2014 Customer Loyalty ASEAN Conference: Lassu (lassuloyalty.com)

Philippines Loyalty Report

It may seem a bit simplistic to frame up this discussion based on a story forchildren but, just for fun, let’s see how customer loyalty marketing might playout if it were expressed in terms of the familiar story of Three Little Pigs.

After that, we will look at survey data from a cross-sectional household surveywe conducted.

The Competitor

He had dominant market share and growing, and had already locked up extremely favorable locations around the country. Many of his malls were in fact a destination for shoppers. He offered a full range of products and merchandising was good, plus some desirable items were exclusive. Pricing was market competitive. Because of his favorable brand position, he could charge prices that were slightly higher than others in some cases, thus ensuring a favorable profit position.

He had a very effective loyalty program with strong penetration and member engagement. Customer experience was good. And he was able to spend heavily on above-the-line advertising. This cost made sense for him, due to his wide geographic reach.

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Marketing Leader 1

In response, the first marketing leader gave almost all his focus to above-the-line advertising for mass consumer audiences. Most of his activity was promotion, especially sale events, which were advertised in newspapers and on billboards. Below-the-line efforts were mostly coupons, lamppost banners, in-store collateral, and email and text blasts to people who registered for raffle prizes. His agency recommended that approach, and his main competitor was doing it too.

The problem was, he spent too much, had a poor return on advertising investment, with flat or even declining sales, and no loyalty program. He was thinking about developing a program, but it seemed too complicated to figure out and he wasn’t sure whether he needed one.

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Marketing Leader 2

The second leader had rolled out a loyalty program. Members could earn points for purchases and then redeem them for merchandise. The program worked more or less like a deferred discount and all customers had the same deal. There was no segmentation and almost no soft benefits. With a few minor differences, he had merely copied what his main competitor was doing. He referred to this as benchmarking.

Although he had collected a lot of data about his customers, including contact information, he mostly used this just to send out text and email blasts about store-wide sale events. He was practically unable to send targeted communications because his transaction data was on one server and demographic data on a different system, with no data mart to pull it all together for segmentation and targeting. Most of the time, he was forced to do filtering in Excel.

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Marketing Leader 3

The third leader had an effective loyalty program, with good member penetration and engagement. Customer segments were defined, and he had identified his top customers. Benefits were structured to reward desired behaviors.

Above all, this leader recognized that a loyalty program is merely an enabler. The main purpose of his program was to enable targeted, relevant and meaningful communication with customers. His program was designed to identify, maintain and increase the yield from best customers through long-term, interactive, value-added relationships. His program structure, segmentation and IT systems were all designed with this end in mind.

Let’s see why this matters.

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Source: Marketing Sherpa, 2012

Conversion RateIs 208% higher for targeted

messages then for email

and text “blasting”

208% Higher

Customer Loyalty Marketing

Source: Nielson, Global Report of Loyalty Sentiment, November, 2013

Customers in

Asia PacificAre 92% more likely to

choose brands that offer a

loyalty program.

92%

Customer Loyalty Marketing

Customer Loyalty Marketing

Source: Michael Lowenstein, Customer Winback

Success Ratesfrom win-back campaigns

are 3-4X higher than for

acquisition campaigns.

3-4 X Higher

Customer Loyalty Marketing

Source: Loyalogy, Loyalty Pulse Study, 2013

65% AGREE:I would recommend a

brand to my friends if they

have a good loyalty

program.

65%

Customer Loyalty Marketing

Source: Bain & Company, Loyalty Guide 6, 2013

A 5% Reductionin customer defection will

bring as much as a 50%

increase in profits.

50%

5%

Goals of Loyalty & CRM

1. Satisfaction & Advocacy

• Recognition

• Convenience

• Personalization

• Problem Resolution

• Consistency Across Channels

• Engagement, Fun, Surprise, Delight

Goals of Loyalty & CRM

2. Customer Retention

• Reactivation

• Win-Back

• Competitive Defense

• Satisfaction is a Key Driver

Goals of Loyalty & CRM

3. Customer Development

• Basket Size

• Up-Spend

• Frequency

• Cross-Shopping

• Relevant Offers

• Best Customer Programs

Goals of Loyalty & CRM

4. Customer Acquisition

• Referral

• Activation

• Trial

Goals of Loyalty & CRM

5. Cost Reduction

• Optimize ATL v BTL

• Better Targeting

• Higher Conversion

• Optimize Rewards Cost v Perceived Value

• Simplification, Reduced Admin Waste

• Fraud Prevention

Goals of Loyalty & CRM

6. Derivative Value

• Monetize Loyalty Data

• Multi-Partner Agreements

• Supplier Funding

Cross-Sectional Survey

570 Households, Philippines

41%

25%

19%

9%

4%2%

<1%

Original Research: Cross-Sectional Survey, 570 households, Philippines

Are you aware of any programs that give points or rewards for buying?

