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Just what is customer loyalty? And how are: Monetization , Socialization , Gamification and Disintermediation changing loyalty forever?. Howard Schneider Metzner l Schneider Associates. Loyalty. F aithfulness or a devotion to a person, country, group, or cause. C ustomer loyalty.

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slide1

Just what is customer loyalty?

And how are:

Monetization, Socialization, Gamification and Disintermediation

changing loyalty forever?

Howard Schneider

Metzner lSchneider Associates

slide2

Loyalty

Faithfulness or a devotion to a person, country, group, or cause

slide3

Customer loyalty

Measurably incremental profit driven by customer engagement, enabled by an understanding of individual customer needs, interests and behavior

slide4

The loyalty landscape

  • 31% of Americans find loyalty programs “extremely relevant”
  • 17% of Americans say programs “very influential” in purchase decisions
  • 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

What consumers say

  • 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

slide5

One hundred years of loyalty

Ancient history

1981

1990s – early 2000s

Today

The origins:

Manual programs

1st generation automated programs:

Travel

2nd generation automated programs:

Retail and card programs

Online programs and beyond:

Omnichannel

programs

slide6

Programs have evolved

Reward charts, status levels, transaction-based, limited channels

Multi-channel, customer choice, experiential, real time

slide7

Loyalty and the customer lifecycle

Maximize

Cross/upsell

Engage / update profile

Activate

Onboard

Retain

Reactivate

Acquisition

Advocate

7

slide8

Loyalty is both rational and emotional

  • How do I feel?
    • Recognition of my value
    • Thanks for my business
    • Community
    • Reinforcement
  • Measured by research and purchases
    • Perception
    • Preference
    • Satisfaction
    • Advocacy

What do I get?

Discounts

Free or upgraded product

Measured by tracking behavior

Purchases

Participation

Share of wallet

ROI

8

slide10

Disintermediation: One of the biggest words I know

the elimination of an intermediary in a transaction between two parties

10

slide11

True or false?

Loyalty programs were invented to reward marketers’ best customers.

disintermediation and loyalty
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.

slide13

The history of loyalty programs is the story of disintermediation

Travel industry

Credit cards

Early retailers

Retailers

Restaurant

Entertainment

Early CPG

Next gen travel

More CPG

OEMs

Media

13

slide14

Consumer empowerment is here to stay

  • More than ever, customers…
    • define relationships
    • demand real time responsiveness
    • choose their preferred channels, content and cadence

14

indirect distribution models
Indirect distribution models

Today, some of the fastest growing categories for loyalty programs are those with 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.

slide16

“350M customers…and we don’t know any by name.”

  • 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

16

slide17

Engaging entertainment fans

WB Insider Rewards looks one way to action movie fanboys

…and very different to classic movie afficianados

17

money talks
Money talks

In a business plan….

In a loyalty program….

“How do we make money from this

great idea?”

“How do we reward customers according to their value?”

money talks1
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
if only we could really reward customer value
“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 program

that delivers better economics to the

airline, more control and a better

experience for the guest.

When was the last time you tried to redeem miles on a legacy air carrier?

as easy as supply and demand
As easy as “supply and demand”

As easy as “supply and demand”

Elevate is the first revenue-managed program of its kind that provides choice, value, and a dynamic approach to enhance ROI.

15 Days Advance

Higher ROS

Lower ROS

14 Days Advance

Near Parity

Near Parity

22

monetization is a major trend in loyalty
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.

what are we doing in social media every ceo in the world
“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.

a sleeper strategy helps downy and macy s clean up
A sleeper strategy helps Downy and Macy’s clean up

Event marketing

Demonstration-chic

Customer acquisition

All enabled by Facebook and Twitter

and the results
And the results?

Voila:

A CPG brand can begin building direct relationships and fostering loyalty.

finding the brand fanatics and building communities
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.
socialization and loyalty
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.

gamification is reality broken
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?”

the economic challenge
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
enter the psychology and mechanics of gaming
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
of course there are skeptics
Of course, there are skeptics…

…but there are many situations where gamification

has been well-received and is brand-appropriate.

gamification and loyalty
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.

slide40

Thank you!

Howard Schneider

Metzner |Schneider Associates

howard@metzner-schneider.com