CMO Challenge Report by Loyalty360 · represent the voice of brands and suppliers in the market. For this CMO Challenge report we asked CMOs and top executives in marketing and

CMO Challenge Report by Loyalty360 | sponsored by Aspire Lifestyles

L o y a l t y P r o g r a m D e s i g n

SUMMARYHardly a day goes by without seeing an article or research piece that explores the topic of marketing to Millennials. We’ve all heard the story… Millennials act as “tastemakers” for the general population. They haven’t known a world without the internet and mobile. The group is ethnically and socially diverse. Purchases related to life stages – like cars, homes and baby strollers – aren’t as predictable as with previous generations… With tremendous purchasing power, both now and for years to come, building loyalty among Millennials could be key to the long-term health of a brand.

But while Millennials garner much attention for their potential impact on business, marketers have not abandoned their predecessors – namely Gen X and Baby Boomers – because of their critical impact today. The challenge for many brands is orchestrating a customer loyalty strategy that engages many different segments. How should marketers design loyalty programs that win the hearts and minds of consumers, when loyalty drivers for each target segment of the population can be different and unique?

At its core, true brand loyalty is predicated on being able to listen to the disparate requests and expectations of customers and personalize a response on the right channel, timeframe and cadence the individual customer prefers. Brands are challenged to properly execute on this true 1-to-1 marketing, especially in regard to the simple loyalty programs of yesteryear, based on points and thresholds. As loyalty programs have evolved from transactional, RFM-based programs to seamlessly integrated experiential, multi-touchpoint programs that engage audiences, we see challenges in understanding how to effectively evolve processes and administer programs in a truly holistic way.

“How should marketers design loyalty programs that win the hearts and minds of consumers, when loyalty drivers for each target segment of the

population can be different and unique?“

3 Powered by Loyalty360 • LOYALTY360.ORG

BACKGROUND As an unbiased, objective and market-driven association for loyalty marketers, Loyalty360 is in the unique position to deeply understand the state of customer loyalty. We conduct research and talk daily with marketers, those who are working to build lasting relationships with end customers, to understand the efforts their companies are putting into customer loyalty. We also work closely with the companies that offer the cutting-edge tools, technology, platforms, consultative and strategic services to help marketers on their quest to earn loyal customers.

With CMO Challenge reports, Loyalty360’s goal is not to provide yet another data point to a market already saturated with studies and research. As an association focused on customer, channel and brand loyalty, our goal is to ask open-ended questions to help us frame challenges and opportunities in a much deeper way than a prescriptive, quantitative survey would. Our goal is not to be prescriptive, but to enable discourse and discussion. It allows a deeper, unfettered, unbiased assessment of the market. Do we have beliefs and perspectives? Yes, we do. Yet the value and mission of Loyalty360 is to objectively represent the voice of brands and suppliers in the market.

For this CMO Challenge report we asked CMOs and top executives in marketing and operations “How is your loyalty program designed to meet the needs of multiple segments of the population (i.e. Millennials, Generation X, Baby Boomers, etc.)?” Looking collectively at the responses we gathered from that question in September and October, 2015, we uncovered insights about the specific tactics brands are using to engage with target demographic segments.




WHAT WE FOUNDWhat we found is that most loyalty programs are designed with features and benefits that appeal across all target segments of the population. Many are focused on rewards, ease of use and value as “one size fits all” loyalty drivers. Segment-specific strategies focus on communication and engagement. Marketers tell us that understanding, at the most micro-level, the content, offers and communications that will engage customers and keep them engaged is critical. Some brands are focused on personalization at the 1:1 level, others communicate based on channel preferences at the segment-level and many use a combination of both.

Our discussions with marketing and operations executives revealed segmentation strategies that focus on four distinct approaches:

Personalization

Channel preferences

Benefits and value

Features and functionality

Personalization can be quite challenging for brands, yet there is an almost immeasurable upside and opportunity for those who can define, implement and administer programs that are built around the idea of 1-to-1 marketing. The ability to listen is quite important, but being able to respond is even more so. Do not lead your customers to believe that you plan to do something that will enhance your relationship with them if you are not able to execute. The tasks of personalization and channel preferences are increasingly difficult, with evolving technology and channels that are expanding on a daily basis due to

significant capital market investment, yet they present a significant brand value and upside in the market when done effectively. Finding the right tool for the job is quite daunting, with 1,900 marketing technologies (and growing) in the marketing landscape.

