Review of loyalty programme business economics and management using big data and tactical retail marketing management.

2. *What is a loyalty programme?
*Loyalty Success Factors
*Introduction to Retail Loyalty Programmes
*Loyalty Programme Structure Secrets
*Loyalty Programme Promotions - Driving Sales
*Loyalty Market
*Summary

4. *The systematic collection of customer data in return for rewards or
benefits, often used to give customer additional privileges or services
to best/loyal customers
Opportunities
• Understand customers
• Give discounts to best customers only
• Adjust real price for certain customers
• Use data to negotiate with partners

5. Points Discount Rebate
Earn points and redeem
for rewards
Good
-Offers control
-Customer understands
-Lower cost
Bad
- Points cost are knowledge
- Accrued liability
Immediate discount for
presenting card
Good
-Easy and instant
- No liability
Bad
- Discount has to be large
(+10%)
- No control
Reward spend over
time
Good
-Easy to manage
Bad
- Little control
- Easy to copy e.g.
stampcard
- Little emotional connection
Esso
Smiles
Jusco
Starbucks
KrisflyerPrivilege
Earn points and redeem for rewards plus tiers of privilege
Good
-Privileges lead to loyalty
-Offers control
-Customer understands
Bad
- Low spend customer disillusion
- Competitors can match
Cathay
Marco Polo

6. What is a privilege program?
Tiers of benefits over and
above points for miles.

7. CoalitionSingle Owner
Lucky Chances for spend
Up to $200
Rebates for spend
over $200
VIP Privileges and private
sales for spend over $1000
Hybrid ModelCoalition Model
Octopus

8. Nets & Credit
Bank
Data
122132
Transaction
Database
Customers
Analysis services
Marketing Planning &
Promotion tactics
Data entry
122132
name
email
mobile
Application Form
age
family
NRIC
122132
name
email
mobile
age
family
NRIC
Customer card

9. Steps to launch
Planning
1.Feasibility audit
2.Customer research
3.Financial planning
4.Develop programme model
Implementation
1.Implementation – develop systems/communications
2.Launch
Management (operations)

11. Loyalty Programme is a cost
of learning about customers
Additional
Customer Profits
Loyalty Programme
Investment
+
Loyalty Promotions
Costs
>

12. Target
Audience
Brand
Positioning
Customer
Loyalty
Drivers
Degree of
Participation
Choice of
rewards
Generosity
Delivery of
rewards
Liability
risk
Investment
Cost
Getting
Customers to
join
Competitor
Strength
Sales
Focus

13. Jusco Program
*Barcode card
Hybred model
*Instant privileges
*Discounts for members
*Birthday privileges
*Points

15. Target
Audience
Regular shoppers
Brand
Positioning
- for everyone
-Birthday treats
-Members only
Customer
Loyalty
Drivers
Use membership
To make offers
Degree of
Participation
High
Choice of
rewards
Choose from
whole store
Generosity
Very generous
rebate up to 20%
Delivery of
Rewards –
rebate vouchers
(cash effectively)
Liability
Risk
High but also
High redemption
Investment
Cost
High
Getting
Customers to
Join
Easy – free
membership
Competitor
Strength
n/a
Sales
Focus
Very High

17. 2
5 46
1
37
8
Data Collection
Sales Promotion
Integration
Loyalty Programme
Mechanics
Brand Extension
Clubs within
programme
FMCG
Partnerships
Value
Proposition
Investment
Ratio

18. Strategy
* Capture all data relevant to the customer relationship
Approach
* Use Loyalty cards to capture all customer transactions, point
redemptions, online transactions and calls to any touch-point
* Segment the data according to shopping behavior, lifestage,
lifestyle and other differentiating factors
Advantages
* Understanding of customer behavior, identify valuable
customers and communicate one to one with customers
creating a more personal relationship
Data Collection
RFM
Lifestyle Lifestage
Basket
Attitude
Shop
Habit
Geo
-Dem
Data Warehouse
Segmentation Engine
Segmented Promotion Marketing
Interest
1

