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Karl Schuster (president of Carlson Marketing Asia Pacific) presented on loyalty as a business strategy at Oracle's CRM and Loyalty Event event in Auckland.
Oracle's CRM Solution Consulting lead Andrew Davidson first profiled Oracle's offerings in this space. Interestingly, Oracle's customer facing solutions are based on a four core components around a Siebel core. Sales and Service form the expected base and are pretty much table stakes for a customer application. The addition of Marketing tools lift the value of the offering from tactical to strategic. The inclusion of Loyalty as the fourth pillar recognises the importance of sustained customer relationships.
Karl Schuster followed Andrew and addressed a list of best practices that our global clients have implemented or are implementing in 2010. Not all suit all industries and not all necessarily belong together in the same program. However they're a useful starting point.
 They are : 1. Multi-channel Quick Enroll : create as few barriers to joining as possible. Ask as few questions as possible when a prospect signs up to the programme. Ask for more data later on in the time of redemption.
2. Preference Center: Where the member manages their communication choices, such as their desired channel, timing, frequency.
3. Member Get Member : Allow the top loyalists in your program to become ambassadors and leverage their own networks to drive acquisition.
4. Multi-channel code submission: is a feature that enables a member to submit an on-pack rewards code via SMS, mobile website, email, web cam or any other channel.
5. Program Dashboards. get all the program data together in one view to be able to assess the performance of your investment (well supported in the Oracle solutions).
6. Instant Rewards: usually for smaller redemption value that drive engagement as an adjunct to the accrual of points. This is also an efficiency play that doesn't have to deal with physical goods.
7. Loyalty program toolbar and widget: Distribution of content and functionality via web browser toolbar or desktop applications.
8. Mobile Program website : The mobile internet is growing faster than than the PC based internet ever did. Customers are trained now to expect ubiquity of access.
9. Loyalty program fan page and feed: Specific fan-based messaging for Facebook, Twitter and others.
10. Dynamic e-Offers: Deployment and overall management of personalized, highly relevant, location based incentives
 Andrew Davidson (Oracle) and Karl Schuster (President Carlson Marketing Asia Pacific) take questions from the floor. |
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News out today is that Rick Ferguson, most recently Editorial Director of Colloquy has joined our parent Groupe Aeroplan as Vice President Knowledge Development effective immediately.
Rick picks up a role as thought leader for our group. If you've been to any of the key loyalty conferences in the Asia region or further afield including the USA, Europe and Canada - you'll likely have heard Rick speak. You've probably also read his analysis of our loyalty industry in the weightier publications such as the Wall Street Journal and Forbes.
There's two major trends we've seen developing in our market that Rick has recognised and analysed on the global stage.
The first is the struggle that travel loyalty programs had in retaining both members and their engagement during the recession (while the opposite has been proving true in other industries, especially retail) . We saw Airline Frequent Flyer and Hotel Frequent Stayer Programs, along with the capital intensive industries they represent, struggle in 2008 and 2009 (and even into 2010). Quoted in AdWeek in July of 2009 last year, Rick commented that “The disparity between travel and the other two industries featured in our latest research mirrors the shift in consumer spending away from the travel sector, in which both business and leisure travel have seen cutbacks, and toward retail categories, particularly in the everyday spend categories of grocery and fuel.”
Rick has also contributed some excellent analysis on another key trend that's evolving and beginning to mature in our market : the targeting and engagement of brand advocates through Word of Mouth. We define Word of Mouth as the output from a brand advocate. It's the opposite of Amway. Customers will recommend a product or service to friends and family not because they get a reward (or more sales as they would in Amway) but because they believe it's the best product or service. (The Net Promoter Score is a good way of determining who is a likely WOM candidate). Rick commented in early 2009 in Adweek that marketers “should find brand champions buried within their program memberships, and build relationships that reward them for positive word-of-mouth activity.”
Rick's thought leadership and deep experience is going to be let loose on a (now) very wide range of our proprietary metrics, data and learnings from our various business units. |
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The Sydney Morning Herald carried an article entitiled "Consumers paying high price for loyalty card rewards". The article was based on research from Choice (most likely similar to New Zealand's Consumer magazine). Their research argued that shopper loyalty cards offer "little benefit to shoppers" and profiled the value the key grocery retail programs offered .