We have been told as marketers (all the way back to B-school) to never sell features and functionality, but to focus on benefits and value. The traditional purview of loyalty is more closely aligned to benefits and value and features and functionality. Those typically have been established from the top – from focus groups and the C-suite – and may not actually be shared by your audience. The challenge and opportunity is to make sure the features and benefits are shared and understood by customers. Benefits and value will vary based on demographic and other assorted factors. Brands that can listen to their customers before, during and after engagements – and measure the actual outcome versus the stated intent in relation to features and benefits – will set the bar higher for the remainder of the industry.

Herewith, is a snapshot of the challenges and opportunities of listening, discussed by those who are leading marketing and customer experience at top brands.

We hope you take away a quote or piece of insight that is a reflection of a brand or this industry, as these quotes help to give context and color to standard quantitative statistics and may be something you can relate to in a more meaningful way.

“Loyalty should be built at the personal-level“

PERSONALIZATIONMany marketers say that focusing on segments of the population is not enough; loyalty should be built at the personal-level. These loyalty programs are designed to engage across segments, but communication between the brand and customer is highly personalized.

At Finish Line, our target customer is between the age of 18-29 with the sharp point at 23. We recognize all customers are unique and each individual has his/her own needs. Our loyalty program, Winners Circle, has rewards and privileges that benefit all members and offers personalized content, promotions and incentives which are designed to deliver value to meet the current and future needs of each customer.

A loyalty program’s benefits should be easy to understand for customers of all generations and appeal to them based on the rewards they will receive – then they’ll consider enrolling. Once enrolled in our Winners Circle loyalty program, we start deepening the relationship with personalized triggers as well as targeted content and promotions with the intent to engage and incentivize them for demonstrating a desired behavior.

Recent examples of this would be our efforts to offer targeted, localized content by delivering tax free holidays and sport team specific messaging to customers living in geographic areas that would most benefit from it. We have also offered early access for our Winners Circle members to our End of Season sale, Free Shipping promotions, point round up campaigns as a thank you for their business and targeted communication to keep customer informed of their loyalty status.

- Imran Jooma, Executive Vice President and Chief Omnichannel Officer | Finish Line

Creating a customized digital experience really has less to do with age demographics than guests’ individual needs and preferences. Whether it’s a couple traveling with their children, adults traveling solo, a girlfriend getaway or a family reunion, with data-driven marketing we’re able to serve them content that is relevant to what they are searching for in their vacation. Planning for your vacation should be a fun experience that begins the moment you visit our site.

- Christine Esteve, VP Ecommerce | Carnival Cruise Line

It’s designed to focus on the intersection between a love of gaming and a love of game stop. That is a segment of the population that we certainly layer on top of that – the whole segmentation strategy within our business. We don’t change the core set of loyalty propositions according to those different segments, we make sure the proposition has enough at its base level to appeal to all of the segments. And then once you’re in the system and we can understand who you are, and we can then tailor market to you. But the base proposition is there to cast the widest net possible.

- Frank Hamlin, Chief Marketing Officer | GameStop Corporation



“...all customers are unique and each individual has

his/her own needs.“

“Different segments of the population have unique preferences for communication tools/channels“



CHANNEL PREFERENCESMarketers see that different segments of the population have unique preferences for communication tools/channels. Brands are focusing segmentation strategies for loyalty programs on connecting with consumers where they already are.

We know engaged customers are more likely to be loyal customers. We use customer journey mapping to understand the moments in a customer’s lifecycle that matter most, and use technology to deliver a better experience at those moments. It can eliminate a pain point or create a “wow” moment. We also have multiple points of contact with customers throughout the vehicle ownership cycle – from when they are researching vehicles to purchasing to servicing the vehicle. Through the multiple channels and points of contact, customers of all segments can connect with us based on their preferences.

Along with loyalty programs, our products and services create unique opportunities to increase customer engagement. With our OnStar 4G LTE connectivity, customers can bring their connected life with them into their driving experience and the vehicle can come with them into their lives outside of it. Customers using OnStar and other connected experiences on a regular basis are more likely to return to our dealers for service and eventually, their next vehicle. They are also a great source of “in the moment” feedback, which enables us to be more responsive in resolving potential issues and improving our sales, service and products.

- Jim Brady, Director of Global Strategy and Development for Customer Experience | General Motors

Our wellness+ with Plenti loyalty program is highly personalized, addressing the unique needs of all customers. Both content and offers are developed based on what our customers want, and our programs goes far beyond typical segmentation. Additionally, we are developing additional digital channels for our customers to engage in the program both through Plenti and Rite Aid directly. These channels will apply heavily to how millennials and GenX behave and interact with technology.