19. Application form is the single
most important point of data
capture
a)Gather all data in form
b)Gather data incrementally
using electronic channels
Key Information
-Contact
-Age/Gender
-Family/No family

20. Today
Primary Retail Segmentation Approaches
* Recency, Frequency, Value (RFV): e.g High Value Frequent
Shoppers, Low Value Frequent Lapsed
* Lifestage: e.g. Young Adult, Young Family, Older Family, Empty
Nesters
* Lifestyle: e.g. Organic, Fast Food, Home Cooking, TV Diners, Ethnic
Dining based on basket
* Internet Shopping: e.g. Trial, Cautious Developing, EverythingData Collection
VisitVisitVisit
Frequency RecencyFrequency Value $
Recency , Frequency, Value Segmentation
1
Time

21. *Basket analysis to get shopper type
Health Conscious Price sensitive
Brown Rice
Brown Bread
Natural
Yogurt
Organic
Carrots
Low far milk
Eco-Washing
Powder
Lowest price
cola
No fresh items
Uses 2-1
offers
Basket <10
items
Lowest price
noodles
Cheapest
washing powder
large format
New organic
chocolate New large value
biscuits
Current
Basket
Recommended
46 other shopping types – tv dinners, deli divers, traditional,
ethnic explorers, meat feast, vegetarians etc

22. Chance
Strategy
* Develop a research proven value proposition for
the loyalty programme underpinned by loyalty
drivers
Approach
* Value proposition has emotional and practical appeal
and the Loyalty programme aims to deliver the
proposition in the customer experience.
Advantage
* Customer benefit is clear and in-line with a customer-
focused organization
* Boots research showed that customers see
programme as ‘more indulgent, different, generous
and offers better rewards’
Value Proposition
2
Savings
Privileges

23. + points on top of everything else

25. Strategy
*Define the right loyalty programme mechanics to
minimize cost while driving customer loyalty.
Approach
*Points because it offers them greater control to
stimulate spend, but use in different ways.
*$1=1pts use points for rewards: voucher
redemption integrated with sales promotions.
Advantage
*Greater control while driving customer loyalty.
Loyalty Mechanics
3

26. Lucky Chance Card Rebate Card
Rebate Card
& Privileges
& Target of 1
Easy to launch
No liability
Develop card mgt experience
Capture all details and transactions
Reward only when customers hits
threshold spend . Tier rebates at
different reward levels
$200 get $10 (5%)
$400 get $40 (10%)
$1000 get $150 (15%)
Layer on privileges for best
customers.
Target every customer with
individual statements.

27. Strategy
*Understand investment margins to
determine reward investment and frequency
ratios for the market.
Approach
*Average investment is between 1% - 3%.
Some retailers are offering under 1% to
keep cost down.
Advantage
*Determining the right level of investment is
balanced against the rewards that motivate
loyalty drivers.
Investment Ratio
4
Normally 1-3%
reward

28. Spend $1.25=1pt
Fill up $100 get 80pts
Fill up 4x $400 and earn enough
for a free coffee worth $5 (1.25%)

29. 4
Investment Ratio
$1.00Spend for 1pt
$0.01Value of 1pt
$1,000Total Store Sales
$800Sales on Card (80%)
800Points Earned
$8.00Value Points Earned
400Points Redeemed
$4Value Points Redeemed
0.50%Investment Ratio

30. *Octopus card offers a chance to earn
with a large number of retailers in
Hong Kong – Watsons, 7-Eleven etc
*Comes in smartcard form or keyring
*Reward rate can be chosen by
individual retailer
* At Wellcome, for example, one point is
earned for every HK400
* Watsons 0.5% per dollar amount of sale
A customer consolidating their spend across
the members could earn a significant amount
of reward $ every month

