just what is customer loyalty? and how are: monetization, socialization, gamification and...
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Just what is customer loyalty?
And how are:Monetization, Socialization,
Gamification and Disintermediationchanging loyalty forever?
Howard SchneiderMetzner l Schneider Associates
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Faithfulness or a devotion to a person, country, group, or cause
Loyalty
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Measurably incremental profit driven by customer engagement, enabled by an understanding of individual customer
needs, interests and behavior
Customer loyalty
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• U.S. loyalty memberships - 2.1 BILLION
• Average American household is enrolled in 18 loyalty programs
• Active in 8.4
• US marketers spend over $2 billion a year on loyalty programs
The loyalty landscape
• 31% of Americans find loyalty programs “extremely relevant”
• 17% of Americans say programs “very influential” in purchase decisions
• 65% view programs as “very essential” or “quite valuable”
• 80% commit to “maintaining or further funding” programs
• Only 13% believe their programs have been “highly effective”
What CMOs say
What consumers say
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Ancient history
The origins:
Manual programs
1st generation automated programs:
Travel
2nd generation automated programs:
Retail and card programs
Online programs and beyond:
Omnichannelprograms
1981 1990s – early 2000s Today
One hundred years of loyalty
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Programs have evolved
Reward charts, status levels, transaction-based, limited channels
Multi-channel, customer choice, experiential, real time
Loyalty and the customer lifecycle
Acquisition
Onboard
Reactivate
Retain
Activate
MaximizeCross/upsell
Engage / update profile
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Advocate
How do I feel?Recognition of my valueThanks for my business
CommunityReinforcement
Measured by research and purchases
PerceptionPreferenceSatisfactionAdvocacy
How do I feel?Recognition of my valueThanks for my business
CommunityReinforcement
Measured by research and purchases
PerceptionPreferenceSatisfactionAdvocacy
What do I get?Discounts
Free or upgraded product
Measured by tracking behaviorPurchases
ParticipationShare of wallet
ROI
Loyalty is both rational and emotional
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Four key trends
DISINTERMEDIATION MONETIZATION
SOCIALIZATION GAMIFICATION
ConsumerEmpowerment
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Disintermediation: One of the biggest words I know
the elimination of an intermediary in a transaction between two parties
Marketer Wholesaler Retailer Customer
Marketer Retailer Customer
Marketer Customer
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Loyalty programs were invented to reward marketers’ best customers.
True or false?
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Disintermediation and loyalty
• In 1981, 95% of all airline tickets were sold by travel agents• Airlines did not know their customers by name
• AAdvantage was launched as a promotional tool to get customers to identify themselves…NOT as a reward program
• Travel, hospitality, car rental companies established direct relationships with their customers
• Banks and some retailers, who had transactional data, soon followed
• Retail, restaurant and others jumped in as technology and cost permitted
Loyalty programs have both driven, and been driven by, disintermediation—and it is a trend that
continues to accelerate.
The history of loyalty programs is the story of disintermediation
Credit cardsEarly retailers
RetailersRestaurant
EntertainmentEarly CPG
Next gen travel
Travel industry More CPGOEMsMedia
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Consumer empowerment is here to stay
More than ever, customers…
• define relationships
• demand real time responsiveness
• choose their preferred channels, content and cadence
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Indirect distribution models
Media companies, studios, manufacturers, CPG companies are turning to loyalty and engagement
programs to create one-to-one customer relationships for the first time.
Today, some of the fastest growing categories for loyalty programs are those with indirect distribution models
• Indirect distribution: exhibitors, iTunes, Amazon, cable, b’cast, satellite• Customers not interested in studio “brand”• Incredible diversity of product means no natural common denominator
Warner Bros. solution: WB Insider Rewards
• A common program platform with different skins for different interests• Rewards interactions and transactions• Allows fans to customize their experience• Tracks, incents, rewards behavior across multiple touchpoints
“350M customers…and we don’t know any by name.”
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Engaging entertainment fans
WB Insider Rewards looks one way to action movie fanboys
…and very different to classic movie afficianados
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Four key trends
DISINTERMEDIATION
MONETIZATION
SOCIALIZATION
GAMIFICATION
ConsumerEmpowerment
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Money talks
“How do we make money from this
great idea?”
“How do we reward customers according to
their value?”
In a business plan…. In a loyalty program….
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Money talks
Early loyalty programs – and many still today – use proxies for value:
Proxies• Miles / flights• Visits / items bought• Hotel nights / rental days
Poor economics for marketers• Rewarding past, not future,
behavior• Rewarding without clear
value metric
Unhappy customers• Decreasing reward
availability• Blackouts and restrictions• Higher cost to redeem
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“If only we could really reward customer value”
The first major airline program to be based directly on customer spend is Virgin America’s Elevate – a program that has changed the way frequent flier programs work.
