the loyalty post magazine

LOYALTY ON A GLOBAL SCALEStanding out in a world of choice isnt easy. Earning consumer devotion to a brand or store takes more than just offering a good product. Price, packaging, customer service and reputation are just some of the factors involved in a consumers decision-making process. Thats why getting to the heart of what makes a consumer stick or switch can be the difference between flourishing and fading. While research shows that bigger rewards generally inspire higher loyalty levels, loyalty programs are no guarantee of loyal behaviours.

How do you turn a fickle fan into a faithful follower? You start by understanding the needs and motivations that drive their purchase decisions. And then you deploy the strategies and tactics that deliver the most value. Global study outlines the reasons why consumers switch brands, service providers or retailers and identifies the loyalty program attributes that potentially have the most staying power.

A new year. Who doesnt love a new year?! Its an opportunity to try new things, test new ideas, and really get after it. With the launch of The Loyalty Post my team is excited for so many things as we roll into the new year. Weve got additions planned for our existing products, as well as big plans around our resources and blog. We are excited by new trends in loyalty, and cant wait to see the industry take on some of them in full form.

In this issue, Id like to run through some of the biggest and best trends we are seeing, and point out some advantages for jumping on the loyalty bandwagon sooner rather than later. Here are the top five trends in customer loyaltywatch out 2015!

#5: Thinking outside your loyalty program#4: Customer analytics takes center stage#3: Personalization and cohort marketing FTW!#2: Experiential rewards = biggest impact#1. The thank you goes offline. Uhm what ?

Looking Ahead

So there you have it, our predictions for 2015. We think it will be a year of more data, personalized customer experiences, and big thinking, and we cant wait to see it all unfold. One thing is for sure customer loyalty is a hot topic as the industry tries to crack the keep customers around code.

Happy Reading

Harish BhatiaPublisher & Editor

Year after year the Loyalty Summit has provided a platform for a large number of organisations to showcase their loyalty products and service offerings. Similarly, a number of organisations have been attracted to the summit in order to learn more or understand how to implement or improve the running of their own loyalty programs. CEOs, CFOs, Loyalty, HR Managers, Channel Partner managers and even students have flocked to the 2 day summit.

The Loyalty Summit is an annual event and a full year passes between one event and another. A lot changes in a year and we thought it a great idea to bridge the time gap by publishing a bi-monthly magazine. This would keep corporates and industry updated periodically on the happenings in the area of Loyalty, be it Employee, Channel Partner or Customer.

So here we are The Loyalty Post. We are indeed delighted that at last there is an official magazine for the industry. While we acknowledge it has a long way to go, the first issue itself brings together interesting subjects as well as basic principles on the subject. As we go further among the contributors will be domain experts, on the job specialists, industry examples and loads of interviews. Our contributors come from all parts of the world and will bring to the reader a global perspective and samples of international best practices.

We welcome your feedback, whether about content or subjects of your interest or any other issue you feel important. Later issues will carry select letters, surveys and other interesting and engaging content that will keep the publication a buzz with excitement. While these are serious subjects that require serious attention, we believe that creativity must remain the central thread.

Currently it wont be available on the stands. So do subscribe to the magazine, to ensure you get your copy and are not disappointed later.

I hope to see your contributions coming in, thick and fast. Content for the next issue in march must reach before 20th February 2015. If youve got something to share that would interest corporates and professionals, on a related subject please keep your date with the editorial deadline.

May each month of this year be interesting and productive for you and your organisation.

CiaoGirish KhareExecutive Editor.

Publisher & Editors Desk

Executive Editors Desk

Contents

19

100420INDUSTRY CONNECT

Preparing the organization for loyaltyby Ashok M.S

Loyalty as we know it, is dead, long live Relevanceby Ajay Kelkar

We have it in us!by Praphul Misra

Getting ahead of the game: Trends in 2015by Aditya Bhamidipaty

Command loyalty, sure demand loyalty? NOby Simeran Bhasin

SPECIAL FEATURE

The power of one- How an enterprise loyalty program is helping Titan

LOYALTY BYTES

Nirmal Lobo, National Sales Manager,Fastrack

TECHNOLOGY

Are you earning BIG VALUE from BIG DATA?by Brian Almeida

FOCUS ON CHANNEL LOYALTY

Engaging channel partnerby Girish Khare

Integrated channel loyalty management an idea whose time has come?by N. Ram

REWARDS & MORE

How to make use of your hard earned loyalty points ?by Rahul Rana

Corporate rewards programby Rahul Rana

AIMIA at workFueling next-generation reward designExcerpt from the AIMIA bulletin 2015

