Idm Loyalty Presentation 25.04.06 By Wanda Goldwag
1. Loyalty Presentation
for the Institute of Direct
Marketing
By Wanda Goldwag
of Goldwag Empson and Otitoju
2. Agenda for 1st half
My background
Global trends
Customer ownership and what they
expect
The Strategic situation
Loyalty schemes in general and what
makes a good one
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3. My background
Yves Rocher
Fidelity Unit Trust
Direct Marketing Agency WWAV
Thorn EMI
Thomas Cook
DM Agency Smith Bundy
AIR MILES
Smedvig Venture Capital, GEO and
6 others
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4. Apparently, I’m now a
Marketing Guru
“a revered instructor,
mentor or pundit” The
Chambers Dictionary
Someone who having
made most of the
mistakes possible, can
give advice to others on
how not to repeat them
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5. My World
Cu
s to
m
A f f in it y
Lo
P ro ya l e r m a rk e ti C u s to
t m
g ra y
me m ng e r
s Lo y a l
it y ty
A f f in
n s P a rtn e r
R e la t io s h ip
h ip s Ma rk e ti
L o y a lt y
ng
w a rd
Re ra m m D a ta
R e la t ba
io n s P ro g s s e
e
h ip m a rk
m a rk e e ti
t in ng
g
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6. The challenges I work on
Creating effective marketing programmes
Finding partners to work with
Difficulties in interpreting and analysing
data
Segmenting customers
Making redemption work
Gaining real benefit from your loyalty
scheme
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7. Customer
Global Strategy Expectations
Trends
Loyalty Schemes
Customer The Internet
Ownership Staff Quality
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8. Global trends
Move from Mass Marketing to something
much closer to one to one marketing
24/7 society
New channels of distribution – an
alternative supplier is a click away
One company makes a change and it sets a
new standard for all
I want it now
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9. Customer Ownership
Battle between the product/
service owner and the
retailer/ intermediary
The battle is being fought on
the field of data
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10. Customers expect
To be recognised
For us to remember what happened
before and what stage they are at in a
process
To be rewarded
To be kept in touch
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11. Strategy should be to integrate
Retail
Call Centre
Internet
Interactive TV
WAP phones
Who knows what next ?
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12. Communications strategy
At every point
Through every channel
Same data
Same offers
Perfect knowledge
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13. Why, what is changing?
Far greater understanding
on behalf of consumers of
loyalty schemes
A great deal more one to
one communication
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15. What is happening in the
market place?
Databases used to be
flavour of the month
Now it is customer
retention strategies and
loyalty programmes
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17. Setting the scene
Millions of consumers already belong to and are
committed to “their” loyalty scheme
Ensuring a place in the wallet or purse is becoming
more difficult
Almost every major retailer and service company is
already or has been approached to become a
member of a loyalty scheme
There are real challenges in using the data
collected
Business to Business loyalty schemes very
fragmented
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18. How did it start ?
American Airlines launched
AAdvantage, the world’s first
mileage-based frequent flyer
programme in the 70’s
100 million people belong to at least
one such scheme
50% of miles are earned on the
ground, credit card spending and
telephone calls are important
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19. The rest
is
history
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20. UK market for loyalty cards
27 million loyalty cards issued
Average home has at least 2
7% of homes have more than 20
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24. What makes loyalty
schemes ideal?
Customers identify
themselves
Because people want
rewards they are willing to
give data
Offers and service can be
tailored to the individual
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25. What should a good scheme allow?
Highly targeted campaigns
Special Offers to distinct segments
Keep valuable customers
Develop better relationships with
infrequent buyers
Not over service poor customers
People spending their points
Valuable rewards
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26. My approach to
segmentation
Segments developed to drive strategic
marketing initiatives and
communication- no point doing it for
fun
Based on every scrap of data you can
obtain, registration, behavioural,
every transaction and communication,
socio-demographic and 3rd party
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27. Need to create this circle
of information
S e g m e n t a t io n
A n a ly s is
P e r s o n a lis e d En h a n c e d
C o m m u n ic a t io n / C o m m u n ic a t io n /
A c t iv it y T r a c k in g C u s to m e r
S e r v ic e
In s t a n t M I
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28. Principals of Successful
Segmentation
•Relevant and sound data
•Groups of homogeneous
customers
•Sufficiently distinct from each
other statistically sound -
Cluster Analysis
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29. Example Segmentation
Matrix
BEHAVIOUR CATEGORIES
EXPLANATORY FAST
FAST
TRACKERS LAPSERS
MULTI TRACKERS + REDEMPTION MULTI
CATEGORIES SOLUS NO REDEEMERS
COLLECTORS REDEMPTION VALUE
SINGLES
YOUNG
COUPLES
AFFLUENT
FAMILIES
LESS
AFFLUENT
FAMILIES
EMPTY
NESTERS
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30. Customer Lifetime Value
R e a c t iv
a te
A C T IV IT Y
X
M o t iv a
te
N u rtu r
X T e r m in
a te
e
X P r e d ic t iv X
e
M o d e llin
g
L IF E T IM E
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AIR MILES and the Flying Boat logo are trademarks of AIR MILES International Holdings N.V.AIR MILES awards are held and issued for use subject to AIR MILES Customer Terms and Conditions.
