|The Loyalty Guide 7 - Executive Summary|
The Loyalty Guide 7 is the world's only complete, up to date, unbiased and comprehensive report covering every aspect of customer loyalty marketing, customer engagement, customer acquisition, customer retention, best customer marketing, customer relationship management (CRM), social media marketing, data-driven business intelligence, metrics, measurement, reporting and analytics.
The report explains not only the best practices you need to survive but all the background marketing theory, the latest research, and the kind of practical know-how, facts and figures necessary to make the right decisions about customer loyalty and marketing campaigns in today's harsh economic climate.
Readers will benefit from more than 100 highly detailed case studies of the world's best loyalty programmes, finding out not only what their strategic purpose is but also what they've achieved since launching, how they did it, what worked and what didn't work, how competitors responded, and how well the programmes are performing.
The report goes on to detail hundreds of new and existing trends affecting marketers in all sectors and geographies around the world, as well as dozens of business critical insights, trend reports, and market forecasts from 2016 to 2020 and beyond.
Learn from two dozen of the world's leading loyalty gurus and most experienced marketing professionals, and benefit from their opinions on what the industry is doing right, doing wrong, doing too much or too little. Our panel of independent experts offer page after page of completely practical advice and sheer hard data that every marketer needs for well informed decisions and and forward-looking strategies.
This executive summary provides a brief overview of The Loyalty Guide 7, and will help you quickly identify the aspects of loyalty marketing that are most relevant to you, both now and later on. Each section below summarises one chapter of the report, making it easy to see at a glance which parts of the report you'll need to refer to as you build and develop your loyalty marketing strategy. You can use this chapter to quickly navigate the report's hundreds of pages of research, market data, guidelines and advice, illustrations, charts, tables and graphs.
We welcome you to what has been built up over more than a decade into the world's fullest and most complete report on customer loyalty, customer relationships, marketing techniques and best practices, cost effective business strategies, and their associated metrics, operations and management.
To order and download the full report, click here: http://www.theloyaltyguide.com/ordernow
There are two basic points of view to be considered when discussing the business case for introducing - or keeping - a customer loyalty programme: Some industry observers have argued that a loyalty programme is often unnecessary because it's just a way of spending money rewarding customers who would probably have been loyal anyway.
Others, however, have recognised that the real benefit of a loyalty programme is not necessarily felt first by the customer; rather that it is the merchant that gains the necessary insight (from detailed analysis of its loyalty programme and transactional data, for example) to be able to improve the way it communicates with and deals with its customers. The customer is actually the secondary (but still the most important) recipient of the benefits of a true loyalty programme.
To say that a loyalty programme is not useful, or is a waste of marketing budget, is to have misunderstood the real purpose of the programme. Rather than offering a simplistic discount or rebate programme, a real loyalty programme offers the customer any number of incentives to allow the programme operator to collect accurate and useful data about their lifestyle, purchase choices, motivations, interests, circumstances, and in many cases even about their household and immediate family. The reason for gathering this data is not - as a very small minority of consumers seem to fear - to create some kind of 'Big Brother' database of peoples' personal habits, but to gain practical insights into ways in which the merchant could serve each customer more effectively, more easily, and more satisfyingly.
Most marketers have heard by now that "it costs five times more to gain a new customer than to retain an existing one", and most would love to gather together a community of like-minded brand devotees who hang on their every word, respond to every promotion, and talk to their friends about how great the brand is. Long term customer loyalty isn't always a case of 'love at first sight' - not often, anyway.
Instant revenue is almost guaranteed from margin-slashing sales, promising buy one get one free, and 75% off. But is this sustainable for your brand in the long term? Of course not. And what does this approach do to your brand image and your bottom line? Why do so many brands go after the coupon-clipping vultures when it is actually their most loyal customers they should be looking after with exclusive benefits?
A loyalty strategy is not a short-term sales fix: it takes time to get it right, for both you and your customers. To make loyalty a success, you need to get to know your customers as individuals so that you can cultivate a community of brand advocates by offering really personal community, benefits and rewards. Once you have a well-established group of customers who are engaged with you and your brand, the figures will speak for themselves.
The best reasons for having a customer loyalty strategy...
In this chapter we explain in detail the different reasons, benefits, strategies and factors driving customer loyalty, including ideas about how to set up a new loyalty programme, what will be involved, and pointers for the financial and operational implications of launching your own loyalty initiative, including:
- The business benefits of a loyalty strategy
- How customer loyalty pays back, both short term and long term
- Factors affecting and driving customer loyalty
- How a loyalty initiative grows and improves your customer base
- Financial and operational aspects of a loyalty strategy
- What you need to know to run a successful loyalty programme
- Viable alternatives to traditional loyalty offerings
How loyalty adds value to your business and brand...
The business case for a customer loyalty programme isn't limited to customer insights. In fact, the following is just a small subset of the benefits you can gain from a well-planned loyalty programme:
- Focusing on acquiring insight, not just repeat visits
- Targeting customer acquisition campaigns more accurately
- Moving existing customers up through your 'spend bands'
- Intelligent deselection of your least profitable customers
- Winning back profitable customers who have already defected
- Identifying patterns that show when customers are about to defect
- Increasing customer tenure and customer lifetime value (CLV)
- Building real customer relationships based on personal relevance
- Setting fairer tiered pricing policies based on customer needs
- Responding intelligently and rapidly to competitive challenges
- Improving product range, stock selection, and on-shelf availability
- Improving merchandising planograms and store layout planning
- Reducing promotional and advertising costs
- Identifying the best areas and catchments for new store locations
- Increasing both customer and store-level profitability
- Developing a core offer that your target market can't refuse
- Increasing customer satisfaction and word-of-mouth advocacy
- Influencing the elasticity of customers' purchasing decisions
- Judging competitors' influence on your customers' loyalty
- Predicting loyalty and defection rates through demographics
- Increasing the share of wallet assigned to you by your customers
- Promoting the brand to build emotional bonds and greater loyalty
- Becoming truly customer-centric and dealing with individuals
- Using loyalty data to derive decision-making business intelligence
- Increasing market sector penetration speed with a loyalty coalition
- Making CRM (customer relationship management) work effectively
- Adding gift cards to build repeat business and brand loyalty
- Building a customer database that contributes to loyalty and profit
- Avoiding technological problems with loyalty and CRM platforms
Only one or two of those could be applied to the kind of discount or rebate programme that is often mistakenly called a "loyalty programme" - and all the rest can only be based on solid business intelligence and insights that can only come from a true loyalty programme's database.
Why you need a loyalty strategy...
Another reason that many companies need a loyalty strategy (rather than merely wanting one) is that the marketplace is changing:
- The playing field is levelling out: most businesses are getting better at doing business, so it's harder to stand out from the crowd by simple efficiency and ability.
- Globalisation and increasing competition are leading to less differentiation - when you are selling the same things or offering the same services as your competitors at very similar prices and with equal efficiency, how do you differentiate yourself?
- Diversification is bringing competition from unexpected directions, particularly in the retail sector. For example, fuel retailers, banks, pharmacies, liquor stores, to name but a few, now have to compete with supermarkets.
And customers are becoming more demanding and have higher expectations than ever before. They also have more choice, and changing suppliers is becoming easier. In short, it is becoming increasingly sensible to:
- Focus on the best customers that you already have;
- Optimise the profit that can be made from them;
- Increase the period in which they remain customers;
- Be able to produce measurable results of success.
A well designed and run loyalty programme can do all of these things - and that's exactly what you'll learn to do in The Loyalty Guide.
Coalition Loyalty: What it CAN and CAN'T do for your brand...
We also illustrate the purpose, advantages and disadvantages, and financial and operational implications of coalition (multi-partner) loyalty schemes, and detail all the latest developments in coalition and multi-partner loyalty programmes, along with their successes, structures, currencies, rewards, redemptions, market performance, and developments over time. Our full coalition loyalty case studies include:
- Aimia Inc. (global coalition operator)
- Aeroplan (Canada)
- Air Miles (Canada)
- Air Miles (Middle East)
- Air Miles (Netherlands)
- Travel Club (Spain)
- Avios (UK)
- Avios (South Africa)
- PINS (Baltic Miles)
- BonusLink (Malaysia)
- Dotz (Brazil)
- eBucks Rewards (South Africa)
- Fly Buys (New Zealand)
- FlyBuys (Australia)
- Grace Kennedy Value Rewards (Jamaica)
- Maximiles/iPoints/Bilendi (UK & Europe)
- Malina (Russia)
- Nectar (UK)
- Nectar Italia (Italy)
- PayBack (Germany)
- PayBack (Poland)
- PayBack (India)
- PayBack (Mexico)
- Punti/PayBack (Italy)
- Plenti (US)
- Points.com (loyalty points aggregator)
- Shopkick (US)
- Webloyalty (UK, Europe, Australia)
The reward is a vital part of any loyalty programme. It is the bait on the end of the line: the bit that actually convinces the customer to sign up. It is also a complex part of the programme and usually presents a delicate juggling act: it must be worth enough to be attractive to the customer but not cost enough to make the programme unprofitable. It must appeal to consumers of the right profile and it must cater for wide variations in taste and desires among those customers.
All in all, the reward has many functions that we will look at in detail in this chapter. We will also examine the properties of a good reward, and which of these consumers think are the most important. We also look at the many types of reward that can be offered: discounts (both targeted and untargeted), points-driven programmes, hard and soft rewards.
Which do customers prefer, and why? And we also look at how, in the eyes of an expert, one should go about planning a successful and appealing reward catalogue - quite often a component that lets a reward programme down. And finally, we examine some recent research into what motivates consumers when they are faced with a choice of rewards.
Reward drives behaviour...
We teach our pets how to behave by rewarding them when they behave correctly, and by not rewarding them when they don't. Reward the behaviour that you want and don't reward the behaviour that you would like to discourage, and behaviour will follow reward - within reason.
Experiments have revealed that, while a bigger reward reinforced the desired behaviour better than a small reward, when the rewards were discontinued, those who had received the big rewards were more likely to return to the unwanted pattern of behaviour than the group who had received the small reward. So the warning is there. Never let your best customers feel that you are withdrawing privileges from them, and try to ensure that customers become loyal to the product or service, and not simply to the reward.
