· The business case for customer loyalty · The practice of customer loyalty · World markets: Sizing & valuation · World markets: Trends & forecasts · Best customer marketing · Pricing strategies · Coalition & multipartner schemes · Customer lifetime value (CLV) · CRM and one-to-one marketing · Prepaid gift & loyalty cards · Best practices and innovations · Customer loyalty tools · The loyalty token · The loyalty reward · Using customer loyalty data · Channels & communication · Metrics, maths & analysis · The human aspect of loyalty

· Loyal employee, loyal customer · Loyalty on the internet · Brand loyalty · Financial services · Supermarkets · General retail · Automotive loyalty · Telecoms and mobile loyalty · Airlines and frequent flyers · Hotels & resorts · General travel & tourism · Food, drink & recreation · Non-profit and more · Business-to-business loyalty · Loyalty Probe results & analysis · What the loyalty experts think · The future of customer loyalty

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, and 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.

Key topics covered in this chapter include:

• The business benefits of a loyalty programme
• Ways in which loyalty programmes pay back
• The major factors affecting customer loyalty
• How loyalty programmes can improve your customer base
• Ways in which loyalty programmes improve your core offering
• What you need to know to run a successful loyalty programme

The theory of customer loyalty is quite plain: a business that retains its customers for longer usually makes more money from them at lower cost than one that is constantly paying to acquire new customers. Actually doing that - the practice of customer loyalty - is not so straightforward. It's not a trick that can be quickly learned and performed; creating loyal customers depends fundamentally on following good and sound business and marketing practices right across the business all the time. It's a sad truth of business that customers are hard to win but easy to lose. A loyalty programme is not a quick fix that can simply be bolted on and produce measurable results immediately.

That said, the principles are quite simple: know your customers, reward them for behaving in the way that you want, and don't reward them for behaving in any other way. In order to know them, you need to collect data and then use it intelligently to identify the valuable customers and to reward them for generating more profit. Of course, there are many refinements that can be made to this broadly stated principle. Enter the loyalty programme.

In this chapter, we look at the main factors involved and how to actually achieve higher levels of loyalty. The chapter includes latest research from experts in the field and discusses the tools that employees need in order to be successful. It also busts some of the common misconceptions about loyalty programmes. Increasingly, the importance of customer engagement is coming to the fore. We look in detail at how to achieve it and why you should. We also look at a dozen or so of the best-used strategies involved in winning loyalty.

How do we know whether our strategy is working or not? The obvious way is to measure whether profits are increasing or not, but that is something that depends on many factors, of which loyalty is only one. The way that is generally accepted as the most accurate is to measure the lifetime value of customers: the potential value of a customer to the business over the whole period of being a customer. If that increases, it's a good indication that a loyalty programme is working. We see how essential trust is in this whole process, and look at some simple rules for building and maintaining it. We examine the crucial role of customer centricity - making the whole business revolve around the customer. We see how vital it is to maintain and build corporate values, and what has to be done to achieve that goal.

Key topics covered in this chapter include:

• How to acquire, profile, segment, analyse and measure loyal customers
   
• The major factors affecting customer retention and 'churn'
   
• The 17 unbreakable rules of running a profitable loyalty programme
   
• Creating and using customer engagement for loyalty and profit
   
• The 11 main strategies of loyalty programme management

In this section 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 late 2006, in which cases the most recent and reliable figures available have been used and adjusted based on previous growth or decline patterns for each of those countries. The result is an overall snapshot of each country's key marketing statistics, up to date as of January 2008.

Rather than drowning in minor facts and figures for hundreds of smaller countries, we have provided demographic, infrastructure, income, population, household, loyalty market sizing and valuation for the world's 54 largest countries.

Key topics covered in this chapter include:

• Current market sizes, values, demographics, and development of major loyalty markets, including the USA, Canada, United Kingdom, Australia, South Africa, and China.
   
• The estimation of a loyalty programme's market size and penetration
   
• Key data about each country covered - plus 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 & no. of households
    ·  Household income share breakdowns (highest & lowest)
    ·  Communications (internet, mobile & fixed lines)

Here we examine the current and future trends that affect customer loyalty, best customer marketing, traditional marketing, e-mail and web marketing, retail marketing, luxury and wealth-based marketing, lifestyle and life stage marketing, and the wider global market.

In terms of customer loyalty trends, retailers are acknowledging that their key efforts in future have to revolve around managing existing loyal customers rather than acquiring new ones, and the highest level of customer loyalty programme involvement is seen among affluent consumers. Rewards programmes are also increasingly being seen as the most important feature of payment cards, in many cases becoming the basis of card issuers' differentiation strategies. And when it comes to spending levels, although consumers only slightly increased their holiday shopping budgets in 2007, they also took every step possible to become smarter shoppers at the same time - which meant taking full advantage of all discounts, offers, and loyalty rewards available.

The basis of brand loyalty marketing is changing rapidly. In this chapter we explain five major trends that are set to impact both luxury and mass-market brands during the next few years, particularly relating to how consumers feel and behave toward brands. There are also seven key trends directly affecting consumers' brand loyalty, and eight trends that will influence the future shape of brand marketing strategy.

We also examine current and future marketing trends, first among which is that companies must avoid over-hyped opportunities and focus instead on measuring marketing campaigns' success, one satisfied customer at a time. For direct marketers, aligning mailer sizes to customer value, and using recycled materials for direct mail, are now regarded as the two top priorities. Following a decidedly turbulent 2007, marketing executives are aiming to increase organisational effectiveness, strengthen customer engagement, and achieve even greater measurability. For companies following a 'natural marketing' strategy, the consumer's increased desire for personal control is an overriding theme throughout today's ten most important trends. At the same time, corporate honesty, transparent customer satisfaction, and niche market mining are all among the new top ten 'alternative marketing' trends.

Electronic marketing teams face some serious challenges, too. E-mail marketers are expected to concentrate more on dynamic content, win-back campaigns, and transactional message marketing strategies over the next two years. The online advertising market is set to expand significantly as new tools and methods are developed to help make the technique more measurable and effective. And most marketers still plan to increase their online marketing spend despite having poor e-mail campaign analysis tools and a lack of multichannel marketing integration. The internet-based world of affiliate marketing is alive and well, however, with more than one-quarter of these marketers now treating the strategy as their main occupation.