30
31. A word of warning about
defining a valuable
customer
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32. What makes a customer
valuable?
Volume
Spend
Frequency
Share of wallet
Satisfaction – willing to be an
advocate
Combination of some or all of these
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33. What works – some truisms
Customers are people
The majority of people don’t change
their behaviour – a minority do and its
normally dramatic
Those that benefit most join and
remain active as they have the most
to gain (normally ABC1’s)
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34. So where do we start in rescuing an
existing programme?
Understand what were the original
objectives
Review the competitive landscape and
if it has changed
Evaluate existing customers
Are they all important / profitable?
Research what matters to those you
wish to retain
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35. Why doesn’t everyone
create their own loyalty
programmes?
High original set up costs
Benefits of increased / shared
communication channels
Need to share marketing and
promotional costs
Requirement for fast redemption
Need for a wide range of rewards
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36. Coalition
Programmes
100
80 Cost of Awards
%60 Available
Budget
40 Ongoing Costs
20
Start Up Costs
0
Solo Programme Partnership
Year 1 Costs Programme
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37. Two challenges for you to
discuss in the break
The consumer increasingly knows the
value of their own personal data. To
spend time giving that data they will
expect something in return – what
will you give?
How can you make a loyalty scheme
more relevant than your competitors?
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38. Agenda for 2nd half
A review of the Major UK schemes
What lessons can be learnt form
Business to Business programmes
Predictions for the future
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39. Major programmes – what is
working and what is not?
Nectar
Tesco
Boots Advantage
AIR MILES
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41. Nectar facts and figures
Largest programme in 7 out of 10 collectors
the UK have redeemed their
Keith Mills did it again points for a reward
7000 retail outlets Nectar has given back
where the card can be over £650 million
used to earn points worth of rewards
At least 17 sponsors Up to 99 people can
collect on one account
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42. Nectar Sponsors
Sainsbury’s 2 points for a £1
BP 1 point per litre of fuel
American Express 2 points for a £1
plus 2 extra points if used with Nectar
retailer
On line shop as well
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43. Overview of the original Programme
Collectors Contact Centre
Sponsors
Over 50% • 400 Employees
of UK Households • 38,000 Contacts / Day
en t
S ta t em
Joe
gs
Blog e P lace ode
Mr. nywher P ostal C
A
123 County,
ts
P oin 0
0000
0
Suppliers
City, 0000 0
nsor
S po bury’s 0000
0
Date 03 Sains ur y’s 0000 0
sb
1/
03/0 03 S ain aycard 0000
0
1/
03/0 03 Barcl aycard 0000
0
1/
04/0 03 Barcl aycard 0000
0
04 /01/ Barcl hams 0000
1/03 en
05/0 03 Deb hams
en
1/
03/0 03 Deb hams
en
1/
04/0 03 Deb
1/
05/0
• 40+ Types of Rewards
• Rewards starting from
Database just 500 pts
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44. The bad and the ugly
Lost major sponsors Nectar for Business
Barclaycard and not as strong as
Vodafone hoped for
Account handling of A decision has been
sponsors not taken not to sell the
always a priority company yet
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46. Tesco clubcard facts and
figures
Launched in 1995 One point for every
One of the UK’s £1 spent
most popular Over 6 million
loyalty card unique coupon
schemes variations in each
12 million active mailing
cardholders
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48. The Good
“Probably the main factor in
Tesco’s success has been the
commitment to use the data
gained to drive the business. The
real benefit of a loyalty scheme
is the very rich data obtained on
customer behaviour. This use of
data has been the major
difference between the Tesco
scheme and other initiatives
that were less successful.” Clive
Humby
49. Comparing results
We know how much money we
give back to Clubcard
customers, how much it costs to
run the programme and what
behaviour we get from those
customers. We can estimate
what behaviour we get from
non-Clubcard customers through
market research. Then we can
look at the difference to work
out whether customers with
cards remain more loyal to Tesco
50. The bad and the ugly
You tell me?
Partners love them
Everyone raves about their use of
data?
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52. Boots advantage card
15 million card 94% of active users
holders are female
4p for every £1 Cardholders on
spent – the most average spend
generous of the big double
programmes Almost always
Over 50% of UK asked for the card
women hold a card when shopping
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53. The bad and ugly
Very biased towards women
Not maximising how generous their
scheme is to others
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55. AIR MILES around the world
REWARDS
THE LMN
AME SPAIN MANAGEMENT
AMTP UK LOYALTY GROUP NETHERLANDS
MIDDLE EAST
1988 1992 1994 1996 2001
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56. Clients
Royal Bank of Scotland in particular
Nat West
Tesco
Shell
Southern Electric
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57. The bad and the ugly
Up for sale or closure, because BA still
don’t know what to do with it
When I left in May 2000 we made £25
million profit now its said to be £1.3
million
Travel offering much expanded – but
now confusing
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58. A quick look at some
Individual retail
programmes
59. WH Smith
Is the programmes still in existence?