PUBLISHERS DESK

Brand loyalty in the digital age by Harish Bhatia

E-tailers go Mobile to draw loyal customers by Harish Bhatia

WORLD VIEW

The Focus for 2015 - A single window view of the customerby Paul Brown The future of loyaltyby E.H. Gori

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January 2015

2 | January-February 2015 The Loyalty Post

Publishers Desk

Brand Loyalty in the Digital Age.What it is and how can brand earn it

We often hear it said that consumers are less loyal to brands in this digital age because the cost of switching is decreasing, decision-making is more transactional and people are more difficult to attract. A recent survey by Retail Week says that Overwhelmingly, the challenges outlined in the interviews focus on the ability to connect with consumers and build loyalty, and the hurdles posed by the multichannel age.

To overcome these challenges, brands need to turn the concept of brand loyalty on its head. The reality is that very few brands have or have had peoples true loyalty, brands have enjoyed beand-habituality, and some have earned loyalty to its brand purpose.

Encouraging brand-habituality

If you look at brand loyalty as building the need in people to habitually return to your brand, the strategy changes. Habits are created when the reward center of the brain is stimulated by a particular behaviour, thus encouraging us to repeat the experience. For brand to become habitual choices, marketers must understand what rewards consumers so they can leverage it to form habits. Consumers are rewarded by inspiration, information, comparison and maximisation. Fresh content from great sources inspires people so they widen their horizons. Reports on whats hot and whats not would do this. Information like product reviews, how many of their friend bought a product and how it rates, help people make more informed choices. Giving people the ability to compare choices helps savvy shoppers conclude that they are not missing

out on a better deal, which in itself is rewarding. In a more literal sense, maximizing a persons experience with the added extras of loyalty programs is also very rewarding.

Loyalty to a purpose

Loyalty is a bigger cause than ourselves and it forms our moral code. If I m loyal to an ideal and you ask me to do something that would contradict that ideal, I am unlikely to do it.

The Android brand is open source because it was created to equalize the opportunity available to everyone in the digital space, and people loyal to this purpose are loyal to Android. Because people are vocal, about their loyalties, the cost of switching is heightened, in our example, switching from Android to the elitist iOS cost far more than money, it would cost people their ideals. On the other hand, if Android were to build a walled garden like Apples, making Android less inclusive, the cost of switching away from Android would be negligible for people. In order to earn peoples loyalty, brands must have a clear brand purpose and obviously act upon that purpose in everything they do.

People are more promiscuous because brands are failing to interest them

With all the data available to us, it is easy for brands to understand what consumers are leaving for. Find out what tempts consumers away and turn crisis into opportunity by using them as attractions towards brand. In this digital age, brands should think about building loyalty in four ways:1. Make each connection between the brand and consumer

build brand habituality by giving generously in exchange for peoples attention.

2. Act on the brand purpose, and ensure that it is felt in every experience people share with the brand.

3. Recognize that choosing brand is not a transactional, commoditized process, but a decision that people see as a reflection of their identity

4. Ask not what is relevant to brand, but what is interesting to target audience.

Mr. Harish BhatiaFounder and CEOKamikaze B2B Media

The Loyalty Post January-February 2015 | 3


How to make use of your hard earned Loyalty Points ?

Have you always wondered why companies give reward points? Have you also received reminders about your loyalty points and have deleted those mails? You then have also thought about how reward points work and if they help at all?

Well, the science behind loyalty points is simple and if used optimally can help you avail several deals, discounts and benefits by leading brands.

HOW LOYALTY REWARDS WORK ?

The number of points earned on each transaction depends upon the product category, amount involved, type of card used and at times on where the transaction is done. Typically a card member can get one point for every RS 40-50 spent.

Reward points on co-branded cards can be 2-5 times the points earned on other cards.

The product category being bought and associated margins also decides the number of reward points you earn.

One can also get bonus points for using cards on special occasions. For example, this Valentine's Day, some reward program might offer 50 bonus points on first online transaction. Some premium cards give bonus points on joining their network too.

