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Today’s Session

Loyalty Programs- A Perspective

What does loyalty mean to businesses ?


Retention of Create Profitable

Customers ? Customers ?

Acquisition of
LOYALTY More data on
Customers ?

Just Another Marketing

Reward Loyal
Loyalty programs are

– Key drivers for enhancing customer

– Active point of differentiation
– Help pinpointing individual buying
patterns and predicting future customer
– Improve “stickiness”
– Enhance Lifetime Value
What’s the Not-So-Good News ?

• Do customers perceive reward A lot of difference 12%

Some difference 23%
programs making a difference ? Little difference 13%
Dont make much difference 25%
Dont make any difference at all 16%
Don’t Know 11%

• 48% customers did not have any serious intention of repurchasing the brand

• 55% customers accumulate points because they anyway come along with their purchases

Do Loyalty Programs work ?

Some insights --- Customer & Company perspective
Customers new perspective of Rewards ( Loyalty )
1. Cash value ---- Immediate gratification
2. Redemption options ---- More Choice
3. Aspirational value ---- Feel Good factor

4. Relevance ---- Does it make sense

5. Convenience ---- Ease of availing reward

Loyalty initiatives are not short term marketing tools. They should
• deliver tangible value in proportion to the value the customer brings to the company
• offer right mix of Product, Price, Service Delivery & Relationship benefits
• Communication to be transparent, timely and focussed
• Consistent across all customer touch points

Loyalty initiatives must also be profitable

• Treat profitable and unprofitable customers differently
• Get your metrics in place ---- measure costs & returns
What does loyalty mean to the customer today ?

Complete Customer
“ Relationship” Experience

Customer cost of
using your product

Primary Product /
drivers Price Brand** Relationship

• Purchase price • Physical product • Ethics • Loyalty Programs

• Effort • Service product • Image • Co Brands
• Time • Service delivery • Reputation • Alliances
• Service environment • Positioning • Special treatment
• Affinity
• Customer community

Customers want an end-to-end relationship experience

Customer Relationship experience – Banking illustration
Customer Value Perception

• Life Time Free • Ease of availability • Easy accessibility • Aspirational value • Understanding
• Transparency in • Speedy service • Flash Value
charges • Relevant Features • Customer empathy • Processes &
• Inspires confidence Service
• Resolution of query
• Value for money • Wide service range Knowledge
the first time
• Preferential

Product / Customer
Price Quality
Brand Relationship

• % returns
• Fee Income • One stop Shop for all • Strengthening • Customer
financial needs Brand image touch time
• Simplified product
• # service calls
offering • Network • No. of
• Advertising product
availability • # customer inquiries
• Bottom line costs training hours
• # billing queries
• Best in class

Organization’s translation of Value

Let us ask yourselves…..are we truly Customer Centric?
• Do you measure your customers ……
1. Lifetime Value & Cost to the business
2. Preferences, Dislikes, Usage Patterns
3. Satisfaction levels

• Can your Products & Delivery systems provide …..

1. End to end solutions / Address future needs
2. Competitive & flexible pricing plans
3. Ease of access / acquisition --- Options to use most appropriate services / channels

• Are your business processes geared up for …..

1. Settling customer issues, with 1 phone call or web-site visit?
2. Responding immediately & appropriately to "moments of truth" when customers' business is on the

• Do you monitor your Loyalty programs to see …….

1. If they address the right customers
2. If they are profitable
Organization’s approach to Loyalty

1st : Have a clear articulated Customer Loyalty Strategy

• Covers the entire customer experience during his lifecycle
• Covers all customer touch points
• Addresses his existing / potential relationship with the company

2nd : Must be in sync with Business Objectives

• Customer / Segment profitability
• Customer Contact strategy

3rd : Business Process to be customer centric

• Risk, Underwriting, Operational processes
• Acquisition, Customer service, Marketing

4th : Design Customer centric & Profitable Loyalty programs

How do you do it …….

• Lifecycle Experience ---- Define value proposition to customer segments

Loyalty • Dynamic ---- Ability to react to changing customer needs and behaviors

• Targets ---- Program objectives clearly communicated

• Metrics ---- Measurement capability in line with objectives

• Seamless --- across all Channels, Business Functions and touch points
• Flexible ---- Ability to accommodate changes without compromise

• Value & Choice ---- Value based on Customer Profitability & offering
Loyalty relevant choice ( Bought-out or Co- Branded )
Programs • Personalized ---- To the customer’s unique profile based on Analytics
• Branded ---- Bought-out or Co-branded to address emotional needs
Role of Partnering & Co Branded Programs
Addresses the new customer need of:
• Offering wider choice of involvement platforms