Never asked for it in store
No obvious mention of it on the corporate
web-site
No evidence that it is being used to drive
marketing
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60. Homebase
4 million cardholders
Said to have been debating if it should
be kept going
Rarely asked for the card in store
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61. What is going wrong
generally
25% of all loyalty card holders do not
use the points they have earned
People acquire cards but don’t carry
them in their wallets
Difficult to maximise the benefits of
the data gained
Difficult to differentiate – everyone
has similar rewards and programmes
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63. What is going wrong cont.
Some programmes loosing their way – but
company is scared to close them down
When partners fall out – customers can be very
badly served
Fears about who owns the customer e.g. when Air
Miles swapped Sainsbury’s for Tesco’s
Loyalty schemes are not cheap to run costing an
estimated 1 to 2% of the cost of the product
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65. Very major challenges
Is it ethical at all to give rewards to
individuals for business decisions
Who should get the reward –
particularly in medium to large
companies
Often complex sales channels with
manufacturers, wholesalers, dealers
etc.
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66. Need to manage disparate
groups
Wanda and co
A wholesaler who
My sales team A 3rd Party re-seller
sells to Dealers
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67. Very often a number of people
are involved in the process
The Finance Dept.
Internal purchasing dept The end user
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68. Arvin Meritor
Headquarters in Troy, Mich., U.S.,
ArvinMeritor is an $8 billion supplier
to the global motor vehicle industry.
approximately 31,000 employees in
25 Countries
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69. Arvin Meritor
Meritor is leading supplier of truck/tractor
systems, modules, and components to the
transportation industry.
They believe they are partner of choice
when it comes to truck/tractor
requirements – for OEMs, fleets of all sizes,
and end-users. From spec’ing the right
components, to product training, service
assistance, support materials, or
aftermarket parts – before and after-the-
sale, they are there to support their dealers
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70. Their 2006 reward
programme
Earn rewards every time you spec
eligible products from Meritor. Each
time you spec an eligible product, you
earn Meritor Loyalty Points. The
dollars you earn are loaded onto your
Meritor Rewards card – a MasterCard™
stored-value card.
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71. How acceptable are the
rewards
You can redeem your points anywhere
MasterCard is accepted – at over 28
million locations worldwide! Your
purchases with the Meritor Rewards
Card are processed like any credit
card transaction. The cost of the
purchase is deducted from your
loyalty point balance.
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72. How complex is the sale
All Dealer Principals, Dealer Sales Managers
and Dealer Salespersons are encouraged to
participate
Dealer Principals and Sales Managers may
enroll more than one dealership; however,
the individual Dealer Principal, Dealer Sales
Manager and Dealer Salespersons
responsible for selling Class 8 new trucks
may enroll only once.
Sales Managers who also sell new trucks
must decide whether to enroll as a Sales
Manager or Salesperson.
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73. Rewards for product
knowledge
Avnet Partner Solutions, a distributor
of servers and storage products for
major manufacturers like Hewlett-
Packard and IBM
Based in Tempe, Arizona, they have a
points-based incentive program,
SMART Rewards, for their channel
partners
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74. Avnet
They anticipated a tougher market
"Customers are making more informed
technology purchases, and so [our
resellers] have to be well-equipped to
address market needs."
Decided to reward resellers for taking
advantage of educational opportunities
instead of for straight sales.
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75. How it works?
Avnet channel partners earn points for
business-building activities like attending
Web seminars in which industry experts
discuss market trends. Or they earn points
for achieving certification and training on
specific enterprise products.
It also rewards partners in an industry with
long sales cycles—which can discourage
reward programs. "We distill information
coming from the suppliers and point
partners to activities that will result in long-
term benefits."
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76. Nectar for Business
Aimed at small businesses. 3.5 million
sole traders and small businesses in the UK
Points for everyday business
purchases, from stationery and
catering supplies to van hire and
decorators' materials.
Sponsors include Viking Direct, ICI
Dulux Decorator Centres, Brakes, EDF
Energy, Hertz UK, HSS and Magnet
Trade outlets.
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77. Points can be redeemed for
The business or its staff, including
computers and office equipment,
cases of wine, flights to Paris and
tickets for rugby matches
Points can also be redeemed for any
of the existing consumer rewards
provided by the original Nectar
programme.
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79. Predictions
Some major programmes will close – saying that
customers are no longer interested in loyalty
More companies will take the option that Virgin
has and stop sending paper statements
New coalition programmes in the charity and
savings area as well as even more niche
programmes
Even greater use of technology – they will know
when you are in store -someone will find a sensible
way of doing the whole thing on mobile phones
A loyalty scheme will become a tradeable currency
in some emerging country
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