employees Create dialogue 30% 20% Review pricing strategy Reward with incentive 10% Involve customers in marketing projects 0% 0% 10% Source: Yearly #YMS2013 Marketing Survey 2013 20% 30% 40% Usage 32 50% 60% 70% 80% 90%
- 33. 100% loyalty isout. Divided loyalty is in. • Loyalty programs have become a commodity “Your consumers are just somebody else‟s consumers who occasionally buy you” Martin Hammer 33
- 34. Loyalty programs havebecome a commodity Marketers should rethink the loyalty concept 34
- 35. Being enrolled ina loyalty program is a habit rather than influential in purchase decisions The average Three-quarters of households are enrolled in at least one frequent customer account. Fewer than 20% of loyalty household has members say their memberships signed up for no are influential in purchasing less than 18 decisions and only 33% of memberships. loyalty customers feel that American households are active in less than 50% of the programs those programs are addressing But ... they have signed up for. Source: The power of points: Strategies for making loyalty programs work 35 Customer Strategist, Peppers&RogersGroup their needs.
- 36. Illustration Famous loyalty programsdon‟t work anymore • Loyalty scheme: redeem points for rewards and prize draws • Unique experience: redeem points for Coca-Cola merchandising, magazines, cosmetics, speakers,… “We are making some changes to Coke Zone following a review of which parts of the site are of most interest to people. What this review tells us is the vast majority of people visit Coke Zone for news, competitions and the chance to win great prizes and experiences, rather than to collect and redeem points in exchange for gifts like T-shirts and headphones.” Statement Company Coca- Cola 36
- 37. Illustration Frequent flyer programsare also under pressure Situation Limited increase of loyalty as business travellers have cards of all airlines Rewards based on wrong metric: airmiles flown instead of amount spent Only reward when it’s convenient for the airline (e.g. upgrading) Slow reward redemption Frustrated non-frequent flyers: lack of engagement Lost status can destroy relationships 37
- 38. 100% loyalty isout. Divided loyalty is in. • Loyalty programs have become a commodity • The savvy shopper wants more, and he wants it now 38
- 39. Changing behavior ofconsumers “the savvy shopper” Better informed thanks to internet Research & plan more deliberately Increased switching behavior Far more discriminating in choosing to which brands to give their loyalty Expect to be rewarded & recognized for their loyalty Want instant gratification, value & relevance in every transaction 39
- 40. 100% loyalty isout. Divided loyalty is in. • Loyalty programs have become a commodity • The savvy shopper wants more, and he wants it now • Digital channels reshape the loyalty landscape 40
- 41. Social media likeFacebook have become mainstream Social media reach in Belgium 5.5 mio users 1.178.723 profiles 167.679 profiles* 46.243 profiles Source: B.L.V.G Blog, June 2012 * Estimation end 2011 41
- 42. Illustration United airlines “Optathlon”gives passengers the chance to instantly win upgrades • The app includes five games: Legroom Legend , Linejump Hero, Mileage Ace, Suitcase Skyway & Airport Oasis. • Playing the games just before a flight gives you a chance for instantly winning access to the airlines Red Carpet Club, Premier Line, Economy Plus or a 10% ecertificate. There’s also a chance to win one million Mileage Plus miles during game play at any time. • All the games are dealing with the realities and frustrations of airline travel 42
- 43. Illustration Converse All Stars:co-creation used as loyalty tool Converse: • December 2011 • Facebook application • Design own Converse shoes and sell them through friends on social network and virtual store • Free pair of shoes when enough pairs are sold 43
- 44. Mobile technology providesan answer to the changing behavior of consumers Consumers expect immediacy, relevance & convenience Immediacy Relevance Convenience Nectar Using location-based services to provide discount codes directly Hilton Loyalty apps which give customers immediate access to booking info, let them order room service, checkin/out, etc Delhaize Mobile shopping Targeted & personalized offers Shop & collect, find stores, … Source: THoM analysis 44
- 45. Illustration “My Starbucks rewards”steps away from real currencies Special features & in-store utilities Mobile Card Card Balance E-Gifts Locationbased Rewards overview 45
- 46. Illustration Qustomer: „the digitalloyalty card of the future‟ 46
