ARTICELS AND

CASE HSBC
REWARD
PROGRAM
Team C:
Nabilla Irawan – 040214353009
Umar Rizki Kusumo Widayu – 040214353062
Andrawina Kartika Sari – 040214353053
Jefri Agustiawan Casano Go – 040214353047
Erlita Kusuma Wardani - 040214353034
ARTICLE 1
Why Your Customer
Loyalty Program Isn’t
Working
By Michael Scharge
March 10, 2015
Nurturing customer loyalty requires a better understanding of
its nature, and the nature of loyalty depends on the economics
of the business. Loyalty to automobiles and mobile phones is NATURING
qualitatively and quantitatively different than loyalty to hotels
and airlines. CUSTOME
R
LOYALITY

Walmart is loyal to its

customers by providing a
tool and technology that
allows it to honors its
“everyday low prices”
promise to shoppers. WALMA VALUAB
Shoppers are rewarded for
their loyalty to Walmart by RT LE
having Walmart do CUSTOM
comparison shopping for ER
them. Savings catcher
creates and cultivates a
How should loyalty from the best and/or most valuable
loyalty behavior that makes
customers be recognized and rewarded differently from that
the relationship more of typical or average customers depends on how businesses
valuable to both. and their customers define, perceive, and value loyalty.
Why Your Customer Loyalty Program Isn’t Working

TRUE
LOYALITY
True loyalty doesn’t just serve and
preserve valuable customer
relationships; it creates and inspires INNOVATIVE
more valuable customers. Loyalty is CONTRIBUTION
a mutual investment, not just an
When loyalty can be defined as
exchange. When loyalty involves
innovative contributions and
bribery, it’s bad for business,
influential word-of-mouth as
morale, and customer expectations.
opposed to repeat high-margin
business, traditional measures and
metrics for loyalty decay into
SOCIAL MEDIA anachronism.

The rise of social media platforms

such as Facebook, Twitter, and
TripAdvisor guarantee that
customers will get a global say on
what loyalty should mean and who
“loyal customers” really are
CONCLUSION
Loyalty is about ethics as it is
business. It is one of those rare
virtues that can be both a means
and an end for new value
creation in healthy relationships
between consumers and
companies. But that only
happens if companies commit to
offering loyalty as well as asking
for it.
ARTICLE 2
Do Customer
Loyalty
Programs
Really Work?
DOWLING & UNCLES
• Loyalty programs that seek to bond
customers to a company or its
products and services by offering an
additional incentive pose an
interesting dilemma.
• Underlying the increasing interest in
loyalty programs are some marketing
managers' widely held beliefs about
customer loyalty
Marketing managers' widely held beliefs
about customer loyalty :
Many customers want an involving relationship with
1 the brands they buy

A proportion of these buyers are loyal to the core and

2 buy only one brand

The hard-core, loyal buyers are a profitable group

3 because there are many of them and they are heavy or
frequent buyers
It should be possible to reinforce these buyers' loyalty
4 and encourage them to be even more loyal

With database technology, marketers can establish

5 personalized dialogues with customers, resulting in
more loyalty.
Why Companies Introduce
Customer Loyalty Programs
A Research claimed that loyal customers are more profitable to a
firm. This profitability was thought to be generated by reduced
servicing costs, less price sensitivity, increased spending, and
favorable recommendations passed on to other potential
customers by loyal buyers.

