A simple approach to loyalty/rewards programs

that delivers astonishing results

with little effort

Six years testing loyalty/rewards models has taught us one crucial thing.

All the complicated, time and cash-consuming data collection, processing and marketing will count for little if we get one small thing wrong... and we’ve discovered what that small thing is.

You can undertake complicated market segmentation, plan complex sales promotions and develop sophisticated communication processes and get 2% to 4% take up 9as shown below)... if you get it right.

Or you can do one simple thing and put zeros after those numbers.

We know what makes loyalty programs really work... and it’s very,very simple. More about that later.

This document is a brief overview of how we believe AdvantageCard Pty Ltd can help businesses retain every customer, increase customer spend and grow its customer base.

This is purely an introduction to who we are and an indication of how we believe we can help, with the view of presenting a more complete approach should you be interested in pursuing the opportunity further.

Our failures have been many, but our successes have been spectacular!! AdvantageCard is a Loyalty/Rewards program that has been tested in Tasmania before expanding into Victoria with some spectacular results.

AdvantageCard has been running this program under two distinctly different models for almost six years. One of these models has had limited effect, while the other has increased average customer spend by up to 120% over 12 months!

AdvantageCard is currently encouraging all program participants to switch to this second model.

The program currently has more than 30,000 cardholders in Tasmania plus 20,000 Trade card members in Victoria. Almost $200,000,000 is spent through the program annually, despite many of our participating businesses operating under a model that has been shown to bring only marginal results. In simple terms, AdvantageCard Pty Ltd performs two basic functions. AdvantageCard: 1 Acts as a ‘bank’, holding the value of the points earned and adminis-tering cardholder accounts in much the same way as a bank might. These funds are held in trust and administered by a board which includes two representative of the Master Builders Association.

2 Operates as a marketing service that provides advice to participating businesses and formulates offers and processes aimed at growing businesses for those who offer rewards, as well as communicating

these offers to the database of cardholders.

We’ve tested our approach with some astounding results!

We’ve trialled the program under two basic models and the secret to running a truly effective loyalty program has become very clear to us.

One model brings only incremental increases in spend - a failure in our minds. The other however, brings results that are nothing short of spectacu-lar, with businesses seeing more than 40% increases in average customer spend in a very short period and up to three times that over 12 months.

Cardholder spend in the original trial business grew from around $600,000 per month for the first five months to $1,250,000 by month eight... topping $1,750,000 recently.

Spend increases... payments improve.During the trial, cardholder numbers increased by 15% while average spend per customer increased from just over $1,600 to more than $3,400! Average monthly customer spend now around $5,000!Payments within terms also improved dramatically!

Accidental growth.

Another business that simply set out to improve payment practices, surprised themselves with significant growth in customer spend.

This business offered points when customers pay by the due date (not our ideal model), as their intention was to improve payment practices, but the effect on average customer spend came as a surprise to them.... not to us.

Payment practices suffered during Year Two due to the Global Financial Crisis with fewer customers paying within terms. However, average customer spend had increased by more than enough to show overall growth of more than 26.5% compared with the previous year.

Average monthly spend Jan 09 $1141.60 Jan 10 $2555.55 Up124%

Average monthly spend Mar 09 $760.00 Mar 10 $1769.23 Up133%

Average monthly spend Apr 09 $1108.69 Apr 10 $2500.00 Up125% Four months of the eight tracked saw a doubling in average customer spend through the program over the previous year, with a total improvement in cus-tomer spend from 2009 to 2010 of over 50%.

“The program has affected payments (some customers now consistently paying on time) but more interestingly, the ones that are earning points are actually spending more”.Accounts Team Member - Mitre 10 Store

The program does seem to have an effect on payments when customers are able, but cashflow obviously has an effect that cannot always be overcome with the offer of an incentive.

What has become clear is, that those who earn points do grow their spend (and we can only conclude that some of that additional spend comes at the expense of competitors) while those who don’t earn points are less likely to increase the proportion of their spend through the offerer. They are likely to continue splitting their spend between competing suppliers.

