Making money out of loyalty - Eesti e

Making money out of loyalty 22ND APRIL, 2014 / TERO TASKILA

The purpose for the Loyalty programs is to make money 

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Extension of the marketing approach 

One-off or Limited time-only promotions (acquisitions)

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Rewards for the purchase (growth)

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Tiered and / or points based program (retention)

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Potentially making money through partnerships and selling points

Aim to increase foot traffic or website visits to generate more repeat purchases 

Does not replace #1 reason for being loyal – product and service

Points programs generate the most cash and loyalty, but require investment high

Points program

Discount program

Partnership requirement

Subscription

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Requires investment and set up Balance sheet implications Generates cash Struggle to remain relevant

Many forms / typically “buy 10, get 11th free” Easy to implement Challenging to increase frequency and upsell

Easy to implement Difficult to sell Very specific and narrow clientele

low low

Earning potential

high

How does the point sale work?

Loyalty program drives traffic to partners through marketing

Customer purchases from the partner and receive points

Partner pays to loyalty program for the points given to customer

Loyalty Program maintains the points-database

When customer “burns” points, loyalty program purchases the service from partner

Loyalty program makes money – mechanism same as currency trading

Some findings on loyalty programs 

Customers prefer to have tier levels (and recognitions which comes with it) 

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Remember to communicate if your top tiers are about to lose status!

People tend to increase frequency or amounts their spending when the reward is getting closer 

Opposite is true as well – if the rewards are far away (or perceived that way), you will not get users

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If using points based program – big numbers work better than small ones

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Give people opportunities to fast-track getting the status 

for example Aadvantage Challenge

Loyalty programs struggle to stay relevant

Getting customers’ Staying relevant and offering timely promotions and attention opportunities to redeem Getting enough wallet space

Keeping people active

Average European participates in 7-9 loyalty programs. Managing cards, coupons and online accounts is challenging.

Good programs have 30-40% activity rate, most driven by top tiers

Promotions are important

Own website Newsletters

Advertisement

Brochures

Partner promotion

Visibility at POS

Larger partner footprint will increase your wallet share Everyday activities

Necessary, but less frequent

Occasional

Groceries

Insurance

Culture

Petrol

Banking

Events

Commuting

Electricity

Travel

Telecommunication

Hobbies

Loyalty programs possess wealth of information which can be monetized

Customer

•Address •Gender •Age •Family situation •Purchasing power •Habits & interests

Purchase details

•Product •Amount and payment type •Point of sale (location, distance travelled) •Time •Location •Frequency

Customer demographics

•Surveys •Targeted marketing •Behaviour analysis and adjustment •Add-on sales

Improve the yield by utilising loyalty programs

Targeted communication for better conversions and upsell

People pay more on experiences – analyse what matters

Monetize the data

Mobility is changing customer behaviour Platforms change (mobile phones are new cards) Instant gratification Prices, promotions and discounts are more transparent Time based offering Location based offering

Customers want engagement 

50% of companies use gamification in 2015 

30% of all e-messaging by 2016

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5.5 Bn USD business by 2015

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Most applicable for Loyalty and Marketing 

AMEX, airBaltic etc. are using it

Case example / BalticMiles •

airBaltic changed ownership structure – altering the financial conditions to maintain an existing Frequent Flyer Program

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We • • •

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The Baltics did not have any consumer loyalty program worth mentioning

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We set our sights to learn from the best (aeroplan, nectar) – and be the best

did not want to have just another Frequent Flyer Program Did not want to just offer discounted tickets Low Cost airline pricing promotes loyalty better than miles issuance We wanted to encourage loyalty

Designed, implemented and launched a global rewards and loyalty program within 4 months Program Launch

Contract signed

January 2010

February

Strategy and Planning

March

April 2010

Implementation Results

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Program parameters identified

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Delivered on time and within budget

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Supplier strategy outlined

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Program parameters delivered

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Staffing requirements defined

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9 Core Markets

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7 Languages

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7 Currencies to support core markets

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Local team in place (Latvia)

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Shared services structure with rewards partner (Loylogic) for support

Local Market Coverage Plan •

Recruited new partners and brands

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Locally sourced rewards

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Determined launch campaign

One year after launch – 850 000 members in 163 countries

Loyalty programs should make money

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Increasing revenue should be the aim 

Higher yield, more frequency, commitment, partners

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Acquiring and managing partners for better footprint in customers’ daily life

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Managing and monetizing data is the key

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Instant gratification and gamification will come with increased mobility

“ Sports and loyalty have one

things in common – both try to maximise fans to attract partners

Thank you!

”