In other parts of this report we have shown that most of the profit that an organisation makes comes from just relatively few customers, and that most of the losses can be attributed to a relatively small group of worst customers. Clearly, the loyalty programme should be designed to retain the good customers and to attract new customers of a similar profile, and not to give those at the other end of the scale any good reason to stay.
In order to have any effect at all, the reward must be desirable enough to actually stimulate a change in behaviour among customers. It also has to be affordable, and balancing the two sides of the desirability/affordability equation is tricky.
Rewards vary tremendously in shape, form and size. There must be thousands of variations, and they all can serve a purpose. The skill lies in finding the right one for the purpose that you have in mind.
How to plan the right rewards for your audience...
Clearly, the importance of the desires and needs of the target group of customers cannot be over emphasised. A decade or two ago most customers were satisfied with simple rewards. This is no longer true. In general (particularly among "best" customers) they are now more affluent and, instead of simple gifts or small discounts, they would rather opt for rewards that save them time and make life more convenient.
The more often that a customer interacts properly - mentally or emotionally - with a loyalty programme, the more effective it will be. The simple handing over of a card at the point of sale is not really significant interaction; neither is receiving a letter every three months informing them how many points they have collected.
A really good loyalty programme would involve them in actual thought or at least consideration every time they visit. And that's the key to customer loyalty: a loyalty programme drives nothing if it fails to engage the customer with every interaction - but it can drive a spectacular return on investment if done properly.
In The Loyalty Guide, we explain in detail:
- The value of your rewards offering
- The function of a loyalty reward
- What makes a loyalty reward attractive and engaging
- How to control your rewards budget
- How to plan the most effective rewards catalogue
- Different levels of reward for different customer tiers
- Points vs. gifts vs. perks vs. discounts
- How to get the timing of your rewards just right
- Internal vs. external vs. networked reward fulfilment
- What customers say they want - and what they really want
- Factors that drive loyalty reward redemptions
As time passes and more loyalty programmes are launched, it is becoming increasingly difficult to actually engage the customer in the programme. Customers are now so used to handing over a card at the point of sale that they feel little real involvement. Handing over a card when transacting and receiving a quarterly statement within a pile of other mail is not engagement.
Real engagement grows little by little, each time the customer has to actively think about and make a decision about the programme. In fact, according to recent research by LoyLogic, following their first redemption, loyalty programme members' earn rates can increase by up to eight times compared to their previous point accrual rates.
As a result, loyalty programme operators must now find new ways to make sure the customer's first redemption happens as soon as possible in the customer lifecycle.
The sheer engagement value of a reward redemption...
The day a customer makes their first redemption with your loyalty programme is the day they can actually be counted as being 'engaged' - they have browsed through all the redemption options, found the best reward, and turned their loyalty into something tangible. (In fact, LoyLogic dubbed the experience of that first redemption 'The Golden Moment', and that best part is that, once a customer has had their first Golden Moment, they're much more likely to come back for many more.)
Customers who have made a redemption are on average 8 times as valuable as those who have not. But, perhaps more importantly, those same customers increase their loyalty point accrual rate on average by 30%. These figures represent a significant increase in engagement, accrual and consequently programme profit by a segment of consumers who have already taken the time to enrol in the programme. These are the consumers who will offer the greatest contribution to a successful loyalty programme. They will drive the profits to the company shareholders and can ensure a loyalty programme directly contributes to, rather than drains, the company revenue.
Striking a balance to engage your customers...
It has often been said that any programme operator could get most customers to be loyal if the reward they offer is big enough. So the art is to find the point of balance where:
- The reward is enough to entice the customer to keep participating;
- The reward is not so big that the customer becomes loyal to the reward and not to the business or brand;
- The reward is not so expensive that it makes the programme uneconomical;
- The reward is structured so that it can be altered, reduced or even withdrawn without alienating too many best customers;
- The reward is able to attract new customers of "best customer" profile;
- The reward encourages the customer to interact with the programme frequently.
The reward is the main bit of the loyalty programme that the customer sees and touches, and it is therefore a key opportunity to increase customer engagement, not only with the loyalty programme itself but with the brand as a whole.
In The Loyalty Guide, we explain in detail:
- How to tackle a customer engagement strategy
- The linkage between engagement, long term loyalty and profit
- The role of relevance and trust in customer engagement
- Using different channels in different ways to increase engagement
- Tailoring your loyalty rewards to build engagement
- How to use social media to engage on a truly personal level
- Ways to re-engage customers who are at risk of defecting
- Drivers of emotional engagement between brands and consumers
- New activities and strategies to help increase customer engagement
Knowing The Customer
There are many different aspects to knowing your customer - all part of the overall customer lifetime journey with your brand. Customers need to be attracted to the brand, encouraged to buy into its values and qualities, provided with a positive and satisfying customer experience, and given as many reasons as possible to keep coming back - to stay loyal to the brand. And you can only achieve all of that if you know something - in fact as much as possible - about your customers; that way you can achieve a sense of personal relevance that the customer is likely to interpret as you "knowing them", or at least understanding their individual needs and desires.
True, part of that whole journey involves the customer, but the rest of the journey lies behind the scenes: the marketer has to ensure that customers are not only happy with their experiences and that all the basic entry level 'hygiene requirements' are met when customers interact with the brand, but also make sure that customers feel emotionally engaged with the brand, that the brand's core message and offering resonates on a personal level with them, and that the brand treats them as real people, showing a genuine understanding of what they want and need from the brand.
Once you have a customer, you have to keep them...
Customer retention is a function of customer satisfaction, engagement, loyalty, and trust. All of these aspects have to be monitored, measured, analysed, and acted upon if current customers are to remain exactly that: current customers. At the core of this lies the Customer Experience; you should have a clearly defined strategy for providing not only a smooth and easy experience at every touch point, but also a personalised and engaging experience - putting the customer at the very heart of your marketing strategy, and focusing your efforts on what the customer needs and wants.
The customer can't easily be averaged out, or broadly classified, either - which makes it much more difficult to understand customers on a generalised level; instead customers need to be understood in terms of similar segments or even as individuals. After all, there's no point marketing meat products to vegetarians just because they bought the same barbecue relish as a non-vegetarian did.
What happens when your customers start leaving?
And what happens when a customer is no longer as happy as they once were? They tend to leave. But not everybody will take the trouble to tell you they're leaving. In fact, most will go as quietly and possible and start dealing with a competitor, then tell all their friends, family, and colleagues about their bad experiences with your brand. The final part of knowing your customer, then, is to know when to try to win back those who have left - or even better still, to know which ones are at risk of defecting long before they actually leave, and then implement a carefully monitored campaign to win them back.
In The Loyalty Guide, we explain in detail:
- How to gather and act upon both customer data and insights
- How to plan and monitor an effective Customer Experience strategy
- How to find your flaws and improve the customer's experience
- Ways in which a weak loyalty strategy is more damaging than none at all
- What consumers say they want from a loyalty programme - and then the reality
- The differences between different generations and customer demographics
- The latest evolution of Customer Relationship Management (CRM)
- Spotting customer defections and churn trends, and winning defectors back
SoLoMo (Social, Local, Mobile)
SoLoMo is the buzzword that marketers have adopted for the inseparable technological trio: Mobile, Local, and Social. Because of the rapid adoption by people worldwide of social apps on their smartphones and tablet devices, almost all of which have GPS location services built-in, these three technologies naturally came together to add real-time relevance, unparalleled personalisation, convenience, and even fun to what otherwise would have been three disparate elements of the marketer's toolbox.
Social media marketing is a relatively new field, driven by the widespread popularisation among consumers of social networking web sites and services such as Facebook, Google+, Twitter, Foursquare and others. These services don't only hold true to the original vision of sites such as Facebook (i.e. connecting people in a safe and personal way) but they now also include other services and technologies that augment that goal, such as location-based services which allow people to 'check in' just about anywhere - whether it be a popular club, restaurant, or their own home, or any other venue - usually thanks to the GPS that's built into their mobile phone handset. This allows people to 'be seen' in all the right places but, more importantly, it has important implications for brands that they choose to associate with in their social network.
Social media: the 'So' part...
When it comes to social media, one of the most common misconceptions among marketers is that social marketing is as easy as putting up a page on Facebook, or setting up a Twitter account. Of course those are the basic building blocks, but there's a whole world of detail that needs to be considered first. As in any other marketing or advertising discipline, you first need to identify and clarify a host of factors (such as the brand identity, brand message, brand values, target audiences, value proposition, referral and advocacy benefits, social gaming elements, social commerce and currency, messaging strategy, creative elements and imagery, and of course how - if at all - the social marketing initiative will link up with any existing marketing initiatives - for example your loyalty programme, or perhaps even an external loyalty initiative or coalition programme).
Generally, unless your brand already has 'top of mind' presence in most households, it is not enough to simply set up a social marketing programme and hope for the best. Like its cousin, web marketing, social marketing requires a great deal of advertising, exposure, reinforcement in every consumer-facing message, ever-present reminders in every communication channel, and even partnerships with external organisations that are also likely to deal with your own target audiences.
Another issue that many marketers seem to wrestle with when they're planning their level of involvement in social media is the degree to which they're willing to surrender control of the brand/consumer conversation. The problem is that, once you have made your brand available for public comment on one or more social platforms, it is impossible to control what is said by others. A number of ill-advised attempts have been made in the past to have posts, pages, and even whole user profiles withdrawn from social media sites, but the outrage and public fury associated with those actions have, in every case, damaged the brand even further.
It may be a leap of faith for the marketer - perhaps more so for the C-level executives who need to vote to fund a social marketing campaign - but the consumer is generally a fair-minded individual and most will ignore (or even 'flame' - a form of internet put-down) those who are too extreme or excessive in their negative comments. However, genuine consumers saying genuinely good things about a brand are worth the leap of faith. That kind of advocacy can spread rapidly among social networks, even leaping from site to site as it is re-posted or re-tweeted.
Location-based: the 'Lo' part...
The ongoing trend toward location-based services is something that consumers were initially afraid of, with many worrying excessively about 'big brother' tracking their every movement, but times have changed and many people now appear to be more interested in the positives that a location-aware device can bring to their everyday lives - improved relevance in mobile search results, or more accurate localised recommendations from mobile loyalty or retail apps, for example.
The mobile channel: the 'Mo' part...