● It is a lot easier for many B2B marketers than for most

consumer good marketers to know who their loyal
customers are.
● Do customers for these products want a relationship with
the supplying company? In a small business deal or for a
risky purchase, the answer may be yes. For low-
involvement products and the types of brands sold by, say,
Nesde, Procter & Gamble, Shell, or Unilever, it is unclear
whether customers really want a relationship.
● There is a belief is that a small percentage of customers
generate I most of a company's sales and that these
customers can be locked in forever (the 80/20 law). The
80/20 law states that about 80 percent of revenue
typically comes from only 20 percent of customers!
The Leaky Bucket Theory vs Polygamous Loyalty
"Leaky Bucket Theory"
Observes that many marketing strategies
seem to be designed to replace "disloyal"
customers who leak away with new ones
in order to keep the sales level steady.
“Polygamous Loyalty"
Better describes actual consumer behavior
than either brand switching (a conscious once-
and-for-all change of allegiance to another
brand, as if propensities were 100 percent or
zero) or promiscuity (the butterfly tendency to
flit from brand to brand without any fixed
allegiance, when there are no long-run
propensities, only next-purchase
probabilities).
The Leaky Bucket Theory
VS Polygamous Loyalty
● Polygamous loyalty for instance, in
the soft: drink and breakfast cereal
markets but extends well beyond to
car rentals, fast-food outlets, and
business airline travel.
● Many reasons for the generalized
patterns of divided loyalty or
polygamy are straightforward (ex :
diffrent seasons or diffrent variety).
 Linking Customer Rewards to Loyalty
Programs
Direct Or
Indirect Effect

How Buyers
Value
Rewards

Timing
Linking Customer Rewards to Loyalty
Programs
TIMING Of Reward
immediate Delayed

1 2
Directly Supports Retailer/Brand Airline Frequent-Flyer
the Product’s
Manufacturer Promotions Clubs, Coupons, and
(PRICE Tokens
Value Proposition
PROMOTIONS) (GM Card)

Type of Reward
3 4
Competitions and Multiproduct Frequent-
Other Indirect Lotteries Buyer Clubs
Type of Rewards (INSTANT (FLY BUYS)
SCRATCHES)
The Claimed Benefits of Loyalty Programs
Advocates of loyalty programs contend that they are
profitable because:

Loyal customers
Loyal pass on positive
The costs of Loyal
customers recommendatio
serving loyal customers are
spend more ns about their
customers are less price
with the favorite brands
less sensitive or suppliers
company

These alluring benefits go far to explain the interest in customer loyalty

programs. The only way that a loyalty program can give extra leverage
to a company's word-of-mouth marketing is if the loyal customers offer
substantially more, or more effective, positive comments
How to Design an Effective Loyalty Program
To maximize the program's chances of success, the following guidelines are
helpful:

Design the loyalty program

to enhance the value
proposition of a product or Fully cost the
service loyalty program

Design a reward
scheme that
Consider specific market
maximizes the buyer's
simulations in planning
motivation to make
the next purchase
Conclusion
• There are three primary lessons from the research and examples we cite here

• First, a major reason for the launch of many customer loyalty schemes is
competition.

• Second, apart from purely defensive reasons, if a loyalty program does not
support the product or service value proposition, it might be justified in
enticing more distributors to handle the product, a demand pull effect.

• Third, the behavioral loyalty research we reviewed here suggests that brand
loyalty is more likely to come from the market in which a company operates
and the brand it has already than from an add-on customer loyalty program.
 ARTICLE 3
Developing
Effective
Customer
Loyalty
Program
 Loyalty Programs
Special
Discounts Service

Loyalty programs are

offered to stimulate
Members allowances
based on their annual
Cash continued patronage
among consumers purchases
through :

Redeemed
Free Goods point
Types of Loyalty Programs
Members receive additional discount at register
Type 1 Example : Supermarket program

Members receive 1 free when they purchase n units

Type 2 Example : Local car wash, nail salon, SuperCuts, Airport
FastPark, PETCO

Members receive rebates or points based on cumulative

purchases
Type 3 Example : Airlines, hotels, credit card programs,
Staples, Office Depot

Members receive targeted offers and mailings

Example : Tesco, Dorothy Lane Markets, Wakefern’s
Type 4 ShopRite, Giant Eagle Supermarkets, Harris Teeter,
Winn-Dixie, Harrah’s, Hallmark
 Potential Benefits of Effective Loyalty
Programs to Sponsors
Access to Important Information on
Consumers and Consumer Trends
While the overall findings
Higher Average Sales (Due to Cross-
on the successes of Selling and Up-Selling
Opportunities)
loyalty programs may
suggest that many do not Greater Ability to Target Special
Consumer Segments
meet their objectives,
there are significant
Increased Success in Implementing
benefits to a well-run Product Recalls

program :
Potential Benefits by Program
Type
 Steps in Developing, Implementing, and
Controlling an Effective Loyalty Program

