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Best practises in loyalty marketing
The document discusses best practices in loyalty marketing. It outlines the loyalty ladder that progresses customers from suspects to advocates. It also discusses different types of loyalty programs including points programs, communication programs, and partnership programs. The key elements of a successful loyalty program discussed include clearly defining objectives and target audiences, offering rewarding benefits and tiers, maintaining regular communication, and tracking and measuring program success.
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Best practises in loyalty marketing
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- 2. Direxions www.direxions.com @2018 Direxions Best Practicesin Loyalty Marketing
- 3. Copyright © 2008,Direxions Marketing Solutions Pvt Ltd Marketing Tools & The Loyalty Ladder Suspect Prospect Customer Client Advocate StrategicValue Consumers’ Switching CostsLow High Tactical Strategic Price Trade deals Promotion Advertising Direct Marketing Database Marketing Loyalty Marketing Area of Relationship Marketing One-to-one Marketing
- 4. Copyright © 2008,Direxions Marketing Solutions Pvt Ltd ….this is also relevant in the e-world Suspect Prospect Customer Client Advocate StrategicValue Consumers’ Switching CostsLow High Tactical Strategic Price Trade deals Promotion Advertising Direct Marketing Database Marketing Loyalty Marketing One-to-one Marketing Abandonment Attrition Churn
- 5. Direxions Marketing Solutions Pvt Ltd Loyalty Programs Astrategic tool in good times and bad Typically launched to Increase sales i.e. growth Reduce churn Audiences include Individual customers B2B Channel partners – dealers, distributors, agents, resellers, retailers etc. Influencers – doctors, chemists, architects, etc. Employees Can be used by practically any industry, for at least one of the audiences
- 6. Direxions Marketing Solutions Pvt Ltd Customer LoyaltyPrograms Large companies have millions of customers Very expensive to maintain a relationship with all A Loyalty Program identifies & rewards best customers Not an acquisition tool – although, a successful program may attract new customers to the brand Typically involves a loyalty card, offers members points to be exchanged for rewards, and benefits to members Often has tiers – Blue/ Silver/ Gold etc. Is different from a sweepstake/ cash back/ discount Is more strategic in nature, more long term with larger investments and potential returns
- 7. Types of programs…. Communication •Usetargeted information or messages to deliver special benefits and offers. •Loyalty driven by frequency of communication and relevance / attractiveness of offers Points •Promote customer retention through the earning of points for purchase of merchandise or services. •Points can be redeemed for future discounts and merchandise incentives. Amenities •Provide special treatment or services to program members. •Recognition is valued •Heavy or frequent users also need special treatment Partnerships •The primary benefits come from participating program partners •Brand values can synergise for many common segmentation types •Costs can be shared
- 8. ….And how companiesparticipate Stand-alone programs Partners in other loyalty programs Coalition programs
- 9. Direxions Marketing Solutions Pvt Ltd Benefits ofloyalty marketing to a company Loyalty Marketing Operations Efficiencies HRD Employee Involvement Purchasing Manage Costs Finance R-O-I InfoServices Customer Information CEO Corporate Image Customer Satisfaction Marketing Brand Share Customer Retention Sales HigherRevenue
- 10. Do you reallyneed to launch a loyalty program? Some questions that you need to ask Is the product or service purchased regularly? Does the product/service have an adequate margin to support the program? Is the product/service a commodity? Is there a significant difference between the value of a frequent customer and an infrequent one? Are sales easy to track? Does the company and its top management have a long term vision for the program? Are there sufficient funds for the program? Is the competition offering a program? Will your needs be better met through a simple communication program, or through targeted database marketing?
- 11. Not so goodreasons to want a loyalty program We need to meet this quarter’s target Everybody is doing it, so why shouldn’t we I saw this great software demo this morning! I want a cool card with my brand on it There’s a management trainee sitting idle with nothing to do…
- 12. 6 Key Elementsof a successful loyalty program
- 13. 1. Program Objectives Mirroryour business objectives
- 14. Direxions Marketing Solutions Pvt Ltd Typical Objectives Increasegrowth/sales/purchases Reduce churn Improve disposition towards my products and services (for influencers) Important: Define measurement metrics at the start of the program 30% increase in sales 20% reduction in churn….