1.1 programs cited on average per household

Distribution of Mentions

0

50

100

150

200

250

0 1 2 3 4 5 7

Nu

mb

er o

f R

esp

on

den

ts

Number of Programs Cited

27.4%

Original Research: Cross-Sectional Survey, 570 households, Philippines

27.1%

Which ones?

Program Types

Grocery GeneralRetail

DrugStores

Banks SpecialtyRetail

Government Gasoline Air Miles

% o

f M

enti

on

s

24.1%

12.4%

3.6% 3.4%

1.2% 0.8%

27.4%

Original Research: Cross-Sectional Survey, 570 households, Philippines

27.1% Program Types

24.1%

12.4%

3.6% 3.4%

1.2% 0.8%

Grocery GeneralRetail

DrugStores

Banks SpecialtyRetail

Government Gasoline Air Miles

% o

f M

enti

on

s

Top 2 ProgramsSM Advantage + Suki Card = 47% of Mentions

221 Other Programs Cited = 53% of Mentions

Other Challenges

Experienced Loyalty Heads

are Hard to Find

Other Challenges

Rapid Changes

in Technology Options

Other Challenges

Increasing

Competitive Sophistication

Other Challenges

Changing

Regulatory Environment

Other Challenges

No Local Community

Devoted to Loyalty

Even Fundamentals are Sometimes Missing

Not Collecting

Demographic Data

Case 1

FMCG

2012-13... Social Focus was facebook

170,000 Fans so far

(after 2-1/2 years)

1-2 Posts per day, themed

2012-13... Social Focus was facebook

BUT

Agency Cost was P13 Million

Only 12.7% of target is online

1-2% are fans, if lucky

facebook – Declining Organic Reach

16.0%

12.6%

10.2%

7.8%6.5%

Source: edgerankchecker.com

Feb 2012 Sept 2013 Nov 2013 Dec 2013 Mar 2014

facebook Filtered Feed

60% Decline in Reach

in the Past Year alone

facebook – Declining Organic Reach

16.0%

12.6%

10.2%

7.8%6.5%

Source: edgerankchecker.com

Feb 2012 Sept 2013 Nov 2013 Dec 2013 Mar 2014

60% Decline in Reach

in the Past Year alone.

It means that of the

170,000 customers who

liked the page, only about

11,000 see each post.

Question:

What is the business case?

2014-15... More Focus on Mobile

Members per year

On Pack (mobile) vs. facebook

68,000

facebook

253,000

On Pack

But then... 40% Opt-Out

68,000

facebook

253,000

On Pack

40% Opt-Out Rate due to

sending “tips”

(Content was not relevant.)

Some Good Questions...

• What behavior is desired?

• How can we track behavior?

• How to make it easy?

• Is the reward worth the effort?

• What are the segments?

• What do we say to each?

Case 2

Retail

Program Relaunch

44.4%

18.5%

11.1%

7.4%

18.5%

Rewards and Benefits

Points not Awarded

Long Wait for Card

Points not Known or Verified

Other

Sources of Dissatisfaction

Program Relaunch

44.4%

18.5%

11.1%

7.4%

18.5%

Rewards and Benefits

Points not Awarded

Long Wait for Card

Points not Known or Verified

Other

Sources of Dissatisfaction

Fixed

Points will buy anything in the store.

