Loyalty and Rewards

A SUPPLEMENT DISTRIBUTED WITHIN THE GUARDIAN ON BEHALF OF MEDIAPLANET WHO TAKE SOLE RESPONSIBILITY FOR ITS CONTENTS No. 3 / December 2012 In association with Distributed within The Guardian LOYALTY AND REWARDS

STEPS3 TO

CONNECTING WITH CONSUMERS

Meet the needs of your customers Understand what’s important to them

Analysing data How to gain a 360 degree view of your customer

The importance of a loyalty strategy Deliver rewards and connect to people THE POWER OF

Coalition loyalty The beneﬁ ts of CUSTOMER DATA multi-partner coalition Bryan Pearson, President of LoyaltyOne and author of The schemes Loyalty Leap off ers his best tips to achieving customer intimacy

PHOTO: COLLOQUY 2 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET CHALLENGES Today, when it comes to companies winning your heart, so much depends on what is in your hands, says Carlos Dunlap of COLLOQUY.

WE RECOMMEND Caroline Papadatos Senior Vice President, International, Key trends for winning LoyaltyOne PAGE 6 ‘Coalitions yield loyalty in a digital age data that is more ust think about the customer complaints. If that means a descriptive, predictive items you interact with gift from duty free, it will happen. and actionable than most — a mobile phone, anything a retailer a tablet and perhaps a More security stores’ laptop. Across all of these In May 2011, the EU updated the screens, you engage with 2 Privacy and Electronic Commu- communities through nications Directive, requiring web- Facebook, Twitter, TripAdvisor, Yelp, sites to get user consent before stor- JFoursquare and many more. In short, ing cookies on their computers. As of people network to meet their exact October 2012, most UK users were al- We make our readers succeed! needs. Any email or communication lowing third-party cookies according Carlos Dunlap that is irrelevant can be zapped away to Computer Weekly. This implies Editorial Director, COLLOQUY LOYALTY AND REWARDS, with the touch of a button. businesses are gaining trust, but we 3RD EDITION, DECEMBER 2012 Brands and organisations, thank- know the demand for greater trans- Entertainment Managing Director: Chris Emberson Editorial and Production Manager: fully, are learning to connect with parency, and relevance, will continue. Call it the emergence of “play- Faye Godfrey consumers on their own terms. They 4 sumers”: Shoppers want Business Developer: Dominic Webber are tailoring operations to suit the Immediacy brands that are fun, so games and Responsible for this issue way people live, and connecting in Mobile technologies have cre- contests are entering the fray. For in- Project Manager: Lee Harrison Phone: 020 7665 4441 meaningful ways. At COLLOQUY, we 3 ated an on-demand market- stance, M&S Money last Christmas E-mail: [email protected] have seen these trends: place that is universally accessible launched a contest that gave its club Distributed with: The Guardian via a multitude of devices. Compa- members the chance to win one mil- Print: The Guardian Print Centre Employee empowerment nies from Sainsbury’s to Starbucks lion M&S points, worth £10,000 — Mediaplanet contact information: More companies now train and are developing apps for a variety of and it won some awards itself. Phone: 020 7665 4400 1 trust their employees to make services, including mobile pay- So next time you click on, consid- Fax: 020 7665 4419 E-mail: [email protected] snap decisions to resolve service is- ments. These apps translate to a er all of the opportunities at hand. sues. This makes sense since one an- speedy check out, they may let you And if you do not like what you see at Find Mediaplanet UK on: gry Tweet can reach thousands of peo- jump a queue at a crowded venue, the moment, no worries — there are ple in minutes. Virgin Atlantic even and they serve up off ers based on plenty of savvy companies that un- trains its staff on the cost of servicing your preferences and GPS location. derstand what is important to you. 300m HOUSEHOLDS

INSPIRING LOYALTY

WORLD’S LEADING BRANDS

We help some of the world’s leading brands connect with their best customers through loyalty and insight programmes. Why not speak to us about how we can help you transform your customer relationships?

contact Will Shuckburgh / MD European Commercial Development T 0207 152 4806 / [email protected]

Proud sponsors of the Loyalty Awards 2013 4 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET

STEP NEWS 1 CREATE A LOYALTY STRATEGY

COLLECT POINTS Loyalty schemes like Nectar offer the customer the opportunity to earn points that they can spend in a number of different ways PHOTO: AIMIA