Mr. Rahul RanaMD and CEO

PAYBACK India

Rewards & More

Loyalty points are truly rewarding! This is because every partner brand of your loyalty card pays back towards your point-bank. How? Typically, a business spends an average of 1-2% of its total revenue on creating customer loyalty, including the software, computing equipment, value to consumers etc. Parts of these investments are passed on to the consumer by the loyalty program, and as a ball park, a member easily saves anywhere between 0.5%-2% of the total billed amount by actively engaging in a loyalty program at the base level, which can go upto 4%-5% with bonus coupons and even more if you aggregate the power of multiple brands on a single transaction. For instance if you shop at Central, using an ICICI Bank card and have activated coupons in the middle of a 3X campaign you get away with 5% worth of rewards. Aggregation!

HOW TO REDEEM ?

Identifying the right loyalty program is the key to this whole denomination. Follow the below parameters to ensure you make every transaction a truly rewarding experience:

Leverage the Power of Aggregation: The real potential of the loyalty program can be leveraged best with a multi-brand loyalty program, which provides the possibility to draw benefits from various categories.

A good loyalty program should bring together numerous brands from across categories who wish to reward their customers for their continued relationship

The four essential pillars of a loyalty program are thus finance, retail, telecom and fuel. These categories capture 70% of an average Indian consumers wallet share; and this will ensure you earn rewards on majority of the expenses incurred during an average day. Benefits or Loyalty Points earned through transactions made across partners, spread across categories of day-to-day requirements will then aggregate under the same loyalty program, ensuring more collection options.

Leverage the Power of Accumulation: Choose a loyalty program that enables you to collect points at a rapid pace. To accomplish this objective, evaluate the accessibility of the loyalty program. Always choose a loyalty program that has multiple touch-points which are in proximity to you, such as in-store, online, kiosks, mobile, and thereby render the possibility to increase frequency of usage while exploring the maximum potential of the loyalty program. Very frequently, it is noticed that when there is slow points accrual, consumers lose interest or old points expire by the time new ones are accumulated hence never undermine the role of points accumulation.

Flexibility is Essential: For transactions made, you should have the option to use any payment modes cash, cheque, credit or debit card and prepaid cards, across the partner network of the loyalty program and still be rewarded. This adds to the convenience quotient of the shopping

experience thus encouraging regular usage of loyalty program. Further loyalty card that allows instant redemption provides real-time saving, as it facilitates shopping when you want.

Keep it Simple: Avoid confusion of using and carrying multiple cards. Choose a loyalty program that is recognized across brands, stores, e-commerce platforms and locations. This will not only help you explore and utilize all the benefits of the program, but also avoid the fatigue of undergoing different processes with various brands, flexi-options for redemption, increase in number of offers and to emphasize again, keeps things simple and practical.

Convert every Opportunity into an Advantage:

A good loyalty program will provide a high degree of personalization to suit individual needs after understanding your demographics and spend patterns. To enable shoppers to enjoy more offers, bonus points, discount coupons and thus earn better. Ensure that you plan your shopping in such a manner that you convert these exclusive offers to make the best of them

Try it! It can be a very rewarding experience.

Loyalty programs have gone beyond earning and redemption of points; campaigns are being designed strategically to bring more power in your hands as a customer. Multi-brand loyalty programs are today the new norm helping you to redeem points in segments of entertainment and travel beyond the regular shopping basket. For that matter loyalty points also allow you to explore your charitable side by redeeming it for donations.


HOW LOYALTY REWARDS WORK ?

The number of points earned on each transaction depends upon the product category, amount involved, type of card used and at times on where the transaction is done. Typically a card member can get one point for every RS 40-50 spent.

Reward points on co-branded cards can be 2-5 times the points earned on other cards.

The product category being bought and associated margins also decides the number of reward points you earn.

One can also get bonus points for using cards on special occasions. For example, this Valentine's Day, some reward program might offer 50 bonus points on first online transaction. Some premium cards give bonus points on joining their network too.

Rewards & More

Loyalty points are truly rewarding! This is because every partner brand of your loyalty card pays back towards your point-bank. How? Typically, a business spends an average of 1-2% of its total revenue on creating customer loyalty, including the software, computing equipment, value to consumers etc. Parts of these investments are passed on to the consumer by the loyalty program, and as a ball park, a member easily saves anywhere between 0.5%-2% of the total billed amount by actively engaging in a loyalty program at the base level, which can go upto 4%-5% with bonus coupons and even more if you aggregate the power of multiple brands on a single transaction. For instance if you shop at Central, using an ICICI Bank card and have activated coupons in the middle of a 3X campaign you get away with 5% worth of rewards. Aggregation!

HOW TO REDEEM ?

