loyalty presentation - cm forum april 15

Connecting ConsumersThe evolving role of Loyalty

Ronan Gilhawley

Consumer Markets Workshop

April 2015

© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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The evolution of ‘Loyalty’

Making the customer connection

Attracting and engaging the customer

Enhancing the value of loyalty

Where to from here?


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The evolving consumerThe ‘typical’ consumer is becoming a more dynamic, evolving and fragmented target for organisations to address

Increasing affluence

Value seeking behaviour

Urban migration

A cultural ‘melting pot’

The informed consumer

Time poor convenience

shopping

International competition

Evolving business models

Focus Groups

Mystery Shoppers

Consumer Surveys

Basket Analysis

Connected Consumers

Evolving Competition

Socio-Economic

Factors

Demographic Factors

Credit Card Feeds

Market Research


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Meeting consumer needs - #1 changing expectationsTo meet target consumer needs, retailers need to continuously refine and adapt their offer and the way in which they engage with their customers

Bas

is o

f bra

nd lo

yalty

cre

atio

n

Brand

Service Convenience

Range Price

Basis of brand loyalty creation Available value proposition levers

Sophisticated

Fundamental

Retail propositions

Note. ‘EST’ Model : McMillan & Dolittle

Easy-est

Hot-est

Big-est

Quick-est

Cheapest

Quality of service

Most fashionable

Range & selection

Speed of service

Lowest prices


4

Meeting consumer needs - #2 the disruptive impact of technologyOmni-channel retailing is creating an increasing sense of complexity in where and how organisation interact with consumers

Technology has introduced new medium for communicating, influencing, and transacting..

Blogs Email SMS Mobile apps

Social media

Customer

Mobile apps

Reseller website

Aggregator websites

Company website

Physical store

TV / radio

Outdoor ads

Print media Mail Telepho

ne

…with different consumer segments interacting through different medium in the path to purchase

Awareness Consideration PurchaseFamiliarity Service

Store

Social media

Comparison Site

Mobile

Blog

Website

Email

Reseller

Engage Recommend Compare InteractAccess Transact PublishTarget

http://www.infochoice.com.au/

http://www.infochoice.com.au/


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Meeting consumer needs - #3 the polarity of scale and intimacyWith increased scale & complexity, retailers increasingly need to invest in analytics to mine insights into who their customers are and how they connect with them

Source: Making the connection – Rethinking the role of loyalty management (KPMG, 2014)


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Rethinking the role of loyaltyLoyalty is increasingly key in understanding who your most valuable customers are and how best to connect to them, in an adaptive and evolving manner


1. Define• Have you defined the

customers that are/would be most valuable to your organisation?

3. Engage• How do you engage with

these customers throughout the customer lifecycle?

2. Connect• Have you developed a

mechanism to reach out and connect with these customers?

4. Evaluate• Do you evaluate your

engagement and the results it has on customer lifetime value?

5. Adjust• Do you adjust your

engagement and value proposition to reflect the results of your evaluation?


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Where to from here?


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3 ‘Ages’ of LoyaltyLoyalty has evolved from its origin as a marketing promotion tool to a data driven capability supporting increasing levels of personalisation in engagement and offer

ENGAGEyour customer

Learn from your customerINSIGHT

COMMERCIALISEyour learnings

Ratings

Trends

Merging external and internal data

Data

Insight

Value

The 1st Age

Loyalty as a promotional tool

The 2nd Age

Loyalty enablement of customer

segmentation

The 3rd Age

Loyalty driven personalisation

Loyalty program value levers Evolution in maturity of loyalty capability


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1st Age : “Thank you for your business, please come again”The majority of loyalty initiatives are characterised by the use of basic customer identifier information to push promotional messaging or to accumulate discounts

Scope & focus Sources of information

Nature of Offer

Examples

Customer identifiers – email address, – mobile number, – postal address

Transaction history– Frequency of visit– Total spend

Promotions by a variety of medium e.g. EDM, text message

Promotions typically discount, BOGOF, or exclusives

Membership is may be card or app based Reward can be member based, or points

accumulation based

Focus on customer engagement

Broadcast marketing

communications

Tailo

ring

of e

ngag

emen

t Personalisation of reward


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2nd Age : “Getting to know you”Programs such as Tesco’s Clubcard in the late 90’s pioneered the use of POS transaction feeds to develop deeper customer insight, leading to tailoring of offers


Nature of Offer

Examples

Focus on customer insight

Segmentation based

communication

Customer identifiers– Customer surveys

Transaction history – Credit card feeds– Basket analysis

Browsing history – Items purchased

Predominantly points based programs offering a opportunity for ‘personalisation’ in redemption

Tailoring of promotional offers predominantly to identified customer segments

Differentiated service through tiered membership

Tailo

ring

of e

ngag

emen



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3rd Age : “Permission to get creepy”Technology is enabling a new means of marketing in a highly bespoke, individual manner, personalising offers based on information specific to the individual


Nature of Offer

Examples

Focus on commercialisation

of insight

Personalised communication

Store service personalisation

EDM personalisation

Web content personalisation

Customer identifiers– Location information e.g. GPS

Transaction history – Basket analysis

Browsing history – Items viewed– Sites visited before and after

Tailoring of service experience based on information relating to customer preferences and history

Individual tailoring of promotions e.g. targeted time based, location based promotions

Tailo

ring

of e

ngag

emen



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Making it a realityWhile most organisations acknowledge the potential of loyalty initiatives and most run some kind of program, our research suggests few actually mine the data they get

88%Of organisations run an ‘earn and burn’ loyalty

program whereby points are accrued and

redeemed for a gift

56%See the card as

primarily a means of capturing a contact

point for promotional material

40%Collect the POS

data accompanying a loyalty registration but do no perform regular analytics

with it

12%Indicated that

results are integrated into front-

line operational decision making such as buying,

merchandising, and store operations

6%Actively leverage

their loyalty program to achieve specific

corporate objectives



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Where to from here?


