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Maximising return on communications
Experiences in managing customer profitability from Nectar
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Presentation overview
• Loyalty Management Group Overview• Maximising return on communications case study• Summary and conclusions
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The Loyalty Management Group
Data Analytics International
LoyaltyManagementGroup
• Over 50% of UK households
• 16 consumer Sponsors
• 40+ rewards Suppliers
• Over £800m given back to customers
• Nectar for Business
• Nectar eStores
• 1988 Air Miles UK
• 1992 Air Miles Canada
• 1994 Air Miles Netherlands
• 1996 Travel Club Spain
• 2000 Air Miles Middle East
• 2002 Nectar
Nectar programme operator Analytics Service provider International development
• Customer Loyalty Management
• Category Management
• Brand Marketing
• Channel Management
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LMG Analytics Service Overview
Advertising Advertising Effectiveness Effectiveness MeasurementMeasurement
Channel Channel AnalysisAnalysis
Format Format PlanningPlanning
PricingPricing
PromotionPromotion RangingRanging
Performance Performance MeasurementMeasurement
Campaign Campaign ManagementManagement
Brand Loyalty Brand Loyalty AnalysisAnalysis
New Product New Product DevelopmentDevelopment
Location Location PlanningPlanning
Segmentation Segmentation & Profiling& Profiling
Channel Channel ManagementManagement
Customer Customer Loyalty Loyalty
ManagementManagement
Brand Brand ManagementManagement
Category Category ManagementManagement
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LMG Analytics Clients
Specialty retail
Food & drink retailing
Financial services
Telecoms & Utilities
Automotive
Travel
B2B
e-Commerce
Leisure & Entertainment
Department store & general merchandise
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Challenge: How to profitably communicate relevant messages to millions of people while addressing objectives of 20+ stakeholders
www.nectar.com
contact centre
sponsor campaigns
coalition campaigns
Nectar campaigns
sponsor POS
supplier POS
Increase frequency
Acquire
Activate new card
Increase loyalty
Acquire
Cross sell
Increase spend
Provide MOT service
Acquire
Re-activate
Encourage second visit
RetainIncrease number of Sponsors utilised
Redeem for most appropriate reward
Keep information up to date
Self-serve via the web
Shop online via eStores
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Approach
• Step 1: develop a meaningful customer segmentation– Behaviour-based segmentation– Overlay research data to evaluate attitudes– Profile using demographic, attitudinal and behavioural data
• Step 2: analyse communication needs per segment– Segment-level SWOT analysis– Prioritise key objective– Determine appropriate incentive and message
• Step 3: align marketing investment with segment profitability– Determine communications format and content for each segment– Select appropriate channels
• Keep testing and fine-tuning
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Application: the Nectar Points Update Mailing
• One of the most complex, high volume direct marketing pieces in Europe
• Different formats and frequencies depending on customer segment
• Variable elements facilitate extreme personalisation
– introduction letter– targeted messages– personalised rewards section– Sponsor coupon offers
• 7 million different combinations of coupon offers
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Step 1: develop a meaningful customer segmentation
Segmentation Requirements• Simple and intuitive
• Categorises appropriate share of the customer database
• Segments of significant sizes
• Sufficient differentiation
• Actionable
SatisfactionSatisfaction
EngagementEngagement
ValueValue
ParticipationParticipation
KnowledgeKnowledge
OpportunityOpportunity
SegmentationSegmentation
Research Data• 2800 survey respondents
• Shopping behaviour
• Loyalty programme participation
• Satisfaction
Transactional Data• Points accrual transactions
• Points redemption transactions
• Shopping behaviour across 17 retail and service brands
• Card usage vs automatic points collection
• Response to promotions
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The Nectar Marketing Communications Segmentation
Nectar IndifferentsRoutine Grocery Shoppers
Swipeless SaversContented X-Shoppers
Savvy Supermarket Shoppers
Bonus Seekers
Engaged Enthusiasts Profile
Compare
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Average Customer Profitability and Ability to Promote by Segment
Profitability Index
Prom
otab
ility
Inde
xStep 3: Overlaying financial data allows for improving the allocation of customer marketing investment
Low profitability, little opportunity to improve
via incentives
Low profitability, little opportunity to improve
via incentives
Low profitability, some opportunity to improve
via incentives
Low profitability, some opportunity to improve
via incentives
Highly profitable segments
Highly profitable segments
Low High
High
Low
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The format of each pack is based upon the segmentation with laser-printed personalisation throughout
Nice little earners from Nectar
Sponsor-specific messages• Predictive models• Decision trees• SQL-based segmentations
Nectar IndifferentsRoutine Grocery Shoppers
Swipeless SaversContented X-Shoppers
Savvy Supermarket Shoppers
Bonus Seekers
Engaged Enthusiasts
Personalised introduction
Personalised “Next best reward” offers
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Creative variations emphasise Sponsor offers, low threshold or aspirational rewards, and ways to earn points more quickly
Nice little earners from Nectar
Target Audience: Engaged Enthusiasts and Bonus Seekers
Nice little earners from Nectar
Target audience: Contented Cross Shoppers and Routine Grocery Shoppers
• Fewer coupons
• Highlighting low-threshold rewards
Nice little earner
Target audience: Savvy Supermarket Shoppers, Swipeless Savers and Nectar Indifferents
• Emphasis on aspirational rewards
• More prominent Nectar Credit Card offer
• Maximum targeting capability for Sponsors
• Four targeted messages
• Twelve Sponsor coupons
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Conclusions
• The segmentation allows the Customer Marketing Team to develop more relevant communications with a more efficient use of the available budget
– Look beyond behaviour and understand what Collectors are thinking– Build on affinities and appeal to their interests– Address what they are less happy about and help them get more out of the programme
• The segmentation forms a bridge between market research and the database– Market research and customer satisfaction programmes are carried out by segment– This provides a better understanding of the reasons why distinct groups are behaving in
different ways
• Establishing cross-functional team proved essential for project success– Ensured business requirements shaped the segmentation, not analytical capability– Segmentation adopted across the organisation– High level of quality achieved via appropriate selection of available data and analysis skills