Identifying the right loyalty program is the key to this whole denomination. Follow the below parameters to ensure you make every transaction a truly rewarding experience:

Leverage the Power of Aggregation: The real potential of the loyalty program can be leveraged best with a multi-brand loyalty program, which provides the possibility to draw benefits from various categories.

A good loyalty program should bring together numerous brands from across categories who wish to reward their customers for their continued relationship

The four essential pillars of a loyalty program are thus finance, retail, telecom and fuel. These categories capture 70% of an average Indian consumers wallet share; and this will ensure you earn rewards on majority of the expenses incurred during an average day. Benefits or Loyalty Points earned through transactions made across partners, spread across categories of day-to-day requirements will then aggregate under the same loyalty program, ensuring more collection options.

Leverage the Power of Accumulation: Choose a loyalty program that enables you to collect points at a rapid pace. To accomplish this objective, evaluate the accessibility of the loyalty program. Always choose a loyalty program that has multiple touch-points which are in proximity to you, such as in-store, online, kiosks, mobile, and thereby render the possibility to increase frequency of usage while exploring the maximum potential of the loyalty program. Very frequently, it is noticed that when there is slow points accrual, consumers lose interest or old points expire by the time new ones are accumulated hence never undermine the role of points accumulation.

Flexibility is Essential: For transactions made, you should have the option to use any payment modes cash, cheque, credit or debit card and prepaid cards, across the partner network of the loyalty program and still be rewarded. This adds to the convenience quotient of the shopping

experience thus encouraging regular usage of loyalty program. Further loyalty card that allows instant redemption provides real-time saving, as it facilitates shopping when you want.

Keep it Simple: Avoid confusion of using and carrying multiple cards. Choose a loyalty program that is recognized across brands, stores, e-commerce platforms and locations. This will not only help you explore and utilize all the benefits of the program, but also avoid the fatigue of undergoing different processes with various brands, flexi-options for redemption, increase in number of offers and to emphasize again, keeps things simple and practical.

Convert every Opportunity into an Advantage:

A good loyalty program will provide a high degree of personalization to suit individual needs after understanding your demographics and spend patterns. To enable shoppers to enjoy more offers, bonus points, discount coupons and thus earn better. Ensure that you plan your shopping in such a manner that you convert these exclusive offers to make the best of them

Try it! It can be a very rewarding experience.

Loyalty programs have gone beyond earning and redemption of points; campaigns are being designed strategically to bring more power in your hands as a customer. Multi-brand loyalty programs are today the new norm helping you to redeem points in segments of entertainment and travel beyond the regular shopping basket. For that matter loyalty points also allow you to explore your charitable side by redeeming it for donations.

Industry Connect

1. Define customer service standards

Setting expectations for customers is an important first step in achieving customer loyalty, for most churn emanates out of a dissonance between the expectations set and what is delivered on the ground. The organization should undertake an exercise of defining customer service standards with full participation of the front end staff, as they have first-hand knowledge of the customers expectations. Once the standards are defined, there should be a conscious exercise of communicating the standards across the organization and reiterating to the level where these are ingrained in the staff at all levels.

2. Train the front end franchisees and their staff

Once standards are set, it is important that these are also communicated to the franchisees and their staff, as the franchisee network plays a very important role in delivering the brand promise to the customers. Training the franchisee staff in delivering the customer service standards, is a challenging task and this is best accomplished when the functional training is bundled with behavioral inputs to these staff. The behavioral inputs should be to enhance the esteem level of the franchisee staff, so that they understand their role in the whole chain in delivering the brand promise.

3. Create multiple channels for customers to reach you

Post rolling out the customer service standards across the organization, you would sense that the customer response to the enhanced service levels being very good. To maintain the service levels, it is important that you establish a direct contact with the end consumer to capture feedback both positive and

Preparing the organization for Loyalty

Mr. Ashok M.SCOO

Accentiv

Most organizations today understand the importance of building customer loyalty and engaging with the best set of customers. However to actualize customer loyalty is an arduous task and companies need to prepare themselves well for sustaining the hard built customer loyalty. So what do companies have to do to prepare their organizations for loyalty ?

negative and also to measure the consistency of the delivery of the service levels across the network. Given the plethora of options today, you need to activate as many channels of communication as possible for the customer to reach you, including but not restricted to E-mail, Voice helpdesk, Facebook page, SMS etc. There has to be constant monitoring of the feedback received through these channels and complaints/ feedback acted upon quickly to make customers feel it worthwhile to provide the feedback.

