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Understanding Customer Loyalty
Key highlights
Warsaw, 27th February 2013
2 2Präsentationskennung
Agenda
A.What is loyalty?
B.What do Polish consumers expect?
C.How to create value?
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3 3Präsentationskennung
A. What is loyalty?
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Well-designed loyalty activities lead to generating extra value to business
Customer loyalty efforts aim at:
• understading customers not receipts
• increasing no. of customers
• increasing depth of relationship (repeat purchase)
• increasing breadth of relationship (cross-category purchase)
through providing extra benefit to customers
LOYALTY
=
VALUE
5
No. of active customers is one of key goals for any loyalty-building efforts
New
Active
Unknown ProspectKnown Prospect
Churning
6
Loyalty efforts support closing "customer purchase cycle" in addition to providing extra strength at each stage
Analysis where to purchase
Awareness where to purchase
Purchase transaction
Post-purchase evaluation
Purchase need
Customer purchase cycle
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Moreover, loyalty efforts deliver extra reason for cross-category purchases
Analysis where to purchase
Awareness where to purchase
Purchase transaction
Post-purchase evaluation
Purchase need
Analysis where to purchase
Analysis where to purchase
Awareness where to purchase
Purchase transaction
Post-purchase evaluation
Purchase need
Analysis where to purchase
Awareness where to purchase
Purchase transaction
Post-purchase evaluation
Purchase need
Analysis where to purchase
Analysis where to purchase
Awareness where to purchase
Purchase transaction
Post-purchase evaluation
Purchase need
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Every business runs numerous loyalty efforts...
Order-value-based discounts
Card-based discunts
-50% SalesBuy 2 for a price of 1
Differentiated service levels
Gifts
Contest/competition Card-based points program
Coalition scheme
Free samples
Exclusive offers
First-minute sales
Collectibles
Subscription sales
Mobile app
Facebook fanpage
Charity/CSR
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...moreover, each has its own design with many questions to be answered
All details must fit one another perfectly!
Can IT support this?
How many basepoints should we offer?
How to targetpromo offers?
What assortment should we have in our reward store?
How tocommunicatethe program?
Should wehave cards?
What's the rightincentivization level?
Whom do we want to offer our program to?
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Key thought: loyalty efforts need to be aligned across complete business value chain
LOYALTY IS...
...INTEGRATED CUSTOMER-CENTRIC APPROACH
...LONG-TERM JOURNEY THAT NEVER STOPS
...INTEGRAL PART OF YOUR COMMERCIAL STRATEGY
...EVERY BUSINESS' DAY-TO-DAY JOB
...END-RESULT YOU ACHIEVE
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In principle there are two types of loyalty schemes...
Standalone loyalty program Coalition loyalty program
heavy buyers medium buyers light buyers
visit at partner A stores visit at partner A storesvisit at other PB partner
Customers
Mid- and low-frequency of shopping at partner companies makes their
standalone program relevant only for heavy buyers
Coalition loyalty scheme ensures program relevancy for all customer segments – also medium- and light-
buyers at partner
20%
30%
50%
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...offering different business benefits
Customer acquisition
Customer loyalty
Standalone loyalty program Coalition loyalty scheme
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2
Direct marketing
Marketing efficiency
3
4
Customer insight5
OVERALL
low impact high impact
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13Präsentationskennung
B. What do Polish consumers expect?
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Two thirds of Polish consumers participate in one of three loyalty schemes: PAYBACK, Clubcard or Vitay
MEMBERSHIP IN LOYALTY PROGRAMMES [%]
TOTAL PAYBACK members PAYBACK non-members
P4. Are you a member of any of the following loyalty/bonus programmes?
Base: Total: total sample, N=1000, PAYBACK members, N= 239, PAYBACK non members N=761
CAPI Omnibus
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Most important features of an attractive loyalty programme are: possibility to quickly redeem and the possibility to use the card in different stores – clear vote for coalition-type schemes
ATTRACTIVE FEATURES OF LOYALTY PROGRAMS [%]A3. What should an attractive loyalty program look like in your opinion?
TOP2BOXES:2009* vs 2012
75 70
76 69
72 67
67 67
-- 65
64 64
60 56
57 53
61 51
65 48Base: Total: total sample, N=500 *CEM
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16Präsentationskennung
C. How to create value?
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Customer value increases in line with customer's engagement
All Customers Active Participants
(Registered customers)
Potential
(Customers with cards)
Users
(Coupon/promotion users)
BusinessImpact$
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There are three important challenges each scheme needs to face and find a solution to
All Customers Active Participants
(Registered customers)
Potential
(Customers with cards)
Users
(Coupon/promotion users)
BusinessImpact$
Awareness1
2
3
AcknowledgementAttractiveness
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Attractiveness is usually the most difficult part...
Effort Benefit Cost Impact
Customer's perspective Business's perspective
Effort required from customer to receive extra benefit
Value of Benefit as perceived by the customer
Cost of Benefit paid by the business to customer
Monetary value generated by consumers meeting the required
effort
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...with three potential outcomes
"Customer Wins"1:0
ineffective incentive
"Win-Win"1:1
MAX IMPACT
"Business Wins"0:1
too difficultto bring impact
Customer's perspective Business's perspective
EffortBenefit Cost
Impact
CostImpactEffort
Benefit
Effort Benefit Cost Impact
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Finding balance requires proper analysis to derive relevant customer insight...
Segmentation
A
○ Who are our customers?
○ What objectives do we want to achieve with each of segments?
○ What do these customers seek?
Targeting
B
○ Which segment is relevant for our business objective?
○ What is the right size of our target group to receive the offer?
Communication
C
○ How to communicate value to these customers?
○ How do they read information?
Cu
sto
mer
In
sig
ht
DWH
Segmentation of customer base Identify relevant customers Define relevant communication approach
Segment 1
Segment 2
Segment 3
Segment 4
Segment 5 run
costs
revenues
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...to enable relevancy and personalized communication
A B C DDefine business objective
Select target group
Select channel
Select timing
Design offer
1
2
3
4
5
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Customer insight is a continues process
○ High flexibility in adjusting to current business needs
○ Maximization of cost efficiency based on campaigns customization and targeting
○ Continues improvement and learnings based on facts and data analysis
○ Measurability of effects and more adequate business case planning
○ High control and coordination efficiency – comprehensive solution delivered by one provider
Analyze sales/ purchase patterns
Design adequate marketing campaigns
Implement and communicate to target
audience
Reward changed
behaviours
Loyalty Partner cooperation model Key benefits for our clients
Customer Lifecycle
Management
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payback.pl
PAYBACK Polska
SkyLight Buildingul. Złota 5900-120 Warszawa
Phone: +48 22 212 51 00