Among the most important retail and global market trends for the next few years will be the decline of the US economy and traditional media steams, and the rise of green marketing, mobile marketing, new technologies, and self service. However, opportunities abound for retailers, as many shoppers still appear keen to be engaged by new concepts and services. Specifically, RFID will be widely applied to track in-store shopping patterns, merchandise, and consumption, while more stores will begin to offer valet parking for their better customers.

The world of luxury retail is also changing at an impressive pace, and among the coming trends are the rediscovery of excellent service as a differentiator, and luxury retailers eliminating marginal brands. Luxury consumers will want more knowledgeable staff in-store and a customer-friendly return policy, along with online availability of all products, easy-to-track shipping, and accurate order handling. High-income households tend to exhibit greater loyalty and are influenced more by loyalty programmes than average income households. At the same time, luxury minorities will begin to drive specialised products, services, and marketing techniques, and technological prowess will be increasingly used to enhance luxury brands' appeal.

Among the social and consumer lifestyle trends affecting marketers in the next few years, there will be a shake-up in consumer markets following shake-ups in the financial and political scenes, while 'crowds' will be the buzzword that replaces 'mash-ups'. Social networking web sites may lose their novelty - and consumer influence - almost as quickly as they arrived, and customer feedback and reviews will become more influential. A new type of consumer identity - a 'networked self' - is expected to emerge, with each individual seeing themselves as a small-yet-significant part of the overall community, and feeling a responsibility to understand and engage with other consumers. More consumers will feel compelled to support local businesses, producers, artists and community initiatives, and the 'local food' movement will leading the way. Consumers will also greatly increase their spending on green products and services, and green issues will increasingly influence not only consumer choices in-store but also in politics.

Consumer life stage will continue to be a significant segmentation tool for marketers. Internet activity will increasingly multiply the 'pester power' of children, with parents being subjected to growing demands for toys and gadgets seen in online stores and web site adverts. The 'tweens' age group (8-14) will become an even more powerful segment, with increasing spending power and influence over family purchase decision making. Major changes in teenage lifestyles will include the growth of technology, a greater appreciation of home and family, and the growing influence of entertainment at the expense of previously popular sports. Asian American youngsters are also now increasingly producing the key trends in pop culture that are being embraced by mainstream American youth culture. And finally, as the oldest Baby Boomers start counting down to retirement, they are also becoming financially smarter, with many adopting the internet as their channel of choice for bill payments and shopping.

Key topics covered in this chapter include:

• Trends and forecasts for customer loyalty, brand loyalty, and the retail market
   
• Trends and forecasts for both traditional and online marketing
   
• Trends and forecasts for luxury, lifestyle, and lifestage consumer marketing

The idea of Best Customer Marketing (BCM) is not simply to restrict your marketing efforts to customers 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 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 (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.

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. This chapter sets out the arguments for it, with detailed examples of the difference that well-executed best customer marketing can make to long-term profits.

Key topics covered in this chapter include:

• Which is best: a long term or a short term BCM programme?
• The business case for Best Customer Marketing
• The properties of Best Customers, and how to identify them
• Customer segmentation for BCM campaigns
• The direct approach to BCM
• Case studies: detailed results of successful BCM campaigns, including:
  
    ·  A popular CTN retailer (Asia)
    ·  A convenience retailer (Europe)
    ·  A supermarket (USA)
    ·  A hypermarket (Italy)

Clearly, pricing strategy is a key feature of any business - it plays a major part in customers' perceptions and impressions of the business. Speak to any average consumer and mention the names of some high quality, leading businesses. The chances are high that one of the first words they will use is "expensive". Not "excellent service", "marvellous range" or even "helpful staff". Possibly "Expensive but worth it", or "You get what you pay for", but in the average consumer's mind, price is almost always a key factor.

The individual psychology of each consumer determines whether they would prefer to simply trust a business to charge low prices all the time, without any exceptional bargains, or whether they would prefer to pay slightly more for some products, but pay really low prices for others. And of course, a growing number of people choose to buy some products at one retailer and then just the bargains at another.

This chapter investigates popular traditional pricing strategies, and examines more deeply a new one - Access Pricing, with a case study - that overcomes many of the challenges with which businesses have had to deal in the past. Most pricing strategies will clearly appeal to one category of shoppers but not to the others. EDLP, for example, would appeal to time-poor/money-poor shoppers who have little to spend and no time to shop around - it would make sense for them to choose a solid EDLP store and do all their shopping there. Hi-Lo pricing would appeal to cherry pickers - who fall into the time-rich/money-poor category. But Access pricing should appeal to all categories of shoppers - a significant advantage.

Key topics covered in this chapter include:

• Pricing strategies, and when each works best
• Access Pricing, how it works, and sectors it could benefit
• Examinations of pricing techniques in action

There are two main types of multi-partner programmes: true coalition programmes, and single operator programmes that include other partners.

For example, Air Miles and Nectar are true coalition programmes. The programme management is independent of any of the partners. The partners have contracts with the operators of the programme to issue and/or redeem the currency of the programme, and only have access to data harvested by the programme through its operator. Individual partners don't have direct access to other partners' data held in the programme, although the operators of the programme will usually market to other partners' customers on behalf of another member. For example, a supermarket member could ask for mailings to be sent to the customers (or just certain segments of the customers) of a fuel retailer partner in an area where a new supermarket is being opened. This is discussed in detail later in this chapter.

Tesco's Clubcard is an example of a single operator programme that involves other partners. The programme is owned and run by Tesco. However, Clubcard holders can collect points when buying from various partners in the programme, such as Alders, Beefeater, Marriott, and National Tyres. Vidal Sassoon is an example of a redemption partner. Actual 'single operator plus partner' programmes are discussed in the relevant market sector chapters later in this report.

This chapter examines the many essential goals that any coalition programme must achieve if it's going to succeed, and why they're so important. Examples of these goals include:

• Rapid market penetration
• Delivery of attractive rewards
• Being the first in the market
• Building communication channels

Supported by statistics, illustrations and expert opinions, the advantages, disadvantages and structural needs of coalition programmes (compared to, say, an non-partnered loyalty programme) are detailed, covering critical factors such as:

• Greater interest in the programme
• Members have fewer cards to carry
• Members earn points more quickly
• A greater variety of rewards
• Concentrated, coherent promotions
• Time saved in development
• Lower costs of development
• Database run by professionals
• Sector exclusivity
• Coalition marketing campaigns
• Higher penetration rates
• Real cost benefits of coalition

Key topics covered in this chapter include:

• Why a coalition?
• The essentials of a coalition
• The advantages of a coalition
• The challenges of a coalition
• Typical application areas
• Expanding into a coalition
• We also provide details and case studies of significant coalition schemes, including:
  
  

  Nectar (UK) Air Miles (all territories) Payback (Germany) S&H Greenpoints (USA) Aeroplan (Canada) GoldPoints Plus (Global) eBucks (South Africa) Fly Buys (New Zealand) FlyBuys (Australia) Malina (Russia)

  Advantage Card (Australia) BonusLink (Malaysia) Buy and Fly! (UK) SelektPoints (Middle East) Pulse (Australia) i-Mint (India) Magna Rewards (Caribbean) OKCashbag (South Korea) Premium Club (Poland) R&R (Kenya)

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". 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.