- 15. Avoid having toomany objectives, no matter how good they sound Identify best customers and make them loyal and make it easier for my sales guys to sell and increase my brand equity and integrate all my marketing efforts and reduce marketing spends and generate revenues through partners and…
- 16. 2. Defining thetarget audience Who can best help us meet the objectives
- 17. All Customers AreNot Created Equal and therefore every relationship is different too % of Total Customers % of Total Revenue 15 35 50 50 35 15 A company’s most valuable customers can easily be worth 10 times as much, or more, as their least valuable.
- 18. Its tempting towant a “large” program Free and auto enrollment of customers: leads to a large member base BUT PITFALLS Leads to low activity High overhead in the program If everyone is in, how does your best customer know this program is for him? Where is the Flaunt value? The Club appeal?
- 19. Wrong selection A leadingtelecom company decided to enroll all customers into their loyalty program Industry was in a steep growth phase, and the numbers mushroomed At the same time, ARPUs dropped Program became unremunerative As a result, communication ceased to all members Heavy churn among high value members to competition who launched a program for only high value members
- 20. 3. Rewards The reasoncustomers become members
- 21. @2018 Direxions “As loyaltyand rewards programs of every type continue to saturate virtually every consumer market, the key to success for hotel loyalty programs is variety of reward offerings,” Rick Garlick, Travel and Hospitality Practice Lead J.D. Power.
- 22. Direxions Marketing Solutions Pvt Ltd Rewards The keybenefit of a loyalty program For hospitality it has to be your resorts and Sterling merchandise Monogrammed Bathrobes and hand towels Complimentary upgrade to luxury suite Free night upon completion of x nights etc Early check-ins, late check-outs, Discounts on dining options, Health club access and more.
- 23. Direxions Marketing Solutions Pvt Ltd More thanjust room nights..1 Frequent travelers want more than hotel stays: Hotel loyalty members redeeming rewards are more satisfied (by 138 points) than members who have not redeemed. Satisfaction is higher for redemptions involving: Special events (+124 points); car rentals (+103 points); and dining (+86 points). Redeeming for hotel stays adds only 4 points, on average, to loyalty members’ overall satisfaction with a program. Source: http://www.jdpower.com/press-releases/jd-power-2017-hotel-loyalty-program-satisfaction-study
- 24. Direxions Marketing Solutions Pvt Ltd More thanjust room nights..2 Many customers do not understand how to redeem rewards: Among customers who say they fully understand how to redeem their points, overall satisfaction is 147 points higher than those who say they do not fully understand the process. Despite this powerful effect on satisfaction, nearly half of all loyalty program members indicate a less-than-clear understanding of how to earn their points and only 50% know how to redeem them. Loyalty program satisfaction boosts brand loyalty: You knew this, of course! Of hotel stays booked in the past 12 months, 47% were booked with a brand affiliated with the member’s loyalty program. That percentage increased to 52% among members who say they are delighted with their loyalty program. Source: http://www.jdpower.com/press-releases/jd-power-2017-hotel-loyalty-program-satisfaction-study
- 25. Direxions Marketing Solutions Pvt Ltd And theGold went to….. Hotel Loyalty Program Rankings Marriott Rewards ranks highest in the 2017 study, and receives the Gold award for overall member satisfaction with a score of 806. World of Hyatt is the Silver award recipient with a score of 805, Hilton HHonors, the Bronze award recipient, with a score of 793. Source: http://www.jdpower.com/press-releases/jd-power-2017-hotel-loyalty-program-satisfaction-study
- 26. Special benefits Sometimes valuedmore than rewards Late checkout Complimentary access to spa Cocktails & dinner Invites to special events…..