1 Outlining Loyalty
Program Objectives 2 Developing a
Budget 3 Determining Loyalty
Program Eligibility

6
Building an

5 4
Considering
Appropriate Selecting Loyalty
Partnerships with
Organization Program Rewards
Others

7 8
Developing and Managing an Internal
Maintaining the Loyalty
Program Database
Data Warehouse and
Data Mining Capacity 9 Evaluating the Success
or Failure of the Loyalty
Program

Taking Corrective
1
Action
0
 Taking Corrective
1
Action
0
Taking Corrective Action
Increasing • Implement a tier system to provide additional points for purchases above a given level (Type 3 and 4
Purchases programs).
by • Develop a differential point structure to reward heavy users (Type 3 and 4 programs).
Members • Provide additional points for related-item purchases (Type 3 and 4 programs).
• Develop a differential point structure for closeouts, overstocks, and end-of-season merchandise (Type 3
and 4 programs).
• Cross-sell goods and services with partners (Type 3 and 4 programs).
• Tailor rewards and communication to a member’s purchase history (Type 3 and 4 programs).
• E-mail special offers to members (Type 3 and 4 programs)
Increasing • Limit enrollment to members with a large and profitable transaction history (Type 3 and 4 programs).
Member • Provide tiered memberships so that heavy users receive greater benefits (Type 3 and 4 programs).
Gross Profit • Charge a nominal fee to discourage inactive or small activity accounts (Type 3 and 4 programs).
• Enable members to easily track activity, points, and award shipment through the Web (Type 3 and 4
programs).
• Restrict membership to a firm’s most profitable customers (Type 3 and 4 programs).
• Drop out unprofitable members or members with low purchase activity over a given time period (Type 3
and 4 programs).
• Develop a differential point structure for closeouts, overstocks, and end-of-season merchandise.This
strategy can be used to reduce the markdown levels needed to clear this merchandise (Type 3 and 4
programs).
 Taking Corrective
1
Action
0
Taking Corrective Action
Increasing • Consider outsourcing loyalty member functions such as fulfillment or award
the Return selection where other firms can fulfill these functions more efficiently (Type 3 and
on Loyalty 4 programs).
Program • Evaluate the loyalty program on a continuous basis (Type 1, 2, 3, and 4
Investment programs).
• Sell aggregate data to suppliers (Type 4 programs).
• Sell points to partners (Type 3 and 4 programs).
• Sell points to customers (Type 2, 3, and 4 programs).
• Evaluate the alternative return on investment on other programs that build and
maintain customer loyalty (Type 1, 2, 3, and 4 programs).

Increasing • Outsource database construction, maintenance, and data mining to firms that
the Quality specialize in these services (Type 4 programs).
of Market • Use market research and information systems personnel in loyalty program
Research design and implementation (Type 3 and 4 programs).
Data • Change from a Type 3 to a Type 4 program (Type 3 programs).
 Market Saturation