This chapter looks 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.

Key topics covered in this chapter include:

• 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
• Ten steps of CLV toward customer loyalty and profitability

The loyalty of customers stems from building relationships with them, and those relationships have to managed. This is where CRM (customer relationship management) comes in. Whether the relationships are so finely tuned as to be one-to-one relationships, or whether they are in bigger segments or groups, the principles of management are similar.

In this chapter we first look at CRM and its role in customer loyalty programmes. When it was first introduced, CRM was hailed as the answer to many of the marketer's problems. However, in many instances its success in application didn't live up to its promise, resulting in a fall from favour. This might have been due to unreasonable expectations, lack of experience, or the hope that installing some software would build customer relationships. Companies adopted CRM on a 'me too' basis without understanding how fundamental it had to be to so many aspects of the business. There were many tales of failure. But now there is a stronger understanding among marketers and board-level executives of what is required for a worthwhile and effective CRM implementation - genuine support from the very top of the enterprise, from the Chairman and CEO down to the customer-facing staff on the front lines.

Part of the chapter looks at the future of CRM, including its new 'CRM 2.0' persona, and the developments that will make customer relationships easier to handle, easier to analyse, and easier to strengthen in the future. Finally, we also examine the role and effect of true one-to-one marketing strategies on customer loyalty and customer retention, and detail some of the most innovative one-to-one technologies we have seen over the past two years.

Key topics covered in this chapter include:

• The role of CRM in customer loyalty
• The future of CRM, the market, and the technology
• The application of CRM in successful marketing strategies
• One-to-one marketing's basic principles
• One-to-one marketing at its best - real world successes

The market for gift and prepaid cards continues to expand rapidly. Clearly, the card is the mechanic: what is done with it determines how useful it is as a vehicle for building loyalty to the retailer. In this chapter we look at some of the ways in which a gift or prepaid card can best be used and, probably more importantly, what consumers want and expect from the cards. Gift cards do not appeal to everyone, but the research we present abundantly shows that there are more than enough supporters of the concept among consumers to make it worthwhile for those companies that adopt them.

We also look at research that examines which segments of consumers (by age, sex and race) are most likely to use them, and also at what they do with them when they have been given one. PrePay Technologies, a company that manages millions of prepaid cards, tells of the nine most important factors that it thinks should be addressed, and Tony Craddock of Giftex Prepay, who believes that success lies in solving customers' problems, examines some of the many such problems that these cards address. We also look at the cultural issues involved in launching gift cards in countries where cultures differ. And the final section of the chapter deals with the technologies and innovations, including a gift card with an interactive DVD built-in. And finally, we provide some examples of prepaid and gift cards that have been launched across various sectors and countries recently.

Key topics covered in this chapter include:

• How to build customer loyalty with prepaid/gift cards
• What are the most beneficial ways to use gift cards?
• Consumer attitudes, opinions, and gift card redemption trends
• Prepaid card technologies and the latest innovations
• Sector-by-sector summary of recent gift card initiatives

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.

In this chapter we detail 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 best customer management (the aim of which is to look after those customers who contribute the most profit), as well as other more general marketing best practices and guidelines, including the up-and-coming issue of 'green marketing'.

Finally, we detail the latest successful innovations that have been taking centre stage in the loyalty market, explaining what works, what doesn't work, and why. We also identify the key factors that put retailers and other companies ahead of their competitors, including 'surprise and delight' strategies, kiosk solutions, in-store communications, loyalty programme interactions, gift cards, self-checkouts, new in-store applications of RFID technology, and even smart shopping carts that interact with the shopper's loyalty card data.

Key topics covered in this chapter include:

• Best practices to increase customer loyalty
• Best practices to stop a loyalty programme from failing
• Best practices for online customer loyalty operators
• Customer management best practices and benchmarking
• Marketing strategies, green marketing, and loyalty innovations
• Innovations that are changing the customer loyalty landscape

It's not always necessary to design and develop a loyalty programme from scratch, and there are many technology platforms and service solutions available that can make the process easy. In fact, some 'on-demand' platforms - which are usually hosted SaaS (software as a service) systems - require no specialist installation or IT infrastructure on the part of the programme operator. Other platforms are installed to suit each specific company's unique requirements, beginning with full scale consultancy, analysis, metrics and report planning, and data mapping. Such systems take longer to implement and roll out, but often include many more features that work with unique aspects of the programme operator's business. Most of these systems, although major aspects of the technology and services can be outsourced, will involve the programme operator in a lot more internal IT infrastructure and maintenance than would be the case with a hosted application.

In this chapter we look at some of these platforms and their features, and also at some of the tools that can be used to help build customer loyalty, increase customer retention, and change consumer behaviour positively. We also look at some of the newer tools, technologies, and techniques being successfully used by loyalty programme operators, including business intelligence systems, customer data analysis, ROI forecasting engines, loyalty programme management services, and hosted CRM systems.

We also examine how companies are already using contactless payment-related marketing techniques, mobile phones, NFC and RFID technologies, RSS-based loyalty marketing, and internet-based loyalty applications. Finally, we focus on new and existing gift card rewards platforms, an innovative frequent flyer sign-up and retention kiosk that can be adapted for retail environments, a smart shopping cart that runs on loyalty card data, and various in-store loyalty marketing kiosks and other advanced retail technologies.

Key topics covered in this chapter include:

• The four critical failures in many existing loyalty platforms
• Offline and online loyalty platforms & loyalty management tools
• Business Intelligence and data analysis tools
• Platforms that provide kiosks, gift cards & other innovations

The identifying token of a loyalty programme is important because many consumers see it as the programme. Many people are just as likely to say "I have a Tesco loyalty card" as "I am a member of Tesco's loyalty programme".