- 47. Mobile New technologies reducefrontier between loyalty & payment Universal payment app (Bancontact Piloted ‘13, launch : ‘14) Mobile wallet (Sixdots, SEQR Launch: ‘14) Mobile wallet, excl Payment (Passbook) Universal loyalty App (Qustomer, Fidme) Dedicated payment app (KBC PayMe, bpost bank) Payment Online payment (Paypal, Ogone) Loyalty Cashier system incl loyalty (e.g. Micro Concept) Piggybacking loyalty scheme (Freedelity, Fiselsys) Debit & credit cards Plastic cards Multi retailer loyalty cards (e.g. Plus card,) Stampcards (e.g. Exki) Size of bubble provides an estimate of adoption rate in BE (from mainstream to niche) Dedicated loyalty cards (e.g. Fnac)
- 48. 100% loyalty isout. Divided loyalty is in. • Loyalty programs have become a commodity • The savvy shopper wants more, and he wants it now • Digital channels reshape the loyalty landscape • Forget “old school rules”: focus on light users and penetration #YMS2013 48
- 49. Question “It costs fivetimes more to acquire a customer than to retain one”. What do you think? 49
- 50. Answer: The statementis a myth Advertising & promotional expenses - Not only for inducing first time purchases, also for brand image and awareness among current customers - Promotions are often enjoyed by both new and current customers Diversity of customer base in terms of acquire and retain costs - Customer profitability is not evenly distributed. - Often the most expensive customers to retain = those who generate most profits - desirable to competitors and receive attractive offers - customers know this and expect a higher level of service BUT - Best customers outspent others by: - 16 to 1 in retailing - 13 to 1 in restaurants - 12 to 1 in airlines - 5 to 1 in hotels - Satisfied customers spread more WOM Source: www.ipsosloyalty.com 50
- 51. The combination ofa penetration and a loyalty strategy is necessary and asks for a dual marketing approach Combined strategy and approach Penetration growth & Existing customers might buy the brand more often New customers might buy the brand Mass Marketing Loyalty growth & Reach all the buyers, including the occasional, light buyers and non-buyers Target Marketing Reach all the heavy users Most effective campaigns aim at new AND existing customers. A company is successful when it targets light users AND heavy users. 51
- 52. Retention and loyaltyinitiatives will only boost business if there is alignment with the business strategy and the marketing strategy Vision & Business objectives Positioning Sales strategy Penetration growth Retention & loyalty strategy & New customers Mass Marketing Reach all potential targets Loyalty growth Existing customers & Target Marketing Reach valuable clients
- 53. 100% loyalty isout. Divided loyalty is in. • Loyalty programs have become a commodity • The savvy shopper wants more, and he wants it now • Digital channels reshape the loyalty landscape • Forget “old school rules”: focus on light users and penetration Loyalty 2.0: working on tailored customer experiences #YMS2013 53
- 54. Illustration Of course, tailoredcustomer experience is more than a creative campaign Creativity works but it doesn’t mean the customer won’t buy the competitor’s product Keep in mind that obtaining 100% loyalty is difficult today. Make sure your brand is at least part of the customer’s basket of brands 54
- 55. Agenda 1. Introduction TheHouse of Marketing 2. What is Customer Loyalty? 3. Loyalty program set-up & examples 4. Trends & challenges 5. Loyalty 2.0: alternatives to loyalty programs 55
- 56. These trends havechanged the loyalty space From today’s loyalty… To next generation loyalty Programs only focused on in-program transaction data to reward target customers (purchase/earn/redeem) ▪ Loyalty extends beyond purchasing, and rewards behavior across the customer decision journey: focus on interaction ▪ Diversify away from currency: increasing focus on customer experience One size fits all ▪ Customized: personalized offers, differentiated ▪ Programs reach customers through ▪ Channel ubiquity – loyalty is conveniently traditional channels: a program website, call centers, email or mail experiences & relevant rewards present wherever and across multiple vehicles ▪ Social media & mobile as powerful loyalty generators : engage customers through new media Relentless focus on the consumer, fueled by data and powered by a remarkable customer experience will enable true attitudinal loyalty Source: THoM analysis
- 57. What do wemean by customer experience? CE = The total set of elements, from product to price/value perception to channel interactions… … from promises to execution to messaging …that determine a customer’s satisfaction …and therefore drive value What I get = What I expect Source: THoM analysis 57 How I feel