Nectar sign up Loyalty is the retail boosts loyalty for British Gas currency of the future When research by energy provider British Gas ■ Question: How can a points to save money, eight out Benefits for all revealed its customers business retain customers and of 10 accumulate points wherev- Johnston adds that loyalty wanted to be rewarded increase sales in today’s tough er they can and one third collect schemes also help companies to for their loyalty it joined times and the years ahead? more points now than they did re-engineer their businesses by the UK’s largest loyalty ■ Answer: With a loyalty four years ago. encouraging consumers to take programme Nectar. strategy that connects with For companies operating in a actions that save the organisa- people however they shop and challenging and often compet- tion money. This could include British Gas, along with its en- delivers relevant rewards. itive marketplace, an effective persuading customers to switch ergy competitors, suff ers from loyalty strategy will be one of the from paper to online billing. a low level of trust and heavy The economic downturn has most powerful weapons to in- Customers are no longer be- customer churn so it needed to fuelled the shopper’s passion for crease sales, drive customers to ing rewarded just for the transac- diff erentiate itself and engage loyalty schemes and prompted different parts of the business tions they make but also for the more with existing and poten- retailers and brands to analyse and keep them faithful. “Loyal- different interactions they have tial customers. more closely the data they collect ty may seem all about cards and with a brand across different Nectar is a loyalty coalition to boost their customer relation- points on the outside but ulti- marketing channels. This trend of brands including Sainsbury’s ships and sales. mately it is about customer re- will accelerate in 2013, powered and Ebay and British Gas saw its lationships and managing these by the increased use of mobile de- involvement as a way to build Economic downturn effectively in future,” says pres- vices such as tablets and smart- lasting customer relationships. boosts loyalty ident and CEO of Aimia, Europe phones that are becoming useful Awarding Nectar points Since 2008, loyalty has become a and the Middle East, David John- shopping aids. boosts retention rates and peo- valuable currency for consumers ston. “Consumers are demanding Johnston expects to see a ple are given points for taking as household incomes have been more of a value exchange when growth in what is known as actions that save the company squeezed. Shoppers are work- they share their data and loyalty showrooming activity where money, such as taking their own ing harder to earn and redeem schemes are popular because this shoppers visit a store and use meter reading or choosing to pay rewards online as well as on the trade-off is very transparent and their smartphones to compare by direct debit. high street. they get relevant rewards.” prices before purchasing at a The campaign reached its ﬁ rst Figures from global leader lower price online. According to year enrolment target of 2.35m in loyalty management Aimia, a YouGov survey conducted for customers within the ﬁ rst eight which owns the UK’s top coali- David Johnston Aimia, about one third of men weeks and direct mail response President and tion loyalty programme Nectar, CEO, Aimia, and one in five women already rates are up by 160 per cent. reveal the importance of loyalty Europe and the shop this way. schemes in the current econom- Middle East STEVE HEMSLEY ic climate. Two thirds of Nectar’s STEVE HEMSLEY [email protected] 18m collectors openly collect [email protected] 1BZXJUIQPJOUT*UTUIBUTJNQMF 5IFVMUJNBUFSFXBSEFYQFSJFODFBUBOZQPJOUPGTBMF