- David Abelman, EVP of Marketing | Rite Aid Corporation

What tool or technology is most frequently used by your customers to engage with/access your loyalty program?

Mobile App37%

Website25%

Email22%

Phone10%

Other3%

TextMessaging/SMS

3%

Source: Loyalty360 Pulse online survey. n = 84



CHANNEL PREFERENCES...continued.

Marcus Theatres’ Magical Movie Rewards® program targets different segments of our membership base with personalized information, based on guests’ varying moviegoing interests and tastes. Members are provided with customized offers and movie recommendations that are more distinct to that member’s desired moviegoing experience. For example, if a member is interested in family films and a nearby theatre is hosting a family-friendly special event, we’ll tell them about it. On the flip side, we’ll stay away from sharing information about horror movies with a family-focused audience. We’ve found that these customized communications, instead of a one-size-fits-all approach, support Marcus Theatres’ goal to provide the most comfortable and convenient moviegoing experience possible for guests of any demographic.

- Ann Stadler, VP and CMO | Marcus Theatres

Currently, the loyalty plan used focused on donors with an average age of about 35. This group is tech savvy and receptive to emails and mobile alerts. For donors falling outside of this demographic will provide high value print reports detailing our work. The program is also delivered through multiple media sources meaning each demographic will be engaged in a way they are comfortable with.

- Andrew George, National Stewardship Specialist | Canadian Red Cross

Understanding the difference between all these segments, we are doing our best to reach them through different communications channels. Some of our communications channels include social media, advertising, print, web banners and a strong web presence.

- Malcolm Persaud, Sr. Product Planning & Development Manager, Heating and Air-Conditioning Solutions Group | PanasonicCorp. of North America

We primarily seek to understand what, how, and when each of the customer segments we have identified along the loyalty dimensions, want to hear from us and then provide products and/or services that would meet those specific needs. For example, millennials would prefer to pay their natural gas bills via mobile devices or web/electronic billing and payment; baby boomers on the other hand more typically prefer paper billing or bank draft programs. Another example would be that millennials are more apt to schedule various services via an online scheduling system whereas baby boomers are more likely to call our customer contact centers in order to talk to a representative. Specific service campaigns are geared toward specific segments, taking into consideration such factors as geography, demographics, socioeconomics and psychographic data.

- Cassandra Newsome, Manager – Research and Customer Program Development | Piedmont Natural Gas

“Understand the difference between segments, and do your

best to reach them through different communications channels.“

“Provide value to the customer and align with the brand’s mission“



BENEFITS AND VALUEA program that truly provides value to the customer and also aligns with the brand’s mission should appeal to and drive loyalty among all target segments.

There is an ongoing debate about the best way to win customers: customer acquisition is a frequent approach, but one that is known to be expensive and potentially unreliable. Hence the more recent focus on creating true customer loyalty through brand affinity, ease of use, and – of course – having the best rates. For us, a large piece of loyalty is through our Expedia+ rewards program. We recently introduced a new element of our program, called Travel with Points, which allows customer to apply their earned rewards points directly to their hotel payment in the checkout path. This is a novel approach among ecommerce players – one that enters a new playing field about creating a balance between two items that used to tip the scale in opposition: the first being creating a product that enables a quick, straightforward, trusting experience for members to redeem their points. Put simply, we think travel with points is the easiest way for all segments of the populations to use rewards points on the web. And what’s more, it guarantees that Expedia+ rewards members will find the cheapest hotel rates anywhere on the web at our site. Travelers, of any segment of the population, get to earn and burn points how they want. Additionally, we offer personalized programs for specific types of travelers, such as small business travelers to ensure everyone’s needs are met.

- David Doctorow, CMO | Expedia

BWR is designed to offer members a variety of ways to redeem their points depending on what they want. BWR members will continue to enjoy the same great rewards variety and value that they do today. This includes the ability to redeem points for free night stays, the Best Western Travel Card, gift cards for dining, shopping and entertainment, gas cards, airline/partner rewards, and merchandise. For a complete listing, go to bestwestern.com/rewards.

For more than 25 years, Best Western Rewards has been one of the most generous loyalty programs where points never expire. It has the lowest redemption thresholds for awards, and is one of few loyalty programs that is truly international.