4. Empower front end staff to resolve customer issues immediately

Having created channels for customer communication and actively inviting customer feedback, it is important for you to empower front end staff to resolve customer issues promptly and adequately. This could range from authorizing them to replace a product or taking back returns, to providing a value voucher for bad or indifferent service. While many companies hold back such empowerment for fear of misuse at the front end, what such companies do not factor in is the value of loss due to dissatisfied or more importantly customers who have not been assuaged inspite of complaining about bad service.

5. Maintain constant engagement with your customers

All of the above lay the foundation for building a strong and meaningful ongoing engagement with your customers. Such an engagement can create a virtuous cycle when your staff and franchisees are aligned, front end staffs are empowered and customers are willing to provide feedback, which you then act upon.

If all of these are done well, then you would have created the right environment to launch a successful loyalty program.


1. Define customer service standards

Setting expectations for customers is an important first step in achieving customer loyalty, for most churn emanates out of a dissonance between the expectations set and what is delivered on the ground. The organization should undertake an exercise of defining customer service standards with full participation of the front end staff, as they have first-hand knowledge of the customers expectations. Once the standards are defined, there should be a conscious exercise of communicating the standards across the organization and reiterating to the level where these are ingrained in the staff at all levels.

2. Train the front end franchisees and their staff

Once standards are set, it is important that these are also communicated to the franchisees and their staff, as the franchisee network plays a very important role in delivering the brand promise to the customers. Training the franchisee staff in delivering the customer service standards, is a challenging task and this is best accomplished when the functional training is bundled with behavioral inputs to these staff. The behavioral inputs should be to enhance the esteem level of the franchisee staff, so that they understand their role in the whole chain in delivering the brand promise.

3. Create multiple channels for customers to reach you

Post rolling out the customer service standards across the organization, you would sense that the customer response to the enhanced service levels being very good. To maintain the service levels, it is important that you establish a direct contact with the end consumer to capture feedback both positive and

Industry Connect

negative and also to measure the consistency of the delivery of the service levels across the network. Given the plethora of options today, you need to activate as many channels of communication as possible for the customer to reach you, including but not restricted to E-mail, Voice helpdesk, Facebook page, SMS etc. There has to be constant monitoring of the feedback received through these channels and complaints/ feedback acted upon quickly to make customers feel it worthwhile to provide the feedback.

4. Empower front end staff to resolve customer issues immediately

Having created channels for customer communication and actively inviting customer feedback, it is important for you to empower front end staff to resolve customer issues promptly and adequately. This could range from authorizing them to replace a product or taking back returns, to providing a value voucher for bad or indifferent service. While many companies hold back such empowerment for fear of misuse at the front end, what such companies do not factor in is the value of loss due to dissatisfied or more importantly customers who have not been assuaged inspite of complaining about bad service.

5. Maintain constant engagement with your customers

All of the above lay the foundation for building a strong and meaningful ongoing engagement with your customers. Such an engagement can create a virtuous cycle when your staff and franchisees are aligned, front end staffs are empowered and customers are willing to provide feedback, which you then act upon.

If all of these are done well, then you would have created the right environment to launch a successful loyalty program.


Industry Connect

Loyalty as we know it, is Dead, Long live Relevance

oyalty cards seem to be everywhere! It all started innocently enough. It seemed like no big deal

when airlines and hotels embraced the 'frequent' traveller rewards programs. We consumers loved the idea of earning rewards for our travel. Soon as we added banks, hotels, and retail cards, the number of loyalty cards that we held crept into the double digits.

US cos spend almost $50 billion a year on loyalty programs & some top programs like Marriot Rewards have over 30 million customers. Loyalty programs in India are still evolving & loyalty marketing research firm colloquy estimates the number of loyalty programme members in India to be over 35 million only.

Metrics around measuring loyalty are also very fuzzy. Some Retailers with mature loyalty programs claim to have nearly 65 to 70 % of their total sales coming from their loyal consumer base. But it is incorrect to look at this metric. What should be tracked are the Sales accruing from customers who have come more than once. New loyalty customers should not be counted!

More importantly, how do companies view loyalty? Should companies build strategies to be loyal to customers or do they really only expect customers to be loyal to them!