31. Strategy
* Data collected drives ALL marketing activity – it is not
operated in isolation.
Approach
* Use data to target sales promotion activity
* Lifestage, Shopping Habits, Location
* Always offer loyal customers something extra!
* Target sales promotions by customer segment – mass
marketing costs have been greatly reduced.
Advantage
* Greater ROI from all marketing activities
Sales Promotion
Integration
5

32. Strategy
*Develop Clubs within the loyalty program that use
knowledge gathered from grocery purchases
Approach
*Create Clubs for key interest groups where product
marketing efforts can be targeted and incremental
purchase is easy to stimulate
Advantages
*Create greater relevance for Club members and
reduce cost of generating incremental spend
Clubs within
Programme
6

33. Specially organized kids
activities at Ikea

34. Strategy
*Extend brand using new services
Approach
*Develop strong own-brand products new non-
grocery services
*Leverage grocery database to offer re-branded
services
Advantages
*More reward earning/redeeming opportunities
*More data from partners and greater marketing
reach
Brand Extension
7

35. 1 2 3 4
5 Petrol
6 Utilities

36. Strategy
*Offer FMCG companies access to
customer knowledge.
Approach
*Offer FMCG brands that pay a fee
access to customer knowledge that
allows the brand to plan promotions
that reach the correct target audience.
Advantages
*Stronger offers to the right audience
create better returns.
FMCG Partnerships
8
Customer
Grocery Retailer

37. 2
5 46
1
37
8
Data Collection
Sales Promotion
Integration
Loyalty Programme
Mechanics
Brand Extension
Clubs within
programme
FMCG
Partnerships
Value
Proposition
Investment
Ratio

39. 1. Statements
2. Personal shopping lists
3. Geo-targeting
4. Events
5. Layered promotions
6. Regular communications

40. Strategy
* Use data collected to personalize
vouchers/coupon offers and upsell
Approach
* Statement types are personalized based
on shopping habits
* RFV
* Lifestage
* Shopper type
* Lifestyle
* Shopper Type models
Advantages
* Increased response rates compared to
standard
* 90% to vouchers
* 30% to cross-sell/upsell
Example Loyalty Statement
1. Statements - online/offline

41. Strategy
*Use data collected to personalize
basket when repeat shopping
Approach
*Can make recommendations
based on basket
*Slip in the up-sell offers
Advantages
*Personalization offers a tested
formula for increasing
response/redemption rates
Online Shopping Basket
2. Shopping lists – online/kisoks

42. Store Catchments
Store Competitor Store
Promotion Target Area
Strategy
• Store catchments areas in
overcrowded markets need to be
defended from competitors
Approach
• Use loyalty program data to run
targeted promotions on areas of
highest competition
Advantages
• Powerful threat defense only for
customers in risky areas
3. Geo-marketing

43. Strategy
*Most valuable customers are invited for store
evenings, where specially hosted events are
put on around themes such as wine and
cheese.
Approach
*High quality store presentation and grocery
expertise allow retailers to create a conducive
environment for offering high end grocery
products
Advantages
*Meet and reward the best customers in
person, while extending sense of privilege
that is popular in all markets.
Wine Tasting Events are a regular
features for Wine Club Members
4. Events

44. Strategy
• Offers attract interest and offer
incentives for immediate purchase
Approach
• Types of incentives
– 2.Personalised shopping list
– 3. Rebate type vouchers
– 4. member prices
– 5. Free gifts
Advantages
• Customers see lots of opportunity
to participate – right offer for right
person
Loyalty Programme Promotions - Driving Sales
5. Layered promotions

45. Offer: Shop Online Offer: Mothers Day
Offer: WineOffer: DVD’s
Tips
• Weekly emails for grocery
but with different themes
each week
• Offers are rotated
• Messages are
personalised
• All Opt in email
Loyalty Programme Promotions - Driving Sales
6. Regular communications

47. *Programmes offer opportunity to get to know
customer – that’s cost of knowledge that must be
recovered
*Opportunity comes from using the data – to drive
more spend - personal shopping lists
*Customers enjoy being part of programmes if they
get privileges of whatever value therefore work
hard to give them value