Loyalty Programs

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					                                                  A Loyalty Program is:
         Proven Client Retention:                The practice of finding, attracting and
         Loyalty Programs that                    retaining customers who regularly
         Work!                                    purchase from you and refer new clients
                                                  to you.
             ISPA Austin 2009
             Lisa M. Starr

Loyalty/Reward Programs                           Start With Internal Customer
Over 75% of consumers have at least one
loyalty card                                      If they don’t believe your
                                                  company deserves loyalty,
American firms spend over $1B annually on         they won’t convey that to
loyalty programs                                  customers
June ISPA survey – 48% of respondents             Ethics start at the top
have loyalty program
                                                  Management team that
Loyalty cards account for 80% of all general      inspires and motivates
purpose credit cards issued
                                                  70% of lost business can
77% growth in loyalty programs 2000-2009          be traced to staff turnover

What is a client worth to you?
                                                  Calculating client value
Calculating client value:

Sally Sorta Good                                  Wanda Worthit
   7 annual visits @ $75 = $525                      12 annual visits @ $130 = $1560
   12% retail purchaser = $63                        25% retail purchaser = $390
   Gift cards purchased annually $150                Gift cards purchased annually $350
  Annual referrals value, 1 new clients @ $350      Annual referrals value, 3 new clients @ $500
  each = $350                                       each = $1500
   $1088/yr x 4 years = $4,352                       $3800/yr x 4 years = $15,200

                                        Gallup’s Metric of Customer
Why will clients refer to you?
Customer believes company offers
superior value (head)                   3 factors of loyalty PLUS
Customer feels valued by company        8 measures of emotional attachment
(heart)                                 Emotionally satisfied customers spend
Both rational and emotional             twice as much as either dissatisfied or
                                        rationally satisfied customers

“The Ultimate Question” –
                                        Net Promoter Score - NPS
    Fred Reichheld
                                        Create 0-10 customer scale based on
“How likely is it that                  feedback
you would                                9-10 score, promoters
recommend this                           7-8 score, passives
company to a friend                      0-6, detractors
or colleague?”                          % of promoters – detractors = NPS
                                        Average US company scores less than

What’s your score?                      Customer Surveys

If you don’t know how customers feel,   Brief and focused
ask them!                               Questions must pertain to behaviors
Previous purchasing data is NOT a       that drive growth
predictor of willingness to continue    Timely (within a few days of transaction)
doing business with you                 Scores don’t link to economics; 60-80%
                                        of satisfied clients still defect

 Value of Promoters                              Value of Promoters
 Higher retention rate
 Better margins; promoters less price-            WOM (word of mouth) activities – now
 sensitive                                        have greater speed and scale
 Annual spend; promoters consolidate                Twitter
 with one vendor                                    Facebook
 Cost effectiveness                                 You Tube
   Detractors carry higher customer svc costs       Blogs
   Promoters cost less; longer duration &

 Develop a Segmentation                          Develop a Segmentation
 Strategy      Colloquy, 2009                    Strategy - cont’d

                                                2. Focus on 4 dimensions of behavior
1. Create programs                                  Time-based - time & day programs; early
   which encourage and                              a.m. & late day or weekday appts
   incent a change in                               Location or channel - internet; specific store
   behavior                                         or department
                                                    Transactional - size and/or numbers of
                                                    Personal - demographics & groups

 Develop a Segmentation                          Develop a Segmentation
 Strategy - cont’d                               Strategy - cont’d
3. Employ segmentation strategy                 4. Filter
   Identify profitable segments                     Require opting in – forces clients to “raise
     More frequent clients                          their hand” and indicate future intention
     Higher average clients
                                                    Gather preference data – learn more about
     Recency effect – new clients                   habits and help predict future behavior
   Consider risk of attrition

Reward Programs should:                     Reward Program Elements

Combine categories                          Easy to understand
  Book an oxygenating facial on a Tuesday
                                            Automated and easy to administer
  $125 or more in services before noon
  Nurses receive free upgrade with every    Easy to participate in
  pedicure on a weeknight                   Promoted both externally and internally
Encourage maximum incremental

Loyalty Program Tools                       What’s the “point”?

Software                                    Find, attract and retain your target
Card programs                               customer
Points programs                             Move marketing dollars to internal
Newsletters and E-zines                     rewards programs to keep them happy
                                            Loyalty becomes competitive advantage
                                            during economic downturns

                                            What do hotel clients want?
Point system
                                            Recent Cornell hotel study:
                                            Chief factors in brand loyalty were
Easy to calculate                           design, amenities, staff
Clients like big numbers - $1 equals 10     Room upgrades, quick check-in, late
points or 100 points                        check-out, free internet, concierge level
Print points on transaction receipts        IHG – priority guests spend 57% more
Let them see their points online            and cost less
                                            Marriott – Rewards members double
                                            stays after joining

Reward Program Elements                     Rewarding Spa Clients
 Prizes/rewards should be valued
                                            Email reminders for gift occasions
 But, not too expensive (or they’ll think
 they’re paying)                            Unadvertised specials
 Attainable goals                           Express check-in or check-out
 Range of prizes                            Online order tracking
 Prizes rotate or vary                      Points toward future purchases
 Cash rewards not valued                    Barter – gym, dry cleaner, restaurants

Rewarding Spa Clients –                     Unique to your business
                                            Special promotions
Special sales                               Double points days, times
Direct Mail offers                          Double points services, providers,
Referral awards                             products
Birthday/anniversary                        Event attendance
recognition                                 Service anomaly rewards
Extended shopping hours                     Last minute services earn points, not
Third party/community                       discount

Current Loyalty Program
                                            Successful Loyalty Programs
Immediate rewards
                                            Meet or exceed organizational KPI’s
Targeted deals – birthday, previous
                                            Communicate one-to-one, not one-to-
purchase by genre
Souped-up Membership – tied to credit
                                            Deliver relevant, timely messages
card programs
                                            Updated consistently and frequently
Manufacturer rewards
                                            Recognize customer needs
Reward consortiums or partnerships

 Keep an eye on the bottom
                                             Relevant Web Sites

  Program should be attracting and           Chockstone.com         Maritz.com
  rewarding the “right” customer             Colloquy.com           Group3marketing.com
  Design programs that inspire desired       Points.com             Smartloyalty.com
  behaviors                                  Rewardforloyalty.com   Loyaltymarketing.com
  Expense of program cannot cut too          Webloyalty.com         Incentivelogic.com
  deeply into profitability

   Proven Client Retention –
  Loyalty Programs that Work!

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