To earn a $50 gift card in Fly Buys requires spend of $15,000 at Coles (or think New World in New Zealand). At an average shopper's purchase rate of $156 per week that would take 2 years.
It would be faster at Woolworths Everyday Rewards program (think Progressive Enterprises Onecard in New Zealand) with customers earning the same $50 gift card after $11,000 or 1 year and 4 months.
One could indeed argue that for the average customer a $50 gift card in return for either 1.3 (Woolworths) or 2 years (Fly Buys) worth of dedicated shopping may not be enough return. That's debatable and some of our data would say otherwise.
However the real issue here is the use of "Average". There are no average customers and loyalty programs serve to enhance differences, especially financial ones, between them.
 The figure shows an extract from an actual retail program. The customer base is ranked from best (buys the most) to worst customer along the x axis. The y axis then shows total sales from these customers. It's clear that the first few customers produce significant sales and the bottom customers very little.
For instance - the customer base once laid out from best to worst - is then cut into 10 deciles of equal turnover. In this case total turnover is $44m and each of those deciles is worth $4.4m. The first $4.4m of sales (or Decile 1) comes from only 91 customers. Each spends $49,000.
The last $4.4m of sales (or Decile 10) comes from over 42,000 customers. Each of them spends only $104.
Looking at this distribution, different customers are treated differently and top customers get inordinate amounts of value. In return they provide inordinate amounts of sales. |
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There has been a long running loyalty program battle in the UK between Tesco (who were first to launch a loyalty card strategy in 1995) and Sainsburys who are a member of the Nectar coalition loyalty program (which I've written about before here). Much of the reporting about these retailers right now relates to their use and expenditure on their respective loyalty programs.
The battle heated up just before Christmas with Tesco doubling the points customers could earn - effectively doubling the value. Sainsbury's seems ave followed suit this month with an increase in the number of nectar points offered.
Tesco also mailed out GBP 67 million of vouchers in November that would normally have been sent in February.
So - who's winning?
Christmas trading results are due out in the next few days for Tesco but there's a concern that they've not got it right. Some analysts expect that their sales growth will be below that of their rivals. They're also concerned that Tesco will include GBP 100 million worth of loyalty vouchers in their sales figures (though the same analysts suggest that if they do this - decreasing their reported figures by 1.5% will deliver a true reflection of like-for-like sales).
Sainsbury's has already reported better than expected results for the Christmas period. In headlining these results - Sainsbury's CEO Justin King noted that "There will be a big difference between the haves and have-nots, with data. Those with loyalty data can see what customers are doing. If they are going elsewhere for a certain product, we can incentivise them to buy it with us.”
This is language that, in the past, would only have been heard from Tesco and their loyalty program partners dunhumby. In the Nectar program this data is worked by LMG Insight and Communication for Sainsbury (full disclosure : LMG is a sister company to Carlson Marketing. We're both owned by Groupe Aeroplan).
At Carlson we have always promoted the use of data to drive customer programs. The data in question for these two giants of UK grocery retailing is all the food their customers buy. The data that flows from customer's purchases of food is so accurate in determining their future buying habits that, in the words of the team at LMG, "You are what you eat".
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We recently inked a deal with loyalty technology company Welcome Real-time to deliver a combined solution in the Oceanic and Asia Pacific market. It's called Carlson Marketing Point of Sale Rewards and it provides personalised loyalty experience in real time, at Point of Sale (POS). The solution enables customers to redeem points for purchases at the till (instead of using money) and helps credit and debit card issuers to deliver personalised offers at the point of sale. It provides retailers with a great opportunity to market to their customers through their cards. retailers can treat different customers differently based on the RFM (Recency, Frequency, Monetary Value) of the payment card at their outlets. They don't need to know who the customer is and can provide an automated offer at the bottom of the till slip. Welcome Real-time has customers in 30 countries and in the past year inked two serious deals. The first is with BarclayCard in the UK and the second with Maritz in the USA. Though not yet launched, these clients will bring Welcome Real-time into the G20 frame.
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