- 27. 4. Communication Make sureyou interact with your selected members
- 28. Direxions Marketing Solutions Pvt Ltd Communication: Anecessary investment Communicate regularly with valuable members Planned communication calendar Standard program communication: Welcome kit, points statements, upgrades, downgrades, redemption etc. Occasions: Birthdays, anniversary, festivals etc. Campaigns and offers Behavioral: Communication to clusters showing specific behavior Eg. Active members who lapse, new members who don’t activate etc. Use new cost-effective media Typically, each member receives 4 to 18 pieces of communication annually, depending on value and interaction
- 29. Direxions Marketing Solutions Pvt Ltd Standard letters– use of analytics Petrobonus Single Sale No repeat Enrolled 3 months prior has done only a single sale transaction in the 3 months Load but No Sale Enrolled 3 months prior has done a single load Inactives Enrolled 3 months prior and has done no transaction High value Members Members who have not transacted in the recent 3 months and have an average monthly sale of Rs 2,500 or more in the 6 months prior to inactivity Constant testing and tracking 45 standard communications developed
- 30. 40% of thetarget base got activated Standard letters were sent to 24,273 Customers of which 9,793 (40%) customers were activated in the year 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Dec04 Jan05 Feb05 Mar05 Apr05 May05 Jun05 Jul05 Aug05 Sep05 Oct05 Nov05 Dec05 Jan06 First Active Last Active
- 31. An activated memberstays active for an average period of 7 months On An Average a member remains active for 7 months (based on the Sale transactions) Overall 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Activity Period in Months Members
- 32. Re-activated members dohigher sales after receiving a Standard letter 16038 17933 18839 14500 15000 15500 16000 16500 17000 17500 18000 18500 19000 19500 Pre HiVal Post AverageSale/Month(Rs.) The Average Value per member per month in the post period is greater than that in the hi value period with a 95% Confidence level
- 33. 5. Technology- an enabler Deployingthe right technologies to manage your loyalty strategies
- 34. Direxions Marketing Solutions Pvt Ltd Loyalty Programsare complex - hundreds of decision points Program Objectives Measurement metrics Membership criteria Membership duration Data strategy Enrollment process Need and effect of tiers Points strategy Points conversion Points and membership validity Points liability Rewards strategy, Benefits Type of rewards Redemption process Communication strategy Program branding options Communication elements Partnerships Program Terms and conditions MIS Reports and Frequency Sizing and ROI for 3 years Customer service set-up In-house training Management structure Likely competitive response Technologies
- 35. Copyright © 2008,Direxions Marketing Solutions Software – the arms & legs of loyalty programs Each loyalty program is different : customised software CRM software does not have all features Loyalty modules of POS systems are inadequate Should integrate with existing systems Should be scalable and flexible Ensure multiple functionality, ease of installation and integration with web and mobile Can allow integration across divisions, group companies, countries and continents
- 36. Data - Amost valuable asset Your loyalty database holds rich information about your best customers, their profile and behavior. Technology that can handle sufficiently large data sets in a secure manner. Enhance the data with deeper profile and disposition information Use the information to add value to members Several data analytics tools available for reporting, segmenting, mining and predicting behaviour
- 37. 6. In housetraining A last mile problem that can really hurt your program
- 38. How much doyour front liners know? In house training is one of the most critical tasks in program implementation Training is at implementation, followed by refreshers to ensure that the program experience is delivered as designed What can happen without training: Your helpdesk calls your program a “discount scheme” Your dealer tells your customer to not bother enrolling because it isn’t worth his time Your best member asks about the new double points scheme and your staff tells him there’s no such thing
- 39. @2018 Direxions Highlights forhospitality
- 40. Colloquy’s recommendations..1 #1 Createloyalty to your brand, not just your program. There is still a big disconnect in loyalty. Many brands understand that they need to create an emotional connection with their customers — and even believe they are doing so. Yet most of the time, they’re merely creating a transactional relationship. https://www.colloquy.com/resources/pdf/reports/COLLOQUY_2017_Loyalty%20Census.pdf #2 Make the redemption itself an experience. Some of the top motivators that drive customers to participate in their most active program focus on rewards: a. The program gives me great discounts. b. I can get to the reward I want within a reasonable amount of time c. The program gives me ways to earn rewards faster. d. The program makes me feel like a valued member.
