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Our Mission… Advancing Professional Standards in Category Management

CMAAssociation for Category Development Professionals

Loyalty Card Marketing with Demand Indexing

Targeting through the integration of Demand Indexing into Loyalty Card Marketing Initiatives

Presented by: Eric Togneri, Principal at the CMA and Neri Consulting

http://www.cpgcatnet.org/



Speaker Introduction

• Eric Togneri has held sales, shopper marketing, and category management leadership positions at L'Oreal and led Wyeth Consumer Healthcare's Drug Channel for cat dev

• He currently is a principal and strategic advisor for the CMA, the largest trade association for the discipline of category management and a Sr. Consultant for NERI

• The CMA currently counts among it’s membership a broad base of category management, sales, trade and brand marketing members spanning manufacturing, retail and educational institution



About CPG CatNet



Loyalty Marketing initiatives take many forms

• There are frequent-buyer programs, frequent-flier programs, frequent-player cards and frequent-dining coupons

• There are points-at-the-pump schemes, turkey giveaways at Thanksgiving, along with $100 copper roasters in which to cook them

• Donations to charities for people who use their Starbucks loyalty card to buy coffee.

Source: CIO - Insight



Loyalty Cards are a critical part of the marketing mix

• More than 75 percent of consumers now have at least one loyalty card according to Jupiter Research

• The number of people with two or more is estimated to be one-third of the shopping population

• Surveys by information technology analysts Gartner Inc., Forrester Research Inc. and META Group Inc. suggest the data-for-dollars explosion is showing no signs of letting up anytime soon

• According to Gartner analyst Adam Sarner, U.S. companies spend more than $1.2 billion on customer loyalty programs



Loyalty Cards in the modern marketplace

• Loyalty cards and prizes have always been, first and foremost, a cheap way for businesses large and small to start tracking their customers' shopping habits

• Customers consider themselves entitled to special treatment, a marketplace psychology spawned in the 1970s by the airline industry's invention of frequent-flier miles

• Says Brian Woolf, president of the Retail Strategy Center in Greenville, S.C., and author of Loyalty Marketing: The Second Act, "Loyalty programs are now an essential part of the marketing mix”

Source: CIO - Insight



Learnings from the annual Category Management Conference

• The next generation of category management will be driven by…– “Focus on linking category management with frequent shopper

marketing”– “Link segment marketing with category management”– “Link Category Management with Local Marketing”

• “Need efficiencies plus local marketing”• “Need to understand how you compete in each local market

(lower level of aggregation than metro areas)”• “Must create category management team member who adjusts

strategy and tactics to the local market level”

Source: Robert Blattsburg



Loyalty Cards Programs cross channels


http://www.kroger.com/index.htm

http://www.cvs.com/CVSApp/cvs/gateway/extracarehome

http://www.cvs.com/CVSApp/cvs/gateway/extracarehome


How are these cards being utilized?

• Price of admission to receive in store discounts• Collection of data on consumer purchase behavior• Marketing programs

– Register receipt discounts• Bounce backs• Affinity purchases

– Purchase level incentives• i.e. Buy $50 this month and get $10 off your next purchase

– Customized Direct Mail Programs• i.e. Consumer will receive coupons in the mail based upon their past

purchase behavior



So how do we forge ahead to the next generation in Loyalty Card Marketing?

Integrating Demand Indexing

Into Loyalty Card Marketing Initiatives



What do loyalty cards tell us about shoppers?

Some or all of the following…• Where they live

– How much their house is worth– Their income

• Contact information– E-mail– Phone

• Their age• How many in their household• Presence of kids• Shopping preferences



What is demand indexing?

• Data sources, like Spectra, can tell us certain things about a brands’ consumers– Age– Household income– Ethnicity– Presence of children– Hobbies/interests– Purchase levels– Affinities



This leads us to a demand index…

• This information can allow us to look at a brand and determine what the demand index (mean or average) should be at the consumer, market and overall levels

• So how does this lead us to insights…

Let’s say Ashley fits the profile of an average Maybelline Great Lash consumer. And we know that the average Great Lash shopper purchases $20 worth of Great Lash per year in Ashley’s market. If Ashley purchases $15 per year she under indexes, if $25 she over indexes.

Meet Ashley

Maybelline Great Lash is a registered trademark of L’Oreal



So, how does this work with loyalty cards?

• Since many of the same data points that are collected through loyalty cards (purchase behavior, demographics, geography, etc.) we can…– Identify loyalty card holders that look like a particular

brand or category consumer– Compare that consumer to their brand or category

purchase behavior– Determine the index level– And create programs to target specific consumers based

upon our brand or category objectives



Why is this an improvement over current approaches?

• The vast majority of current loyalty card marketing initiatives are delivering un-targeted price discounts

• This strategy rewards…– Price chasers

• The fair-weather friends of the CPG industry• You can keep them through heavy promotions, but they are just

as easily swayed to purchase alternatives• A high investment for those who will not be with the brand for the

long haul– Pantry loaders

• Skewed toward loyal consumers• Traded down on a price per equivalized unit



Affinity programs are often inefficient

• Affinity programs deliver incentives to consumers that are both positively and negatively indexing

• An example would be a targeted coupon program that provides a discount on salty snacks to consumers who purchase carbonated beverages– If a consumer already purchases both on each shopping

trip, the discount did not provide an incentive (i.e. we gave money away)

– We could have gone directly after the consumer that is not purchasing both and “should be”



So why are the under indexing not purchasing?

• There is no way to know for certain…

• But, the more these individuals can receive brand communications directly -- whether they are price or education or some other combination – there is an increased chance that incentives will lead to purchases and ultimately loyalty



What are the experts saying…

Stephan G. Kouzomis, Faculty and Staff Member, University of Louisville’s College of Business

• Consumer buying patterns in today's world are somewhat not as good as our parent's or grandparent's were!

• One of the keys to loyalty marketing is knowing your target consumer and then your converted shopper. In some retail businesses, indexing may be possible, if the index can incorporate the differences in market share of the retailer; its image, and importance of and reasons for a premium loyal buyer.

• Better indexing processes may be a vehicle for customer service call-ins, and associate service levels at outlet

Source:


http://www.retailwire.com/Index.cfm


What are the experts saying…

Lisa Bradner, Senior Analyst, Forrester Research• I think all of us applaud CPG channels getting smarter about to

whom, where and when they apply discounts--targeting those offers vs. simply subsidizing everyone's purchases makes a lot of sense. The interesting question in loyalty is always--do you give your best price to your best customers--who probably would have bought anyhow--or do you use it to entice potential customers? While using data modeling to identify likely customers who aren't is a core best practice, retailers and brands need to make sure that they don't spend so much time chasing new customers that they forget to show proper appreciation to their current customers. Good loyalty programs should always balance these two.

Source:


http://www.retailwire.com/Index.cfm


Thanks you for your time!

Eric Togneri, Principal for the CMA…


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