The token is the bit of the programme that the members actually see and feel and carry - it's seen as their contact with the programme. So it plays an important part. And it's main purpose must not be forgotten - it is there to identify the customer at the point of contact; to link the transaction with the correct record in the database. It's also important to the programme operator. There is a wide range of possibilities, from paper-based stamps, coupons and vouchers, through the ubiquitous magnetic stripe cards, up to smart cards, RFID-based tokens, and even biometric devices. Clearly, as their complexity increases, so does the price. A balance has to be struck. What will serve the purpose, appeal to the customer, and not cost too much?

In this chapter we look at the main identifying tokens; at their advantages and disadvantages, and at some leading edge examples of how they have been used. We move from the simplest - the paper coupon, up to the most sophisticated RFID-driven billboard in your pocket that will even play promotional movies. Even the simple discount coupon comes in many varieties, from the straightforward printed sort, through coupons that consumers download from the internet and print themselves, to those that are electronically generated and printed in real time at the checkout, based on either purchase history or present purchases.

The plastic card ranges from a simple bar-coded card, through magnetic stripe cards, smart (chip) cards, to visual cards that can display an erasable and rewritable message visibly on the card each time it is used, as well as having a magnetic stripe and/or a chip for data storage.

But the main trend at present is towards RFID tokens (in the form of cards or plastic key fobs, or even stickers that can be applied to a mobile phone or a wallet). They don't need a source of power - when they are held close to a transponder terminal, the power from the terminal is enough to activate the token and data is transmitted to and fro. And, of course, the market for biometric transactions is growing apace. This needs no token - other than the consumer's finger or thumb. Using biometrics, an algorithm stored in the system will connect the unique fingerprint with its owner's record in the database, which holds loyalty programme details as well as payment details.

Key topics covered in this chapter include:

• The importance of the loyalty token
   
• Types of tokens (coupons, cardless, stamps, vouchers, key fobs, mag-stripe cards, smart cards, visual cards, mobile phones, biometrics, and more)
   
• Details of how each type of token is used, and the benefits and pitfalls of each
   
• Emerging technologies, details of trials, consumer opinions, and business benefits

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 the 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.

Key topics covered in this chapter include:

• The value, function, and properties of effective loyalty rewards
   
• Types of rewards, and their popularity (or otherwise) with consumers
   
• How to plan an exciting rewards catalogue and decide on items and redemption levels
   
• Strategies to drive points redemption and programme member engagement
   
• Research into loyalty rewards, and what drives members' redemption choices

Many of the benefits of creating and operating a customer loyalty programme, or implementing a customer relationship management (CRM) system, come from the collection, analysis, and use of data. The more data we can practically use, the better: customer demographics, preferences, lifestyle and life stage, transaction history, returns, and even customer service event history.

The loyalty programme gives us a way of identifying specific customers, and tying their demographic records to their transaction records in the back-end database (whether that be an in-house collection of databases, an enterprise-wide CRM system, or some other data warehouse that's being updated, analysed, and used across the whole business). The uses of the resultant array of data, given all the technologies that are now available to analyse it and turn it into useful support for business decisions, are potentially endless. Everybody understands that customers' supermarket transaction data can be used to segment them for marketing campaigns later on, whether that's based on demographics, spend, or products purchased.

This chapter discusses the many techniques for gaining benefit from the analysis of the customer database, including customer loyalty programme data, purchase history, and other external augmentations of the data. The list of potential uses could go on and on - they seem to be limited only by the ingenuity of the database or loyalty programme operator. However, it is arguable that the single most important use of the customer database is to analyse and identify the strengths and weaknesses of your business, and then to repair the weaknesses and build on the strengths, so that the core offering of the business improves. This is what will ultimately build lasting loyalty and greater profit.

Key topics covered in this chapter include:

• The technologies behind customer data collection
   
• The practicalities: What data to collect, when, how, and what to do with it
   
• The ethics of opt-in, opt-out, data protection, and the true cost of a security breach
   
• Data lifetime, duplication, accuracy, cleansing, mining, and modelling
   
• Segmentation, analysis, and monitoring of a loyalty programme's data
   
• Dozens of ways in which loyalty data translates into competitive advantages

There are many more communication channels available today than there were before the rise of interactive and electronic media. Even in the past two years since the publication of The Loyalty Guide II, marketers have found a growing number of innovative ways to reach consumers, whether at home, at work, or at play.

Communication with consumers and other businesses can take place by mail, telephone, fax, text message (SMS), multimedia message (MMS), computer games, television, films, radio, mobile sales units, in-store teams of brand representatives, focus groups, leaflets, newspapers, free-standing inserts, coupons, e-mail, instant messaging (IM), voice over IP (VoIP), internet chat rooms, web sites, bulletin boards, online communities, social networking platforms, and even other internet-based systems such as video conferencing and meeting sharing systems. Each 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.

With each channel of communication comes a unique set of challenges: as a rule, consumers don't like junk mail, or 'spam' (unsolicited commercial e-mail), or unsolicited sales telephone calls. They complain about their mobile phone being invaded by irrelevant advertising messages, and they don't want companies "muscling in" on their private social networks without permission. They don't want to run up bandwidth bills for receiving unwanted videos by e-mail, and they don't want their PC's instant messenger software 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 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. For this reason, we begin this chapter with a detailed examination of customer communication best practices that are both law-abiding and consumer-friendly.

Key topics covered in this chapter include:

• Best practices and ethics for effective customer communications
   
• Traditional, new media, and emerging communication & marketing channels
   
• Research into consumers' preferred communication channels, content, and timing
   
• Deliverability, metrics, monitoring, analysis, and campaign improvement
   
• Direct marketing, web marketing, e-mail marketing, word of mouth and viral marketing
   
• Social networks, Web 2.0, consumer generated content, consumer reviews, and beyond

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.

Key topics covered in this chapter include:

• The practical calculations and formulae involved in customer loyalty analysis
   
• Customer lifetime value's importance in loyalty programme reporting
   
• Practical statistics - a backgrounder
   
• The five most important management reports and tools
   
• RFM customer segmentation techniques and examples
   
• Measuring loyalty: the key metrics and formulae you'll need, including interactive versions of the formulae through the report's special readers-only web site.