The mobile device is now, in most countries at least, a fully developed personal organiser, social hub, communication device (note that we didn't list that first), portable office, entertainment console, navigation system, and a host of other things - with billions of apps available (many for free) it seems there is no limit to the device's capabilities or usefulness in everyday life. And this is good news for the marketer, because a device which commands that much attention is a potential friend not only for brand messaging but for the almost-viral spread of word of mouth brand advocacy.
For example, did you know that the average SMS text message is read within 30 seconds, while most email goes unread for several hours (if at all)? We cannot overstate the importance of the adoption of the mobile channel in all its glory (the mobile web, mobile apps, geo-location services, text messaging, mobile payments, NFC contactless chips, QR Codes, and so on) if marketers are reach their target audiences in a timely, relevant, and trusted way.
In The Loyalty Guide, we use real world examples to explain in detail:
- The pros and cons of integrating social media into loyalty and marketing efforts
- The tangible and subtle benefits of social loyalty marketing campaigns
- The dangers of falling behind your competitors in the social media race
- How the social channel helps you reach your target market ('So')
- How location-based marketing can put engagement on a whole new level ('Lo')
- How to plan a mobile/social strategy that gets Word of Mouth flowing ('Mo')
Best Customer Marketing
It's not a new concept to concentrate the lion's share of your marketing budget on consumers who are most likely to respond. But best customer marketing (BCM) is not purely about restricting your marketing efforts to those who are somehow defined as being better than others in the customer base. In fact, best customer marketing is all about directing the majority of your marketing spend toward customers who will bring greater profit.
The key to the concept, however, is not to identify only those customers who are already bringing you the most profit and then increase their spend (although that does come into any good best customer marketing campaign, as you will see from the case studies later on in this chapter). What a good best customer marketing strategy sets out to achieve is to identify those customers who are not yet spending as much as they could, and to increase their value until they become best customers. In essence, if you split your customer base into - for example - five segments (i.e. five 'spend bands') based on their spending (or profit if you have that data available), best customer marketing is all about trying to modify the behaviour of customers in the lower four segments to shift them up to higher spend bands. And if that shift in behaviour can be made permanent by forming more profitable shopping habits in the customer's mind, the campaign has been absolutely successful.
The simple argument for best customer marketing...
Having realised that the existing customer base is potentially much more profitable than it already is, most marketers would say that best customer marketing is an incredibly obvious strategy. And yet very few companies actually practise it effectively. Here we set out the arguments for it, with examples of the difference that well-executed best customer marketing can make to long-term profits.
Like so many other aspects of the marketer's life, there isn't a clear cut right way or wrong way to employ best customer marketing. What you do depends largely on what you want to achieve. The objective is always the same, though: to increase the number of best customers while decreasing the number of least profitable customers. The three most successful ways are:
- A long term loyalty programme - This involves the use of a loyalty programme to identify and segment customers into groups, and then the use of different marketing strategies for each segment.
- A short term best customer programme - This involves a short-term marketing programme (say, up to six months) designed to appeal more to best customers than to the others.
- Both types together - The first two methods can be piggy-backed, one on top of the other. This is probably the ultimate solution, and is used by many successful loyalty programme operators.
In The Loyalty Guide, we explain in detail:
- The financial case for overlaying Best Customer Marketing on your loyalty scheme
- When to use short term, long term and mixed term BCM strategies
- How the loyalty programme interlinks with BCM to drive new revenues
- How to identify best customers, and what makes them 'better' than the rest
- Different methods of customer segmentation for a more flexible strategy
- The retail marketer's best kept secret: the continuity programme
There are many more communication channels available today than there were before the rise of social, interactive and other electronic media. Even since the publication of The Loyalty Guide 6, marketers have found a growing number of innovative ways to reach consumers, whether at home, at work, or at play - especially through the rapidly growing social media phenomenon.
Communication with consumers and other businesses can take place via e-mail, instant messaging (IM), mobile apps, web sites, web chat, forums, online communities, social networking platforms (such as Twitter or Facebook), text messages (SMS), instant messaging (IM), multimedia messages (MMS), games, TV, films, mail, telephone, fax, radio, kiosks, self-service units, mobile sales units, in-store teams of brand representatives, focus groups, leaflets, newspapers, free-standing inserts, coupons, voice over IP (VoIP), and a plethora of other internet-based and mobile systems.
Clearly, each channel has different costs, social implications, complications, emotional connotations, privacy issues, and various perceived benefits and risks for the consumer. Each brings its own challenges in terms of finding the right frequency, message, tone, voice, relationship-based permission, and value proposition.
How to reach your customers without ever upsetting them...
With each comes a unique set of challenges: as a rule, consumers don't like junk mail, or 'spam' (unsolicited commercial messages), or unsolicited sales calls. They don't like their social network feeds being overrun with brand messages, even from brands they've 'Liked'. They complain about their mobile phone being invaded by irrelevant advertising messages. They don't want to waste time and bandwidth by receiving unwanted videos and sound clips by e-mail or MMS, and they certainly don't want their Skype or Instant Messenger services popping up unwelcome advances from companies they've never heard of or dealt with. The list goes on.
But the good news is that there are still ways, means, laws, and ethical practices that cut through the communication barrier for all of these channels, allowing you to communicate and build relationships with existing customers and sales prospects alike.
Customers actually want to hear from you more often...
In fact, research has found that most consumers (around 90% in fact) are happy to remain loyal to retailers that regularly provide genuine special offers for items they frequently purchase. Despite a widespread suspicion among marketers that consumers are tired of "being marketed to" all the time, this and other studies reinforce the idea that to know about a customer is not enough: they still want you to communicate with them on a regular basis with well-timed and personally relevant messages.
In The Loyalty Guide, we explain in detail:
- How to formulate your customer communication strategy, and keep it up to date
- How to avoid falling into the most common communication traps and pitfalls
- How to build customer trust and intimacy through multiple channels
- The importance of customer centricity, personalisation, and relevance
- How Voice of the Customer initiatives can pay back in unexpected ways
- The growing need to build on Word of Mouth as a distinct communication channel
- Why dealing with customers through social channels is no longer optional
- The legal ins and outs of customer communication, opt-ins, opt-outs, and privacy
- One and two way communications via email, mobile, web, mail, and contact centres
The Power of Customer Data
Examining your customer database to find behaviour patterns can be very enlightening, offering previously unavailable insight into not only what customers buy but also when and sometimes even why. For example, a much-quoted example is that, in supermarkets, there is a positive correlation between the purchase of baby nappies and the purchase of beer during the same visit.
Other correlations can be spotted by examining unrelated factors, such as purchases and product returns, or brand-switching within the same category in correlation with pricing changes or promotional offers. The database can be used to determine whether or not a particular customer is easily influenced by price offers, added value promotions, and so on.
The customer's lifestyle and 'demographic positioning' is important to establish if your marketing campaigns are to address issues such as births, marriages, moving home, graduation, birthdays, and other life events. Lifestyle profiles can also be used to make better-informed guesses about the suitability of a product or promotion for particular products and categories. For example, a cross-sell promotion based on premium quality goods may be better suited to those in wealthier geographical areas, or those who have dual incomes.
For example, information about new births in the family - if reliably obtainable - can be used to target promotions for baby products, toys, and years later, childrenswear. A customer's geographic profile, drawn from external sources, can be used to approximate the family's overall month spend in your sector. That information can then be used to determine your approximate 'share of wallet'.
Transform your existing database into valuable insights...
Understanding a customer's product preferences and repertoire (what they usually buy, either by brand or by category) can help to refine marketing campaigns, and to 'safety check' them - for example, if your data indicates that a customer has never purchased meat-based products, they may be a vegetarian: it may not be appropriate to offer two-for-one on hamburger meat. By establishing category based preferences (e.g. do they buy alcohol, or meats, or dairy products, or magazines, or clothing, etc.) you can determine how best to cross-sell or up-sell.
By analysing the database to find potential relationships between product lines or categories, you can drive cross-sales of own-brand or higher margin goods. For example, you might choose to issue coupons for certain products when another type of product is purchased. Some systems are triggered by specific products bought (such as Catalina's system), and others by the customer's previous purchase history. For example, the UK supermarket chain Tesco [www.tesco.com] issued electronic coupons at the checkout, printed by the cash register along with the usual sales receipt. Rather than being triggered by the purchase of a specific product, the customer's recent purchase history was the key. One hundred different offers - changed every two weeks - were reported to be available.
Analysis of customer purchase data over time can be used to determine appropriate pricing strategies. For example, some stores (most notably those in the USA) have introduced 'tiered pricing' programmes, through which loyalty programme members pay different prices for goods than non-members. Depending on the complexity of the programme, there may even be multiple tiers of pricing based on different levels of membership.
The loyalty programme's role in gathering data and insights...
Over a decade ago the ultimate use of loyalty programme information was to target offers at customers more accurately. That still is an important use but there are now many more uses as well. The sophistication of the leading loyalty programmes has developed beyond recognition. Technology now enables us to do things that were only dreamed of ten years ago. Nevertheless there are a great number of loyalty programmes that don't seem to have developed much at all. They still do what companies were doing back then, and wonder why it doesn't make much difference.
Then CRM joined the marketing armoury. The common ground between CRM and loyalty marketing is that they both serve the same ultimate purpose - through better knowledge of customers, and better relationships with them, they aim to generate more profit. Both help to improve the business right across the board, both depend on data, both should not only pay for themselves but bring in extra profit, both can be very difficult to implement properly, and few truly understand the true worth and purpose of either.
Following on from CRM, the vast wealth - an excess even - of data collected from digital channels has created a 'super set' that has become known as 'Big Data', leaving marketers with something of a problem in terms of the meaningful analysis and extraction of insights from this huge pool of information. But as time has passed, the analysis of smaller sub-sets of that data (known as 'Little Data') has become a key strategy for data-driven marketing initiatives, and none more so than for loyalty programme operators.
Loyalty can't be bought - but customer insights can...
It is true that true loyalty cannot be bought by giving customers a loyalty programme. What the loyalty programme buys is information. That information can highlight the strengths and weaknesses of the business, and can be used to improve the core offering - which is what can really bring true loyalty. It's a chain, from data, to analysis, to action, to loyalty. The links of the chain are many and varied, and companies across the globe are using data in different ways to produce a wide variety of business benefits that directly impact customer loyalty, customer relationships, the bottom line, employees, and stores.