Elevate is a revenue-managed programthat delivers better economics to theairline, more control and a betterexperience for the guest.
When was the last time you tried to redeem miles on a legacy
air carrier?
15 Days Advance15 Days Advance
14 Days Advance14 Days Advance
Elevate is the first revenue-managed program of its kind that provides choice, value, and a dynamic approach to enhance ROI.
Elevate is the first revenue-managed program of its kind that provides choice, value, and a dynamic approach to enhance ROI.
Higher ROS Lower ROS
Near Parity Near Parity
As easy as “supply and demand”As easy as “supply and demand”
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Elevate is the gateway through which guests engage with Virgin AmericaAll guests are encouraged to join Elevate; in fact, they have to in order to access certain benefits
Elevate recognizes past behavior and preferences, and rewards future, profitable behavior.
Through Elevate, Virgin has the platform to maintain and extend the relationship into a guest’s lifestyle, beyond specific transactions, even when not traveling.
More than just a reward program. It’s an experience.
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Monetization is a major trend in loyalty
Credit cards and retailers have used customer spend for years.In the travel category, hotels have used a combination of revenue and stays/nights.
Southwest, JetBlue, and Virgin America all have revenue-managed loyalty programs• Earning based on spend• Dynamic reward pricing
Look for more and more companies to reward behavior based on better understanding of individual
customers’ monetary value.
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Four key trends
DISINTERMEDIATION
MONETIZATION
SOCIALIZATION
GAMIFICATION
ConsumerEmpowerment
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“What are we doing in social media?” - every CEO in the world
Every emerging media tool or channel has a lifecycle, something like this:
• Novelty
• Skepticism
• Infatuation
• Evangelism
• Overuse / misuse
• Disenchantment
• Sooo last year
Eventually, each finds its optimal role in an ever-evolving mix of media, strategies and tactics.
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Why would I “like” a fabric softener?
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A sleeper strategy helps Downy and Macy’s clean up
Event marketing Demonstration-chicCustomer acquisition
All enabled by Facebook and Twitter
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And the results?
Voila: A CPG brand can begin building direct relationships and fostering loyalty.
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Finding the brand fanatics and building communities
Email, in-store promotion, social media combine for the biggest video upload sweeps ever for a retailer:
• 45k entries• 5.7mm views
This promotion built awareness of and participation in the SYWR program, and reinforced the value of points.
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Socialization and loyalty
Social strategies, while not always driving immediate sales, measurably help marketers achieve:
• Increased awareness of and participation in programs
• Invaluable WOM
• Identification of brand fanatics
• Channel for addressing customer concerns
Social and mobile media are not only a necessary component of effective loyalty strategies – they are becoming the leading channel in many programs.
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Four key trends
DISINTERMEDIATION
MONETIZATION
SOCIALIZATION
GAMIFICATION
ConsumerEmpowerment
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Gamification: IS Reality Broken?
There is an increasing need, driven by both
marketplace psychographics and program economics,
to reward non-transactional behavior
…and you may ask yourself: “You said programs should be based on revenue.
Now you say programs should reward non-transactional behavior. WTF?”
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The economic challenge
It IS challenging to cost-effectively reward non-transactional behavior. But that doesn’t mean it is impossible to value and reward non-purchase interactions.
• Establish a point structure that allows for small earnings and small rewards for interactions, and more meaningful earnings and rewards for sales
• Use a separate earnings and rewards scale to incent and recognize non-transactional, but still valuable behavior
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Enter, the psychology and mechanics of gaming
Marketers increasingly want to reward interactions like:
• Posting a review
• Sharing something with a friend
• Answering a survey
• Posting a photo, video or comment
• Visiting a website, watching a trailer or demo
• Downloading a ringtone, trailer, link or instructional video
Game constructs can reward these activities with virtual rewards:• Recognition for achievement and participation
• Bragging rights
• Reinforcement
• Badges, stars, leader boards, graphics, enhancements
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Of course, there are skeptics…
…but there are many situations where gamificationhas been well-received and is brand-appropriate.
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Games in the air…on the road…online
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Gamification and loyalty
Innovative applications are emerging, technology platforms that can add gaming elements to conventional program websites
• More fun, greater variety for customers
• More ways to engage on the customer’s own terms
• More economic leverage for marketers with more ways to reward behavior without giving away the store
Even conservative, established brands are adding gaming elements to their customer relationships.
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Disintermediation, Monetization,Socialization and Gamification
DISINTERMEDIATIONEstablish relationshipsBuild loyaltyMeet the challenges of indirect distribution
MONETIZATIONImproved program performanceGreater value for customers
SOCIALIZATIONID superfansCreate/leverage communityDrive engagement beyond simple quid pro quo
GAMIFICATIONCost-effectively reward non-revenue interactionsMake programs funDeliver the psychological rewards of games
YOUR program?