Despite the fact that the number of customers paying within terms actually reduced in the second year with this Mitre 10 store, the dramatic increase in average customer spend more than offset and overall spend through the program still increased by an average of just under 30%.

It took almost 12 months before this Mitre 10 store saw any obvious effect, but the effect was dramatic when it came.

Affect on payment takes two forms.Although there does seem to be an effect on payment behaviors and there is little doubt that those who have the capacity to pay on time do pay more consistently, the greatest effect seems to be on the level of spend as shown on previous pages..

Even the poorer results have been solid.

Although this business appeared to have had a dramatic improvement in payments within terms, growth in spend is less spectacular than some other businesses, but still very solid at 17% improvement in average customer spend per month.

The secret to making loyalty programs work.

Even some of the biggest programs in the land have fallen short in terms of setting up a program that really work well for both the customer and busi-ness.

There seem to be some key factors to making loyalty programs really work and they’re pretty simple. Miss one element and you’ll have a program that has some effect, but not a great effect.

The good news is that the value of the offer, though a factor, is less impor-tant than they way it is delivered and we’ve designed a delivery method that has proven to be spectacularly successful. Businesses in your program (or at least some of them) can actually offer less and get a better result… but they will need to offer rewards in a particular way.

We know what ‘addicts’ customers to earning points and we’ve proven it. We’ve learned the secret to making even those who are adamant that they are not interested in loyalty programs, into committed points ‘addicts’.

Initially there is one thing that must be done to set the foundations. It won’t get results in the short term (maybe three or four months) but without it, the program will have only marginal results that would be easily dismissed as market fluctuation. At around month four there is one simple thing that must be done. It requires a simple communication, but that communication must contain one vital piece of information.

Other marketing initiatives/offers/bonuses will have an effect and are certain-ly worth the effort, but timing is important and we’ll make sure cardholders know what you’re offering – cost effectively!

We’d love to show you exactly what we’ve learned - that will happen when you believe it is worth pursuing this discussion further.

AdvantageCard can offer you access to:• A program that, when delivered in a particular manner, has shown growth in cardholder spend by as much as 120% in 12 months, as well as signifi-cant improvement in payment habits;

• A program that even works on customers who are adamant that they are not interested in loyalty programs and will not actively collect points;

• An experienced marketing team that has discovered the key to mak-ing loyalty/rewards programs work spectacularly well and has developed a model that delivers results beyond the incremental improvements achieved by other models;

• 150,000+ homemakers annually through Home ideas Centre network in Australia and New Zealand - currently spending approximately $2 billion an-nually on building and renovation projects;

• 30,000+ trades cardholders jointly spending in excess of $15 billion - with 20,000 set to be added within 12 months as new businesses launch into the program;

• Potentially 100,000s of online shoppers including trade businesses as well as homemakers, building or renovating homes;

• A program initiative (with potential to turn entire communities into a virtual sales force) which has been trialled and is set for national rollout;

• A partnership that will link Socially Responsible Corporations with Nation-al charitable organisations as well as local community groups;

• A platform with the capability to incentivate cardholders based on level of spend as well as individual product purchases;

• Point of sale agnostic platform that can work across many businesses/sectors using a variety of accounting systems and software;

• An online rewards platform that can be fully integrated with partner pro-grams;

• Stored value capability within program capability;

• Fully trackable and scalable transaction automation platform;

... and there’s more including:• Web based reporting tools for tracking program performance;… and there’s more! Including:

• A process and system that has proven to deliver huge growth in trade business;

• A process and system that has the ability to “hook” customers into doing business with you... and actually enhance brand image... unlike some other programs that have seen a growth, but from disgruntled customers who feel duped; and

• A ‘closed-loop’ payment card that will become a welcome alternative to the Qantas, Woolworths and Virgin points aligned payment cards.

The bottom line is that we know how to make loyalty/rewards programs work and we’d love the opportunity to show you what we can do.

To find out more about how you can use AdvantageCard

to grow your customer spend, improve your collections and

improve your bottom line, please call the AdvantageCard office

on 1300 552 946