Ask yourself: who has the most loyal customers? What names come to mind? Here are just a few: Nordstrom, Coutts Bank, Lexus, Harley Davidson. All of them have fiercely loyal customers. That loyalty comes from their core offering and their products: the way they satisfy their customers. They use their knowledge of their customers to improve their service and products. And that simple message is what so many don't fully understand. The name 'loyalty programme' is therefore a bit of a misnomer: what is generally called a loyalty programme is in fact a data collection programme.
In The Loyalty Guide, we explain in detail:
- The benefits and pitfalls of collecting customer, loyalty & transactional data
- How customer data can be turned into loyalty and other profitable behaviours
- The linkage between customer data and long-term profitable customer relationships
- Customer behaviour, demographic and lifestyle profiling techniques
- The analysis of transactional and loyalty data to streamline business operations
- Using customer data to make more profitable pricing strategy decisions
- Driving incremental sales using insights automatically generated from loyalty data
- Segmentation of the customer base using multiple criteria and tiering systems
- The competitive advantage of knowing each customer's lifetime value (CLV)
- Customer flow and customer base analysis, and the prediction of future trends
- Market share and share-of-wallet estimation based on customer profiling
- The key ideas and benefits of modern digital/database marketing
- Managing data quality, and keeping a 360-degree view of your customers
- Big Data: A whole new role for today's marketing professional
- Making the customer/data value exchange work in both directions
- Planning a customer loyalty database, what to collect, and how to keep it safe
- Data ethics, data protection laws, consumer trust issues, and data lifespans
Loyalty Operations & Tools
Loyalty and marketing operations and the tools employed in the running of a loyalty programme are areas that are all too often overlooked when planning a strategy, with tools, technologies, and day to day operations being developed on an ad-hoc basis when each need arises. Clearly this approach is far from ideal and, although it results in systems that do what they need to do, there are operational efficiencies that are easily missed, resulting in a divide between marketing expectations and actual results.
There are many different strategies used in loyalty marketing today - each with its own unique advantages and disadvantages. Some focus on price while others focus on perceived value, and some focus on customer acquisition while others focus on retention. Clearly, the choice of your marketing strategy should be based on your marketing goals, whether long-term, short-term or a combination of these strategies.
What are the choices for effective loyalty marketing?
Multi-partner (i.e. multi-sector) or 'coalition' loyalty programmes are a good and inexpensive strategy for their partner companies because they have relatively small partner set-up costs but have predictable ongoing operational costs. They are either true coalition programmes (where the programme is developed and managed by a dedicated provider) or a single-operator programme run by one business but including other redemption or points-earning partners.
Single-operator loyalty programmes come in two flavours: bespoke, and turnkey. Bespoke loyalty programmes are those that are custom-designed and built by an outside supplier. More expensive than turnkey programmes, they have the advantage that they take individual requirements, ideas, goals, and features of the business into account. The cost can usually be quite accurately forecast.
Turnkey loyalty programmes are 'off-the shelf' or 'boxed' loyalty programmes that are usually supplied with ready-to-run software and hardware that can be personalised to the organisation's requirements. Some turnkey programmes offer management of the programme and database as well. It is one of the most cost-effective ways of running a loyalty programme, particularly suited to small businesses. A major advantage is that a finite cost can be negotiated initially, avoiding the possibility of development costs running far over budget.
Credit and debit cards are often used as vehicles for loyalty programmes. Financial institutions can build loyalty programmes directly into the cards; businesses in other sectors can 'co-brand' and incorporate a loyalty programme in a card provided by a financial institution. Gift cards are rapidly gaining in popularity, too.
Access Pricing is a newer addition to the loyalty armoury and, while it is a type of best customer marketing, it allows the difference between the rewards that best customers get and worst customers get to be amplified.
Stealth marketing is a highly developed form of targeted marketing, in which offers or rewards are provided to best customers without anyone else knowing about them. This makes it extremely difficult for competitors to copy.
Best customer marketing is another option, distinct from customer loyalty, yet much more powerful when linked to a loyalty programme. It is all about directing the majority of the marketing budget toward customers who can bring greater profit. The key to the concept, however, is not to identify only those customers who are already bringing you the most profit and then increase their spend but to identify those customers who are not yet spending as much as they could, and to increase their value until they become best customers.
Not just a guide: A whole new loyalty strategy...
With so many options and strategies to consider, and so many factors involved in each, The Loyalty Guide de-mystifies and explains in detail:
- How different types of loyalty programmes work
- The 15 key secrets behind every successful loyalty programme, worldwide
- The 17 key concepts that are common to all successful loyalty programme operators
- The continuing role of innovation in loyalty operations
- Key structures and strategies for great loyalty programmes
- How to choose the best loyalty programme identifier (token), and the options available
- The growing use of prepaid/gift cards in loyalty initiatives, and why they're so popular
Proving & Analysing Loyalty
The business case for any loyalty programme needs to be well supported and justified, not only in the planning stages but on a continuing basis after implementation, and during development. The application of solid mathematics, statistics, and scientific measurement is the only way to prove the effect the programme is likely to have on profitability and the customer base. And the application of regular and meaningful management reporting is the only way to monitor all the factors involved both before and after implementation of the programme.
Every aspect of the creation of a loyalty marketing initiative - or of any differentiated marketing initiative - must be evaluated at all stages, and useful metrics must be implemented with proper processes and controls to help determine the success, failure, progress or stagnation using preset standards. In this chapter we examine the detail and practical workings of the necessary formulae, calculations, metrics, and management reporting tools that every marketer needs during the process of evaluating new and ongoing loyalty marketing initiatives.
Quantifying and analysing what customers think...
One big problem is that, while marketers are looking for valid and reliable customer loyalty metrics to guide their actions, there is no single survey question that can give you all the answers you need to build a base of passionately loyal customers. This suggests a need to use metrics that support your company's business strategy, as well as a need to ensure the reliability of multi-faceted metrics, a need to understand the power of emotion in building customer loyalty, and a need to put customer loyalty research to work more effectively than ever before. The good news is that, with so much digital data available to marketers, it's actually a lot easier than ever before.
Metrics can help marketers see potential failures coming, in enough time to be able to address the problems. For example, for companies working with customer satisfaction and loyalty strategies in multiple territories, there is often a strong influence from cultural nuances. Other risks to loyalty programmes' effectiveness include the premature abandonment of a loyalty programme, the need to translate customer loyalty return into a monetary value (and its bottom line impact), and the tracking of emotional drivers of loyalty.
In The Loyalty Guide, we explain in detail:
- The measurement of loyalty, and the role of customer-centric metrics
- Formulae for monitoring loyalty, patronage, profitability, retention, and customer value
- The importance of studying attitudinal equity and customer lifetime value
- A practical primer on statistics and the calculations behind the key loyalty metrics
- The analysis of customer loyalty and profitability, in theory and in practice
- The drivers of loyalty and their correlations with bottom line profitability
- The pros and cons of the Net Promoter Score (NPS) and its alternatives
- Establishing accountability and setting up a loyalty management reporting framework
- The five essential management reports and tools for loyalty programme operators
Customer Lifetime Value (CLV/CLTV)
In theory, building customer loyalty increases company profits. But how can we measure accurately how effective it is in practice? How can we predict the effect an investment in loyalty will have on the future of the business? No method is perfect, but measuring the effect on Customer Lifetime Value (CLV) is one of the best ways - particularly if managing and maximising profitability over the complete customer life cycle is the goal.
The positive correlation between customer loyalty and company profit is not a new and revolutionary idea: thirty to forty years ago international management guru, Peter Drucker, said: "It is the purpose of a firm to create satisfied customers" and Theodore Levitt said: "... satisfaction is an important basis for loyalty, which is the key to profitability". Within the marketing arena, the correlation has been expressed even more directly by statements like: "It's 3-5 times as expensive to acquire a new customer as it is to keep an existing customer", and "The best 20% of customers contribute 80% of the company's net profit".
Comparing loyalty with profitability is the best measure of success...
But, while most managers and marketers agree with such statements, few companies are able, due to a historical lack of focus on the correlation, to confirm them using their own data. In addition, the calculations required to analyse long term correlations are quite complicated. Over the past decade, business managers and marketers have become increasingly interested in learning about the loyalty/profitability correlation, leading to more research of customer loyalty (e.g. the causes of customer churn and defection), and the implementation of many loyalty programmes and CRM initiatives.
But despite this interest, most managers still have a number of unanswered questions, including:
- Who are the most loyal customers and who are the most disloyal?
- Who are the profitable customers and who are the unprofitable customers?
- How do we calculate the yield from an investment in customer loyalty?
- How much do we have to invest to acquire each new customer?
- How much do we have to invest to retain an existing customer?
- How much do we have to invest to develop existing customers into 'total' customers?
- How much do we have to invest to win back each defected customer?
- How should we allocate our marketing budget for the optimal return?
The Loyalty Guide looks closely at customer lifetime value, customer loyalty, and customer profitability both in theory and in practice. Different methods of calculating the effects on return on investment (ROI) that increasing customer loyalty has are detailed. The main emphasis is on the calcula¬tion of customers' lifetime value, including the basic theory, hypotheses, models, and the tools that help managers to use these calculations in practice.
Among the key issues covered in this chapter:
- Calculating the cost of keeping customers - or letting them go
- How to calculate customer profitability and lifetime value
- Examples of the calculation of customer lifetime value
- CLV models and CLV systems (marketing ROI models)
- The relationship between CLV, loyalty, retention, and profit
- The ten steps of CLV toward customer loyalty and profitability
The Marketing Strategy
Marketing consists of many aspects and disciplines, each of which makes use of many different channels and environments, and many of which work hand-in-hand with others. Although there is no one single best marketing environment - whether it's the real (offline) world, the online world, the mobile world, or the world of social networking - there are times and places and circumstances in which each environment is the clear choice.
There are many strategic questions that continue to challenge brands and their marketing teams in every sector, every day, such as:
- Should we adopt the mobile channel? And should we write an app, or should it be a mobile version of our web site?
- Should we launch social network pages, and what would we say? Would we try to sell through social networks, or offer customer support, or is it just for brand awareness? Will we act on what consumers say to us, or will we merely be talking 'one way'?
- Can we scale up later, and what resources are needed for each aspect of the marketing strategy?
- Should our retail operation do most of its marketing offline, or should we put a bigger budget into embracing and enticing the online consumer? And what are the competitive challenges in doing so?
