Loyalty Marketing Basics

1. Loyalty Marketing

2. AGENDA
• Loyalty Marketing
– Understanding
– Objective & Scope
– Process
• Failure/Success in Loyalty Marketing
• Minimizing operational cost
• Case Studies
• Implications

3. Loyalty Marketing
• Best-kept secret behind incredibly successful businesses
• Develop a stronger relationship with each and every“one of the company's
“
best customers
• Based on strategic management
• Focuses on growing and retaining existing customers
• Less investment & high profit
• Long term business relations

4. Why talk about Loyalty?
• Mature Industry
– Increasing competition
• Focus on getting more customers
– Market share Vs. share of customer
• Competitive advantage
– Price
– Service quality
– Loyal relationships

5. Objective & scope
Is 80 – 20 principle valid ?
If yes – who are the top 20%
How do we retain them
 No LBM: anonymous customers
Lost customers to new competition
Know our customer better  Attract back with relevant inputs
 No LBM: general offers for entire
than anybody else catchments – more spends
Categories failing to attract customers
Identify the core spending large amounts on other categories
 ‘shop the shop’ initiatives
customers contributing to the  No LBM: promo’s to all customers– more
business and to allow these spends
privileged customers to special Low cost communication in catchments –
(specific) benefits specific - relevant
 No LBM: mass media communication -–
more spends
Leverage customer Attract drop out customers with specific offers
information to sell more of – bill value based or sku based
 No LBM:
higher gross margin Anonymous customers
products general offers – more spends
Customers shopping only once or irregular
Get them back for incremental spends with
specific offers
Create life time customers  No LBM:
Anonymous customers
general offers – more spends
Own product launch – trial offers to bench
The power of data from an mark brands
inclusive loyalty program to  Large consumers can get more inputs
Track trials, gain/loss.
deliver the above  No LBM: one size fits all – more spends
Effectiveness of promotions
Pre, during and post promo tracking at customer
level
No LBM: anonymous customers

6. REACHING THE CUSTOMER – JUST GOT
PERSONAL
• Use Complaints to Build Business
• Reach Out To The Customers:
– Contact . . . contact . . . contact with current customers is a
good way to build their loyalty
• Profile of Customer :
– The key behind a successful customer loyalty program is
knowing who (Profile of Customer) purchases
what, where, when, how much (History of Transaction), and
using this magical insight to drive (Desired Behaviour)
• Employees’ loyalty impact on customer loyalty

7. Why do we need this initiative?
• Create a jump in enrolments
Target1:
• New members getting attracted through the special benefits offered to
members
Target 2 :
• Create interest for current members
Target 3:
• Reward them for being members –special feel
Target 4:

8. Communications - Sniper approach Vs the traditional
shot gun approach
• Focused communication via low cost media vis-à-vis expensive mass media
• Proliferation of communication media
– 22% fragmentation in Television
– 15% inflation in CPRP in TV
Communicating to Loyal customers
medium and 20-25% inflation in
Print medium SMS@Rs.1/contact
– Media spillage Direct Mailers@Rs.25/contact
E-Mailers@ Rs.5/contact
– Reduction in the time spent on One-to-one communication and
Mass Media by the Consumer minimum wastage

9. Who has succeeded and failed?
•410 programs total, 75 stopped - 18% failure rate, many more are underperforming
•Who succeeded
•AirMiles, Canada
•Singapore Airline
• Krisflyer
•Tesco Clubcard, UK
•Who failed
•McDonald’s
• McBreak Card
•Swissair Qualiflyer
•Canadian Airlines
• Plus
•Walt Disney
• Company’s The
• Disney Club

10. Why they failed?
• No programme communication - programme owner does not use
communications to grow spend making programme un-profitable
• Low customer redemption - customers do not redeem rewards, therefore see
no benefit and stop taking part
• Not enough customers - Few programmes attract a critical mass of customers
to justify operation costs
• High set-up costs - Costs incurred are too high to recover from incremental
customer spend

11. Getting to 0 cost loyalty model? Its possible!
What’s in it for LBM
companies?
5% convert to co-branded
credit cards Co-branded credit cards & PLCC:
 Conversion fees
 Share of transaction charge
 Complete cost of PLCC & co-
40% converts to PLCC branded credit cards along with
redemption to be borne by bank
All credit risks borne by bank
Base loyalty program

12. CASE STUDIES
 International Case Studies
 Domestic Case Studies

13. TESCO
Loyalty Program Features
• TESCO Clubcard- Closed Loop, for use in TESCO and affiliated outlets
Variants
• TESCO Clubcard Credit Card- For use in TESCO and all other merchant outlets
• TESCO Clubcard
― 1 point per GBP spent at TESCO stores, petrol stations, online purchase
Points Structure • TESCO Clubcard Credit Card
― 5 points for every 4 GBP spent at TESCO stores, petrol stations, online purchase
― 1 point for every 4 GBP spent at other merchant establishments
• Every quarter-end TESCO sends Clubcard vouchers that can be used for:
― Savings on In-store purchases
― Online shopping at Tesco Direct
Points ― On Clubcard deals which include collecting AirMiles with airlines, vouchers for Restaurants &
Redemption Bars, Holiday packages and various deals that are offered by Tesco
― Tesco Personal Finance products
• There are special schemes like Doubling up Clubcard Vouchers specifically to be spent at Tesco wine club
on Tesco.com
• Free membership for exclusive clubs like Food Club, Wine Club, Healthy Living Club
Additional Perks • Facilities like 0% on balance transfers for 13 months and 0% on all purchases for 3 months for TESCO
Clubcard Credit Card holders
• Royal Bank of Scotland (acquired by TESCO)
Partners
• Avis Car Rentals, National Tyres and Autocare
Source: Company website, Annual Report