- 41. Colloquy’s recommendations..2 https://www.colloquy.com/resources/pdf/reports/COLLOQUY_2017_Loyalty%20Census.pdf #2 Makethe redemption itself an experience. Some of the top motivators that drive customers to participate in their most active program focus on rewards: a. The program gives me great discounts. b. I can get to the reward I want within a reasonable amount of time c. The program gives me ways to earn rewards faster. d. The program makes me feel like a valued member. 57% left a program because it took too long to earn, and 53% left because a program did not provide rewards they were interested in.
- 42. Colloquy’s recommendations..3 #3 Keepthe friction out. Loyalty programs must be a tool for eliminating friction in the customer experience (CX). Successful programs bridge the gap between loyalty and great customer experience. Starbucks is a great example of frictionless CX. It created a loyalty program out of an existing CX issue: long customer lines. Starbucks created a prepay option to eliminate that barrier (purchase on your phone through the Starbucks app: pick up your order at the nearest Starbucks shop). https://www.colloquy.com/resources/pdf/reports/COLLOQUY_2017_Loyalty%20Census.pdf
- 43. Colloquy’s recommendations..4 #3 Pushyour loyalty program to be better. Create short-term promotional sales by leveraging loyalty for everyone while also focusing targeted investment on the best customers. For example, companies can create an emotional connection by unpacking which attributes are important to the best customers, such as a special night of shopping or other experiential rewards. https://www.colloquy.com/resources/pdf/reports/COLLOQUY_2017_Loyalty%20Census.pdf
- 44. Sterling sizzlers: 1. SterlingBrand goodness on steroids 2. In room differentiators 3. Personalization 4. Sharing economy @2018 Direxions
- 45. Within the SterlingBouquet… @2018 Direxions While all resorts will showcase the ‘Sterling’ness, each one can have a different brand spin! Sportspitality Hi-end gym with experts like Micky Contractor associated, Zumba session etc Organic Food all organically sourced Farm to table concept, Masterchef classes Only vegetarian by choice Supporting locals All staff are locals who have been trained Solar driven etc Weddings Whats your ‘Sterling’ness Quotient? SQ
- 46. In room differentiators @2018Direxions In the rooms: Can we have mouthwash provided in the washroom? Laundrywash facility –self service with charge Chargers available on request Small things
- 47. Personal milestones @2018 Direxions Birthdayscould be the graveyard for brands. Why? The customer gets to experience the different brand messaging at the same time…think about it. Personalisation! Taking the cake in loyalty
- 48. Reimagining the conceptof the birthday reward Process driven. Efficient. Collaborative If there is one go-to strategy loyalty marketers use to turn occasional shoppers into rapt customers, it is evidently through enhanced birthday presence. The Sterling Holidays difference! Note all customer birthdays that fall on weekends and holidays Communicate at least 6 months in advance and tell them why! So, they can book their airtickets and make it happen! Tell friends and family join them Select the Sterling vacation of their choice. Bring guests along for two more rooms and your room is complimentary! A Birthday photograph framed! By inviting the member into the process early on, you build a sense of anticipation and excitement Its more than a birthday discount, it’s a memory! @2018 Direxions
- 49. Sharing economy @2018 Direxions Thefun in this pic is the ‘going dutch’ concept Allow for a group to split ‘ pay per use’ concept Should I pay for my friends alcohol when I am into fruit juices and detox! Cutting Chai
- 50. To summarise Loyalty programcan be a strategic tool, in good times and bad Typically launched to increase sales or reduce churn Need to be customized for each company Improper design could cause the company to lose thousands of dollars, and result in unhappy customers 6 key elements – define program objectives, target audience, rewards, communication, technology and training Relationships built during good times come to the aid in bad times
- 51.