It's easy to get so involved in the intricacies and technicalities of loyalty programmes that the most important part - the human aspect - gets neglected. The technology involved is a marvellous tool - without it, loyalty programmes as we know them would not be possible. But we must remember that loyalty (and its opposite, the desire to simply walk away) are both intensely human emotions. And unless the programme generates the right feeling in people, it won't work. We must also remember that humans aren't as predictable as technology. Actions that might make one person loyal could well turn off someone else. It gets even more complicated: something that could engender loyalty in someone on one day might do the opposite on another day. With all of this mind, we have pulled together much of the relevant research that has been done on the subject over the past couple of years, and have extracted the salient points. We have also reported some of the knowledge that experience has brought. There is a comforting correlation in most of the findings, but there are also some differences of opinion and experience.

Who is more qualified than customers to tell us what customers want, and what they don't want? For this reason, much of the research presented here looks at the customer/supplier relationship from their side. But one thing is certain: the building of loyalty will not get any easier. While advances in technology have made loyalty programmes more effective, accurate and appealing to customers, these same advances have made it much easier for customers to switch suppliers. Comparisons of stock, prices, trading policies and delivery times and costs are now only a mouse click away from many customers. And if the item is to be sent to them, need they care from where it comes? Many suppliers are apparently equally trustworthy and reputable. It is important to have some unique property that makes you stand out from the crowd. All other things being equal, a good loyalty programme can do just that.

Because all customers are not the same, we have looked at the different ways that different groups of customers respond to marketing, at the psychology of loyalty, and the influence that different rewards have. In addition, factors such as age, gender, race. wealth, pricing policy, general satisfaction, level of service, the internet and the new "green" marketing all come into planning a programme for a target market. All of these are examined separately.

Key topics covered in this chapter include:

• Multiple ways to win consumers' true loyalty
   
• Drivers and inhibitors of customer loyalty scheme participation
   
• The influence of rewards on loyalty, frequency, share of wallet, and customer profitability
   
• The effects of age, gender, race, wealth, lifestyle and life stage on customer loyalty
   
• The impact of the customer experience, service, products, range, and stores on loyalty
   
• How the internet influences consumer behaviour, attitudes, and loyalty

The virtuous circle of 'customer - employee - shareholder - customer' has become well known in loyalty marketing. These groups go together and if the loyalty or even co-operation of any of the groups is lost, the chain breaks. To be completely successful, they must all work together, supporting each other, to build strong relationships. According to Frederick Reichheld, a Bain & Company (www.bain.com) fellow, "the only way a company can build a loyal customer base is by building committed relationships with the employees responsible for serving those customers." By keeping profitable customers and growing the relationships with them, the 'loyalty leader' companies identified by Reichheld out-performed their competitors in the stock market by a factor of 2.2 on average during the 1990s.

In this chapter we discuss the reasons for the importance of loyal employees - without their support the most sophisticated and costly loyalty and CRM programmes will simply not work. Recent research supports the view that top executives are at last not only realising this, but actually doing something about it. It would seem that while there is no shortage of businesses that pay lip service to employee loyalty - even featuring it prominently in their company policy - fewer actually have procedures in place that percolate through the business right down to the bottom and exert a real effect. The days when management could expect undying loyalty simply because they have employed someone have gone forever.

Add to that the fact that in many cases, it's actually the employees near the bottom of the ladder - those who are often treated most poorly and underpaid - that have most personal interaction with customers, and it becomes clear that there is a problem. Without loyalty to the business there won't be enthusiasm at the customer facing level, and that's enough to nullify the very expensive marketing programmes that are intended to show the customers how important they are. In this time of almost universal cost-cutting resulting in employee cutbacks, fewer employees are being asked to do more and more work and - quite understandably - are becoming demoralised and discontented. It is becoming increasingly difficult for HR managers to maintain the loyalty of their employees.

And of course, the level of employee loyalty is influenced by factors other than those within an organisation. For instance, the state of the general job market has a major effect on whether employees change jobs frequently or not. As more jobs open up, the opportunities to defect increase. So how should top management approach the challenge of increasing the loyalty of employees? We look at some of the current strategies and how they're working. And what exactly are the challenges facing these executives? Where should most money be invested for the best return on investment? This chapter explains what's needed, what works, and what doesn't work.

Key topics covered in this chapter include:

• Why loyalty often starts with your most valuable asset: a helpful employee
   
• The linkages between employee and customer loyalty, satisfaction and engagement
   
• Misconceptions and myths about employees, their needs, and their desires
   
• How to reward employees with more than simple cash bonuses
   
• Details of employee rewards providers, including Maritz Incentives (EY Card), Globoforce, the Compliments Card, Centive, FanBox and The Logic Group, plus details of successful reward schemes at Asda (UK) and SEAT (Ireland).

Customer loyalty on the internet has arrived, developed, and matured over the past few years. The concept of using the internet both as a loyalty marketing channel and as a platform for creating and running loyalty initiatives has developed so far now that it is increasingly hard to distinguish customer loyalty mechanisms from other parts of the enterprise. Internet-based loyalty initiatives have generally been integrated tightly with every other aspect of the online enterprise. For consumers, this is a good thing: It means, for example, that member of an airline's frequent flyer programme have now mainly come to think of the programme's web site as being the programme itself. This also affords the marketer some unique opportunities for brand reinforcement and more regular, relevance-based communications.

Although many loyalty programmes have a web presence in the form of an online account management interface, a reward redemption catalogue, or a sign-up form, those do not represent truly internet-based loyalty. But there are challenges for those companies that choose the online loyalty path instead of a systematic programme of low pricing and discounts. Loyalty requires a relationship, and the ability for the programme's operator to collect high quality, accurate data about consumers and their preferences and spending habits. But many consumers, while they are willing to give accurate personal details in-store, or on a printed application form, are unwilling to give out personal details in the online environment. Part of this unwillingness is certainly attributable to the idea that the internet is not secure, and that it is too easy for personal information to be gathered, analysed, copied, sold, distributed, or abused.

At the same time, the use of the internet as a marketing channel has never been so cheap, so flexible, so fast, or so easily monitored. An e-mail is currently one of the cheapest communication channels available to marketers (with SMS text messaging following close behind), but e-mail is still one of the most flexible channels: Every e-mail (given the right database, segmentation, insight, and campaign strategy) can be personalised not only in terms of the customer's name but right down to the message's content, images, vouchers, coupons, and special offers. E-mail is unlike traditional direct mail in that the marketer can tell almost immediately when a message could not be delivered, meaning that consumers with 'dead addresses' can be immediately swapped over into direct mail win-back campaigns to try to reacquire their latest e-mail address, contact details, and opt-in permission.