- 58. Different stages ofthe consumer decision journey have impact on customer experience & loyalty behavior Pre-purchase Research Awareness Evaluate Advocacy Loyalty Use (service) Post-purchase Buy Purchase Capture data at all touchpoints Source: THoM analysis 58 Datamining & analysis Use insights to learn & adapt
- 59. Pre-purchase Illustration Ikea‟s sleep likea princess contest Engaging loyalty members and raising awareness DESCRIPTION • Ikea ran a Facebook competition which was only open to loyalty card holders • Users had to upload a photo of a friend who was having a nap • Then Facebook users voted for the best picture • Prize = a bed worth up to £1,500 Results: • 44,000 YouTube views • 13,650 Facebook visitors • Almost 4,000 new fans Source: Six awesome examples of Facebook campaigns by Ikea 59
- 60. Pre-purchase Post-Purchase Illustration Booking.com reminds reviewwriters of previous holidays DESCRIPTION Booking.com sends a mail one year after writing a review to remind the customer of a previous holiday and to advertize new accommodations Source: www.booking.com 60
- 61. Purchase Post-purchase Illustration At The Ritz-CarltonHotel, Ladies and Gentlemen are serving Ladies and Gentlemen DESCRIPTION • Employees are empowered to create unique, memorable and personal experiences for our guests • Employees note all the preferences of the guests and fulfill these, even if the guest doesn’t ask it explicitly • Each employee has a budget to serve the customer in any way he likes • Employees are also treated like ladies and gentlemen Source: www.corporate.ritzcarlton.com 61
- 62. Post-purchase Illustration Telenet „Verwenbrigade‟ Creating advocateswith surprise & delight DESCRIPTION Telenet looked on Twitter for customers who were having a bad day and surprised them with a nice gift, a voucher to rent a movie with Telenet Digital TV. Source: https://twitter.com/Verwenbrigade.com 62
- 63. Post-purchase Illustration Spanair “Unexpected Luggage” IncreaseWOM & Customer Satisfaction DESCRIPTION • Spanair gave Christmas Gifts to all the passengers of the last flight that arrived at midnight before Christmas. Results: • 100.000 views in 48 hours • 7.000 people shared it on Facebook & Twitter • 600.000 viewings in 12 days & Presence in the international media • +13 Mio people received our greetings Source: http://www.youtube.com/watch?v=F-Fk2hpdrdU 63
- 64. Purchase Post-purchase Illustration KLM: Meet &Seat on Twitter/LinkedIn • February 2012 • Meat & Seat initiative • Link booking to Facebook/LinkedIn • Select seat based on most interesting profiles Source: Trendwaching.com 64
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- 66. Join us atour Meet & Greet! Cook & Book – Woluwe 28/11/2012 – 19h00 Subscribe www.thom.be/meet-greets
Editor's Notes
- #15 AvailabilityPriceQualityServiceSelection/ choiceFeatures
- #22 Bottom line impact: increase avg basket, frequency of visit, etc.Build client database => communicationBuild knowledge => data mining (+ even sold to third party – e.g. Retailers)Branding (awareness, engagement)Industry standard (retail, airlines)
- #23 Nielsen – How loyal is your customer (Nov ‘13)(European avg)Discount/ free products: 82%Free shipping: 34%Customer service: 32%Exclusive product/ event: 22%Opening hours: 11%
- #31 Nielsen – How loyal is your customer (Nov ‘13)(European avg)Too expensive: 47%Don’t shop there regularly enough to get benefit: 42%Don’t like benefits: 36%Too complicated: 30%Too much communcation/ mailings: 29%Don’t like to share personal info: 20%
- #33 The Yearly Marketing Survey 2013 indicated that traditional reward programs don’t do the trick anymoreSo in fact, building loyalty is about the basics: work on relevance, improve experience....
- #34 53% van de Sensodyne users buy Colgate46% of the Colgate users buy Aquafresh...72% of the Pesdrinkers buy CocaCola....Once or more every 12 monthsMartin Hammer ‘YOURCONSUMERS’AREJUSTSOMEBODYELSE’SCONSUMERSWHOOCCASIONALLYBUYYOUPeople are loyal to a group of productsDevided loyalty: consumer buy different brandsTake care of the basics (experience, needs)Old school rules: gaining a new customer costs 5 times mre than keeping a customerDus het enige wat werkt is de switching barriers hoog houden (vb legaal,vb Nespresso ) maar vooral het involvement (Pampers, Nike) hoog houden
- #39 Savvy shoppers:They want more, and they want if nowPrice sensitive, but also value quality & serviceWant to be in control over their experienceSharing behavior
- #47 http://www.qustomer.com/pages/home
- #49 Take care of the basics (experience, needs)Old school rules: gaining a new customer costs 5 times mre than keeping a customerDus het enige wat werkt is de switching barriers hoog houden (vb legaal,vb Nespresso ) maar vooral het involvement (Pampers, Nike) hoog houden
- #64 http://www.youtube.com/watch?v=F-Fk2hpdrdU