Update Your Loyalty Program

Loyalty Program Refresher
Time to update your loyalty program?
Sallie Burnett
sallie@customerinsightgroup.com

Sallie Burnett
Strategist. Leader. Innovator.
© Customer Insight Group, Inc. All rights reserved. * www.customerinsightgroup.com • +1 303.422.9758
President of Customer Insight Group, Inc., a
leading strategic relationship-marketing firm
Digital marketing professor at prestigious Daniels
College of Business
2009 Direct Marketer of the Year

Agenda
• What is loyalty marketing?
• Why is customer loyalty important
• What can loyalty marketing do for your business?
• How is customer loyalty marketing evolving?
• Where is customer loyalty today?
• 7 keys to building customer loyalty.
• SOSTAC
• Resources

What is Loyalty Marketing?
Loyalty
• Customer’s faithfulness; advocacy,
devotion; constancy.
Loyalty Marketing
• Discipline of identifying and nurturing the
yield of best customers through a long-
term, reciprocity, value-added relationship.

Why is Customer Loyalty Important?
45%
of sales are from existing
customers.
Cost 5X
more to attract a new
customer than to keep an
existing one satisfied.
60-70%
probability of selling an
existing customer again.
5-20%
probability of selling to a
new prospect.

What can Loyalty Marketing Do for Your Business?
GROW
Grow and maintain the number of
existing customers who purchase
from you.
FREQUENCY
Increase number of times a
customer makes a purchase.
TRANSACTION SIZE
Build transaction size by meeting
more of the customers needs.
PROFIT PER
CUSTOMER
Increase average value per
customer through efficient
marketing.

Where is Customer Loyalty Today?
 CUSTOMER
 More demanding, more choices
 Trust is key to customer loyalty
 Participation in loyalty programs
increasing
 COMMUNICATION
 Irrelevant, impersonal messages
 New customers/members are
forgotten
 No customer engagement plan
 STRATEGY
 Me too value proposition
 Launch and put into “auto” drive
 Measurement metrics not tied to
strategy
 INSIGHT
 Manage defection, not migration
 Data used to run program, not
used to run the business
 Customer relationships are “siloed”
in the organization

7 Keys to Building Customer Loyalty
1. Recognize and Reward Customer Loyalty
2. Proactively Manage Customer’s Lifecycle
3. Make a Great First Impression
4. Create at Customer Engagement Strategy
5. Show Brand Advocates the Love
6. Communicate. Communicate. Communicate
7. Practice Serendipity

Recognize
Reward
Ask for their
input

34%
20%
13%
12%
10%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Providing exceptional 24/7
customer service
Rewarding me for purchases,
feedback and referrals
Sending me exclusive and/or
relevant offers and specials
Providing personalized products,
services
Knowing me when I visit or call
When consumers were asked about the best ways companies can gain
their loyalty, the top choice for respondents was providing exceptional
24/7 service, followed by reward programs.
Customers want to be rewarded for their loyalty.

2. Proactively Manage Customer’s Lifecycle
Value to the Customer
ValuetotheOrganization
Unqualified
Customer
Prospective
Customer
Advocate
Customer
Repeat
Customer

3. Make a Great First Impression
48%
40%
11%
1%
0% 10% 20% 30% 40% 50% 60%
When I make my first purchase or
begin service (first impression)
Exceed my expectations in resolving
an issue (service and experience)
Before I buy or decide to do
business with a company
When I consider switching to a
competitor
First impression critical to winning customer loyalty and trust.
Clickfox2012BrandLoyaltyStudy

4. Create a Customer Engagement Strategy
Companies who have profited from social media are twice as
likely to have a FORMAL STRATEGY.
BE SOCIAL DO SOCIAL MEDIA

Consumers Trust
Friends, family, connections have greater influence.
SourceNielsonGlobalTrustinAdvertisingSurvey,Q32011
Don’t Trust
Much/ At All
Trust Completely/
Somewhat
36%
41%
42%
46%
47%
47%
47%
50%
58%
70%
92%
64%
59%
58%
54%
53%
53%
53%
50%
42%
30%
8%
Ads served in search engine results
Ads before movies
Ads on radio
Ads in newspapers
Ads on TV
Brand sponsorships
Ads in magazines
Emails I signed up for
Branded websites
Consumer opinions posted online
Recommendations from people I know

Engaged customers…
• Recommend products, services or
brand” (52% respondents)
• Engaged customers are “more likely to
convert more readily (31%)
• Engaged customers “purchase
regularly” (28%)
• Engaged customers “less likely to switch
supplier” (27%)
• Engaged consumers are “more aware of
product family” (28%)

MEASURE
Measure success of program based on objectives including increased brand
advocacy, referrals, and sales.
ENGAGE BRAND ADVOCATES
Create a formalized plan to recognize and reward desired behavior.
IDENTIFY BRAND ADVOCATES
Qualification of brand advocate can include the value to the organization as
well as quantity and quality of posts, customer referrals, etc.