Potential Low Levels of Consumer Commitment by

Consumers to Loyalty Programs

Pitfalls of Use of the Wrong Type of

Program

Loyalty Focusing Only on Monetary

or Gift Rewards

Programs Use of Loyalty Programs as a

Cover-Up for Ineffective Marketing

Program Privacy Issues

 Potential Pitfalls of Loyalty Programs
Market
Saturation
In this competitive environment,
firms are unable to pull back from
their loyalty program commitments
due to the fear of lost sales, yet are
unable to secure a long-term
competitive advantage over other
firms due to high costs or the
concern for being matched by
competitors.
In instances where a firm is first to
introduce a loyalty program, the
gains may be short run since
competitors are typically able to
quickly introduce a similar or
perhaps even better program
Low Levels of Consumer
Commitment by Consumers to
Loyalty Programs
Since rewards such as 1 airline mile per
dollar purchase or a 3-cent discount off
future purchases per $1 purchase are so
common, a consumer may have little or no
commitment to any specific loyalty
program. In this situation, customers join
multiple programs and switch loyalty
among these programs. This pitfall can be
applicable to all program types
Use of the Wrong
Type of Program
Type 1 programs are best suited for firms with
low levels of resources, a low level of
managerial commitment to loyalty
programs, and the desire for a defensive
strategy
Type 2 programs enable a firm to shift the
database responsibility to consumers and
are appropriate when a firm has a major
product purchased by a large percentage
of its customer
Type 3 programs are appropriate for firms with
higher levels of resources and managerial
commitment and when there are
strategic benefits to partner with other
membership programs
Type 4 program firms have the highest level of
resources and commitment for a loyalty
program, view loyalty programs as a
major offensive strategy, and are willing
and able to use the market research data
to fine-tune their market strategy
 Potential Pitfalls of Loyalty Programs
Focusing Only on
Monetary or Gift
Rewards
Firms can utilize other benefits to
instill loyalty based on purchase
volumes. For example, a marketer
can offer its best or most loyal
customers such additional
benefits as preferential access to
trunk shows of major designers,
special parties, free alterations,
early boarding privileges on
planes, availability of personal
shoppers, and special customer
support phone numbers.
These benefits may be perceived as
more valuable to these customers
than gifts or extra discounts.
This pitfall is applicable to all
program types
Use of Loyalty Programs as
a Cover-Up for Ineffective
Program
Marketing Privacy Issues
No loyalty programs, regardless of type, Along with the management of computer
should be used to cover up for ineffective databases (in Type 3 and 4 programs)
marketing. Firms should not lose sight that comes the responsibility to control the
a loyalty program is designed to reward or distribution of sensitive data relating to
reinforce a customer’s loyalty, not be the such things as income, social security
reason that consumers shop at a particular
number, and purchase history.
retailer or purchase a given brand
These issues relate both to privacy as well
A study of Western U.S. residents found that
of 28 loyalty factors examined, a food- as to the potential use of data for identity
based retailer’s offering a shopper loyalty theft
card was rated number 18 of 28 factors and
was the lowest ranking factor among
moderately important loyalty factors
In contrast, the six most important loyalty
factors were quick-moving checkout lines, a
wide variety of fresh produce, convenient
location, a high-quality fresh meat
department, a fresh bakery, and a wide-
selection deli counter
 CAS
E
HSBC CREDIT CARD
REWARDS PROGRAM
 PROGRAM EVOLUTION
1995-1996 The Early
Years
• Introduce point-based
Loyalty Program
• Gift redemption to
branded and luxury
goods also miles
number for selected
airlines
The future
• Term of loyalty
program and market
1999-2001 Recovery overall is the key
areas
• Confirmed that reward
program is the key driver of • Affected the number
customer usage and loyalty of transaction
• New reward catalogue • Significant cost
issued and have wider kind • Becoming every
of merchandise and voucher. standard feature of
Good but not GREAT. credit card

1997-1998 The down turn 2002-2005 Best in Town

• Gift redemption out of
stock due to supply issue
• Competitors began
offering cash voucher
• Making policy to expiring
all the point in the same
time, there are a lot of
complain
• New program launched:
reward and cash
multiplier, special item
redemption, point share,
and quarterly redemption
booster
• Online redemption service
launched, ability to pay
income taxes.
 Global travel,
financial and
AmEx
network services
provider

Locally
incorporated Bank of
licensed bank, the China

MAJOR
channel is the king

Offered variety of

COMPETITO
Citibank
services

RS
Strong regional
competitor, grown DBS
rapidly

Hang
Subsidiary of HSBC
Seng
and direct
Bank
competitor
Limited

Standard
Global operations Chartered
Bank
 RELATIVE IMPORTANCE OF ATTRIBUTES IN
INFLUENCING OVERALL IMPRESSION OF KEY
CREDIT CARD ISSUERS
Higher
Importance

