Making money out of loyalty22ND APRIL, 2014 / TERO TASKILA

The purpose for the Loyalty programs is to make money

Extension of the marketing approach

One-off or Limited time-only promotions (acquisitions)

Rewards for the purchase (growth)

Tiered and / or points based program (retention)

Potentially making money through partnerships and selling points

Aim to increase foot traffic or website visits to generate more repeat purchases

Does not replace #1 reason for being loyal – product and service

Points programs generate the most cash and loyalty, but require investment

• Many forms / typically “buy 10, get 11th free”• Easy to implement• Challenging to increase frequency and upsell

• Requires investment and set up• Balance sheet implications• Generates cash• Struggle to remain relevant

Partnership requirement

Discount program

Subscription

Points program

Earning potential

high

low

low high

• Easy to implement• Difficult to sell• Very specific and narrow clientele

How does the point sale work?

When customer “burns” points, loyalty program purchases the service from

partner

Loyalty Program maintains the

points-database

Partner pays to loyalty program for the points

given to customer

Customer purchases from the partner and receive points

Loyalty program drives traffic to

partners through

marketing

Loyalty program makes money – mechanism same as currency trading

Some findings on loyalty programs

Customers prefer to have tier levels (and recognitions which comes with it)

Remember to communicate if your top tiers are about to lose status!

People tend to increase frequency or amounts their spending when the reward is getting closer

Opposite is true as well – if the rewards are far away (or perceived that way), you will not get users

If using points based program – big numbers work better than small ones

Give people opportunities to fast-track getting the status

for example Aadvantage Challenge

Loyalty programs struggle to stay relevant

Staying relevant and offering timely promotions and opportunities to redeem

Getting customers’ attention

Average European participates in 7-9 loyalty programs. Managing cards, coupons and online accounts is challenging.

Getting enough wallet space

Good programs have 30-40% activity rate, most driven by top tiers

Keeping people active

Promotions are important

Own website

Newsletters

BrochuresAdvertisement

Partner promotion

Visibility at POS

Larger partner footprint will increase your wallet share

Everyday activities

Groceries

Petrol

Commuting

Telecommunication

Necessary, but less frequent

Insurance

Banking

Electricity

Hobbies

Occasional

Culture

Events

Travel

Loyalty programs possess wealth of information which can be monetized

Customer demographics

•Surveys•Targeted marketing•Behaviour analysis and adjustment

•Add-on sales

Purchase details

•Product•Amount and payment type•Point of sale (location, distance travelled)

•Time•Location•Frequency

Customer

•Address•Gender•Age•Family situation•Purchasing power•Habits & interests

Improve the yield by utilising loyalty programs

Targeted communication for better conversions and upsell

People pay more on experiences – analyse what matters

Monetize the data

Mobility is changing customer behaviour

Platforms change (mobile phones are new cards)

Instant gratification

Prices, promotions and discounts are more transparent

Time based offering

Location based offering

Customers want engagement

50% of companies use gamification in 2015

30% of all e-messaging by 2016

5.5 Bn USD business by 2015

Most applicable for Loyalty and Marketing

AMEX, airBaltic etc. are using it

• airBaltic changed ownership structure – altering the financial conditions to maintain an existing Frequent Flyer Program

• We did not want to have just another Frequent Flyer Program• Did not want to just offer discounted tickets• Low Cost airline pricing promotes loyalty better than miles issuance• We wanted to encourage loyalty

• The Baltics did not have any consumer loyalty program worth mentioning

• We set our sights to learn from the best (aeroplan, nectar)– and be the best

Case example / BalticMiles

Strategy and Planning

• Program parameters identified

• Supplier strategy outlined

• Staffing requirements defined

Local Market Coverage Plan

• Recruited new partners and brands

• Locally sourced rewards

• Determined launch campaign

Implementation Results

• Delivered on time and within budget

• Program parameters delivered

• 9 Core Markets

• 7 Languages

• 7 Currencies to support core markets

• Local team in place (Latvia)

• Shared services structure with rewards partner (Loylogic) for support

Contract signed

January 2010

April 2010

February March

Program Launch

Designed, implemented and launched a global rewards and loyalty program within 4 months

One year after launch – 850 000 members in 163 countries

Loyalty programs should make money

Increasing revenue should be the aim

Higher yield, more frequency, commitment, partners

Acquiring and managing partners for better footprint in customers’ daily life

Managing and monetizing data is the key

Instant gratification and gamification will come with increased mobility

“

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Sports and loyalty have one things in common – both try to maximise fans to attract partners

Thank you!