But when you look at the benefits that the loyalty programs profess, there is a large vacuum. You get minuscule points for your purchases, hardly a reason for you to come back. And companies hesitate to give you real benefits wondering whether they can actually differentiate amongst customers at the store front or in the bank. Loyalty programs which have been launched as yet another tick mark in a marketing arsenal are bound to fail. The program needs a wider commitment within most companies for it to give real benefits back to customers. After all what is the point of a loyalty program which does not give me a

separate checkout line in a retailer or give me a preview sale with relevant offers.

Loyalty programs are meant to break down barriers between customers and your business & yet charging a fee is not a bad idea. In some circumstances, a one-time (or annual) fee that lets customers bypass common purchase barriers is actually quite beneficial for business and customer alike. By identifying the factors that may cause customers to leave, you can customize a fee-based loyalty program to address those specific barriers.Not enough thought is being given by marketers to the softer benefits that loyalty programs can incorporate. Patagonia, an eco-friendly outdoor apparel company, realized that their customer needed more than just points and discounts from a loyalty program. So the company implemented its Common Threads Initiative. In it, they partnered with eBay to help customers to resell their highly-durable Patagonia clothing online through the company website. While consumers love discounts, you can get them passionate about incentives for living a healthier lifestyle, for sharing on social media & for participating in socialresponsibility programs. I have yet to see substantial innovation around this for loyalty programs in India.

There is so much talk about Coalition loyalty nowadays. Almost every large global company in the loyalty space is here & batting hard! Does Coalition loyalty work in India? Will marketers cooperate & align together or will multiple program partner interests be too complex to manage. Or will the Indian crab syndrome come in the way!

India is seeing a plethora of Coalition loyalty companies

Value-added resellers (VARs) managed service providers (MSPs), consultants, systems integrators (SIs), distributors, stockists, retailers and decision influencers are all part of what we call channel partners. The service they provide for a brand to reach the user is invaluable and without which it would be near impossible for products to be made available to consumers, especially in remote locations. More and more organisations are realizing just how important it is to keep your channel partners well informed, stocked and happy. Its not simply about providing them with products but an incentive to recommend your products. Therefore the supreme relevance of communicating and engaging the channel is becoming apparent.

Communication is a powerful tool for managing channel partners and it should focus on what the brand expects from channel partners. Effective communication produces a huge emotional spike in the relationship second in benefit only to that of financial incentives. Despite knowledge of this fact, far too many organisations have ignored it and engage only in communicating instructions, schemes and terms and conditions.

Communications should be cost effective, behavior oriented and it should address each partner personally, bases their contribution and position in the network. This recognizes their due and turns the spotlight on performers. Failure to do so is unfortunate and costly mistakes could result in loss of vital mind share. It is important to remember that channel partners are subject to the same drivers and emotions as employees and end customers; in fact they have added distractions.

Like customers, the reason channel partners favor some relationships more highly than the others is based on a variety of factors, Financial motivations rate the highest amongst the list. Organizations should nurture a culture of partner engagement so that, like employees and customers, channel partners also become emotionally engaged: This makes them more likely to take an active interest in the organizations success. Disengaged channel partner cannot be expected to build engagement around the brand. They may meet monthly goals and be able to accurately describe the benefits of your product, but if they are emotionally detached, they will be far less effective and less likely to be motivated to make the effort to sell more.

Can they improve the quality of programs that exist? Payback has been the early coalition entrant. Some reported figures place the transaction throughput via Payback to be around $350 million (Rs 1,500 crore to Rs 1,600 crore) every month. Research suggests that in India, around 35 to 40 per cent of the loyalty points that are given by Payback to its members is redeemed, while in Germany, about 95 per cent of the points given by Payback are redeemed.

Breakage is simply the amount of points or credits that expire or never get redeemed. Along with gift cards and cash cards, it is widely associated with Loyalty and Rewards Programs. The biggest question is How much breakage is optimal? If the breakage is low, does it mean that the program is a success, and if it is high, is it because members do not care about the program? This is not always easy to answer, as a certain percentage of points do naturally break and form a part of expected revenues. Studies have indicated that breakage in the retail loyalty programs hover around 25-30%. Some large airlines indicate a breakage between 13-25%.

It would be interesting to do analytics around the profile of customers who redeem regularly & get some insight into what customers find valuable in a loyalty program. Program design has a huge impact on breakage. It is a myth that high breakage leads to a good loyalty program, its exactly the reverse! Marketers should go back to the basics of building a credible loyalty program & not get misled into shortcuts through only the coalition loyalty route.