Lower
Importance
HSBC PRODUCT LINE
(2005)
 RELATED
CASE WITH
THEORY
CHAPTER 5
 Value
Proposition
HSBC offered a comprehensive range of
financial services, including personal
financial services; commercial banking;
corporate, investment banking and
markets and private banking.
HSBC menawarkan berbagai layanan
keuangan yang komprehensif, termasuk
layanan keuangan pribadi; perbankan
komersial; korporasi, perbankan investasi
 Brand Communities
1865
HSBC
The HSBC Group was named after The Hong
Kong and Shanghai Banking Corporation
Limited, which was established in 1865 to
finance the growing trade between Europe, India
and China
Grup HSBC dinamai setelah The Hong Kong and
Shanghai Banking Corporation Limited, yang
didirikan pada tahun 1865 untuk membiayai
perdagangan yang berkembang antara Eropa, India
dan Cina.
1866 1888
IN JAPAN IN Thailand
In Japan, where a branch was
established in 1866, the bank acted as In 1888, it was the first bank to be
adviser to the government on banking established in Thailand, where it
and currency printed the country’s first
HSBC membuka sebuah cabang Di banknotes
Jepang,yg didirikan pada tahun 1866, Pada tahun 1888, itu adalah bank
bank tersebut bertindak sebagai pertama yang didirikan di Thailand,
di mana ia mencetak uang kertas
penasihat pemerintah di bidang
perbankan dan mata uang pertama di negara itu
 Customer Profitability Analysis
 HSBC menggunakan informasi demografis tentang pendapatan dan tahap kehidupan nasabah untuk mensegmentasi
pasar.
 Pelanggan dalam setiap segmen harus memenuhi syarat dalam hal peringkat kredit mereka, dan akan berbeda secara
signifikan dalam hal profitabilitas mereka, berdasarkan apakah mereka transaksi atau revolver.
 Untuk membidik setiap segmen dengan tepat, HSBC menawarkan berbagai jenis kartu kredit. Seperti kebanyakan emiten:
1. HSBC menawarkan kartu Classic, Gold dan Platinum untuk tingkat pendapatan yang berbeda

2. produk khusus, seperti kartu Renminbi Gold atau Classic Visa, dan kartu JCB Gold merek bersama yang memberikan manfaat bantuan pribadi
kepada pelanggan sebagai JCB Plaza dan JCB Desk di seluruh dunia

3. kartu iCAN, yang menawarkan poin reward ganda untuk pembelian online dan rabat tunai untuk poin reward. Ini juga menyediakan akun
kartu virtual yang aman untuk kontrol dan pengelolaan pengeluaran online yang lebih mudah.

 HSBC juga memiliki kemitraan dengan pedagang Hong Kong pada berbagai kartu pengecer. Tergantung pada jenis kartu
yang dimiliki, pelanggan dapat mengajukan dua atau lebih kartu ritel. Setiap kartu ritel akan menawarkan manfaat
khusus bagi pemegang kartu, seperti:
 Diskon toko

 Parkir gratis

 Pengiriman gratis

 Undangan pra-penjualan

 Layanan pembungkus kado gratis

 MANAGING THE REWARDS
PROGRAM
The Rewards Program was the responsibility of the marketing department, which controlled aspects of the program such
as:
 The Types Of Reward Partners
 The Number And Types Of Rewards
 Redemption Levels
Program Rewards merupakan tanggung jawab departemen pemasaran, yang mengendalikan aspek-aspek program
seperti:
• Tipe Hadiah utk partner
• Jumlah Dan Jenis Hadiah
• Level Penukaran

The effective operation of the program required support from:

 Regional Card Systems (RCS) - worked with marketing to implement enhancements and changes to the rewards
program, such as the introduction of a new redemption partner or rewards feature
 Group Purchasing Unit (GPU) - responsible for the procurement of the redemption items
 Customer Service Department (CSD) - responsible for many of the daily operational aspects of the program:
• Processing redemption orders received via fax, mail and branches. Orders received through Internet banking and
telephone (automated phone banking) were automated.
• Fulfillment of redeemed coupon/gift items and mailing of redemption letters/coupons to customers.
• Monitoring and managing inventories of redemption items and coupons.
• Providing reports on program results such as redemption orders and rates.
• Working with redemption center/hotline staff on special redemption cases handling.
• Monitoring call center and redemption center performance.
Managers from these departments met with marketing personnel to generate ideas, identify potential problems and
suggest solutions for current problems. The program was updated quarterly, and major changes occurred on a yearly
MANAGING THE REWARDS
PROGRAM
The effective operation of the program required support from:
 Regional Card Systems (RCS) - worked with marketing to implement enhancements and changes to the rewards program,
such as the introduction of a new redemption partner or rewards feature
 Group Purchasing Unit (GPU) - responsible for the procurement of the redemption items
 Customer Service Department (CSD) - responsible for many of the daily operational aspects of the program:
Managers from these departments met with marketing personnel to generate ideas, identify potential problems and suggest solutions
for current problems. The program was updated quarterly, and major changes occurred on a yearly basis.
Pengoperasian program yang efektif membutuhkan dukungan dari:
• Regional Card Systems (RCS) - bekerja sama dengan pemasaran untuk menerapkan peningkatan dan perubahan pada
program hadiah, seperti pengenalan mitra penukaran baru atau fitur hadiah
• Unit Pembelian Grup (GPU) - bertanggung jawab atas pengadaan item penebusan
• Departemen Layanan Pelanggan (CSD) - bertanggung jawab atas banyak aspek operasional program sehari-hari:
1. Memproses pesanan penebusan yang diterima melalui faks, surat, dan cabang. Pesanan yang diterima melalui
Internet banking dan telepon (automated phone banking) diotomatisasi.
2. Pemenuhan kupon/barang hadiah yang ditukarkan dan pengiriman surat/kupon penukaran kepada pelanggan.
3. Memantau dan mengelola inventaris item penebusan dan kupon.
4. Memberikan laporan hasil program seperti redemption order dan tarif.
5. Bekerja dengan staf redemption center/hotline dalam penanganan kasus redemption khusus.
6. Memantau kinerja call center dan redemption center.
Manajer dari departemen ini bertemu dengan personel pemasaran untuk menghasilkan ide, mengidentifikasi masalah
potensial dan menyarankan solusi untuk masalah saat ini. Program ini diperbarui setiap tiga bulan, dan perubahan besar
terjadi setiap tahun.
 PROBLEM OF TIMING
CONCEPT
• Berdasarkan pandangan Grahame R. Dowling & Mark Uncles, permasalahan yang dialami HSBC pada tahun
2004 erat kaitannya dengan salah satu atribut yang digunakan konsumen untuk mengevaluasi Reward Program,
yaitu timing.
• Dalam konsep Timing, pengaruh Program Reward dalam membangun loyalitas konsumen dipengaruhi oleh
sebuah pemikiran yaitu “Kapan reward bisa diambil?”. Jadi, jika Rewards semakin sulit diakses atau terlambat
dalam proses pengambilannya, maka loyalitas konsumen terhadap program-program yang ditawarkan oleh
suatu perusahaan akan semakin rendah.
• Hal ini tergambar jelas pada kasus HSBC pada tahun 2004, dimana semakin banyaknya permintaan konsumen
terhadap produk Vacuum Cleaner yang diunggulkan oleh HSBC mengakibatkan terjadinya kelangkaan
(Shortage). Munculnya fenomena kelangkaan tersebut tentunya mengganggu upaya HSBC untuk menjawab ide
kunci Timing yaitu “Kapan reward bisa mulai dikumpulkan”.
• Pemikiran kunci lain dari konsep Timing adalah preferensi konsumen yang lebih memilih Gratifikasi Instan
dibandingkan dengan Gratifikasi Tertunda.
• Gambaran pemikiran kedua konsep Timing terartikulasikan dengan baik melalui kondisi HSBC yang segera
meminta pemasok lain agar mensubstitusikan peran Samsung sebagai produsen Vacuum Cleaner
• Adanya upaya HSBC untuk mensubstitusikan peran produsen karena fenomena kekurangan tentunya akan
memakan waktu. Hasil dari Gratifikasi Instan mengalami transisi secara perlahan menjadi Delayed Gratification.
mencarinya, beberapa konsumen segera mencari pesanan untuk Reward Programnya karena yang dirasakan
tidak langsung.
THANK YOU
감사 해요
谢谢