The widespread rise of the 'Web 2.0' phenomenon during 2007 also presented marketers with some interesting new options. At first there was a great deal of debate about how long the Web 2.0 craze would last, and whether or not it carried with it any new opportunities to communicate with consumers in a more personal, relevant and engaging way. The answer, of course, lay in the inventiveness of individual loyalty marketing experts around the world: For some it bore no fruit, while for others it turned out to be an incredibly effective platform for building advocacy, distributing offers, acquiring new customers, and even some limited viral marketing efforts involving consumer-generated video clips. And, although Web 2.0 will no doubt give way to a new buzzword (we have heard the term 'Smart Web' being suggested for its replacement) in the next few years, its impact - as the first of many new consumer driven channels - will continue to be felt.

Key topics covered in this chapter include:

• Insights, opportunities, and techniques for building online retail loyalty
   
• Details of online loyalty technology providers, loyalty initiatives, and their impact
   
• The impact of Web 2.0, social networking, search engines, comparison sites, and CGM
   
• Detailed case studies of online loyalty programmes, including:
  
    ·  Points.com (USA/Canada)
    ·  Nectar e-Stores (UK)
    ·  iPoints (UK)
    ·  Pigsback (Ireland/UK)

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 closely at which groups of consumers are worth marketing to, and how much they're worth, along with some sector-specific branding ideas and research, market variations in brand loyalty, and tools that can be used for brand marketing.

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.

Key topics covered in this chapter include:

• Best practices and insights for more effective brand loyalty
   
• Drivers and inhibitors of brand loyalty, and how to use them advantageously
   
• Using traditional, electronic, new media, and emerging channels for the brand message
   
• Key rules and ethics for branding campaigns, both online and offline
   
• Brand threats, opportunities, leaders, strategies, protection, and successful strategies

Customer 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 two years.

Key topics covered in this chapter include:

• The strained relationship between financial services and customer loyalty
   
• Loyalty insights for credit cards, debit cards, prepaid cards, an affinity cards
   
• The role of customer satisfaction, recognition, and rewards in retail banking loyalty
   
• Details, history, and case studies of card issuers and associations, including:
  
  

  MasterCard (worldwide) Visa (worldwide) American Express (worldwide) Bank of America (USA) Barclays/Barclaycard (UK) Chase (USA) Citi (Global) Discover (USA) Garanti Bank (Turkey) GE (USA)

  HSBC (Global) Lloyds TSB (UK) MBNA (Global) RBC (Canada) Samsung Card (Korea) Scotiabank (Canada/USA) TD Bank (Canada) US Bank (USA) Wells Fargo (USA)

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 two 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 same 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 sectors 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 well being, 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 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.

In this chapter we look at the dynamics of loyalty programmes in the supermarket sector, then in close detail at some of the leading programmes.

Key topics covered in this chapter include:

• The three main strategies available to supermarket & grocery retailers
   
• Loyalty insights, and the grocery loyalty card's effect on customer behaviour
   
• What grocery shoppers want, why they behave the way they do, and how to change it
   
• Successful strategies, including those of Wal-Mart, Safeway, Ukrop's, Giant Food, Foodtown, and other grocery rewards initiatives
   
• Detailed case studies of the structure, features, history, benefits, and success of grocery loyalty programmes and incentives, including:
  
    ·  Tesco (UK)
    ·  Asda (UK)
    ·  Sainsbury's (UK)
    ·  Somerfield (UK)
    ·  Co-op (UK)
    ·  Big Y (USA)
    ·  Coles Myer (Australia)
    ·  IGA (Australia)
    ·  Foodtown/Woolworths (Australia)

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 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.

Key topics covered in this chapter include:

• Drivers and inhibitors of retail loyalty scheme participation
   
• The consumer's attitude to retail loyalty cards, and the impact of new shopping habits
   
• Examination of customer loyalty in the department store, apparel, entertainments, drugstore, home improvement, books, office supplies, and other retail marketplaces
   
• Detailed case studies, features, histories, and developments among leading retail loyalty schemes, including:
  
    ·  Boots (UK)
    ·  Hbc (Canada)
    ·  Neiman Marcus (USA)
    ·  Nordstrom (USA)
    ·  Virgin (USA)
    ·  Best Buy (USA & Canada)
    ·  Home Depot (USA)
    ·  Staples Easy Rebates (USA)
    ·  CVS/Pharmacy (USA)
    ·  Brazin (Australia)
    ·  AdvantageCard (Australia)
    ·  Jet Club (South Africa)

There are two key areas involving customer loyalty in the automotive sector: Vehicle sales, and fuel sales. In this chapter we examine both areas, showing how each is being handled by manufacturers and suppliers.

Cars are now almost a commodity, and car manufacturers have a problem. It might almost be fair to say that the most noticeable point of differentiation between competing, similar marques is the dealer who sells the car. Certainly, that seems to be the area where most can go wrong, and most complaints arise. So much depends on the way the car is sold and particularly the way that the after sales contacts and service are carried out. It's quite possible that it's for this reason that research shows less loyalty to dealers than to manufacturers. To build loyalty to the marque, the manufacturer has to produce an attractive, desirable, reliable vehicle at the right price. Most of them would seem to be very good at doing that. It is essential that dealers - the potential weak link in the chain - are single pointed, focusing on finding out what their customers want, why they want it, and work out ways of meeting these needs as closely as possible. And, while new cars with very lengthy service intervals may be very convenient for the customer, they make it even less likely that the dealer and customer will have many opportunities to build a relationship. Every contact - rare as they are becoming - must be treated with great care and delicacy if any loyalty is to be built.

Fuel retailers also have a very difficult problem to face, and it's one that isn't going to get any easier in the near future. With the alarming rise of the oil price in early 2008 to US$100 per barrel, fuel prices around the world have been increasing rapidly. Many industry studies and public surveys over the past two years have already identified a growing concern among consumers that they won't be able to afford as much travel as they could in the past, and many are taking steps to reduce their travel costs. Of course the first travel items to be axed - for most consumers - are trips that aren't strictly necessary, such as leisure and entertainment-related journeys. The travel and tourism market has been feeling that pressure for some time now, and the next phase of consumer travel cut-backs has begun: mileage in the family car. Consumers are buying smaller, more efficient cars, and travelling fewer miles. Car sharing is becoming a major trend in cities and large suburban areas. All of this means that building true loyalty to a specific brand of fuel has become imperative, with almost all other differentiating factors having been made far less significant by the global rise in fuel prices.

