honesty engagement focus long term

October
2014
Issue no.
core trade
crm gain education
satisfaction types
feedback long term costs sales
sale
think
concept
group
product
service love focused
communication
expectations business
value
scale
cycle
help
customer
loyalty
client initiatives
engagement
consumption
support
positive
quality
references
information
performance
effort
attention
plan
management
manage
concept revenue
activities
improvement
survey
profitablity
offers
core
relationship
menu share
tracking
benefits
assistance
group
opportunities
bonds focus
strategy loyalty marketing
deliver
challenge
percentage
help
honesty
feedback
sales
concept
understanding
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October
2014 Issue no.
So what about loyalty initiatives?
On a simple level, these actions and programs are designed to reward customers for past purchases and to incentivize them
to proceed with repeated ones.
A well-designed rewards program that offers a strong value proposition to the customer can do a lot more than just
that. On the softer side, it builds emotional bonds between the customers and the product or service, it creates
a community of brand ambassadors, it delivers valuable data on consumer trends. In terms of hard results, it deepens existing customer penetration, it achieves cross-selling, it can enhance the brand’s long term profitability.
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October
2014 Issue no.
If you do it, you need to invest...
The US invests $ directly...
The US have been pioneers in the overall loyalty perception
and are leaders in loyalty trends, investing US $50 billion
on schemes for a solid customer base. In 2013, there were
430 million payments and credit card loyalty programs –
more than one per person, and 2.60 billion active loyalty
memberships.
….whereas Japan invests considerable time
What is customer loyalty
It is both an attitudinal and behavioral tendency.
Customers which continue to favor one brand
over all others, believe that the specific product/
service offer is their best option on different levels. It derives from a series of positive emotional
experiences; it also best fulfills their perceived
The Japanese have in their DNA the notion of loyalty and
highly value its importance in the success of a brand.
Loyalty is a respected value of Japanese culture. Japanese
customers are very cautious, savvy and relatively conservative; they present incredible high levels of loyalty towards
the brands that are close to their likes.
From their side, brands invest significant time in training for
and in offering outstanding and personal customer service
throughout the customers’ journey with a brand.
What motivates consumers to
change brand/service provider
or retailer?
GLOBAL AVERAGE
8%
10%
15%
26%
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41%
value expectations in terms of convenience, performance, familiarity, comfort, price, status etc.
...invest appropriately and
then do it well.
We have witnessed hundreds of programs being launched
that do not achieve true engagement with their audience.
Just having a loyalty program is not the purpose; the goal
is to have a program constantly synched with consumers,
competition and the market, which is not only self-sustaining, but can eventually become profitable. A “set it and
forget it” attitude is simply spending instead of investing.
Customers today are empowered with information, and
continuously evaluate their relationship with a brand
with respect to their own evolving needs. The challenge
is to build initiatives that are simple and user friendly,
that are relevant to the customers and to the brand, and
that contribute to building an honest relationship with the
customers. A good program must offer benefits for both the
business and the customer.
To succeed in loyalty initiatives, companies need to find the
right mix of funding and redemption options, to embrace
new digital tactics, re-examine old systems, and move
beyond just points and rewards.
October
2014 Issue no.
Considerations when building successful loyalty initiatives
Different models of loyalty programs exist. Through its experience, OMNI APICO has identified a few elements that are critical
to the long-term success of any customer loyalty initiative.
specific objectives and keep the
1. Have
mechanics simple
Which are the services/products
that have high relative loyalty?
Setting your objective as “increasing customer loyalty”
is not enough. This may be the longer-term objective but
there are different paths to follow to achieve this overarching goal. Do you want to directly increase repeat sales?
Engage your customers in a dialogue with your brand?
Deepen their knowledge and understanding of your products? Acquire new customers through your existing ones?
Enhance cross selling? Collect valuable data? All of the
above?
At the same time it is crucial for any system that you build
to be simple and straightforward to understand, to pick up,
and to use.
People nowadays are bombarded with a multitude of
marketing messages, choices, information and channels.
Whether it is a discount or special customer treatment,
customers work toward a certain goal to redeem a reward.
Companies need to keep this relationship between effort
put in and receiving tangible rewards intuitive. Making sure
customers understand and enjoy the experience is a key
factor to its success.
Bloomingdales set up the Loyalist program to increase their
customers’ shopping basket and to enhance repeat purchases. Loyalist, rewards customers with points irrespective
of the payment method or the channel they have chosen to
shop from; the more points a customer earns, the more he/
she gets for free.
Customers are “surprised and delighted” by unexpected
double, triple or even quadruple points. Bloomingdale’s has
also incorporated a variety of apps to allow its customers
to access their balances wherever they are. The success of
Loyalist lays mainly on its simplicity, on the straightforward
approach, communication and on the generous rewards.
2. Know and segment your customers
Customers are looking for added value everywhere. They
understand they may need to pay something for the added
value or that they may need to work for it. But a necessary
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condition to engage them in the process is for a brand to
prove that it knows them, it values them and it will reward
them with propositions that are relevant to them.
Traditionally, companies use standard metrics such as
frequency of purchase and total value of purchases to
segment their customers. But considering other factors like
profitability contribution, loyalty to a specific product category, or longer term purchase potential, may lead a brand
to generate different ideas and initiatives that in the end
can prove more effective in driving customer loyalty.
From their side, customers prefer not to be treated with a
mass approach. It is hard to engage them with copy-paste
promotional offerings, which neither speak to their needs
and preferences nor offer unique benefits for them.
October
2014 Issue no.
A program that comes with a sign up cost has to have
a crystal clear and appealing set of rewards, otherwise,
customers will not participate.
