2012 Trends in Loyalty Marketing

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TABLE OF CONTENTS

1 GAME MECHANICS ................................................................... 3 2 SOCIAL MEDIA ........................................................................... 4 3 TIME-BASED POSTING ................................................................5 4 PRIVACY .......................................................................................6 5 REAL-TIME MARKETING .............................................................7 6 MOBILE ........................................................................................7 7 STAYING AHEAD OF THE CURVE ..............................................8

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Todays standards for measuring the strength of customer engagement frequency, recency, monetary value, and advocacy are really no different than those in the hit American television show Mad Men, set more than fty years ago. While the measures of success remain the same, the marketing landscape has changed beyond recognition, with enormous challenges to establishing any customer relationship at all, much less advocacy. Marketers cant simply tack on the internet to the TV, print, radio, and outdoor options available in the Mad Men era. The internet itself is fragmented into social media, search, games, the blogosphere, entertainment channels, and conventional web sites that may or may not involve e-commerce. The audience is fragmented as well, consisting of Baby Boomers, Gen X-ers, and Millennials whose media habits and modes of communication have little in common. Brands trying to establish relationships with the members of these diverse groups are hindered by privacy laws that block the most fundamental effort behind establishing a relationship with customers: nding out who they are. In this new environment, loyalty initiatives play an increasingly important role, particularly those initiatives that go beyond simplistic points-for-purchases and encompass the extent of loyalty-building tactics now available. This whitepaper seeks to keep marketers up-to-date on the newest trends and tactics in loyalty marketing and authentic customer engagement.

Game Mechanics
Theres a reason why World of Warcraft has over eleven million players, over $290 million in quarterly sales, and why online game participation has grown over 700 percent in the last ten years. Game mechanics rationalize and codify the psychological reasons people enjoy games. Now marketers can use these same techniques to get people hooked on their brand. Game cation, or using game mechanics in industries other than gaming, has produced new concepts ripe for use in marketing like interval rewards schedules (participate for a speci ed time period and get a reward) or micro-leaderboards (compete with a small group of friends for points). Game cation can make interacting with your brand fun and gives consumers new paths for brand interaction.

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Game mechanics can of course help you engineer a successful game-oriented program, either on your own, or in conjunction with an established game, but you can also apply the tenets of game cation to marketing in many diverse ways that scale costs. One of the best examples of game cation has nothing to do with a literal game, but with artful use of the simple game mechanic called envy. Every time airline passengers in a loyalty program are allowed to board rst or use members-only airport lounges, a certain amount of envy is created in (at least some of) the passengers who dont have these privileges, which can in uence them to change their buying behavior.

Social Media
Conventional loyalty programs differentiate themselves through their reward/ purchase ratio and type of reward (merchandise, discounts, coupons, levels, etc.). There is a temptation to transfer this thinking to social media, and with Facebook consuming over 12 percent of peoples online time its not a bad idea as an initial step. But in order to fully exploit the power of social media, brands need to adopt a new strategic approach to how they value their customers, and speci cally, place more value on brand advocacy. Even before the rise of social media, there was strong academic evidence that a brands most valuable customers are not those with the highest lifetime value (LTV), but those most likely to recommend a brand to pro table new customers those with the highest lifetime referral value (LRV). Social media ampli es the voice of advocates in three contexts. In order of importance they are: posts in market connections such as Trip Advisor, or Amazon where potential customers are in the process of making a decision posts in relationship venues, such as Facebook or Google+, where participants may exchange view on brand choices posts in broadcast venues, primarily the wall on a brands Facebook page

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The bottom line is that loyalty programs that factor in advocacy and reward it with the same currency gained through purchases will reward many brands. Measuring success in this area requires new techniques, but the benchmarks can be reached, and its worth the trouble.

Time-Based Posting
So youve created a hot Facebook fan page, with over one million likes, meaning access to over one million news streams. Of course youre thinking about what to post offers, discounts, invitations to join a game but you should also be carefully considering when to post. Morning or evening, weekday or weekend, the times you post or tweet can dramatically affect response rates, and opportunities to maximize responses (e.g. likes or re-tweets) arise and disappear daily, even hourly. While there are dozens of studies available that will prove useful timing factoids applied to social media fans are the least active on Sundays the two best practices for successful timing havent changed since the days of traditional direct marketing via postal services: Be relevant. Relevance relates not only to the customer segment (or individual customer), but also to the time. To take an obvious example, its smarter to offer a deal on pizza in the evening than in the morning. Test. No matter what studies may reveal about behavior in general, the only people who really matter to a brand are the ones in its target demographic. Rigorous testing against this group will produce results.