The list goes on. For example, a brand selling fashion products to teenage consumers will be in the offline world (with its retail outlets) but it will also benefit from a strong presence in the mobile environment (with a mobile app that perhaps suggests accessories or new trends) and the social environment (to help drive brand ambassadorship and word of mouth, and to tap into the social status of 'trend setters'). Meanwhile, an online music seller will have its primary presence in the digital world, and may benefit more from an additional strong presence in the mobile environment (for example, a mobile/tablet app that offers live streaming music playback on demand).
Whichever environments your marketing mix spans, there are benefits and insights to be extracted, and pitfalls and challenges to be avoided.
Planning, budgeting and spending...
The marketing strategy in many organisations is not collaborative and transparent enough to really deliver on brand awareness and growth objectives. The process requires all your stakeholders to work together in planning marketing operations, including your marketing objectives, target products, customer segments, distribution channels, list of campaigns (and their key activities and expected results).
After these processes are mapped out, you'll need to set detailed progress milestones and targets, and predefined metrics for success or failure. This planned approach brings complete transparency, accountability and alignment into marketing operations.
The marketing budget is always under pressure in terms of visibility, transparency and accountability. Marketing typically has one of the largest budgets, yet many companies lack a consistent or clear way to track spending and return on investment (ROI) as part of their planning and execution processes. Your operational plan should allow you to:
- Ensure that budgets are appropriately allocated to each programme in the marketing plan;
- Track programme spending for each campaign or loyalty initiative at a detailed level;
- Report on planned vs. committed vs. available funds for any campaign at any time.
Without this level of visibility, it's difficult to put controls in place to reduce or even eliminate negative spending surprises. Consequently, you'll need to integrate your budgeting and marketing processes with spend tracking and marketing execution processes. This allows you to define and track how much is budgeted, planned, already committed, already spent, and left remaining at an overall marketing or campaign level. Track these numbers each month or quarter or fiscal year (or all three).
In The Loyalty Guide, we answer all of those issues, and explain in detail:
- Which digital marketing techniques work best for what purposes, and when
- The integration and harmonisation of online and offline channels
- Potential areas for the development of tomorrow's most profitable marketing strategies
- New ideas, concepts and research for retail and online marketing strategies
- Different pricing strategies and how they affect customers and loyalty operations
- The place of coupons (both printed and digital) in the modern marketing mix
- The benefits of marketing automation technologies, and when to deploy them
- Promotional marketing and other effective strategies
Brand Loyalty & Marketing
There would be no point in spending marketing dollars building brand awareness if customers don't buy the brand again after they've tried it the first time. Today's brand marketers all have the same aim: to encourage brand loyalty - the situation where consumers choose a brand over its competitors and private label equivalents because they want to.
In this chapter we focus on the successes and techniques seen most recently, and also the problems facing brand marketers and how they can be overcome. We look at the key drivers of brand loyalty, how to form a more effective brand strategy, and how to predict the impact of brand loyalty. We also detail ways to build and boost a brand, both offline and online, along with an examination of common brand threats and nationally successful brand strategies.
A good definition of brand loyalty is that given by Jan Hofmeyr and Butch Rice, in their book 'Commitment-Led Marketing':
"Brand loyalty is the tendency of someone to buy a brand again and again because they prefer it over others."
Hofmeyr and Rice developed a brand marketing tool called The Conversion Model, which enables the marketer to segment users of a brand in a market by their commitment to staying with the brand, and non-users by their openness to adopting the brand. Research shows that the brand loyalty of customers has fallen steadily over the past two or three decades. Results vary, but it's probably fair to say that today's average consumer is only 75% - 85% as loyal as the consumer of the 1970s or 1980s. So why did this happen? There are several reasons:
- There is much more choice today: the number of products within categories has increased.
- Many "me too" products have been launched, some looking very similar to the original.
- The number of advertisements seen by consumers daily has increased enormously, especially since new channels like the internet, email and SMS have come on the scene.
- Modern consumers are more sophisticated and more likely to think for themselves and to try new products.
- There is more comparative information available, on web sites and in consumer magazines and the national press.
- The standard of service (and of products) has in many cases improved to the stage where there is not much difference between brands.
- Price competition has increased.
It must never be forgotten that brands exist in the minds of consumers. A brand is not a finite thing like a building, that will remain unchanged no matter what people think of it. As public perceptions change, brands change with them. A brand can change without the brand owner making any changes simply because, for some reason, public perception of it has changed. That's why much of this chapter is devoted to the consumer's perception of brands.
Brand development and brand marketing are inextricably tied to brand loyalty. And companies that tie brand development to top level corporate goals deliver better shareholder value and build stronger brands.
How to create new value through brand loyalty...
In The Loyalty Guide we clearly explain the linkage between customer loyalty attributes and brand loyalty, and provide you with the necessary strategies and insights to increase your customers' loyalty to your brand. Key strategies and insights covered include:
- How consumer trust can be earned, leading to brand loyalty
- How to keep customers close to the brand
- Brand positioning as a key prerequisite for customer loyalty
- Factors that drive brand loyalty and advocacy
- How consumers see brand loyalty in human terms
- Insights such as the eight key emotions that drive brand loyalty
- Avoiding behaviours that create 'brand blocker' consumers
- Which consumer groups are most likely to be your brand advocates
- Differences in brand loyalty between genders and age groups
- Brand strategy, including the five key acts of good brand marketing
- Several ideas and techniques to compete with dominant brands
- How critical consumer conversations can actually drive brand advocacy
- The long-term mark left by the recession on brand loyalty
- The growing role of social media in 'branded conversations'
Customer Loyalty & Marketing Best Practices
Over the past few years there have been many innovations in the field of customer loyalty marketing, and many of these have come about through the earnest implementation of established best practices. For example, the idea of giving customers exactly what they expect and engaging them in a meaningful two-way dialogue is not something new - but it is the foundation of the current trend toward greater customer engagement and satisfaction.
Don't let your loyalty strategy stumble in the dark...
In this chapter we detail the warnings to heed and the best practices that need to be observed when building customer loyalty, and to make sure your loyalty initiative doesn't stumble or fail, whether it's online, offline, or both. We also examine the best practices behind successful customer loyalty management techniques, and highlight the main traps and pitfalls that catch so many new programme operators.
In addition, we cover best practices for the broader marketing discipline - including details of the strategies that have worked best, and the strategies that didn't work at all - as well as customer management, customer retention, customer relationship management (CRM), and a number of other more general marketing guidelines.
In The Loyalty Guide, we explain in detail:
- Customer loyalty best practices
- The importance of tracking Customer Lifetime Value
- New metrics for better predicting customer loyalty levels
- Online marketing best practices
- New ways to understand the digital customer
- Best practices for digital operations management
- How to plan your Content Marketing strategy
- Ways to build up your brand's profile
- Best practices for Generational Marketing
- Targeting Millennials, Generation X, and lucrative elderly consumers
- How best-in-class marketers are proving their worth
- Best practices for digital marketing
New Trends & Future Forecasts
In terms of customer loyalty and marketing, the most significant trends that seem to be surfacing include those surrounding social media and gamification (adding fun and value by providing subject-relevant games), the mobile channel (including apps, web sites, coupons, NFC-based contactless payments, and location-based services), emotional and personal relevance to the customer, more insightful analysis and usage of customer data, more consistent and helpful customer experiences, and customer engagement.
When it comes to consumer behaviour, there are several ongoing changes that are likely to be with us for years to come. The global recession had a significant effect on consumer attitudes to money - and more specifically value for money - even at the highest ranks of the wealthy and the elite. Shoppers have become increasingly promiscuous when it comes to everyday purchases, but they still value quality and value above simple price.
Mobile marketing is about to see a number of significant developments and changes in thinking, the next few years are likely to see not only an increase in marketing spend on mobile search and a widespread improvement in both speed and usability where mobile web sites are concerned, but also a growing battle between SMS, mobile sites, and the mobile app, thanks to a range of factors including marketing costs, user convenience, security concerns, and mobile platform technology considerations. And the meteoric rise of the smartphone (in the guise of the Apple iPhone, Android-based, and Microsoft Windows-based handsets among others) has changed the way consumers think about product research: when considering a retail purchase of any significant value, most consumers will now reach for their smartphone to find out about the item, read reviews written by 'people like me', compare prices, and even determine product availability.
Social networks have also changed the way consumers interact, not only with each other but also with brands; there is now a sense that anything short of an immediate response to a question or complaint posted via social media should be a public relations disaster. Consumers are changing far more quickly than marketers, and it's a full time job keeping up.
And consumers are also crystalizing into distinct behavioural groups that can help marketers segment them more easily, even when nothing else is known about them. For example, the art of examining web site visitor behaviour and drawing meaningful conclusions about their possible purchase intentions is no longer an art: it's a very precise science. As more and more data is collected about customers and the way they interact digitally with their chosen suppliers, increasingly refined models can be built to help predict the intentions of other unknown consumers when they make first contact with a brand, regardless of which channel they choose to use. As a result, those parts of the organisation that collect, handle, process, analyse and use data are becoming more instrumental in the success of loyalty and marketing initiatives, turning from back-room IT geeks into modern front-line heroes.
Identify the trends and forecasts that matter most...
In The Loyalty Guide, we examine the latest trends and forecasts involving customer loyalty (from both a strategy-driven and a consumer-driven perspective), retail marketing, social and digital marketing, mobile marketing, multichannel marketing, and brand marketing, including:
- Forecasts & trends for the future of customer loyalty
- Today's major trends in marketing and branding
- Retail marketing trends and forecasts
- Customer Experience trends and predictions
- Omnichannel marketing trends and forecasts
- Mobile marketing trends and predictions
- Mobile advertising trends and forecasts
- How the future of Proximity Marketing is shaping up
- Trends and predictions for Email Marketing Automation
- Key trends and predictions for Digital Marketing
- Customer Data trends and forecasts
- Incentive Marketing trends and forecasts
- Employee motivation trends to watch
- The most essential Customer Engagement trends
- Global and market-specific trends and forecasts
Sizing The Market For Loyalty
In The Loyalty Guide, we explore, on a country-by-country basis, global consumer market sizes and statistics, providing breakdowns of population structure, numbers of households, household income distributions, consumer age groups, gender bias, and other commercially useful facts and figures. The data has been researched through and gathered from a number of trustworthy sources, including the American CIA World Fact Book, and various annual consumer-oriented and marketing fact books and tables. In terms of accuracy and recency of data, the information for a very few countries was not updated by government or other authoritative sources since 2014, in which cases the most recent and reliable figures available have been used and adjusted based on previous growth or decline patterns for each country. The result is an overall snapshot of each country's key marketing statistics, up to date as of January 2015.