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Loyal retail customers spend between 30 per cent and 50 per cent more each transaction than the average customer, visit a store three times more of- WORKING TOGETHER ten and spend four times as Caroline Papadatos of much each year. LoyaltyOne says the ability A loyalty scheme not only to share data is just one of the many benefits of rewards customers for being coalition loyalty schemes faithful but by identifying pur- PHOTO: SHUTTERSTOCK chasing patterns it allows a retailer to segment its customers and communicate with them in a more meaningful way. Choose to believe: Gathering valuable data Yet before launching a scheme, a retailer must know who its typical customers are, average three coalition myths spend and how frequently they visit. Without this information ■ There is one unassailable Caroline all the exclusive brands on the in- it is diffi cult to measure wheth- truth in marketing: people Papadatos side. It has only one purpose: to in- er a scheme has succeeded in love rewards. Senior Vice crease the number of people en- its goal of getting people to President, rolled and build the mechanism to shop more regularly and spend DISPELLING MYTHS International, LoyaltyOne collect and redeem with partners. more when they are there. While loyalty schemes abound, few This leaves partners all the ﬂ ex- Once a retailer has decided programs deliver the reward attain- ibility to promote their brand to on a loyalty programme that ability and choice that comes from insights become richer. Coalitions a broader base of customers with suits its brand, the scheme a well-managed coalition. It stands yield data that is more descriptive, greater scale, impact and relevan- should be trialled in a small to reason that if customers can col- predictive and actionable than an- cy than they could do on their own. number of stores. This will lect everywhere they shop and get to ything a retailer stores. A company Coalitions are the call-to-action. indicate quickly whether it a reward faster, they will engage and gains a 360⁰ view of their custom- brings the expected financial change their shopping habits to earn. ers — shopping behaviours, travel Shared customers are return and any teething prob- Around much of the world, promi- patterns, mobile usage, social ac- errant customers? lems can be ironed out. nent brands are rethinking their pro- tivity and media responsiveness to Not true. Coalitions around The most common mistake prietary programs to harness the val- start, as well as qualiﬁ ed data about 3 the world have proven that retailers make is thinking that ue of multi-partner coalitions. non-customers who can be targeted members who shop within a coali- launching the scheme is the Most in the UK are familiar with with relevant messages and off ers. tion are more likely to consolidate hardest job. In reality, the re- coalitions in concept if not in name Shared data is smart data. their purchasing with merchants al work starts once the loyalty — Nectar counts more cardhold- inside the network, leading to in- programme begins generating ers than any other UK program. But Shared brands are creased spend and basket size. This valuable data. many would-be partners still cast a diminutive? “network eff ect” increases the cu- Loyalty schemes tend not to suspicious eye on the coalition mod- Retailers love to have their mulative spending of customers, work for price-driven retailers el, fearing it dilutes the brand or sales. 2 logo in customer wallets, but but it also capitalizes on increased or those that consumers visit With this, I want to dispel the three that’s not how brand loyalty is frequency of shopping across the infrequently, such as opticians. biggest myths in coalition loyalty: built. If the true measure of a brand coalition by building and maintain- These businesses should con- is awareness, activation, off er re- ing high top-of-mind awareness. In sider joining a loyalty coalition Shared data is lost data? sponse, customer and revenue every case, a shared customer is a programme so they can still ob- Merchants sometimes fear growth then coalition ultimately more active and engaged customer. tain important data. 1 that data sharing in a loyalty makes retail brands stronger. It is a coalition means depreciating their brand accelerator, acting as a plat- In truth: Coalitions are the data asset. In reality, when partner form, like Intel Inside or Microsoft. way forward for creating STEVE HEMSLEY data is augmented with multi-cat- The coalition brand invites cus- shared value and marketing [email protected] egory transactional behaviours, the tomers to enrol and engage with co-creation.

8 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET INSPIRATION Today, loyalty marketing and information sharing are as common as coconuts in the produce aisle. But getting from customer information to customer intimacy has taken many leaps — in technology, in confidence and in consumer understanding. One small step for marketers, one giant leap for customer intimacy Consider that years ago, back when For instance, I have a friend who Customer intimacy, mean- redirect your focus from the product the concept of customer intimacy used to shop at the same grocery while, is when a customer choos- to the consumer. sounded like something that could store almost every week. And every es to stay with a brand even when get you fired, I was fighting an uphill week, she complained: the store lay- an equal or potentially better al- These four steps should enable al- battle just trying to get merchants out was cumbersome, the employees ternative is available. How is cus- most any merchant to hold on to its to understand something a lot less were ill informed, and she was often tomer intimacy achieved, then? My customers, even in the face of wor- sexy: the power of customer data. overcharged on sale items. guide includes four basic, but im- thy competition. Take my friend. I recall one presentation, when a Yet every week she returned, using portant, steps: She eventually dropped her nearby skeptical retail executive scoffed at her loyalty card that recorded all of supermarket in favor of a merchant my results. “How many of our cus- her purchases, even though the cou- ■ Build emotional loyalty: Know that is further from home and no tomers were captured in this study?” pons she got in return were rarely for what your best customers love about less expensive, but it responds to he asked. “Two hundred, 500 or products she purchased. you and build on that. her shopping patterns with offers 1,000?” I told him: “Roughly 689,375.” My friend was hardly loyal, ■ Assure you are relevant to your and services that are relevant. Twenty years later, that mer- though I have a hunch the merchant customers: Resonate with your It took a leap of faith on her part, chant and I are still working to- thought she was. In fact, I bet a lot of customers through a differentiated and some responsible data use on gether, though the landscape has companies define “loyal customers” experience. the part of the new merchant, but changed markedly. Loyalty is now by repeat business and longevity. ■ Use data responsibly: When now she is much happier. a multi-billion-dollar, global indus- But it would be a mistake to con- consumers share personal information try spanning almost every industry. fuse repeat business with customer with you, they are entering into a value Bryan Pearson is president of LoyaltyOne And customers have much higher loyalty, or intimacy. Repeat business exchange. Give them something of and author of the bestselling book The Loy- expectations regarding the value may be the simple result of location, worth in return for the data they give you. alty Leap: Turning Customer Information exchange that occurs when they price, service or product. It also is driv- ■ Make the loyalty leap: Get Into Customer Intimacy. For more informa- share information. en by routine, needs and availability. organisation-wide commitment to tion, visit www.pearson4loyalty.com.

