Exploring near-term loyalty marketing strategy

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By: Wise Marketer Staff |

Posted on December 15, 2010

Exploring near-term loyalty marketing strategy

The recent Loyalty World conference in London attracted a globally representative audience of marketers from a variety of sectors, with a full house jostling for position to see Colloquy's Kelly Hlavinka and LoyaltyOne's Bryan Pearson open the proceedings, according to our contributing European Editor, Peter Wray.

Among the conference's overall findings and themes, the topics of the rapidly changing mobile channel and of course best practices for customer loyalty programmes were at the fore.

Consumers around the world, it seems, are changing their media consumption habits, and the customer loyalty industry has to move with its target market. This is becoming ever more complex. As the title of Hlavinka's presentation suggested - 'Access: Everywhere, Device: Anything, Connect: Everyone, Content: Everything' - loyalty marketers really do need to start thinking about how, when and where they connect with their customers.

The conference began with a well-attended customer analytics 'focus day', in which LMG (operator of Nectar) and Yahoo gave a joint case study on leveraging online and offline customer loyalty data. The Nectar coalition loyalty programme in the UK is already well established with a claimed 50% penetration of UK households, 16 issuing offline partners, several hundred online issuing partners, and over 30 rewards supply partners.

Nectar already cover a broad media portfolio of direct mail, quarterly mailings to 16 million collectors, in-store coupons, market research, web and mobile digital channels. But it has also now partnered with Yahoo to develop the 'Consumer Connect' initiative, which aims to blend target users based on the actual products they purchase offline with measurement of the impact of online exposure on actual offline sales.

Across six different FMCG categories this initiative is achieving sales uplifts (compared with a control group) of 41% on average and an ROI of 2.93. Claiming to be the first initiative of this type in Europe, and with over 500 campaigns already run in the USA by Yahoo for FMCG clients, it is likely to be followed by other large scale players as digital media and mobile application penetration reaches critical mass.

The UK managing director for Nectar, Jan-Pieter Lips, added more background in this area with a presentation in which he focused on 'Why mobile, and why now?', featuring details of LMG-commissioned research which highlighted the importance of several mobile phone-based internet access developments, including:

  • Screen size and clarity;
  • Flat rate monthly data charges;
  • Mobile network speed;
  • The demise of internet 'walled gardens';
  • By 2013, more people will access the web from a mobile than a PC (according to recent research from Gartner);
  • Member appetite (based on Facebook comments and a Nectar collector survey);
  • Critical mass of smart phones.

Nectar has therefore developed its own mobile application that is compatible with the Apple iPhone, Android phones, and Blackberry devices. It offers collectors their points balance, one-to-one bonus points offers, a store locator, and other general Nectar programme information. Results of the first two months of targeted mobile offers for Nectar's three biggest retail partners were impressive, including:

  • 23%-57% offer opt-in;
  • 4%-48% of targeted customers completing the right purchase;
  • £4.4 million in incremental spend;
  • High ROI.

The Ten Commandments Don Peppers gave a keynote address on 'The Ten Commandments of customer loyalty'. He used some Forrester research to emphasis the 'Age of Transparency' theme (83% of consumers trust the recommendations of their friends, over 50% trust on line recommendations from complete strangers and just 14% of consumers trust advertising).

Peppers kept returning to a theme of 'Trustability'. This translates into the concept of taking the customers point of view. This actually sounds similar to the Tesco mantra of putting the customer at the front of your thinking and all other strategic and operational issues will flow from that starting point.

In short, his Ten Commandments were as follows:

  1. Cultivate customer relationships;
  2. Develop customer insight;
  3. Manage the customer experience;
  4. Customise products and services;
  5. Be trustable;
  6. Improve product and service quality;
  7. Engage your customers in dialogue;
  8. Discover complaints;
  9. Engage and enable your employees;
  10. Plan for rising customer expectations.

Andrew Mann, director of customer insight & loyalty for Sainsbury's (and formally director for Tesco's Clubcard) knows this list of commandments intimately, and his presentation also reflected how Sainsbury's is striving to put customers at the heart of its own business using a variety of marketing initiatives - including the maximisation of the benefits that can be gained from the Nectar partnership, and subsequent analysis of customers' shopping habits.

The coalition business model Roberto Chade, CEO for the Dotz Coalition in Brazil, spent some time outlining his views on the coalition business model for collectors, sponsors, and rewards suppliers.

He stressed the key role that the programme manager plays to hold all interests in balance. For collectors the programme must be easy and simple to communicate, for sponsors they must learn to exploit the power of the data and for reward suppliers they must understand that the time to reward and collector dividend are the two primary measurement standards for all rewards. To achieve all of this Chade observed that programme operator independence is critical for maintaining the balance as well as attracting new sponsors.

The Dotz coalition currently has over 20 sponsors covering the critical sectors of grocery, fuel retailing, banking and general retailing. The programme has over 400,000 collectors and 70% of the fuel retailer collectors visit other sponsors within the programme, and this group spends 15% more on average than collectors only visiting the fuel retailer. The programme is already achieving a 60% coverage rate for sponsor sales, and a high active card ratio of 81% of all cards issued. With input from LoyaltyOne (which owns 29% equity in the Dotz programme) this initiative is clearly off to a very positive post launch development phase in Brazil.

Other key themes emerging from the conference included:

  • The growing importance of social media communities to loyalty marketing;  
  • The ever increasing importance of using data analytics to maximise collector value and sponsor ROI from loyalty programme investments.

One final area for consideration by any loyalty marketer came from Bryan Pearson, whose reflections on the future of customer loyalty focused on the move into personal wellbeing, the next frontiers for loyalty being government initiatives, the environment, health care and non-profit loyalty concepts. The early indicators are already visible in a variety of customer loyalty initiatives around the world, and the blurring of social, personal, business and political considerations seems inevitable in a loyalty marketing world that seeks to track and follow the increasingly complex world of consumers.

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