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Three dimensions of LoyaltyThe key to success in a loyalty initiative is to build currency and value into the program

Range of redemption

Scope of spend

Depth of data insight

Greater flexibility and freedom in how the consumer benefits from a program equates to greater value in the program ‘currency’

Broader capture of spend (including retail and non retail) increases the frequency with which a consumer interacts with a program, derives benefit and contributes to data

By increasing the data captured in a program to include dynamic data, benefits include deeper behavioural insight, greater ability to personalise offers, more personalised engagement


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Adding range of redemption to loyaltyIncreasing the range of a program brings greater value in redemption and currency in points, but brings with it added complexity and need for additional skills

Member Database

Member Benefits

Member Accrual

In House Store Points

In House Points

Currency

In HouseAffiliates

Tied Coalition

CoalitionRetail

CoalitionLifestyle

In house membership programs are relatively easy to set up and are typically run within the marketing team

Increasingly the programs fail to ‘cut through’ or differentiate the retailer

A closed in store points system is relatively undifferentiated from a member program

Inclusion of external affiliate partners, or paying for access to airline points increases value

Managing the economics of ‘earn & burn’ partners requires greater financial oversight

Operating a coalition loyalty program offers the greatest opportunity to create value for customers due to their openness

However, operating these programs are complex and data intensive

Participating as an ‘earn & burn’ partner will limit access to customer insights

In house ‘earn & burn’ programsIn house ‘membership’ loyalty programs Coalition Loyalty Programs


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Adding depth of insight to loyaltyThere is an obvious ‘hierarchy’ to data within a loyalty program, with higher sets of data offering deeper insights and richer opportunities to add value

Who am I?name, e-mail, address, mobile number

What is my household?Age, family, gender, income, residential information

What are my interests?Lifestyle information, travel history, hobbies, service preferences

Who do I follow?Social media interests and activities, browsing activity

What do I spend & where?Credit card feeds, POS feeds, transaction history, channel history

What are my activities?Health & wellbeing, gym visits, driving habits

Where am I?Real time location based information

Transactional Activity

Online & social media Activity

Location Information

Lifestyle Activity Information

Survey based interests & hobbies

Socioeconomic & demographic data

Identifying Information


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Expanding horizons beyond retailThe evolution of loyalty in adjacent sectors, notably insurance, has created a new category of loyalty which increases the depth of insight and frequency of interaction

Auto Insurers Auto manufacturers Maintenance & spares

Discounted insurance premiums linked to ‘safe’ driving activity & distance

Information on distances travelled, popular routes, driving style, peak times of travel for individuals

Promotional discounts linked to lifestyle preferences

Data on demographics and driving habits linked to brands and brand preferences

Ability to improve alignment of brand to targeted demographics

Proactive management of maintenance intervals

Impact of driving frequency & style on vehicle wear & impact on service intervals

Improved frequency of interaction with customer, enhancing garage service proposition

Health Insurers Gym memberships Retail

Health dashboard, promotional discounts, incentives to lead healthier lifestyle

Information on dietary habits and lifestyle preferences

Tailored insurance premiums to match individual’s lifestyles

Links to discounted fitness apparel

Discounted gym membership, linking gym membership & vitiation frequency to health insurance premium

Link to healthy eating habits, Weightwatchers membership

Grocery retailer participation, focused on discounts on ‘healthy food’

Health & Wellbeing Programs

Linking health insurance, physical activity,

pharmacy spend, healthy basket analysis

Motoring ProgramsLinking telematic based

car insurance to car servicing and auto

retailing

Gymbetter

Safe Driver


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Where to from here?


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Where to from here?In order to understand the role and value of loyalty within your organisation, its is key to first understand what role and function you want it to serve

The two roles of loyalty

Marketing and promotions tool Tool to drive changes in customer behaviour

Typically creates one off benefits such as sales uplift resulting from promotional activity

A channel for direct marketing and customer engagement

A point of connection to deliver promotional messaging

Loyalty owned by marketing

Typical executions include: points, coupons, discounts

Focus on influencing ATV (Average Transaction Value) or CLV (Customer Lifetime Value)

Refine retail offer (store location, range, pricing, etc) based on insight into most valuable customers

Loyalty management as a function linking into store operations, marketing, merchandising, ranging decisions

Increased range, depth, and frequency of customer interaction



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Where to from here?While there is clearly a degree of complexity to the subject of loyalty, we have identified seven questions that may help you tailor your approach

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2

3

4

5

6

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Tailoring Loyalty to

your needs

Customer insight

Customer diversity

Valued customers

Goals to improve value

Measureable benefit

Ownership of the customer

Adaptive organisation

How well do you need to know your customer?

How diverse is your customer base and how much tailoring of your value proposition is required to address these different segments?

Do you understand which customers are most valuable to achieving your organisation’s goals

Do you have clear goals for improving your value to customers? And are these supported by structured programs / initiatives?

Can you measure the return you get from these initiatives and are these benefits sustainable?

How integrated and co-ordinated are the customer touch points across your organisation

Do you know what your customers think of you? and Do you have processes to continuously adapt and refine your proposition in response to these thoughts?

© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

Ronan GilhawleyPartner

KPMG 10 Shelley StreetSydney NSW 2000

Tel: 02 9335 7029 Mob: 0410 668 440Email: [email protected]

loyalty presentation - cm forum april 15

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