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
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
 Loyalty Programme Options
Points Discount Rebate

Earn points and redeem Immediate discount for Reward spend over
for rewards presenting card time
Good Good Good
-Offers control -Easy and instant -Easy to manage
-Customer understands - No liability Bad
-Lower cost Bad - Little control
Bad - Discount has to be large - Easy to copy e.g.
- Points cost are knowledge (+10%) stampcard
- Accrued liability - No control - Little emotional connection

Privilege Krisflyer

Earn points and redeem for rewards plus tiers of privilege

Good Bad
-Privileges lead to loyalty - Low spend customer disillusion
-Offers control - Competitors can match
-Customer understands
What is a privilege program?
Tiers of benefits over and
above points for miles.
(SpiceJET)
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
 Nets & Credit
Bank
Data Data entry
Application Form
name
NRIC
email
mobile
age
family

122132

Customer card
122132

Marketing Planning &

Promotion tactics
Analysis services
Transaction Customers

Database
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)
Balancing Loyalty Investment Against Return

Loyalty Programme is a cost

of learning about customers

Loyalty Programme
Investment

>
Additional
+
Customer Profits
Loyalty Promotions
Costs
Critical Success Factors for Customer Loyalty
Getting
Target Degree of Delivery of
Customers to
Audience Participation rewards join

Brand Choice of Liability Competitor

Positioning rewards risk Strength

Customer
Investment Sales
Loyalty Generosity
Drivers Cost Focus
Redeem Program
Barcode card Hybred model
Instant privileges
Discounts for members
Birthday privileges
Points
How is it successful?
Getting
Delivery of
Target Degree of Customers to
Rewards –
Audience Participation Join
rebate vouchers
Regular shoppers High Easy – free
(cash effectively)
membership

Brand
Positioning Choice of Liability
Competitor
- for everyone rewards Risk
Strength
-Birthday treats Choose from High but also
n/a
-Members only whole store High redemption

Customer
Loyalty Generosity Investment Sales
Drivers Very generous Cost Focus
Use membership rebate up to 20% High Very High
To make offers
Loyalty Programme Structure Secrets
Data Collection

FMCG Value
Partnerships
1 Proposition

8 2
Brand Extension
7 3 Loyalty Programme
Mechanics

6 5 4
Investment
Clubs within
Ratio
programme
Sales Promotion
Integration
 Loyalty Programme Structure Secrets
1
Strategy
Data Collection  Capture all data relevant to the customer relationship

Lifestyle Lifestage
Approach
RFM Basket
 Use Loyalty cards to capture all customer transactions,
Attitude
Shop point redemptions, online transactions and calls to any
Interest
Habit
Geo touch-point
-Dem

Data Warehouse  Segment the data according to shopping behavior,

lifestage, lifestyle and other differentiating factors
Segmentation Engine

Segmented Promotion Marketing

Advantages
 Understanding of customer behavior, identify valuable
customers and communicate one to one with customers
creating a more personal relationship
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
 Loyalty Programme Structure Secrets
Primary Retail Segmentation Approaches
 Recency, Frequency, Value (RFV): e.g High Value Frequent
Shoppers, Low Value Frequent Lapsed

1  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
Data Collection  Internet Shopping: e.g. Trial, Cautious Developing, Everything

Recency , Frequency, Value Segmentation

Frequency Frequency Recency Value $

Visit Visit Visit Today

Time
Loyalty Programme Structure Secrets
 Basket analysis to get shopper type

Health Conscious Price sensitive

Organic Lowest price Basket <10
Brown Rice Carrots cola items
Lowest price
Low far milk Brown Bread noodles
Uses 2-1
offers No fresh items
Natural
New organic
Yogurt Eco-Washing Cheapest
chocolate New large value
Powder washing powder
biscuits
large format

Current
Recommended
Basket

46 other shopping types – tv dinners, daily divers, traditional,

ethnic explorers, meat feast, vegetarians etc
 Loyalty Programme Structure Secrets

2 Strategy
 Develop a research proven value
proposition for the loyalty programme
Value Proposition underpinned by loyalty drivers

Approach
Chance  Value proposition has emotional and practical
appeal and the Loyalty programme aims to
deliver the proposition in the customer
Savings experience.

Advantage
Privileges  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’
 Loyalty Programme Structure Secrets

3
Strategy
 Define the right loyalty programme mechanics to
Loyalty Mechanics 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.
 Rebate Card
Lucky Chance Card Rebate Card & Privileges
& Target of 1
Easy to launch Reward only when customers hits Layer on privileges for best
No liability threshold spend . Tier rebates at customers.
Develop card mgt experience different reward levels Target every customer with
Capture all details and transactions 1200 get 60 (5%) individual statements.
2400 get 240 (10%)
6000 get 900 (15%)
 Loyalty Programme Structure Secrets
4 Strategy
Understand investment margins to
Investment Ratio determine reward investment and frequency
ratios for the market.
Normally 1-3%
reward 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.
Loyalty Programme Structure Secrets

Spend for 1pt 100

4 Value of 1pt 1

Total Store Sales 1,00000

Investment Ratio
Sales on Card (80%) 80000

Points Earned 800

Value Points Earned 800

Points Redeemed 400
Value Points Redeemed 400
Investment Ratio 0.4%
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
 Loyalty Programme Structure Secrets

5
Strategy
 Data collected drives ALL marketing activity – it is not
Sales Promotion operated in isolation.
Integration
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
 Loyalty Programme Structure Secrets

6 Strategy
 Develop Clubs within the loyalty program that use
knowledge gathered from grocery purchases
Clubs within Approach
Programme  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
 7 Strategy
 Extend brand using new services

7 Approach
 Develop strong own-brand products new non-
grocery services
 Leverage grocery database to offer re-branded
Brand Extension
services

Advantages
 More reward earning/redeeming opportunities
 More data from partners and greater marketing
reach
Loyalty Programme Structure Secrets
Strategy
8 Offer FMCG companies access to
FMCG Partnerships
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
Grocery Retailer
Stronger offers to the right audience
create better returns.
Customer
Loyalty Programme Structure Secrets
Data Collection

FMCG Value
Partnerships
1 Proposition

8 2
Brand Extension
7 3 Loyalty Programme
Mechanics

6 5 4
Investment
Clubs within
Ratio
programme
Sales Promotion
Integration
Promotions
1. Statements
2. Personal shopping lists
3. Geo-targeting
4. Events
5. Layered promotions
6. Regular communications
 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
 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
 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
Store
highest competition Competitor Store
Store Catchments
Advantages Promotion Target Area
• Powerful threat defense only for
customers in risky areas
 Loyalty Programme Promotions - Driving Sales
4. Events/Product Sampling 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
Noodle Sampling Events are a regular environment for offering high end grocery
features for Reliance One Members products

Advantages
 Meet and reward the best customers in
person, while extending sense of privilege that
is popular in all markets.
 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
 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
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