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STEP

3 Why it’s time for Loyalty 2.0 If you’ve ever played mobile is dramatically heightening ACHIEVE Buzz-Word Bingo, the game people’s expectations, such schemes CUSTOMER INTIMACY in which you score points by struggle to surprise or delight. predicting which phrases will Not only do smartphones give crop up in a meeting, you’ll us an unprecedented level of con- know that ‘customer loyalty’ trol over the shopping process, they is an absolute banker. also change our relationship with brands. Increasingly, we expect to be This isn’t surprising given that loy- empowered in highly personalised alty — or more accurately, profi table and contextually relevant ways. To loyalty — is the lifeblood of any busi- keep pace, loyalty programmes need ness. But what is surprising is how to evolve in three particular areas: often companies talk more about what they’re doing rather than fo- ■ Whilst spend will always cusing on the customer response. be important, there are other My favourite defi nition of loyalty scarce resources which should be comes from Dr Tony O’Reilly when rewarded; particularly, in a mobile- he was running Heinz. If a shopper fi rst world, a shopper’s location. couldn’t fi nd one of his products on ■ In addition to points, the shelf, he expected them to drop recognition, information and their basket and go elsewhere. I like entertainment should become key this not only for its ambition, but parts of the reward structure. also because it nails two important ■ The emphasis should switch truths. First: real loyalty is some- from passive collection to active thing active and passionate (which participation, with communications is what distinguishes it from habit). using mobile best practice to drive And second: the acid test of loyalty immediacy of response. is how people react in the moment. As we accelerate towards a mo- This shift from entitlement to em- bile-fi rst world, both of these are powerment will be the defi ning char- going to become ever more impor- acteristic of Loyalty 2.0. Inevitably, tant. In the process, as we’ve argued mobile will be the key driver: partly in our recent white paper, some sig- because of enabling technologies like nifi cant cracks will appear in the wifi , NFC and image recognition, but standard loyalty marketing model. mostly because of the demands of the A LEAP OF FAITH It’s not that current programmes smartphone-enabled shopper. Bryan Pearson, author of The Loyalty Leap offers his don’t work. They clearly do. But the 4 basic steps to achieving more they proliferate, the more PHIL GAULT customer intimacy shoppers come to see them simply Director of Strategy for mobile PHOTO: COLLOQUY as an entitlement. At a time when marketing agency, Sponge

Byron Hamburgers loyalty systems

Businesses then use this information to get in touch with their best customers to give them extra rewards, and send extra REDEMPTIONS IN ‘MOVEMBER’ enticements to customers who visit less regularly. What’s more a simple loyalty system can be up and running in days. 15 NEW CUSTOMERS CUSTOMERS WHO USED As loyalty marketing specialists we have experience spanning CARD EVERY DAY a number of sectors including retail, leisure and hospitality. If you are thinking of launching a loyalty programme, let us help. “Footfall123 helped support our charity fund raising for our Movember campaign, ensuring that our rewards got to the right Have a look at what we’ve done for some of our clients people.” DQGWR¿QGRXWPRUHJHWLQWRXFKRQ0207 078 8333HPDLO Marketing Manager [email protected] or visit www.footfall123.com. 10 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET NEWS

Tailored offers to keep Window on the customers loyal

Nigel Turner, VP of information management strategy at Trillium world of loyalty Software explains why big data analysis is crucial to customer loyalty.

