eMarketer Webinar: Loyalty Marketing—Creating Stickiness in a Mobile World

Loyalty Marketing: Creating

Stickiness in a Mobile World

Yory Wurmser

Retail Analyst

January 28, 2016

Made possible by

Agenda

Trends in loyalty marketing

Drivers of consumer loyalty

Mobile’s effects on customer expectations

Tactics to communicate with loyal customers

Trends in Loyalty Marketing

Three major trends in loyalty marketing:

Companies are spending more on loyalty programs

Loyalty program membership is growing

Active loyalty program membership is decreasing

1. Companies

are spending

more on

loyalty

programs

Increased spending on loyalty in part reflects a

better understanding of customer retention

Over a third of marketing

executives see improved

visibility of customer

retention and lifetime

value (LTV)

Better CRM and analytics capabilities allow for a

broad range of applications for loyalty data

Leading use of

loyalty data is in

marketing

campaigns

Loyalty marketing produces better results than

acquisition marketing

“We have found most marketers do

best when they spend about 70%

of their marketing dollars talking

to actual buyers, 20% of those dollars

talking to people new to the brand and the

remaining 10% on people that just happen

onto their website that they’ve never tried

to acquire.”

—Ric Elert, President, Conversant

Loyalty is fleeting for the majority of customers

Less than half

of customers

stayed loyal to

US CPG brands

over the course

of a year

Levels of loyalty vary only slightly by age cohort

Baby boomers

are slightly less

loyal to brands

than millennials

Roughly

75% of US

loyalty card

holders say

they are more

likely to shop

at stores that

offer loyalty

points

Four reasons for increased marketer spending on

loyalty programs:

1. Better CRM and analytics systems make the data

benefits for businesses larger

2. Better capabilities in targeting customers directly

3. Better understanding of the importance of retention

marketing

4. Programs succeed at drawing people into stores

2. Loyalty program membership is growing

In 2014, there

were 3.3 billion

memberships in

the US—roughly

10 per resident

Rising loyalty

program

membership

is occurring

across most

sectors

Two reasons for increased loyalty program

membership:

1. Companies are spending more to establish programs

and entice users to join

2. Signing up has become easier with mobile apps and

point-of-sale (POS) systems

Two reasons for increased loyalty program

membership:

1. Companies are spending more to establish programs

and entice users to join

2. Signing up has become easier with mobile apps and

point-of-sale (POS) systems

NEITHER HAS TO DO WITH TRUE CUSTOMER LOYALTY

3. Active participation in programs is falling

In 2014, 71.5%

of US loyalty

program

memberships

were “active”

In 2015, it was

roughly 50%

Drivers of Consumer Loyalty

Loyalty is a product of two components:

Transactional

Rational

Customer Experience

At points of engagement

Emotional

The value side is important: Discounts are a cost

of entry

“There are certainly

rising expectations

today around

discounting as the

cost of entry for

loyalty programs.”

—Jeff Berry, Research

Director, Colloquy

“Never discount …

the transactional

side. While it is

perhaps not the most

important thing, it is

still a very important

concept and a part of

most every program

out there.”

—Geoff Smith, CMO,

CrowdTwist

Saving money is the most common reason for

joining a loyalty program, including for millennials

But discounts without a deeper connection

actually reduce loyalty

“For far too long, ‘loyalty programs’ have

really just been a mechanism for distributing

price discounts, which really has virtually

nothing to do with loyalty. It frankly can

create precisely the opposite

behavior of loyalty. It can create loyalty

to the lowest price, wherever that lowest

price can be found.

—Katie Casavant, CEO, Kantar Shopcom

Consumers

join loyalty

programs for

discounts,

stay for

relevance of

rewards and

simplicity

Loyalty is an emotional state and depends on the

customer experience

“Loyalty is an emotional state. The way to

drive real loyalty is to create

engagement through experiences.

… Consumers are looking for a seamless

and pleasant experience with companies,

more than they’re looking for some kind of

future discounts.”

—Mark Taylor, Senior Vice President, Digital

Customer Experience, Capgemini Consulting

Four key elements of an engaging experience:

1. Relevant offers

2. Alignment with lifestyles

3. Exclusivity

4. Gamification

1. Relevance: People expect an even value

exchange for their data

“A huge frustration for customers [is that]

they’ve given you all this data. They’ve

stated they’re interested in your brand.

They’re shopping physically there and

they’re willing to download an app and opt in

to the various relationships with you, and

you’re still not using the data.”

—Gabe Weiss, Digital Customer Experience

Strategy Lead, SapientNitro

Lack of relevance is the biggest complaint about

loyalty programs

2. Alignment

with lifestyle

Successful loyalty programs align benefits with

brand positioning

‘Aspirational’ consumers want brands aligned

with their values

“Aspirationals are most driven to the

brands that are delivering

innovation, embedding purpose and

positive impact ... in a way that is on

performance or better, and on price parity or

better. It informs purchase decisions,

purchase intent, loyalty and evangelism.”