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Privacy
Privacy concerns are growing worldwide, and theres plenty of evidence to con rm the legal establishment is going to support them. Some examples: The California Supreme Court ruled that the common practice of identifying customers by matching their zip code to their name in the course of a transaction is illegal. The German State of Schleswig-Holstein determined pro le creation associated with Facebooks like button violates data protection laws and banishes the button from state sites. A group of South Korean iPhone users sued Apple, claiming it invaded their privacy by collecting location data without their consent. This trend will surely frustrate the efforts of brands to identify and engage their customers and it casts a new light on the value of loyalty programs. To put it simply: loyalty = permission Loyalty programs are evolving into what amounts to a contract between a brand and its customers, a give-to-get relationship where customers give brands permission to access personal data that would otherwise be blocked in order to get rewards in the form of merchandise, discounts, status, and other bene ts. Loyalty programs in the new climate of heightened privacy concerns offer both opportunities and risks. Your marketing campaigns can now be much more targeted and effective, which can boost the top and bottom line. However, loyalty data is extremely sensitive, and requires the highest level of protection available to avoid the potentially disastrous consequences of a security breach.

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Real-Time Marketing
Driven by enormous advances in microprocessors and networking, data is now available not in days or even hours but milliseconds. Due to this change in technology, loyalty marketers have access to an invaluable new tool called complex event processing, also known as event-driven computing. This technology can combine data from multiple diverse sources in real time to personalize the customer experience. You can now provide shoppers with customized up-sell and cross-sell offers based on their buying history, current purchases and status in a loyalty program (e.g. level, number of points, etc.), as well as inventory levels and ongoing promotions. These millions of diverse data points are made more complex considering transaction location either online, in stores, at a kiosk or ATM. This proactive management of the customer experience in real time through transactional data can be combined with operational data for truly spectacular results. Southwest Airlines is one company thats making full use of event-driven computing to exploit operational data, even when things go wrong. All airlines know from the moment a plane takes off that a passengers bags didnt make the ight. But the passenger typically nds out after waiting half an hour or more at a baggage carousel, growing increasingly irritated. The Southwest system informs customers of baggage problems immediately after takeoff via a text message to their cell phone, and promises to deliver the delayed baggage to any address the customer texts back in reply. Managing travel experiences is an extreme example of how real-time capabilities can build loyalty. We all live in a real-time environment all the time, and creative use of operational data can make a difference to the customer experience in many different situations.

Mobile
Mobile technology allows for instant price information on most products which can unfortunately cause some customers to become less loyal in favor of a cheaper buy. This challenges retailers to move their customers beyond shopping based on price comparison alone. Loyalty programs are an important means for achieving that goal especially when delivered instantly through mobile devices which can counteract purchasing based on real-time price.

Mobile devices can deliver the bene ts of event-driven computing to consumers wherever they shop, while in uencing behavior in a way thats advantageous to the retailer as well. If a store is over-stocked any item can instantly be put on sale and shoppers can be immediately informed. More broadly, smart phones can serve as in-store offers engines. Another idea that is sure to catch on over time is the idea of brand-speci c apps for retail chains. These could enable both enrollment and reward delivery, and serve as a replacement for reward cards.

Staying Ahead of the Curve

Developments in technology the rapid penetration of mobile platforms, the dominance of social networks as a communication nexus and the ability of database engines to integrate and mine vast amounts of data have given rise to game-changing opportunities for loyalty marketers. The winners in this new, technology-driven environment will not only reap short-term gains, but may well in uence their market share for decades. For more leading edge information on trends that are affecting loyalty marketing and how it can boost both revenue and market share, please stay tuned.

TIBCO Loyalty Lab helps develop pro table and long-lasting customer relationships for some of the worlds largest brands. Our on-demand loyalty platform supports end-to-end loyalty programs that can in uence behavior across all channels mobile, social, online and in-store. TIBCO Loyalty Labs deep loyalty knowledge base and technology solutions enable organizations to cultivate a deeper and sustained brand relationship with millions of their customers the day their programs go live. For more information head to www.loyaltylab.com, email loyaltylab@tibco.com or call us on +1.415.633.1400.

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2012 TIBCO, TIBCO Software, and The Two-Second Advantage are trademarks or registered trademarks of TIBCO Software Inc. and its subsidiaries in the United States and/or other countries. All other product and company names and marks mentioned in this document are the property of their respective owners and are mentioned for identi cation purposes only.