14. Walmart
Loyalty Program Features
• Wal-Mart Credit Card- Closed Loop, for use in Wal-Mart and affiliated stores
Variants
• Wal-Mart Discover Credit Card- For use across merchant outlets
• Upto 1% cash back on purchases
Points • Upto USD 100 cash advance on purchase
Structure • 3 cents off on every gallon of gas purchased at Wal-Mart affiliated gas stations
Partners • GE Money Bank
Source: Company website, Annual Report

15. Target
Loyalty Program Features
• Target Check Card- Closed Loop debit card for use in Target and affiliated outlets
• Target Credit Card- Closed Loop credit card which can be used in Target and affiliated
Variants outlets
• Target Visa Credit Card- For use at Target and all Visa affiliated outlets
• Target Check Card and Credit Card:
― 1 point per GBP spent at Target and affiliated outlets
Points
• Target Visa Credit Card:
Structure
― 1 point per GBP spent at Target and affiliated outlets
― 1 point for every 2 USD spent in other merchant outlets
Points • On accumulation of 1000 points, customers earn 10% discount on an entire day’s
Redemption shopping at Target
Additional • Target donates 1% of the amount purchased through the REDcard to a school of the
Perks customer’s choice
Partners • Target National Bank
Source: Company website, Annual Report

16. CASE STUDIES
 International Case Studies
 Domestic Case Studies

17. Reliance Retail
Loyalty Program Features
• Reliance One Card- For use in all Reliance Retail outlets as well as other
Variants merchant outlets
Points • 1 point for expenditure of Rs. 100
Structure
Points • Minimum of 25 points to be accrued prior to redemption
Redempti
on • 1 point equivalent to Rs. 0.7
• Return ticket to destination of choice in India once a year on monthly
Additional shopping of Rs.1,100
Perks
• Accident insurance worth Rs. 50,000 free on enrollment
Partners • Citibank

18. Future Group
Loyalty Program Features
• ICICI Bank Future Card- For use in all Future Group outlets as well as other merchant
outlets
― Silver
― Gold
Variants
• ICICI Bank Big Bazaar Credit Card- For use in Big Bazaar as well as other merchant
outlets
― Silver
― Gold
• ICICI Bank Future Card:
― 2 points for every Rs. 100 spent at Future Group Outlets
Points ― 1 point for every Rs. 200 spent at other outlets
Structure • ICICI Bank Big Bazaar Credit Card:
― 6 points for every Rs. 100 spent at Big Bazaar
― 1 point for every Rs. 200 spent at other outlets
Points
Redemption
Additional • Special payment counters for cardholders
Perks • Exclusive offers for cardholders from time to time
Partners • ICICI Bank

19. Shopper’s Stop- First Citizen
Loyalty Program Features
• First Citizen Card- Closed Loop, for use across Shoppers Stop outlets
― Classic
― Silver
Variants ― Golden Glow
• First Citizen Citibank Co-branded Credit Card- For use in Shopper’s Stop as well as other
merchant outlets
― Silver
― Gold
• First Citizen Card:
― Classic: 1 point for every Rs. 100 spent at Shopper’s Stop
Points ― Silver: 1 point for every Rs. 50 spent at Shopper’ s Stop
Structure ― Golden Glow: 1 point for every Rs. 30 spent at Shopper’s Stop
• First Citizen Citibank Co-branded Credit Card:
― Same redemption structure for corresponding level of First Citizen Card
Points • 1 point earned at Shopper’s Stop worth Rs. 0.7
Redemption • 1 point earned at other merchant outlet worth Rs. 0.65
• Invites to end of season sales preview for all members
Additional • Special offers only for First Citizen members
Perks • Free parking for Silver and Golden Glow members
• Exclusive cash counter for Golden Glow members
Partners • Citibank

20. Action Outline
• 1. To Select market segment
– Identify most valuable customers – existing
– Identify customers who might become valuable - prospects
2. To Design a relationship-building service culture
– Identify what type of treatment promotes customer loyalty
– Identify what loyal customers want to give to us
– Identify potential for the development of a brand community
3. To Implement a loyalty treatment
– Design specific communication strategy and message
– Train staff to understand the importance and the process
– Create opportunities to invest and receive investments
– Generate a sense of community among the customers
4. To Measure effects of program and redesign
– Maintain constant communication with the loyal customers
– Monitor costs and results of the program

21. The Loyalty Triangle
Social Network / Community
Provider Customer

22. The Loyalty Triangle – Implication on Education business
Student Community/ Counselor forum
Education Business Student/Centre

23. Building a Community
• Student Community
1. Use a newsletter to share news about industry/career
2. Develop an online forum for customers to stay in touch
3. Organize annual events “by invitation” for top customers
4. Facilitate picture / story sharing
5. Help customers help each other
6. Give a name to the community
Counselor Forum
• Can explore the option to initiate “Facebook” kind of forum where counselors can interact
with each other and gelling into company’s culture – ‘Employees’ loyalty impact on customer
loyalty’
• Develop a loyalty programme for the counselors

24. Thank You