But are people forgetting a few fundamentals. Loyalty programs, if they are to engage customers should allow them to see value. Loyalty is no longer about points, discounts, miles or rewards, rather loyalty points as a method of building loyalty is myopic and in fact a lazy marketers dream. Give them points and they will come back is an absolute myth today. Discounts dont have memory and so most programmes come out with points. But according to the 2011 Colloquy Customer Loyalty Census, of the $48 bn worth of perceived value in reward points and miles distributed by American businesses annually, one-third goes unredeemed by consumers. Companies lose money on time and effort, and customers get no more value from the businesses to which they are supposedly loyal.

Engaging your channel partners consistently, give you an opportunity to control what they communicate with your end users, about the company, products, and services.This form of calibrated communication provides them with the tools they need to successfully promote your products. Needless to add, well-equipped partners are crucial to the success of your business.

Amongst all of this, providing accurate data becomes an important component in terms of building relationship with the channel partners. Having a solid information retention plan is essential to ensure a healthy and agile system. Obtaining regular reports about sales and prospects ensure the smooth functioning of operations throughout the chain. Proper data and information also maintains transparency and avoids multiple conversations which lead to misunderstanding. Most distrustful relationships stem from the fact that Channel Partners find Company data dubious. Trusting what the company issues, statements, data, and market facts are crucial. The brand is respected and the alliance is valued. Certainly a good and popular product is a welcome business for Channel Partners. Every product or service in the bouquet may not be a best seller and hence good relations, quality engagement bridges that gap and make the relationship worthwhile.

Channel Partner engagement in one form or the other exists in cement companies, other infra product companies and pharma, to name just a few

However one finds that most of these relationships are built on what we term incentives. With the exception of a few companies, in most cases these incentives are overriding and are bundled with promotions. Some have seasonal programs and others quarterly. This does not constitute engagement.

The term engagement implies that there is a meaningful two way communication between the Channel Partner and the Brand. Cement companies, with large budgets, for instance focus mainly on type of rewards (products or travel packages). A survey conducted by the authors research team among channel partners of some specific brands, indicated that more than 43% of them found the selection of Gifts/Reward products were ordinary and nothing to shout about. Also almost 35% claimed that gifts/products were similar among rival brands. This leaves nothing much to be excited about. This is a serious amount of money that is committed to such rewards, and it would be prudent to take a step back and have a serious relook at the entire plan. It is for this reason that the sure fire choice of channel partners is gold or gold coins are the sure. In other words they have no faith in the concept of perceived value of the reward products being offered by the brands. This illustrates the fact that the channel partner loyalty quotient cannot rest on Rewards only. It is obvious then that in themselves rewards (products) dont or cant be the distinguishing factor between brands. We conducted a similar exercise with mutual fund a few months earlier and the results were similar.

Brands must give top priority in engaging channel partners. This does not imply that rewards have no purpose or value, it simply means theres more to this relationship than pure rewards. The term making its rounds is Total Reward, for employees, channel partners and customers.


oyalty cards seem to be everywhere! It all started innocently enough. It seemed like no big deal

when airlines and hotels embraced the 'frequent' traveller rewards programs. We consumers loved the idea of earning rewards for our travel. Soon as we added banks, hotels, and retail cards, the number of loyalty cards that we held crept into the double digits.

US cos spend almost $50 billion a year on loyalty programs & some top programs like Marriot Rewards have over 30 million customers. Loyalty programs in India are still evolving & loyalty marketing research firm colloquy estimates the number of loyalty programme members in India to be over 35 million only.

Metrics around measuring loyalty are also very fuzzy. Some Retailers with mature loyalty programs claim to have nearly 65 to 70 % of their total sales coming from their loyal consumer base. But it is incorrect to look at this metric. What should be tracked are the Sales accruing from customers who have come more than once. New loyalty customers should not be counted!

More importantly, how do companies view loyalty? Should companies build strategies to be loyal to customers or do they really only expect customers to be loyal to them!

But when you look at the benefits that the loyalty programs profess, there is a large vacuum. You get minuscule points for your purchases, hardly a reason for you to come back. And companies hesitate to give you real benefits wondering whether they can actually differentiate amongst customers at the store front or in the bank. Loyalty programs which have been launched as yet another tick mark in a marketing arsenal are bound to fail. The program needs a wider commitment within most companies for it to give real benefits back to customers. After all what is the point of a loyalty program which does not give me a

separate checkout line in a retailer or give me a preview sale with relevant offers.