Pay P 434.00

Program Relaunch

44.4%

18.5%

11.1%

7.4%

18.5%

Rewards and Benefits

Points not Awarded

Long Wait for Card

Points not Known or Verified

Other

Sources of Dissatisfaction

Fixed

Fixed

Simplified point rules

Program Relaunch

44.4%

18.5%

11.1%

7.4%

18.5%

Rewards and Benefits

Points not Awarded

Long Wait for Card

Points not Known or Verified

Other

Sources of Dissatisfaction

Fixed

Fixed

Fixed

Permanent cards printed in the store real time

Program Relaunch

44.4%

18.5%

11.1%

7.4%

18.5%

Rewards and Benefits

Points not Awarded

Long Wait for Card

Points not Known or Verified

Other

Sources of Dissatisfaction

Fixed

Fixed

Fixed

FixedReal-time points calculation

on the receipt+ website

Lassu

www.lassuloyalty.com

Program Relaunch

44.4%

18.5%

11.1%

7.4%

18.5%

Rewards and Benefits

Points not Awarded

Long Wait for Card

Points not Known or Verified

Other

Sources of Dissatisfaction

Fixed

Fixed

Fixed

Fixed

Fixed

Live customer service line with email and chat

support

Program Relaunch

7%

28%

50%

9%6%

E D C B A

Classifications derive from• Member Income• Occupation• Automobile Y/N• Household Staff

3,240 possible combinations each maps to a socio-economic class.

THENMember data could not describe profile

of shoppers.

and NOW

The Results

Member Base Loyalty Sales

95%Growth

22%Growth

Prior Year Prior Year RelaunchRelaunch

The Results

Member Basket Size

2.4X Non-Member Basket

2.4X

79% of Cards are Active

79%

The Results

Payback on

P16 Million Investment

Incremental Sales per Month*

* At 95% significance vs. control group.

24 Millionper Month 2.8 Months

Great!

So where does that position the program so far?

Good penetration. Good Engagement.

No segmentation.

No data mart to enable targeted communication.

Ready to start next phase now...

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None of the loyalty heads we interviewed claim

that they are doing a “great job”

Delivering a personalized

customer experience, with

highly-relevant, targeted offers

based on RFM and customer

demographic profile.

What is Usually in Place

Advertising Agency

of Record

aor

What is Usually in Place

Social Media

(Hygiene Factor)

What is Usually in Place

Loyalty Program

with Scale

What is Usually in Place

Partner to

Push Campaigns

the Gap

The Agency has established brand position and creatives

The tech partner is able to push campaigns

... but what exactly to communicate, to whom, and when?

. . . . . . .

Tying it all Together

About Lassu

Lassu is the ASEAN partner member of

Customer Strategy Network. Collectively,

the members of our global team have

launched or helped to reengineer well over

100 loyalty programs around the world,

including most of the top global brands.

Working with a CSN partner like Lassu, gives

you access that network. We bring this

expertise to your doorstep.

Optimized Program Design

• Benchmarking, Voice-of-Customer

• Customer Value Proposition

• Financial Model

• Program Mechanics & KPIs

• Best-Customer Marketing

Mike AtkinChairman, CSN

Jim GriffinFounder, Lassu

Lassu is connected to faculty at the

University of the Philippines, Graduate

School of Statistics. We have experience

with nationwide household surveys, and

the head of our statistical practice is a

consultant for measurement science at

Nielsen Media Research, SAS and McCann

Worldgroup, among others, including a

wide variety of marketing initiatives at top

companies in the banking sector, FMCG and

other verticals.

Customer Knowledge

• Single Customer View

• Segmentation

• Analytics

• Event Detection

• Campaign Management

• Serving the Right Content

Francisco de los ReyesProfessor, Statistics

University of the Philippines, Diliman

Lassu is the ASEAN distributor and reseller

of Loyalty Prime – a complete enterprise-

class loyalty platform. We offer full CRM

and loyalty management, and excellent

integration to backend systems, like POS,

reservations, and ERP. With our platform,

you can easily segment your customers, and

then build engagement using social, mobile,

website, email, SMS and marketing

campaign automation. Or we can handle it

for you.

Delivery Platform

• Integrated Loyalty & CRM

• Member Engagement via SoLoMo

• Campaign Automation

• Reporting & Analytics

Kunal MohiuddinCofounder

Creatives and Launch

Metro Rewards Card II

Launch Campaign

Creatives and Launch

Metro Rewards Card II

Launch Campaign

Creatives and Launch

Metro Rewards Card II

Launch Campaign

The Campaign

Relaunch

Creatives and Launch

Let’s build a solid foundation

for sustainable growth & profit

Jim Griffin

jim.griffin@lassuloyalty.com