- Glen MacDonell, Managing Director, Loyalty & Partnership Marketing | Best Western International

The RediCard program is designed for everyone. Its economic-friendly perks and rewards positively affect the pocketbooks of guests, no matter their age and customers from Millen-nials to Baby Boomers can appreciate that.

- Marina MacDonald, CMO | Red Roof Inn

What is the most important aspect of a customer loyalty program?

ExclusiveRewards

/Benefits32%

Customer Recognition/Personalization

28%

Ease ofProgramAccess

25%

ExceptionalService

25%

Other3%




BENEFITS AND VALUE...continued.

When you look at hotel loyalty programs and what members want out of them, there’s a clear answer that comes back regardless of age or travel preference: a free night. In designing the new Wyndham Rewards, we took an approach – in the form of a free night at any hotel for just 15,000 points – that really democratizes loyalty and makes it simple for all of our members to earn generous rewards. At the same time, we also introduced the Wyndham Rewards Wyzard. Empowering, optimistic and whimsical, he’s a character who resonates across multiple demographics and reinforces for travelers of all ages our commitment to rewarding those who’ve earned it.

- Noah Brodsky, VP Worldwide Loyalty and Engagement | Wyndham Hotel Group

The great thing about this new partnership is it enhances the overall appeal of The League to all generations. Millennials continue to lead an active lifestyle and want to be connected, while it is now more of a priority in Generation X to stay fit. Even baby boomers want to stay healthy to reduce health care costs. We are excited to reward customers across generations for their fitness activities through MapMyFitness.

- Crissy Davis, VP Customer Strategy | Sports Authority

We cater to all guests with the 24-hour email, phone number, login with Google and Facebook and My Account on the web/mobile for complete transparency.

- Pamela Barnhill, President & COO | InnSuites Hospitality Trust (IHT) and InnDependent Boutique Collection (IBC) Hotels

Our loyalty program caters to our biggest fans. We know we appeal to a wide segment of the population so we try to create offers for everyone – whether you’re shopping alone or with your family, or if you love to purchase the same product at every visit. This fall, we launched our new pumpkin spice nuggets exclusively through our loyalty app for the first two weeks. Initially offering this “secret” menu item to a select group provided us with a unique way to engage and reward our loyal users. Plus, we know the millennials and generation x segments, especially, love all things pumpkin spice. We also understand that value and fun freebies appeal to everyone, regardless of your cohort. Earning points for free products is a fun way to drive consumer engagement with our brand.

- Heather Neary, CMO | Auntie Anne’s

“...value and fun freebies appeal to everyone...“



BENEFITS AND VALUE...continued.

Aligning our products and messaging with our fan segments has been key for our growth this year. As an example, we’ve felt the need to grow our next generation of fans as our average season ticketholder age is 54 years old. In order to address this we launched a new product called “Trail Blazers Student Pass”. Students opt-in to receive a text/ push notification on game day should last minute seats become available. Once notified, the student is able to enter our mobile app to purchase tickets at a special student price. Then, once in venue our students can purchase seat upgrades should one of our season ticketholders tell us they can’t make the game (also done through our app). The program added 5,000 new student names to our database and helped us sell last minute distressed inventory on game days.

- Vincent Ircandia, Senior Vice President of Business Operations | Portland Trail Blazers

I am not interested in serving millennials, but I am interested in being attractive to Gen X because they turn 50 this year. But we are not trying to be all things to all people; we are trying to serve the various segments within our core demographic.

So we have people in our demo who are less vulnerable and more vulnerable. That can mean everything from those who are still working and have a healthy household income and live an aspirational lifestyle. We want to make sure that our loyalty program services this group. So you can see in the catalogue for redemption, we may be featuring the trip of a lifetime to Africa, or a flat screen TV, which are all aspirational things.

But we also have a more vulnerable audience who is very focused on the everyday savings of their family, in keeping their lights on, in putting food on the table. This program also serves a very real need because it helps people save money.

So we want to make sure that we are talking to the core segments of our audience, and much less worried about being attractive to millennials.

- Nataki Edwards, VP of Digital Strategy & Operations | AARP

“Grow Your Next Generation

of Fans!“

“Build a program that engages multiple segments of the population“



FEATURES AND FUNCTIONALITYBuilding a program that engages multiple segments of the population must start with an understanding of loyalty drivers for each segment. A combination of cross-generational and segment-specific features is important, as well as features and functionality that are differentiated from the competition.