—Raphael Bemporad, Founding Partner and Chief

Strategy Officer, BBMG

Significant portion of consumers want programs

to align with their personal values

Percentage of internet users in North America who

consider donations to charities an important loyalty

program benefit:

Millennials: 30.0%

Gen X: 30.0%

Baby Boomers: 31.5%

Source: CrowdTwist, June 2015

Brands increasingly incorporate social

responsibility into branding—and loyalty

Source: Toms.com

3. Exclusivity: Strongest impact with younger

consumers

25% of millennials joined a program in the past year to attend a

members-only event, compared with 16% for the US

population

Source: Colloquy

Pepsi lets members cash in points for exclusive

experiences

Members can earn

points for hanging out

with other members

Members get access

to exclusive events,

concerts and trips

Source: iTunes

4. Gamification: Turning participation into the

reward

“[Loyalty marketing] needs to really help you

create that sense of accomplishment and

that sense of progress, and give you

meaningful feedback, but most programs

these days don’t because they’re

essentially the same, exact

program over, and over again.”

—Ankit Shah, Managing Director, Dopamine

Starbucks and

Target create

loyalty

experiences

that reward

participation

Starbucks Target

Source: iTunes Source: Cartwheel app

Mobile’s Effect on

Consumer Expectations

1. Consistent experience across channels

67% of US consumers in an iVend study said that it was “very

important” or “somewhat important” for retailers to have

an integrated view of them across channels

Source: iVend, December, 2015

2. Immediacy

Real-time reward

redemption can run as

high as 70% to 80%, a

figure that drops in half

when it’s offered in a

follow-up email two hours

later (Source: Ifeelgoods)

“Customers are willing

to even pay more in

points than they

typically would in order

to receive them

instantly.”

—Sean Claessen,

Executive Vice President,

Strategy,

Bond Brand Loyalty

3. Real-time relevance

“The messages we deliver with the highest

engagement rates are those data-driven

messages that have a personalized

context, that are based on both the

historical profile of the customer

and what are they doing in real

time.”

—Lars Albright, CEO, SessionM

Mobile Loyalty Channels

1. Email: Still the leading channel for loyalty

marketing

Nearly three times

as many US

retailers use email

marketing as offer

official loyalty

programs

Majority of

smartphone

owners use email

daily on their

phones

Dynamic content is gaining traction in email

marketing

32%of US marketers use dynamic content

Source: The Relevance Group, December 2014

Email works well when geared toward personal

preferences and points in the customer lifecycle

“The odds of opening an email right then when you’re

at the store is probably a little lower than a push

notification on a smartphone. [But] keeping that

overall customer lifecycle in mind and the

touchpoints that you’re creating along the way, I don’t

think it necessarily takes away from the power that

email has.”

—Cynthia Price, Director of Marketing, Emma

2. Loyalty apps:

More than a

third of US

smartphone

users planned to

use apps to link

to a loyalty

account for

holiday shopping

Most consumers do not use a retailer app

25% of US internet users use a retailer app (excluding Amazon)

Source: TSYS, June 2015

It’s very hard for retailers to break into

consumers’ app rotation

The largest

share of US

smartphone

owners use only

four to six apps

per day

3. Mobile wallets: Simplified loyalty membership

management and wide-scale push platform

“In terms of adoption, we are hoping that it’s

much easier to get people on board with

passes [than apps] because they don’t

have to download anything. It’s one

touch. These are people who have already

opted in to email, so this is just incremental.”

—Jonathan Wall, CTO and Co-Founder, Index

A majority of US smartphone owners express an

interest in storing loyalty cards in mobile wallets

Mobile wallets are still early in their adoption life

4. Social

media: Nearly

a third of US

loyalty card

members

follow the

brand on

social media

Social

networks

draw the

biggest share

of US users’

time spent

with mobile

Facebook Messenger has added new business

messaging tools

“This is a unique

opportunity for businesses

to interact with

people both where

they’re already

spending their time

and … also in this context

of one to one.”

— Benji Shomair, Director of

Product Marketing for Pages,

Facebook

Source: Facebook

5. Clienteling

Only 6% of

retailers in

North America

can identify a

customer on

store entry, but

nearly 40%

expect to be

able to by

mid-2017

Many consumers want more in-store

personalization

23% of North American consumers wish the personalized experience

they have online could be replicated in-store

Source: iVend, December 2015

Marketers are spending more on shoring up the loyalty of fickle

customers

Loyalty program membership is increasing, but active

participation is decreasing

Although value considerations are important, lasting loyalty is a

more emotional connection

Mobile has raised consumer expectations for channel

consistency, immediacy and real-time relevance

Email is the leading loyalty channel, but apps, mobile wallets,

social media, and mobile-enabled clienteling can deliver real-

time engagement

Built On

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Yory Wurmser

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