Key topics covered in this chapter include:

• Insights into automotive loyalty, branding, and loyalty to fuel retailers
   
• Drivers and inhibitors of loyalty to automotive brands, and the dealer's significance
   
• Examples and details of car buyer, parts, service, and fuel loyalty schemes and incentives
   
• Case studies, structures, features, benefits, and histories of fuel retailer loyalty schemes:
  
    ·  BP (Nectar)
    ·  Shell (Drivers Club)
    ·  Texaco (We.O.U)
    ·  Esso (Extra)
    ·  Exxon (Smiles Driver Rewards)
    ·  Coles Myer (Cents-Off Fuel)
    ·  Indian Oil (XtraRewards)
    ·  Centego (Fuel Rewards)
    ·  eCount (Fuel Card)
    ·  TruCash (Future Card)

Telecoms operators across the world have tried a number of different techniques to nurture customer loyalty and reduce the inevitable churn produced by number portability and mobile handset subsidies. Some operators have paired up with existing loyalty programmes while others have set up their own schemes. Yet others have chosen to run shorter-term promotions in their bids to both acquire and retain customers.

As has been the case for at least the past three years, much of the loyalty-related activity has come from the mobile telecoms sector, while fixed line providers - particularly in the USA - seem to have been concentrating more on the bundling of services, internet and cable broadband services, VoIP (voice over internet), and improvements in both customer service and satisfaction.

In particular, 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 we predicted in The Loyalty Guide II - 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 forthcoming addition of contactless technology to many mobile phones (in the form of 'near field communication' or 'NFC' chips), our next prediction is that personalised, opt-in, event-based marketing will increasingly take place through contactless consumer interactions with anything from POS systems to 'smart posters' in the High Street.

Key topics covered in this chapter include:

• Loyalty to telecoms operators, and the factors that make or break customer commitment
   
• Drivers of mobile network loyalty and churn, and the influence of the mobile network operator
   
• Examples of mobile network loyalty initiatives, including Virgin Mobile, Fido, Vodafone, Vodacom, MTN, Cell C, DTAC, Hutch, and others
   
• The role of the mobile channel in building customer loyalty, and the various platforms available
   
• Using the mobile phone as a loyalty card, marketing channel, and engagement mechanism

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).

This chapter covers in detail the various airlines and frequent flyer programmes that are most popular around the world, and their currencies, partnerships, rewards and benefits, along with details of each programme's progress and development over the years. In-depth studies throw light on 32 major airlines and their frequent flyer programmes, including:

Air Berlin (Top Bonus) Air Canada (Aeroplan) Air France & KLM (Flying Blue) Air New Zealand (Airpoints) Alaska Airlines (Mileage Plan) America West (FlightFund) American Airlines (AAdvantage) Bangkok Airways (FlyerBonus) British Airways (Executive Club) China Southern Airlines (Sky Pearl Club) Continental (One Pass) Delta Airlines (SkyMiles) Emirates (Skywards) Etihad Airways (Etihad Guest) Frontier Airlines (EarlyReturns) Hawaiian Air (HawaiianMiles)

Jet Airways (JPMiles) JetBlue (TrueBlue) Kingfisher Airlines (Power Flyer) Lufthansa (Miles & More) Malaysia Airlines (Enrich & Grads) Midwest Airlines (Midwest Miles) Northwest Airlines (WorldPerks) Qatar Airways (Privilege Club) SN Brussels Airlines (Privilege) South African Airways (Voyager) Southwest Airlines (Rapid Rewards) United Air Lines (Mileage Plus) US Airways (Dividend Miles) Virgin Atlantic (Flying Club) Virgin Blue (Velocity Rewards) Virgin Express (Flight Club)

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 two 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 RFID, NFC, and even biometrics - many upscale hotels have already taken active steps to get this aspect of their service right.

Key topics covered in this chapter include:

• Hotel and resort loyalty insights, and the key factors that drive loyalty and repeat visits
   
• Detailed case studies of the major hotel and resort loyalty programmes, including:
  
    ·  Best Western (Gold Crown Club)
    ·  Carlson Hotels (Goldpoints Plus)
    ·  Cendant Hotels (TripRewards)
    ·  Choice Hotels (Choice Privileges)
    ·  Hilton (Hilton HHonors)
    ·  Hyatt (Gold Passport)
    ·  InterContinental (Priority Club Rewards)
    ·  Marriott (Marriott Rewards)
    ·  Starwood Hotels (Preferred Guest)
    ·  Wyndham (ByRequest)

The world of travel and tourism has grown rapidly over the past few years, with a greater number of consumers travelling and treating themselves to some luxury "me time" instead of investing in more material items such as home entertainment systems and new computers and gadgets. This has meant that all aspects of the travel industry - and car hire operators in particular - have seen ongoing growth, and the result has been a strong desire among tourism marketers (and indeed various national tourist boards) to give consumers a reason to come back, and to remain loyal.

This chapter looks into recent developments and innovations in the general travel and tourism sector that are not directly associated with airlines, frequent flyer programmes, hotels, holiday resorts, and frequent guest programmes. It includes loyalty and customer satisfaction-related developments throughout the sector, worldwide, and the findings of surveys and research concerning cruises, travel sellers, travel incentives and loyalty schemes, rail operators, regional and national tourism initiatives, and car rentals.

Key topics covered in this chapter include:

• Travel loyalty insights, and how to differentiate tourism-oriented loyalty programmes
   
• Loyalty, rewards, and incentives offered by holiday companies, cruise lines, and travel bookers
   
• Details of public transport loyalty initiatives including coaches, trains, car sharing and toll roads
   
• Case studies of the major car rental loyalty and benefit programmes around the world, including:
  
  

  Alamo Avis Budget Dollar Enterprise

  Europcar Hertz National Thrifty

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. In this chapter we examine the best of the best among these initiatives, and explore how their mechanisms work, and what effect they have had on customer loyalty, repeat business, and overall customer retention and engagement.

Key topics covered in this chapter include:

• Insights into consumer attitudes and loyalty to fast food and drinks companies, including McDonald's, Burger King, Subway, plus numerous restaurants, coffee houses, and more
   
• Sporting loyalty initiatives, including bowling, golf, racing, and team affinity credit cards
   
• Loyalty to family entertainment providers, films, video rentals, and gaming establishments

There are several market sectors that are increasingly becoming involved in loyalty and relationship management initiatives, despite many not having "customers" in the usual sense of the word. For example, charities and non-profit organisations (NPOs) around the world are increasingly turning their attention to donor relationship management to either stabilise or increase their flow of donations. During the past two years, many NPOs have discovered what they believe to be flaws in traditional charity marketing strategies and have set about creating new strategies, often employing the latest customer loyalty ideas and technologies.