The authors of this report are often asked about the size of the global market for loyalty programmes. For several reasons, of which the following are the most significant, this almost an impossible question:
- It depends on the measure of market size (e.g. measured by cards issued, households penetrated, total spend, number of customers, and so on);
- It depends on which countries and regions are included in the calculation - and which are not;
- It depends on which market sectors and industries are being measured (for example, very different figures would come from supermarkets, general retail, car sales, and accommodation);
- It depends on which types of loyalty programmes are under scrutiny: the market size (assuming we mean the potential number of households that could be penetrated) would be significantly greater for a global or online coalition loyalty programme than it would be for a standalone hotel frequent guest programme that rolled out globally.
However, from experience, we note that history is perhaps the best teacher in the matter of potential adoption of loyalty programmes. The estimates for each country should, quite reasonably, vary depending on culture, population density, size and culture, and of course economic conditions. They can be reasonably estimated using past performance as a guide - and that's exactly what this chapter shows you how to do.
Figures & forecasts for loyalty schemes, worldwide...
Among the up-to-date facts, figures and market forecasting tools provided in this chapter:
- How to estimate a loyalty scheme's market size and future penetration rates, year-on-year
- Factors governing a loyalty scheme's participation rate and penetration rate
- Key demographic data about each of the world's 54 biggest countries, plus aggregated totals and averages for North America, Europe, the Middle East, and the Whole World, including:
- Consumer age breakdowns
- Consumer gender breakdowns
- Household sizes, population count, and number of households
- Household income share breakdowns (highest and lowest earners)
The Expert View of Customer Loyalty
If you could have an personal interview with a global expert on customer loyalty, retention marketing, customer win-back, retail operations, and marketing operations management, what would you ask them? If you could spend a day asking them what made their loyalty marketing initiatives successful where others failed, what would you ask first?
We've done exactly that for you. For this edition of The Loyalty Guide, we asked international loyalty consultant, Brian Woolf - who is widely and affectionately known as the 'Godfather of Loyalty Marketing' - to bring together his fifteen most insightful articles and speeches from his vast database of customer loyalty and marketing expertise spanning the last 20 years: the fifteen topics and pieces of wisdom that should be passed on to every marketer, every practitioner of customer loyalty, and in fact every professional who's in business to make a profit.
In this goldmine of a chapter, Woolf shares the following articles with you, our reader:
- The 3-Question Marketing Plan
Three simple questions to help you grow customers and sales...
- How Good Is Your Produce Department - Really?
How can you find out what your regular customers really think of you?
- The Best Type of Promotions
The best type of promotions are those that customers actively remember...
- The Intelligent Loss of Business
What we do well, and what we don't do at all, are two of the most important elements of strategy...
- The Most Important Number in Marketing
Imagine your new CEO asking you to provide him with the most important customer number every 4 weeks. You respond "no problem", and then tell him what the number will be and why...
- The Single Best Way to Increase Sales
One of the greatest insights I have gained from analysing customer data over the past two decades is that there is one best way to increase sales...
- The Customer 5% Reward Programme
A common practice of card-based food retailers is giving benefits (discounts, gifts, etc) to their regular (ie, 'better') customers. But how much should be given? How? And to whom?
- Shopkick: A Unique Approach to Loyalty
This article explains why Shopkick is a loyalty programme worthy of our attention as marketing professionals...
- A High-Octane Supermarket Loyalty Programme
What is it about gas prices that make people switch from a more convenient gas station on their side of the street to one on the other where the posted gas price is 1-2¢ gallon cheaper?
- Loyalty Marketing: The Next 20 Years
Twenty years ago I had the privilege of spending 6 months researching one question: Why, in those early days of Loyalty Marketing, were a few pioneers experiencing success, many more were failing (losing money), and the rest had ambiguous results?
- The Differentiator
Differentiation is a critical element of effective strategy, whether we are talking about a corporation or a loyalty programme, and Big Y does it best...
- The Beeper Greeter
You want more higher-spending customers, right? So did Vernon, NY-based Katz Foodtown. While many companies profess to be customer-centric, Foodtown truly is. But what makes this 13-unit retailer so different?
- Access Pricing - The Fourth Way
Pricing strategy has long depended on three key techniques: HI-LO, EDLP, or PUF (profit up front). But now a new Fourth Way, 'Access Pricing', is making an appearance...
- Crazy Prices ... And More!
How can supermarket operators differentiate themselves from behemoth discounters, with their low costs and prices? High quality meat and produce? A great bakery? Superior service? Yes! Yes! Yes! But there's far more to it...
- Mission Marketing
Measured Marketing is collecting, analysing and using customer information to develop marketing programmes. Then there's Mission Marketing: an all-out, frontal assault on the competition with your best weapon...
With consumers becoming ever smarter about prices and product options, countries of origin, 'food miles' (i.e. how far an item actually travels before reaching the shelf), green and organic foods, and healthy lifestyle options, it is no surprise that supermarkets are finding it more difficult to satisfy all of the customers all of the time. But the problem is worse still, with competition having really opened up on the internet over the past few years, and even greater price pressure being applied by discount supermarkets such as Wal-Mart in the US and Asda in the UK. No consumer market is safe from this intensively competitive atmosphere, it seems.
When Sir John Cohen, founder of the UK-based Tesco empire, brought the idea back to the UK from the US soon after World War II, the model for supermarkets was to "pile it high and sell it cheap". Many of the original supermarkets were like glorified market stalls. Then came the concept of self service, and the distant ancestor of the modern supermarket was born. But today, the leading supermarkets (such as Tesco) are among the most sophisticated retailers in the world. They lead every other sector in terms of customer data collection and analysis, stock management, customer service, and pure retail innovation. Metro Group [www.metrogroup.de] in Germany continues to push forward with new automation technologies (such as RFID-based tracking of goods throughout the supply chain, self-checkouts, and 'intelligent' shopping carts), and is steadily marching forward with its Future Store [www.future-store.org] initiative.
And as supermarket groups and traditional grocery retailers diversify rapidly into other markets and sectors, they are strengthening not only their hold on the consumer's monthly household budget but also on insurance, communications, banking, loans, credit cards, household maintenance, car maintenance, travel and holidays, health and wellbeing, and a vast array of other aspects of daily life. This, of course, means that their loyalty card programmes can now collect even more valuable data, gaining a much wider and more general view of each household's lifestyles and life stages. These 'mega retailers' are now the leaders in customer segmentation based on purchases in multiple categories and sectors, and are the ones to watch to find out how to target both meaningful and appropriate offers at specific customers.
With respect to customer retention strategies, supermarkets can be broadly divided into three groups:
- Those that rely on every-day low prices (EDLP) to keep their customers;
- Those that rely on loyalty programmes for best customer marketing;
- Those that rely on excellent service and ranges of products.
Of course, there are many shades in this spectrum and some supermarket chains adopt all three methods to varying degrees.
Just as there is no such thing as an average customer, there are no definitely 'right' or 'wrong' approaches to customer retention. EDLP will appeal to one group of consumers, better service and choice will appeal to another, and loyalty programmes will appeal to another.
It is important to choose the method that will appeal to the chosen market sector: if the culture of the business revolves around quality (up-market premises, exclusive ranges of premium goods and a superior shopping experience) then EDLP is probably not the way to go. However, for an enterprise geared toward attracting and retaining the bulk of the population as customers, EDLP may be the answer. Once the decision is made, it has to be whole-heartedly applied. All decisions should be made with the culture of the business in mind.
Detailed case studies...
In The Loyalty Guide, we illustrate and explain all the latest developments in supermarket & grocery loyalty, as well as the relative successes (or otherwise) of the different pricing strategies used in different markets. This chapter includes highly detailed case studies of the world's major grocery loyalty programmes and EDLP initiatives, including:
- ASDA, UK (EDLP)
- Big Y, US (Express Rewards)
- Coles/Wesfarmers, Australia (FlyBuys)
- Co-op, UK (Dividend Card)
- Countdown, New Zealand (OneCard)
- Dorothy Lane, US (Club DLM Rewards)
- Giant Food & Martin's Food Markets, US (BonusCard)
- Hy-Vee, US (Fuel Saver)
- Kroger, US (Kroger Plus)
- Meijer, US (mPerks & EDLP)
- Morrisons, UK (Match & More)
- Pick'n'Pay, South Africa (Smart Shopper Card)
- Price Chopper/Market 32 (AdvantEdge Card)
- Safeway, US (Club Card & Just For You)
- Safeway, Canada (Safeway Club)
- Sainsbury's, UK (Nectar)
- Tesco, UK (Clubcard)
- Waitrose, UK (myWaitrose)
- Walmart & Sam's Club (EDLP)
Retail & E-Retail Loyalty
In general retail, today's key need is to focus on what drives loyalty programmes, what customers actually prefer, and what the future is likely to bring. Most retailers accept that they need to know more about their customers, and that the knowledge should be centrally recorded so that it is available to employees when they need it.
In this chapter we examine what makes consumers shop the way they do, what makes them choose one retailer over another, and illuminate the dynamics of loyalty programmes in the general retail sector, looking in detail at some of the leading programmes, operators, and developments in the field.
We also examine the effectiveness of loyalty programmes, and follow current and future shopping trends. Also highlighted are the many problems of customer retention strategy planning in the supermarket and general retail sectors.
Most retailers accept that they need to know more about their customers, and that the knowledge should be centrally recorded so that it is available to employees when they need it. The days when it was enough for 'Mary in Haberdashery' to know all about which lace sells and which one doesn't, or who the best customers are and what they like, have long gone.
Loyalty programmes enable that information to be recorded and so are an essential part of retail. The retailer judges the usefulness of a loyalty programme by how it can help run the store more efficiently and profitably.
But customers have a different view of loyalty programmes. To the customers, the programme exists solely to reward them for their custom. If they think that they would prefer to be rewarded in some other way, they dismiss the programme as being unnecessary. The people on opposite sides of the counter assess the usefulness of loyalty programmes in totally different ways. With that in mind, it's not surprising that many customers, when given the choice, opt for simple discounts instead of a loyalty programme - they are not taking into account the hidden benefits that a programme provides for them - the more effective stock control, the better merchandising and the greater personal relevance of marketing messages.
