Today’s Session

Loyalty Programs- A Perspective

 What does loyalty mean to businesses ?

Repeat
Purchases?

Retention of Create Profitable

Customers ? Customers ?

Acquisition of
Customers?
LOYALTY More data on
Customers ?

Just Another Marketing

Reward Loyal
Program?
Customers?
 Loyalty programs are

– Key drivers for enhancing customer

experience
– Active point of differentiation
– Help pinpointing individual buying patterns
and predicting future customer behavior
– Improve “stickiness”
– Enhance Lifetime Value
 What’s the Not-So-Good News ?

• Do customers perceive reward A lot of difference 12%

Some difference 23%
programs making a difference ? Little difference 13%
Dont make much difference 25%
Dont make any difference at all 16%
Don’t Know 11%

• 48% customers did not have any serious intention of repurchasing the brand

• 55% customers accumulate points because they anyway come along with their purchases

Do Loyalty Programs work ?

 Some insights --- Customer & Company perspective
Customers new perspective of Rewards ( Loyalty )
1. Cash value ---- Immediate gratification
2. Redemption options ---- More Choice
3. Aspirational value ---- Feel Good factor
4. Relevance ---- Does it make sense
5. Convenience ---- Ease of availing reward

Loyalty initiatives are not short term marketing tools. They should
• deliver tangible value in proportion to the value the customer brings to the company
• offer right mix of Product, Price, Service Delivery & Relationship benefits
• Communication to be transparent, timely and focussed
• Consistent across all customer touch points

Loyalty initiatives must also be profitable

• Treat profitable and unprofitable customers differently
• Get your metrics in place ---- measure costs & returns
 What does loyalty mean to the customer today ?

Complete Customer
“ Relationship” Experience
C
Per usto
cei m
ved er
Customer cost of val
using your product ue

Primary Product /
drivers Price service*
Brand** Relationship

• Purchase price • Physical product • Ethics • Loyalty Programs

• Effort • Service product • Image • Co Brands
• Time • Service delivery • Reputation • Alliances
• Service environment • Positioning • Special treatment
• Affinity
• Customer community

Customers want an end-to-end relationship experience

 Customer Relationship experience – Banking illustration
Customer Value Perception

• Life Time Free • Ease of availability • Easy accessibility • Aspirational value • Understanding
needs
• Transparency in • Speedy service • Flash Value
• Relevant Features • Customer empathy • Processes &
charges
• Inspires confidence Service
• Resolution of query
• Value for money • Wide service range Knowledge
the first time
• Preferential
offers

Product / Customer
Price Quality
Brand Relationship
Service

• % returns
• Fee Income • One stop Shop for all • Strengthening • Customer
/cancellations
financial needs Brand image touch time
• Simplified product
• # service calls
offering • Network • No. of
• Advertising product
availability • # customer inquiries
• Bottom line costs training hours
• # billing queries
• Best in class

Organization’s translation of Value

 Let us ask yourselves…..are we truly Customer Centric?
• Do you measure your customers ……
1. Lifetime Value & Cost to the business
2. Preferences, Dislikes, Usage Patterns
3. Satisfaction levels

• Can your Products & Delivery systems provide …..

1. End to end solutions / Address future needs
2. Competitive & flexible pricing plans
3. Ease of access / acquisition --- Options to use most appropriate services / channels

• Are your business processes geared up for …..

1. Settling customer issues, with 1 phone call or web-site visit?
2. Responding immediately & appropriately to "moments of truth" when customers' business is on the
line?

• Do you monitor your Loyalty programs to see …….

1. If they address the right customers
2. If they are profitable
 Organization’s approach to Loyalty

1st : Have a clear articulated Customer Loyalty Strategy

• Covers the entire customer experience during his lifecycle
• Covers all customer touch points
• Addresses his existing / potential relationship with the company

2nd : Must be in sync with Business Objectives

• Customer / Segment profitability
• Customer Contact strategy

3rd : Business Process to be customer centric

• Risk, Underwriting, Operational processes
• Acquisition, Customer service, Marketing

4th : Design Customer centric & Profitable Loyalty programs

 How do you do it …….

• Lifecycle Experience ---- Define value proposition to customer segments

Loyalty • Dynamic ---- Ability to react to changing customer needs and behaviors
Strategy

• Targets ---- Program objectives clearly communicated

Business • Metrics ---- Measurement capability in line with objectives
Objectives

• Seamless --- across all Channels, Business Functions and touch points
Process
• Flexible ---- Ability to accommodate changes without compromise
Changes

• Value & Choice ---- Value based on Customer Profitability & offering
Loyalty
Programs relevant choice ( Bought-out
or Co- Branded )
• Personalized ---- To the customer’s unique profile based on Analytics
• Branded ---- Bought-out or Co-branded to address emotional needs
 Role of Partnering & Co Branded Programs
Addresses the new customer need of:
• Offering wider choice of involvement platforms