Similarly, the education sector has benefited greatly from customer loyalty rewards models, particularly those using the emotionally charged notion of "local community strength" to reward residents for loyalty to local merchants while also financially supporting the local schools.

Governments have also become far more involved in rewards programmes to drive citizen behaviour changes, including the use of emerging technologies and complex rewards platforms to encourage, for example, waste recycling efforts. And governments are not alone in that desire: Even consumer product manufacturers such as Lexmark have also begun bypassing distributors and retailers to directly reward such eco-friendly behaviour.

Media channels have also found that, with an increasing number of non-traditional entertainment options (such as internet video and radio, and online daily journals and blogs), the battle for the loyalty of listeners, viewers and readers has become more intense than ever before. Many forward-thinking newspapers and magazines have begun rewarding subscribers and re-subscribers with luxury or aspirational rewards and services. Radio stations are increasingly using web sites and SMS (text messaging) to encourage listeners to engage with them and earn rewards. Marketers have also come to realise that today's youngsters are tomorrow's mature consumers, and a number of youth loyalty initiatives have also been implemented to make brand advocates out of students.

Finally, in the private healthcare sector, consumers are also being encouraged to adopt healthier lifestyles (including weight loss and giving up smoking) by healthcare insurance providers. And health product and food brands have been increasingly observed taking part in and sponsoring loyalty rewards initiatives.

In this chapter we examine all of these sectors and the various loyalty marketing initiatives that have succeeded during the past few years.

Key topics covered in this chapter include:

• Charitable rewards, community rewards, educational support, and government CRM initiatives
   
• Newspaper and magazine loyalty programmes, radio station rewards, and student cards
   
• Healthcare incentives, utility referral programmes, real estate rewards and many other sectors

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.

Key topics covered in this chapter include:

• The main strategies involved in creating and setting up a B2B loyalty programme
   
• The structures of different B2B loyalty initiatives, depending on the target audience
   
• The latest B2B loyalty developments, sector by sector
   
• Case studies and breakdowns of B2B coalition loyalty programmes, including Business Rewards (Australia, New Zealand, USA, UK), Nectar for Business (UK), and various programmes from Argos Business Solutions (UK)

From time to time The Wise Marketer (www.thewisemarketer.com) asks its subscribers to answer simple questions that will help marketers to better understand particular issues, trends and topics. The Loyalty Probe (www.loyaltyprobe.com) series of marketing polls provides insights into the mindset of a broad cross-section of the industry's key players, from customer-facing employees right through to senior management and board-level executives. The Loyalty Probe research detailed and analysed in this chapter has been split into four key subject groups:

1. Year-on-year loyalty marketing strategy trends
    ·  Importance of major uses of loyalty data in 2006 vs. 2007
    ·  Critical factors for retail customer loyalty in 2006 vs. 2007
    ·  The focus of marketing strategy in 2006 vs. 2007
    
2. Loyalty from the programme operator's point of view
    ·  Most used reward types in loyalty programmes
    ·  The future of e-mail marketing: 2006 to 2010
    ·  Loyalty scheme setup problems in developing markets
    ·  Executives' own familiarity with everyday retail prices
    
3. Loyalty from the consumer's point of view
    ·  Consumer attitudes to marketing techniques
    ·  Consumer resistance to intrusive web advertising
    ·  Consumer resistance to TV advertising
    ·  Customer communication channel usage
    ·  Main driver of true brand loyalty
    ·  Which loyalty communications make the most impact?
    
4. Consumer card usage statistics
    ·  Active usage of dedicated loyalty cards
    ·  Active usage of non-card loyalty programmes
    ·  How many chip cards do people carry with them?
    ·  How many non-chip cards do people carry with them?

If you could have a personal interview with the world's leading experts on customer loyalty, retention marketing, customer win-back, retail operations, and marketing operations management, what would you ask them?

We've done exactly that, and asked a selection of thought leaders from around the world to share with us their thoughts on customer loyalty marketing. They were given the freedom to comment and expound upon the subject that they thought matters most today, and their honest opinions, answers, and solutions are provided in this chapter.

The future of customer loyalty is an exciting one for most loyalty marketers around the world. Rather than being a marketing discipline that's had its day and is destined to repeat itself in hundreds of subtle variations on old themes, the room for development and innovation is more immense now than ever before.

Indeed, as this report's authors predicted in both previous editions, the humble mobile phone now seems to have less to do with making and receiving phone calls than running your entire life from a central, convenient - and often impossibly tiny - box of electronic gadgetry. The average mobile phone can not only tell you who you are, where you are, what you're supposed to be doing and who with, but also who you know, how to contact them, and what the weather will be like later in the day. But perhaps, most importantly for marketers, the mobile phone is a constantly available channel of communication right to the target consumer. This presents untold opportunities for customer interactions and the building of relationships that are based on a genuine two-way dialogue between customer and company.

And another new channel has come along recently (albeit a subset of the existing internet channel): social networks. The use of internet-based social networks to directly promote products is perhaps not something that will ever be wildly successful, but they can be used to grow brand advocates from existing customers - people who will gladly associate themselves with a particular brand or company as part of a web-based public declaration of their personal allegiances and priorities. If a car enthusiast is willing to advocate the use of his favourite brand of spare parts, that recommendation will act as a signal to others in his social network - some of whom are likely to also be car enthusiasts. But the opportunities don't end there. There are other ways in which social networking sites can be used to build customer loyalty and cross-promote brands among peer groups.

But, in general, loyalty programmes are certainly likely to become more and more sophisticated, and even more useful to both consumers and programme operators as time passes. But while they might be much more complex beneath the surface, they will have to appear to be simple to the consumer. Think of the ways in which advancing technology has often led to much more complex and powerful equipment that is much easier to use. Rewards will have to become even more imaginative in order to give something that still has value but is not too expensive, and data will have to be both gathered and used more effectively.

Key topics covered in this chapter include:

• The future possibilities for the concept of customer loyalty
   
• The future of customer engagement and relationship marketing
   
• The future of coalitions and multinational loyalty programmes
   
• Future loyalty mechanisms including mobile phones, NFC, and other emerging technologies
   
• The future roles of customer data, feedback, analytics, metrics, and the internet
   
• The combined effects of changes in population, wealth, lifestyles, and life stages
   
• Global factors and conclusions on loyalty marketing in a fast-changing world