Ritz-Carlton uses its customer relationship management
system, “Mystique”, as a tool to know their customers and
to conceptualize the brand’s attribute of high end personalized service. Ritz-Carlton gathers information on preferred
guests such as frequency of visits, issues that have come up
during their previous stays, even the snacks, magazines,
movies and music they had requested in the past and then
provides a customized proactive approach based on these
guests’ preferences.
Amazon launched ‘Prime Program”, a subscription based
program with an annual fee. It targeted those customers
who would accept the fee as they found it had good value
for the services they would receive in return. The benefits
of the program include among others free shipping and
unlimited streaming of movies. The customers who agreed
to pay the subscription increased their purchases by around
150% after they joined.
Starwood generates 30% of the company’s profit from only
the 2% of travelers/guests. The Starwood loyalty program
offers tiered levels of indulging experiences. Guests who
stay 75 nights a year at any Starwood hotel can check in
and out at any time; guests who stay 100 nights a year
are awarded with a 24/7 personal concierge service even
when the guest is not staying at a Starwood hotel.
Why do they leave?
TOO EXPENSIVE
RELEVANCE & VALUE ADDED
OF THE BENEFITS
TOO COMPLICATED
INTENSE COMMUNICATION
FROM THE BRAND PART
FREQUENCY OF
SHOPPING
CONFIDENTIALITY REASONS
GLOBAL AVERAGE
50%
37%
43%
30%
27%
25%
3. Build a holistic experience
Consumers are going Omni-channel. They are increasingly
tech savvy, and consequently more sophisticated in their interaction with the brands. The current Omni-channel reality
unlocks opportunities for brands that can leverage different
platforms and incorporate them into their customer loyalty
strategy.
Starbucks, drives loyalty through its “My Starbucks Reward” program which rewards a wide variety of actions
and offers “surprise and delight” elements through the
random jackpot prizes.
More recently Starbucks has introduced a payment application that is simple and makes the payment transaction a
sleek and enjoyable experience.
It has also incorporated foursquare in its loyalty programme; rewards are offered based on the frequency with
which people check in and customers have the opportunity
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to be nominated “Mayor of Starbucks”.
In late October 2013, Starbucks announced that 11% of
sales volume comes through its own mobile wallet. This
translates to about four million mobile payments per week.
Overall, eight million consumers are using the mobile app
to pay for their Starbucks products.
4. Build cross-selling partnerships
The right partnerships can be the key to success for a loyalty programs, as they can enhance the offering for customers and take it to a whole new level of appeal. The size of
the opportunity can be as big and as long as the selection
of the partners and the rewards offered are relevant and
appealing to the target audience.
October
2014 Issue no.
American Express exemplifies the value of teaming up.
It has a vast partner base with companies from which
customers can choose their rewards. Recently American
Express launched the Twitter Sync campaign; customers are
incentivized to tweet about the discounts and deals offered
while syncing them with Twitter #hashtags. The numbers
are impressive: over $2,000,000 were offered in rewards
to their customers.
5. Interact
Consumers join loyalty programs for
the benefits; but what counts most?
DISCOUNTED OR
FREE PRODUCTS
EXCLUSIVE PROCUTS
OR EVENTS
FREE SHIPPING
SPECIAL
SHOPPING HOURS
ENHANCED
CUSTOMER SERVICE
The current trend in loyalty schemes is gamification;
the incorporation of game playing elements into loyalty
schemes. In other words turning your loyalty programme
into a fun game in order to motivate customers, increases
their engagement, interact more times with the brand and
ultimately securing repeat purchases.
The most indicative example is McDonalds; a pioneer of
gamification approach since its partnership with Hasbro
for the board game which started as early as in 1987. The
McDonald’s Monopoly stickers is the famous board game,
tray paper and eventually online game which has become
as well-known as the menu itself and literally thousands
of people play offline and online every day. Hundreds of
game pieces are produced annually, given to customers
upon purchasing food items that correspond to a property space on the Monopoly board. They’ve produced 4.2
billion game pieces since 2003 -- sufficient for over 60% of
the world’s population to have a piece. It provides enough
instant prizes to give the feeling that you’re winning, but in
the end, everyone dreams about scoring that Boardwalk, so
they go back for more.
SOME HISTORY
The earliest loyalty type programmes: were
found in the US in the 18th century, when a
merchant offered copper tokens to its customers
to be exchanged for items in the store.
GLOBAL AVERAGE
75%
44%
42%
33%
25%
The first modern loyalty programmes
Airlines
American Airlines were considered as pioneers
with the revolutionary Advantage frequent flyer
programme, which rewarded “frequent fliers”
with miles that could be accumulated and later
redeemed for free travel. Soon, dozens of travel
companies followed, initially by becoming partners
in existing airline programmes
Hotels
The Holiday Inn chain hotel was the first to launch
its own programme followed by others. Despite the
booming in loyalty programmes, many companies
were reluctant towards their efficiency as marketing
tools and their entailed operating costs.
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October
2014 Issue no.
SOURCES
OMNI APICO Analysis, Forbes, Bain & Company, Deloitte Touche Tohmatsu Limited, Colloquy, BCG,
McKinsey & Company, USA Today, Harvard Business Review, Consumer Reports, Epsilon Group,
Loyalty leaders, Nielsen Holdings N.V., Forrester Research, EY Global, Business Week, Business
Insider, Raconteur, Fast Company, McDonald’s, Starbucks Corporation, American Express Company,
Bloomingdale’s, The Ritz-Carlton Hotel Company L.L.C., Starwood Hotels and Resorts, Amazon.
Page 2 Photograph: Apple Store, Regent Street by Paul, under a Attribution 2.0 Generic (CC BY 2.0) license
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