Amtrak Guest Rewards is designed to meet the diverse needs and expectations of our customer base and our membership represents the full spectrum of generations and lifestyles. The program, at its core, is designed to provide flexibility, value and ease of use. From a generational standpoint, Millennials expect the program to work as advertised, to be easy to use, offer compelling options and provide a fast pathway to rewarding benefits. We see these traits as cross-generational and appealing to all of our member segments. Based on this customer feedback, we are launching new features in 2016 that will focus on making the program even easier to use and more flexible for members. We believe these improvements to the program will meet the needs of our various members, driving a higher level of engagement and satisfaction with each member’s Amtrak experience.

- Rob Friedman, Brand Management and Marketing | Amtrak Vice President

The Ounce Back® loyalty program is offered in two different options, both digitally and plastic card style, to fit the needs for all age groups. We also segment our loyalty emails by region so our franchisees can target their most loyal customers with special regional offers. In addition, we personalize communications whenever we can, which is appreciated and valued by all age groups.

- Karley Harper, Director of Brand Development | Orange Leaf Frozen Yogurt

The Klein Loyalty Program is quick, easy to understand, and simple to use. Customers start earning points on their first purchase. Then they can redeem points for Klein merchandise. $1 of merchandise = $1 point. So now, not only are they getting a quality tool, they are getting free merchandise too. Points can be tracked and redeemed online through our Tradesman Club.

- Tom Barton, Product Marketing Manager | Klein Tools

What is the most important way you differentiate your loyalty program from your competitors?

Ease ofRewards

Use/Redemption

33%

Unique Rewards29%

MultipleTechnologyTouchpoints

14%

ProgramFlexibility

10%

ExceptionalCustomer

Service14%




About Loyalty360

Loyalty360 is an unbiased, market driven, voice of the customer focused clearinghouse and think-tank that is committed to bringing loyalty to the forefront as a critical marketing strategy. A trusted source for cutting-edge research, best practices, and networking opportunities, Loyalty360 gives members the expert insights and guidance they need to better understand loyalty and develop programs that effectively engage their customers and employees and build stronger relationships with them.

Loyalty360 offers you a roadmap to engaging customers and driving loyalty through research, reports, webinars, conferences, news, expert articles, multimedia and more. We pride ourselves on our ability to continuously deliver relevant and timely customer loyalty and engagement marketing best-practice perspectives and industry thought leadership on a variety of topics.

About the Author

Emily Heitkamp, Vice President, Marketing

As an experienced market researcher and consumer insights expert, Emily has guided some of the most valuable brands in the world on their marketing strategies. At Loyalty360, Emily’s research and thought leadership provides organizations with an understanding of broad trends in the marketplace, helping them develop strategies for creating profitable and loyal customers.

Prior to joining Loyalty360, Emily held client services positions with The Nielsen Company, where she advised clients on measuring and optimizing advertising campaign effectiveness. Emily previously served as an account manager at NM Incite – a joint venture between Nielsen and McKinsey – helping brands measure and act on the chatter about them on social media. Prior to that, she honed her analytics skills as a research manager with Nielsen BuzzMetrics, a social media measurement solution, starting in 2007 when social media was in its infancy. In her time at Nielsen, Emily grew adept at packaging vast amounts of consumer and market data into easy-to-understand and actionable insights for clients, which makes her a valuable asset for Loyalty360’s members.

This report is sponsored by Aspire Lifestyles. Aspire Lifestyles is a leading global B2B

benefit solution, Concierge service and personal assistance provider. Our wide range

of custom-built programs are designed to effectively engage our clients’ customers

by providing them whatever they need, whenever they need it, wherever they are

in the world. We quite literally do whatever it takes to deliver this promise all

around the world: to millions of people, 24 hours a day, 365 days a year.

Our global footprint spans 21 Concierge Centres in 19 major cities, with close to

1,000 Concierge Consultants speaking over 90 different languages and dialects

call 513.800.0360 | visit loyalty360.org | follow @loyalty360call 513.800.0360 | visit loyalty360.org | follow @loyalty360

Copyright © November 2015 Loyalty360. All rights reserved. Loyalty360 is a registered trademark of Loyalty 360, Inc. Other product and service names are trademarks or registered trademarks of their respective companies. Unauthorized reproduction is

strictly prohibited. Opinions reflect judgments at the time and are subject to change.

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CMO Challenge Report by Loyalty360 · represent the voice of brands and suppliers in the market. For this CMO Challenge report we asked CMOs and top executives in marketing and