However, it's what the customer thinks of the programme that really matters. That's why it's important to listen to their views and to do whatever is possible to correct their misapprehensions. It must also be understood that loyalty cards are not a substitute for getting the basics right, even though they do add value to the retail proposition.
In The Loyalty Guide, we explain in detail:
- How retailers can adapt their strategies to earn true customer loyalty
- Why retail loyalty schemes have become a necessity rather than an option
- Ways that retailers can look to loyalty programmes for new growth
- Why retail loyalty strategies are in urgent need of an overhaul
- How leading retailers are planning to invest in loyalty over the next few years
- The latest developments and innovations in retail loyalty around the world
Furthermore we provide detailed case studies of the world's major retail loyalty schemes, including:
- Amazon.com (Amazon Prime)
- Best Buy, US (My Best Buy)
- Bloomingdale's, US (Loyallist)
- Boots, UK (Advantage Card)
- Canadian Tire, Canada (Canadian Tire Money)
- Clicks, South Africa (Clubcard)
- Costco, US (membership & coupons)
- CVS/Pharmacy, US (ExtraCare Rewards)
- eBay, US & UK (eBay Bucks & Nectar)
- Hbc, Canada (Hudsons Bay Rewards)
- Ikea (Family Club)
- John Lewis, UK (My John Lewis)
- Kohl's, US (Yes2You Rewards)
- Liberty, UK (Liberty Loyalty)
- Marks & Spencer, UK (card-based loyalty)
- Myer, Australia (Myer One)
- Neiman Marcus, US (InCircle)
- Nordstrom, US (Nordstrom Rewards)
- Rite Aid, US (Wellness+/Plenti)
- Sears/Kmart, US (Shop Your Way)
- Staples, US (Staples Rewards)
- Superdrug, UK (Health & Beautycard)
- Walgreens, US (Balance Rewards)
The traditional long-haul and domestic airlines and their frequent flyer programmes have faced increasing competition over the past few years, not only from each other but also from a vast array of smaller start-ups and low cost, budget carriers. An increasing number of 'business class only' airline operators has added extra pressure to a market that relies heavily on business and first class fares to subsidise operations. And business growth has been made even harder to achieve by increasing numbers and complexities of security checks and updated airport procedures, all of which have conspired against the humble passenger and caused many people to seriously re-think any plans they have for air travel.
The simultaneous rise of internet-based phone calls (such as Skype), online meeting and presentation services, and of course video-conferencing has provided many business people - who would previously have had to travel by air - with an alternative way of conducting business without the cost or inconvenience of leaving the office.
These factors have combined to spur airlines across the board into ever-more clever and innovative frequent flyer programme developments. Some of the new features focus on the airport and its associated services, while others focus on the flight itself.
Almost all focus on passenger comfort and convenience, with almost all higher tiers (the so-called 'elite' frequent flyers) being offered faster ways of getting through check-ins, security checks, baggage collection, and transfers. There has also been a mass move among the larger airlines into online loyalty malls and new mileage redemption options that start at lower levels than the traditional 25,000 or 35,000 miles-per-seat award ticket.
The higher classes of travel (business class, premium class, first class, and half a dozen other names describing non-economy classes) are clearly the focus of airlines' attention. This report's authors predict that this trend will continue to grow, driving a significant wedge between airlines that carry economy passengers (for whom personal service can be expected to decline in line with decreasing prices) and those that carry business and luxury passengers (for whom personal service will increase thanks to the lower financial and staffing overheads caused by the loss of economy class).
There is, however, a consumer-facing problem that is common to many of today's airline loyalty programmes: excessive complexity. While airlines are complex enterprises with many hundreds of variations of tickets, seats, classes, routes, destinations, customers, and even baggage and security rules, the customer should not have to understand and negotiate all of these complexities in order to work out what reward they can get for flying from Point A to Point B next month.
Most frequent flyer programmes offer different tiers or status levels (which are clearly necessary to differentiate between high-end benefits for profitable customers and low-end rewards for occasional passengers), but programme members are understandably confused by a wealth of tier points, elite status qualifying miles, qualifying segments, qualifying miles, partner points exchange rates, redemption mechanisms, vouchers, class upgrade options, and so on. Now compare this situation to a supermarket retailer's "points means rewards" loyalty card programme, in which shoppers understand that every US$1 they spend earns them 1 loyalty point, which equals US$0.01 in rewards, and in which redemption is as simple as walking up to a checkout counter. If frequent flyer programmes are really aiming to differentiate their respective airlines in the mind of the time-pressured traveller, airlines must surely take a step back and re-examine their loyalty offerings with a view to simplifying them and making them more predictable and comparable.
In The Loyalty Guide, we examine the different possible airline loyalty strategies, and explain in detail:
- What makes frequent flyers feel they're getting value from their FFP membership
- What frequent flyers really feel about how safe their personal data is within an FFP
- New ways to re-think and rejuvenate airports' customer loyalty strategies
- Why the mobile phone is the new frontier of the frequent flyer loyalty battle
Detailed case studies...
Furthermore we provide detailed case studies with membership counts, programme structures, performance notes, and developmental histories for the world's major frequent flyer programmes and airline alliances, including:
- Star Alliance
- OneWorld Alliance
- Sky Team Alliance
- Air Canada (Altitude)
- Air France/KLM (Flying Blue)
- Air New Zealand (Airpoints)
- Alaska Airlines (Mileage Plan)
- All Nippon Airways (ANA Mileage Club)
- American Airlines (AAdvantage)
- British Airways (Avios)
- Brussels Airlines (Miles & More)
- China Southern Airlines (Sky Pearl Club)
- Delta Air Lines (SkyMiles & Sky Miles Medallion)
- EasyJet (EasyJet Plus)
- Emirates (Skywards)
- Etihad (Etihad Guest)
- Frontier (Early Returns)
- Jet Airways (JetPrivilege)
- JetBlue Airways (TrueBlue)
- Lufthansa (Miles & More)
- Malaysia Airlines (Enrich)
- Qatar Airways (Privilege Club)
- Ryanair (Business Plus/Family Extra)
- South African Airways (Voyager)
- Southwest Airlines (Rapid Rewards)
- United Airlines (MileagePlus)
- US Airways (Dividend Miles)
- Virgin America (Elevate)
- Virgin Atlantic (Flying Club)
- Virgin Australia/Virgin Blue (Velocity Rewards)
Hotel & Tourism Loyalty
In today's competitive hospitality market, many hotel operators are adding frequent guest loyalty programmes to foster customer relationships, attract new customers, and encourage longer stays, which suggests that rewards programmes are seen as being more effective in creating loyalty to hotel brands than simple discount-based promotions and incentives.
In the past few years, hotel and resort operators have also made significant efforts to expand the 'pampering' and luxury options available to their most frequent guests. Many hotel groups have also found value in providing extras and perks for every guest, regardless of membership of a frequent guest programme. But by far the most valuable rewards offered to travellers who frequent the same hotels time after time are the personal touches that provide a feeling of consistency, familiarity, and home-like comfort - such as having their preferred newspaper delivered each morning, having their preferred type of pillows and bedding, or having the hotel staff know their preferences in advance.
While there is still a lot of progress that can be made in this respect - for example, with the use of technologies such as NFC, and even biometrics - many upscale hotels have already taken active steps to get this aspect of their service right.
This chapter also looks into recent developments and innovations in the wider travel and tourism sector that are not directly associated with airlines, frequent flyer programmes, hotels, holiday resorts, and frequent guest programmes.
The loyalty market has reached a state of maturity in the travel sector, with very few being able to claim any genuine competitive differentiation. Simply matching the proposition offered by the competition is not enough to create lasting customer loyalty. When all programmes within a sector are basically the same (e.g. they all have online enrolment, an award chart, a welcome bonus, double miles promotions, and so on), customers tend to react with indifference. With this in mind, true differentiation is the best way (and arguably the only way) to maintain interest and increase consumer awareness, for the simple reason that customers tend to notice new products and services that stand out from the crowd.
But how can travel-related loyalty programmes differentiate? To gain that competitive advantage, the marketing team responsible for the loyalty programme must:
- Use their member data to garner true customer insights;
- Use all their market know-how to enable better market positioning on a strategic level.
Only by using this knowledge - and using it before the competition does - can a travel sector loyalty programme create a sustainable, differentiated proposition. Indeed, loyalty schemes cannot afford to stand by and watch new schemes and approaches develop among their competitors.
Along with some methods for measuring differentiation, some best practices, and some future trends, this chapter demonstrates that:
- Despite significant competition in the travel sector, there is still plenty of room for differentiation;
- Smart positioning and innovative techniques can make the difference between successful differentiation and being "just another travel programme".
Loyalty programmes are adding much needed value for travel customers. It is true that there are still many opportunities for travel loyalty programmes to lead the way, but having the next 'great idea' is just part of the success equation: putting them into action before the competition does (and creating a barrier to entry wherever possible) is what completes the equation.
In The Loyalty Guide, we look into the latest research and strategic options for hotel loyalty, guest satisfaction, and travel and tourism loyalty marketing initiatives, including:
- Emerging travel customer segments and what they mean for travel marketers
- Factors driving hotel guest loyalty and repeat bookings
- Factors driving frequent traveller and guest engagement
- Why relevance and rewards are still the keys to traveller loyalty
- The growing influence of independent hotel alliances
- How travel and tourism brands can become truly mobile
Detailed case studies...
Furthermore we provide detailed case studies with membership counts, programme structures, performance notes, and developmental histories for the world's major frequent guest programmes and hotel alliances, including:
- GHA Discovery alliance (global)
- Stash Hotel Rewards alliance (USA)
- Voila Hotel Rewards alliance (global)
- Accor (Le Club Accorhotels)
- Best Western (Best Western Rewards)
- Carlson Hotels (Club Carlson)
- Choice Hotels (Choice Privileges)
- Hilton (Hilton HHonors)
- Hyatt (Gold Passport)
- IHG (IHG Rewards Club)
- Marriott (Marriott Rewards)
- Ritz-Carlton (Ritz-Carlton Rewards)
- Starwood Hotels (Starwood Preferred Guest)
- Wyndham (Wyndham Rewards)
Financial Services Loyalty
Customer acquisition and retention costs a lot in the financial services sector, and that calls for deeper relationships to help keep customers loyal over time. With a growing ease of switching, relying on inertia is no longer an option to keep customers tied in, so financial service institutions in every country have identified the need to adjust their customer loyalty strategy to suit today's highly competitive marketplace.