Robust analysis of how existing and potential customers are acting and what they want is vital if people are to receive tailored and relevant off ers that keep them loyal for years. Central to this is analysis of big data, that huge amount of infor- ■ The secret is mation collected from various out on the popularity sources including retail transac- of customer loyalty tions and social media comments programs. They span made on Twitter or Facebook. the globe, transcending It gives an organisation an culture, religion, politics, ‘outside in’ view and a great- age and sex to attract er breadth and depth of knowl- consumer participation in edge of existing and prospective developed and emerging reinvention from the loyalty programs 10 per cent of Canadians said they customers. It means companies economies alike. in which they participate. Emerging feel strongly that it pays to be loyal to can raise awareness and react to market consumers, conversely, are a favourite brand. Compare that to what customers are doing and al- But what about the individual con- energetic, engaged and enthusiastic. the 29 per cent of consumers across so how competitors are acting. sumer who signs up for a program? Their distinct commonality was opti- the three emerging markets who said With so much data availa- Is the Nectar card holder just like the mism. Here are highlights from the in- brand loyalty is benefi cial. Additionally, ble, organisations must be clear AIR MILES Collector in Canada or the triguing insights consumers revealed emerging market consumers are about what information they Dotz participant in Brazil? How do about themselves: twice as likely as those in developed want and why they need it. They those individuals compare to the Del- economies to say that a rewards must also be able to match and ta frequent fl yer in the United States ■ Brand loyalty defined program infl uences decisions about integrate data across their organ- — a market where consumers hold Consumers almost universally defi ne where they do business. isation. Is the person complain- over two billion memberships in loy- “brand loyalty” as telling friends or ■ Mobile ing about the organisation on Fa- alty programs? family to shop at a particular store, There’s certainly an uptick in mobile cebook the same person with the To shed light on the global consum- except in China, where loyalty is defi ned usage for loyalty programs in developed same name signed up to the loy- er mindset, COLLOQUY, the research as shopping with a specifi c company nations. Still, loyalty program members alty programme, for example? arm of LoyaltyOne, conducted a one- for more than three years. in emerging countries are up to eight One company analysing Big of-a kind global study on shopping be- ■ Foreign vs. domestic brands times more likely than their developed Data well is car maker Volvo haviour. The goal was to identify sim- Shoppers in emerging nations country counterparts to engage via which has in-vehicle sensors that ilarities and diff erences in attitudes welcome and trust foreign brands. In electronic media channels to respond generate data. This is loaded in- about key consumer issues: the defi ni- China, nine out of 10 consumers said to a reward offer. to a central database, integrated tion of brand loyalty, loyalty to domes- global brands are more trustworthy ■ Privacy with CRM data and analysed by tic versus foreign producers, econom- than domestic brands. Consumers in No less than 68 per cent of Brazilian Volvo and its dealers to improve ic outlook, technology and other sali- developed nations are twice as likely to consumers said they’re concerned customer engagement, car de- ent concerns. trust their own brands versus those of about protecting their personal sign and safety. COLLOQUY’s research focused on other countries. information, compared to 50 per cent All organisations must iden- consumer survey responses in six ■ Optimism of consumers in developed countries. tify the right data they need to economies, half in developed markets The study revealed fundamental Chinese consumers are relatively solve business problems. They and half in emerging markets.The re- differences in sentiment about big- unconcerned at 33 per cent. must then be able to integrate search revealed that consumers, es- picture issues like the economy and and match data collected from pecially on the basis of developed ver- future prospects. How does that Is there something about which we various sources, build an eff ec- sus emerging markets, have diff er- translate into shopping behaviour? can all agree? The research says, yes — tive IT infrastructure and have ent outlooks and expectations. One China, Brazil and India consumers are it’s special treatment. Consumers in the right skills internally to ex- size does not fi t all when it comes to fi ve times more likely than U.S. and all surveyed countries said they val- ploit what all the information is loyalty program participation. Con- Canadian consumers to say they’ll ue perks, privileges and recognition telling them. sumers in the three developed econ- use credit cards for “things you can’t benefi ts, and that special treatment omies could be characterized as tired, afford now.” infl uences their shopping behaviour. STEVE HEMSLEY turned off and tuned out. They have ■ Influence on purchaser [email protected] high expectations for innovation and Just 12 per cent of Americans and Phaedra Hise, Senior Editor, COLLOQUY

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