• Accrual / Redemption of Rewards across several relevant involvement categories

• Faster value accumulation compared to stand-alone programs

• Branding association to address aspirational & emotional needs

Addresses the company’s need to :

• Lower costs of loyalty through sharing

• Access partner customer touch points

• Access additional customer databases

• Improve Brand image

 Success Factors

Success in Co-Brand partnership is higher, if

• Core value of the two partnering brands are related

• Partner Co brand objectives are similar

• Each activity has consequent benefit to both partners

• Availability of Partners

Bought out approach works when

• No feasible Co Brand partners are available

• Feature / Service is commoditised

• Cost of feature low

• Partner not interested in Co branding

10 STEPS TO BUILD A LOYALTY PROGRAM
 Step 1: Evaluate the Product/ Service
• The first step is always to answer the following
questions honestly:

• Is my product/service good enough?

• Is my product/service worth the investment?

 Step 2: Identify the Value Proposition
• This part is one of the absolutely most important steps before imp
lementing a Customer Loyalty Program.
• What do we offer customers?
• What is the value proposition?
• If the value proposition is not well received, the program will not
work
• Therefore use extra time to develop your value
proposition
• The right value proposition differs from industry to
industry - from product to product, service to service
• It also depends on high involvement or low involvement products
 The Right Mix

Soft Benefits
Hard Benefits Eg Magazine, Travel
Eg Discounts, aids, special
Rebates, Coupons products, services,
events
 Step 3: Create Program Goals
• Goals can be divided into core, primary and
secondary loyalty program goals
• Clearly identify your program’s goals and
target groups
• Each target group has its own preferences and
demands different benefits
 Goals of a Customer Loyalty program

Core Primary Secondary

Increase in : • Loyalty • Increase frequency of
visits at point of sales
•Revenue • Acquisition • Increase usage &
purchase frequency
•Profit • Build a robust data base • Develop problem solution

•Market Share • Create communication • Support PR of Co

opportunities
•Add support capacity &
service dealer network
Improve product, brand &
Co image
 Step 4: Determine the Financial Cost

• The main costs to consider are:

• Technical, organizational and personnel infrast
ructure
• Program service centre
• Development, storage and shipping of the rew
ards
• Communication measures
• Initial development and constant improvemen
t of the program concept
Step 5: Develop a communication platform

• Must include communication methods that reach its mem

bers with themes that are of interest to them
• It has to communicate in three different
environments, each with different interests and goals:
1. The first group is the loyalty program members
2. The company
´s employees, management and stakeholders
3.
The external loyalty program environment, which includes
the media, the industry in which the sponsoring company
operates, external partners, and so on
• New media is the key in this exercise
 Step 6: Determine program
organization and management

• Put up a project team made of people from

different departments (marketing, sales, IT,
research, finance and so on)- cross functional

• Across management levels : senior to the

junior most for an organizational level buy-in
 Step 7: Set up a database

• A database that contains detailed and correct inform

ation on your customers is a strategic
weapon that will greatly influence success
• Databases should be seen more as a strategic
viewpoint than tactical
• CRM is often described as information enabled
relationship marketing
• Without detailed knowledge about its customers no c
ompany will be able to compete
Step 8: Research on other loyalty programs

• How do competitors organize their customer loyalty progra

ms
• How are loyalty programs set up in other industries or in
other countries?
• What can we learn from other successful customer loyalty
programs?
• What can we learn from loyalty programs that have failed?
• Is there any specific literature (eg
case studies on the subject? )
• Are there external specialists whom we can consult?
 Step 9: Implement the loyalty program

• One of the questions that need to be addressed is ho

w to implement or integrate the program into your c
ompany’s organizational structure
• There are a variety of alternatives, from founding a t
otally independent company to manage the loyalty p
rogram, to integrating the loyalty program into an exi
sting department, to outsourcing the entire loyalty pr
ogram management to an outside agency and so on
• It is more important to ensure that the customer loya
lty program
´s enormous support potential is fully exploited withi
n the company
 Step 10: Prepare a strategy for program defectors

• Customers who leave can provide a view of

the business that is unavailable to those inside,
and whatever caused one individual to defect
may cause many others to follow
• In most businesses, 60 % ‐ 80 % of customer
defectors say that they were “satisfied” or
“very satisfied” on the last satisfaction survey
prior to their defection
• The reasons for satisfied customers defecting are often due to competitors
changing offerings and/or the customer developing new requirements or
buying habits and beginning to look for alternative products or the customer
simply moving to another location.
 To summarise

• Loyalty is not created by a program……it can at best strengthen it.

• Loyalty is not about short term rewards…….it is about end-to-end customer

experience with your products / services

• Companies need to have a enterprise wide loyalty strategy backed by

customer centric processes to deliver value

• Co branded programs work --- Ensure you get the value proposition right

• Use of technology is the key- Real time data

Loyalty has to be earned…..its hard

work….but at the end you have a profitable
customer
Any Questions Please?