• Accrual / Redemption of Rewards across several relevant involvement categories

• Faster value accumulation compared to stand-alone programs

• Branding association to address aspirational & emotional needs

Addresses the company’s need to :

• Lower costs of loyalty through sharing

• Access partner customer touch points

• Access additional customer databases

• Improve Brand image

Success Factors

Success in Co-Brand partnership is higher, if

• Core value of the two partnering brands are related
• Partner Co brand objectives are similar
• Each activity has consequent benefit to both partners
• Availability of Partners

Bought out approach works when

• No feasible Co Brand partners are available

• Feature / Service is commoditised

• Cost of feature low

• Partner not interested in Co branding

Step 1: Evaluate the Product/ Service
• The first step is always to answer the following
questions honestly:

• Is my product/service good enough?

• Is my product/service worth the investment?

Step 2: Identify the Value Proposition
• This part is one of the absolutely most important steps befo
re implementing a Customer Loyalty Program.
• What do we offer customers?
• What is the value proposition?
• If the value proposition is not well received, the program
will not work
• Therefore use extra time to develop your value
• The right value proposition differs from industry to
industry - from product to product, service to service
• It also depends on high involvement or low involvement pr
The Right Mix

Soft Benefits
Hard Benefits Eg Magazine, Travel
Eg Discounts, aids, special
Rebates, Coupons products, services,
Step 3: Create Program Goals
• Goals can be divided into core, primary and
secondary loyalty program goals
• Clearly identify your program’s goals and
target groups
• Each target group has its own preferences and
demands different benefits
Goals of a Customer Loyalty program

Core Primary Secondary

Increase in : • Loyalty • Increase frequency of
visits at point of sales
•Revenue • Acquisition • Increase usage &
purchase frequency
•Profit • Build a robust data base • Develop problem solution

•Market Share • Create communication • Support PR of Co

•Add support capacity &
service dealer network
Improve product, brand &
Co image
Step 4: Determine the Financial Cost

The main costs to consider are:

• Technical, organizational and personnel infrastructure
• Program service centre
• Development, storage and shipping of the rewards
• Communication measures
• Initial development and constant improvement of the progra
m concept
Step 5: Develop a communication platform
• Must include communication methods that reach its members with theme
s that are of interest to them
• It has to communicate in three different
environments, each with different interests and goals:
1. The first group is the loyalty program members
2. The company´s employees, management and stakeholders
3. The external loyalty program environment, which includes the media, the
industry in which the sponsoring company operates, external partners, and so
• New media is the key in this exercise
Step 6: Determine program
organization and management

• Put up a project team made of people from

different departments (marketing, sales, IT,
research, finance and so on)- cross functional

• Across management levels : senior to the

junior most for an organizational level buy-in
Step 7: Set up a database

• A database that contains detailed and correct inform

ation on your customers is a strategic
weapon that will greatly influence success
• Databases should be seen more as a strategic
viewpoint than tactical
• CRM is often described as information enabled
relationship marketing
• Without detailed knowledge about its customers no
company will be able to compete
Step 8: Research on other loyalty programs
• How do competitors organize their customer loyalty programs
• How are loyalty programs set up in other industries or in
other countries?
• What can we learn from other successful customer loyalty
• What can we learn from loyalty programs that have failed?
• Is there any specific literature (eg case studies on the subject? )
• Are there external specialists whom we can consult?
Step 9: Implement the loyalty program

• One of the questions that need to be addressed is how to implement or

integrate the program into your company’s organizational structure
• There are a variety of alternatives, from founding a totally independent
company to manage the loyalty program, to integrating the loyalty program in
to an existing department, to outsourcing the entire loyalty program manage
ment to an outside agency and so on
• It is more important to ensure that the customer loyalty program´s
enormous support potential is fully exploited within the company
Step 10: Prepare a strategy for program defectors

• Customers who leave can provide a view of the business that is

unavailable to those inside, and whatever caused one individual to defect
may cause many others to follow
• In most businesses, 60 % ‐ 80 % of customer
defectors say that they were “satisfied” or“very satisfied” on the last satisf
action survey prior to their defection
• The reasons for satisfied customers defecting are often due to competitors
changing offerings and/or the customer developing new requirements or
buying habits and beginning to look for alternative products or the customer
simply moving to another location.
To summarise

• Loyalty is not created by a program……it can at best strengthen it.

• Loyalty is not about short term rewards…….it is about end-to-end customer

experience with your products / services

• Companies need to have a enterprise wide loyalty strategy backed by

customer centric processes to deliver value

• Co branded programs work --- Ensure you get the value proposition right

• Use of technology is the key- Real time data

Loyalty has to be earned… is hard

work….but at the end you have a profitable
Any Questions Please?