It's often said that it can cost up to seven times more to acquire one new customer than to retain an existing one. But in the financial industry, the costs reach a whole new level: acquiring one new customer can exceed US$350. As a rule, of these 20% will be very profitable, 20% will cost money to retain, and the middle 60% will pay for themselves while generating marginal revenue, according to Harvard Business Review [www.hbr.com]. With statistics like these, a customer engagement and retention plan based on extensive data collection and analysis is imperative for the long-term health of companies in the financial industry.
Financial institutions must therefore find a way to retain profitable customers, make marginally unprofitable customers into profitable ones, and reduce the marketing budget spent on the most costly customers. To do that, and to increase customer loyalty, financial industry firms need to constantly monitor their customer portfolio and actively manage their marketing efforts based on the changing behaviour of their customers. In this chapter, we examine not only the latest thinking on how to do so, but also the many customer retention, loyalty and CRM initiatives that have been launched during the past few years.
Best practices and insights to grow financial customer loyalty...
In The Loyalty Guide, we examine not only the latest thinking on how to do exactly that, but also the many customer retention, loyalty and CRM initiatives that have been launched during the past few years. Among the practical insights and best practices detailed in this chapter for financial service providers:
- Building loyalty to banks and cards
- Ways that banks can better engage their customers
- How insurers and engaging customers, and what they could do better
- Techniques for more appropriate targeting of retail finance customers
Detailed case studies...
In addition, we provide highly detailed case studies and loyalty/rewards programme summaries for the major banks and card issuers around the world, including:
- American Express (Global)
- Bank of America (USA)
- Barclaycard (UK & Global)
- Barclays Bank (UK)
- BMO (Canada)
- Capital One (USA, Canada & UK)
- Chase (USA)
- Citi (Global)
- Deutsche Bank (India)
- Discover (USA)
- HSBC (US, Canada & UK)
- Lloyds Bank (UK)
- MasterCard (Global)
- MBNA (Canada & Europe)
- RBC (Canada)
- Scotiabank (Global)
- TD Bank (US & Canada)
- US Bank (USA)
- Visa (Global)
B2B Loyalty Marketing
Business to business loyalty programmes and incentive schemes seem, on first consideration, to be a great idea: a way of encouraging one business to continue doing business with another. But they also come with their own pitfalls that don't occur in consumer-based loyalty programmes. For example:
- Is it ethical to reward a client's employees to make decisions based on personal gain?
- Who should be rewarded: the business owner, management, employees, the business itself, or all?
- Is the person who gets the benefits always the one who makes the actual purchase decisions?
The list of problems grows or shrinks depending on the industry sector involved, and on how well the relationship between supplier and client is defined and controlled. For example, there is little point in a CPG manufacturer rewarding the product buying clerks at a supermarket's head office when the decisions on product range, quantity, and shelf space allocation are taken by others (such as marketing and merchandising managers). This represents a tightly controlled buying environment in which direct rewards for employees are fruitless.
However, in a more flexible (and typically smaller) business environment, buyers often have authority over stock control, product range, quantities, and even merchandising arrangements. In these cases, a B2B loyalty programme that rewards the buyer would probably work - even if it stands on unsteady ethical ground.
There is another situation where B2B loyalty schemes work very well: channel sales partner programmes. These are where a manufacturer directly rewards the sales staff of companies that resell its products. This kind of selling incentive is very constructive because it benefits both businesses equally, in terms of greater sales and profit.
By generating strong engagement between channel partners' sales people and the products themselves, the resultant increase in product knowledge and familiarity means that a more authoritative line can be taken in the sales process when dealing with end users. A fine example of this kind of programme's success is the Indian networking specialist Nortel, which achieved 40% growth in channel sales after one year of running such a programme.
In The Loyalty Guide we explain all the different B2B loyalty strategies and describe the situations and circumstances under which each is best used, along with practical guidelines on which job roles can be most effectively targeted within the client company.
We detail the key drivers of B2B loyalty, strategies for channel loyalty and reward schemes, a new channel engagement strategy, the major factors that drive channel partner loyalty, the link between business intelligence (BI) and successful channel marketing, and how word-of-mouth travels between businesses.
We also explain, step-by-step, the four key ways B2B companies can grow channel partner loyalty:
- Prioritise and review success metrics
- Conduct ongoing data analysis
- Apply relevant segmentation
- Improve targeted communications
Case studies of successful B2B loyalty initiatives...
The detailed case studies in this chapter drill down into some of the world's best B2B loyalty success stories, what they did, how they did it, and what the results were, including:
- Nectar Business (UK)
- Argos Business Solutions (UK)
The fuel retailing market (that is, 'petrol' to the Briton or 'gasoline' to the American) was one of the first to become involved in loyalty programmes. In fact, in the early 1990s, many people equated loyalty programmes with forecourt programmes. Many of the initial programmes were quite rudimentary and collected no useful customer data. Some gave a gift when a certain amount was spent on fuel - for example, a free drinking glass for each £5 spent. Not even the customer's name was collected.
Others issued stamps or coupons for each purchase. And when these were redeemed, the customer was only sometimes identified. Another problem with forecourt loyalty programmes is that they tend to eat into already-slim profit margins, and usually contribute very little to lucrative non-fuel sales in forecourt shops. However, the market has changed significantly over the past few years, and fuel companies have been quick to change their tactics accordingly. Loyalty card and token-based initiatives on the fuel forecourt have become far less common.
Today, the most common types of reward seen on fuel forecourts are undoubtedly the 'cents off per litre' discount offers tied to various minimum supermarket spend levels, reward points-per-litre that are redeemable for fuel discounts and convenience store vouchers, and fuel retailer branded credit cards that offer rebates against future fuel purchases.
In this chapter we examine a possible roadmap for the future of fuel and related retail loyalty offerings, and provide detailed case studies of the world's most prominent and forward-thinking fuel loyalty programmes.
Case studies of successful fuel retailing loyalty programmes...
The detailed case studies in this chapter drill down into some of the world's best fuel retail loyalty programmes, what they did, how they did it, and what the results were, including:
- BP & Nectar (UK)
- BP Driver Rewards (US)
- ExxonMobil (US)
- Fuel Rewards Network (US)
- FuelPerks! (US)
- Petron Miles Privilege Card (Malaysia)
- Shell Drivers Club (UK)
- Shell & Fuel Rewards (US)
- Shell & Air Miles (Canada)
- Shell V-Power Club (Rest of World)
- Tesco, Sainsbury's, Morrisons, Waitrose & ASDA (UK grocery/fuel retail programmes)
- Woolworths, Safeway, Coles Express (Australian grocery/fuel retail programmes)
- Caltex Rewards (Australia)
- FuelCents (Australia)
- AA Smartfuel (New Zealand)
Loyalty In Other Sectors
Organisations in a wide variety of market sectors - other than the most familiar ones such as travel, retail, and grocery - have begun to experiment with customer loyalty, behavioural rewards and incentives. And there are yet more sectors that are increasingly becoming involved in loyalty and relationship management initiatives, despite not having "customers" in the usual sense of the word.
Food and drink providers - whether they are diners, quick service restaurants, pizzerias, snack bars, or full service restaurants - have all had a hard time differentiating their offerings during the past few years. The over-abundance of these establishments in every town in almost every country has had a profound effect on customer loyalty, with many consumers now viewing the task of choosing a place to eat or drink as being insignificant and irrelevant. The nearest place is often the first choice. But there have been many innovative efforts to combat this undifferentiated and often lack-lustre market, including the use of new technologies such as mobile phone loyalty programmes, new and more convenient payment methods, programmes to drive greater emotional engagement, internet-based and mobile phone-based coupons and vouchers, and a host of partnerships between food service providers and major brands in other sectors. Other recreational sectors have also seen great strides in terms of customer loyalty innovation over the past few years, with new programmes, rewards, and engagement tactics appearing in family entertainments, film and video, sports (of just about every kind), and of course the ever-popular casinos and gaming markets.
Perhaps not surprisingly, most brands in the entertainments industry have been focussing increasingly on experiential and aspirational rewards - personal treats, even - in their bid to win the hearts and minds of their customers. For example, the perks and bonuses that are often attainable for a reasonable degree of loyalty to a particular casino might commonly include priority check-in and admission at the casino hotel and restaurant, access to special luxury lounges, toll-free VIP reservation and assistance phone lines, guaranteed hotel room availability, free upgrades to the best available room at check-in, additional discounts on rooms and with partner brands, waiving of resort fees when booking, free celebratory meals on qualifying for higher loyalty programme membership tiers, free early check-ins and late check-outs, companion status sharing (to grant a friend or family member the same privileges), special members-only events, and so on. The list goes on, and there is no doubt that any serious player will - once they've attained each successive elite level within the loyalty programme - jealously guard their eligibility for those perks and privileges.
At the same time, the mobile phone has become increasingly associated with customer loyalty, not only because mobile network operators and handset manufacturers are desperate to find ways of 'locking customers in' to their brands but also because the mobile phone itself has become a worthy target for all kinds of new loyalty-enabling concepts and technologies. For example, loyalty marketers are now - as The Loyalty Guide predicted as early as 2006 - looking at the consumer's mobile phone as not only a potential replacement for plastic loyalty cards, but also as a replacement for payment cards and as a mechanism for direct, personalised, one-to-one marketing communications. And with the addition of contactless technology and integrated social networking to many mobile phones, our next prediction is that personalised, opt-in, event-based and location-based marketing will increasingly take place through contactless consumer interactions with anything from POS systems and smart posters to social networks and mobile apps.
In this chapter we examine a variety of sectors in which customer loyalty has - in one way or another - helped to change the way people think and behave, whether that's toward brands, services, lifestyles, or even other people.
In The Loyalty Guide, we examine and explain the latest thinking and developments in customer loyalty in a range of other industries and market sectors, including:
- Restaurants & Diners
- Coffee Houses
- Cruise Lines
- Mobile Networks
Detailed case studies...
We also provide a number of detailed case studies and summaries for loyalty programmes across sectors and geographies, including:
^ ^ ^
- Caesars Total Rewards (US)
- Motor City Casino (US)
- Hard Rock Rewards (US)
- Subway (Global)
- Starbucks (US)
- Seabourn Cruises (the Seabourn Club)
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