Low High Customer Satisfaction
High
Loyalty
Brand Champion
Significant value to influence
Viral Loyalists
Loyal and do tell
Loyalist
Loyal but don’t tell
Mercenaries
Switch based on price —little value created
Antagonist
Dissatisfied and tell others

6. Communicate. Communicate. Communicate.
0%
10%
20%
30%
40%
50%
60%
70%
80%
strongly
agree
somewhat
agree
neutral somewhat
disagree
strongly
disagree
Good Communication Drives Customer
Satisfaction
Satisfaction
“Program” communications are relevant to me
MaritzInsightstheLoyaltyReport2012

38%
62%
47%
Modify purchases to
maximize loyalty
benefits.
Loyalty programs make
me more likely to
continue doing business
with a company.
Modify when and where I
shop to maximize loyalty
benefits.
Best Practice: Use contextual,
relevant communications in the
moment, when it matters and you
will strengthen customer loyalty
and reinforce customer satisfaction.
6. Communicate. Communicate. Communicate.

7. Practice Serendipity

SOSTAC
• Situation Overview
• Objectives
• Strategy
• Tactics
• Actions
• Controls

Depth of customer information
Business
Objectives
Expand marketing channel
with direct capabilities
(“broad and shallow”)
Build strong
relationships with
growth segments
(“narrow and deep”)
Collect data to be leveraged
as a core business asset
(“broad and deep”)
No explicit strategy
Continue to pursue defined
initiatives
 Provide direct, targeted
messages and offers across
customer base
 Target all segments, with
limited ability to target and
tailor between segments
 Collect customer data to make
better decisions across the
business
 Target all segments, significant
ability to target & tailor
between and within segments
 Develop strong relationships with
most valuable segment(s)
 Target growth segments only,
significant ability to target and tailor
between and within segments
Low
High
Low High
Breadthofcustomercoverage
Developing Program Strategy

Expand marketing channel with direct
capabilities
Key areas of
benefit
Potential Types
of impact
Customer
Segments
Functions
Limited
data for all
customers
Growth
segments
Maintain segments
Marketing Only
• Improved efficiency of markdown
spend through direct targeting and
understanding of promo response
“broad and shallow”
Build strong relationships
with growth segments
Deeper
data for select
segments
• Limited customer insights to drive core
function business decisions
• Increased customer loyalty (e.g., greater
margin, improved cross sell, higher
frequency of purchase)
• Enhanced customer perceptions (e.g.,
affordable indulgences positioning)
• Targeted levers (e.g., conversion,
frequency, UPT, and markdown)
“narrow and deep”
Collect data to be leveraged
as core business asset
Robust
data for all
customers
• Robust customer insights to drive core
business decisions
• Strategic decision support (e.g., segment
assortment preference)
• Strategic choice evaluation (e.g., impact of
menu changes on core customer segments
behavior)
• Increased customer loyalty
• Enhanced customer perceptions
• Targeted levers
“broad and deep”
Growth
segments
Maintain segments Growth
segments
Maintain segments
Marketing
Distrib.
Merch.
Planning
Buying
Store Ops.Marketing
Distrib.
Merch.
Planning
Buying
Store Ops.
Strategy Options and Potential Impact

Successful Strategies

Key Economic Considerations
Potential Execution ElementsProgram Type Key Economic Considerations
Instant store discount
“broad and shallow”
Points based rewards
“broad and deep”
Segment specific propositions
“narrow and deep”
• Customers present card to receive in-store discounts
automatically at POS
• Markdown dollars distributed through card
• “Swipe Sweepstakes” element to encourage consistent use of
card
• Mass consumer data insights to build tailored merchandising,
pricing and promotional mix at store and customer level detail
• Customers present card to accumulate points over time to be
redeemed for tiered rewards
• “Swipe Sweepstakes” element to encourage consistent use of
card
• Mass consumer data insights to build tailored merchandising,
pricing and promotional mix at store and customer level detail
• Select customer segments invited to participate in program that
appeals to them
• Brand distinctions leveraged against group for distinctive
positioning and brand strength
• Purchase response to tailored messages drives follow-up
communications and determination of need for additional
customer data detail
• Highest participation
• Low customer upside
• Minimal incremental impact on UPTs, store trips
and conversion
• High participation
• High free rider hurdle
• Aspirational purchases to achieve rewards
will provide gains in UPTs, store trips and
conversion
• High exit costs
• Select participation
• Greatest customer upside
• Enhanced loyalty to drive per cap and margin
• Strongest gains in conversion and UPTs
• Minimal exit costs

Thank You!
Sallie Burnett
sallie@customerinsightgroup.com
Twitter.com/sallieburnett
LinkedIn.com/in/sallieburnett

Resources
Social Media Library
http://www.customerinsightgroup.com/loyaltyblog
Infographics
http://www.customerinsightgroup.com/loyalty-infograph
SallieBurnett on Twitter
http://twitter.com/sallieburnett
LinkedIn Group
http://linkd.in/LinkedInDiscussion
Social Media Grader
http://www.customerinsightgroup.com/marketinglibrary/social-media-grader
White Papers & eBooks
http://www.customerinsightgroup.com/white-papers

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