Loyalty programs are meant to break down barriers between customers and your business & yet charging a fee is not a bad idea. In some circumstances, a one-time (or annual) fee that lets customers bypass common purchase barriers is actually quite beneficial for business and customer alike. By identifying the factors that may cause customers to leave, you can customize a fee-based loyalty program to address those specific barriers.Not enough thought is being given by marketers to the softer benefits that loyalty programs can incorporate. Patagonia, an eco-friendly outdoor apparel company, realized that their customer needed more than just points and discounts from a loyalty program. So the company implemented its Common Threads Initiative. In it, they partnered with eBay to help customers to resell their highly-durable Patagonia clothing online through the company website. While consumers love discounts, you can get them passionate about incentives for living a healthier lifestyle, for sharing on social media & for participating in socialresponsibility programs. I have yet to see substantial innovation around this for loyalty programs in India.

There is so much talk about Coalition loyalty nowadays. Almost every large global company in the loyalty space is here & batting hard! Does Coalition loyalty work in India? Will marketers cooperate & align together or will multiple program partner interests be too complex to manage. Or will the Indian crab syndrome come in the way!

India is seeing a plethora of Coalition loyalty companies





Industry Connect

Can they improve the quality of programs that exist? Payback has been the early coalition entrant. Some reported figures place the transaction throughput via Payback to be around $350 million (Rs 1,500 crore to Rs 1,600 crore) every month. Research suggests that in India, around 35 to 40 per cent of the loyalty points that are given by Payback to its members is redeemed, while in Germany, about 95 per cent of the points given by Payback are redeemed.

Breakage is simply the amount of points or credits that expire or never get redeemed. Along with gift cards and cash cards, it is widely associated with Loyalty and Rewards Programs. The biggest question is How much breakage is optimal? If the breakage is low, does it mean that the program is a success, and if it is high, is it because members do not care about the program? This is not always easy to answer, as a certain percentage of points do naturally break and form a part of expected revenues. Studies have indicated that breakage in the retail loyalty programs hover around 25-30%. Some large airlines indicate a breakage between 13-25%.

It would be interesting to do analytics around the profile of customers who redeem regularly & get some insight into what customers find valuable in a loyalty program. Program design has a huge impact on breakage. It is a myth that high breakage leads to a good loyalty program, its exactly the reverse! Marketers should go back to the basics of building a credible loyalty program & not get misled into shortcuts through only the coalition loyalty route.

But are people forgetting a few fundamentals. Loyalty programs, if they are to engage customers should allow them to see value. Loyalty is no longer about points, discounts, miles or rewards, rather loyalty points as a method of building loyalty is myopic and in fact a lazy marketers dream. Give them points and they will come back is an absolute myth today. Discounts dont have memory and so most programmes come out with points. But according to the 2011 Colloquy Customer Loyalty Census, of the $48 bn worth of perceived value in reward points and miles distributed by American businesses annually, one-third goes unredeemed by consumers. Companies lose money on time and effort, and customers get no more value from the businesses to which they are supposedly loyal.

Here are some ideas for CMOs as they go into Year 2015:

1. Loyalty programs are more about customer insight: Loyalty is a mindset about building relevance for customers through information. So it is a larger transformation effort centred on creating an information led strategy with the Customer at its heart. Ensure that you have the analytics firepower to glean insights from the program & apply the learnings to other parts of your business. Dont leave the insights in the marketing department alone.

2. Having a loyalty program without driving relevance for customers is no good: Use the information that a powerful loyalty program collects to personalise the experience for your customers.

3. Get more ownership of loyalty programs at the front end ? Often you walk into a retail store or bank & expect some form of recognition as a loyal member. Can I expect to connect with a fashion savvy Customer care associate of a Fashion retailer & seek his advice as I weave fashion into my life! Would a retailer formally allow their associates to build up such a customer relationship! And can that be a feature for fashion forward customers in a retailers loyalty program.

4. Transform your Loyalty programs into Digital centric initiatives: Can I use digital to personalize my interactions with customers ?

a. An example is Target, which with the MyTargetWeekly Facebook application provides its fans a customized shopping experience with in-store deals that fit their wants and needs through a recommendation system that gets smarter as they use it.

b. Another example is US retailer Tory Burch as a company using a private website with its loyalty data. The loyalty program provides online access to a secure area of its website for its better customers, where it shows designs that could be put into production.

5. Loyalty points as a method of building loyalty is myopic & in fact a lazy marketers dream! Given them points & they will come back is an absolute myth! And yet we see a flurry of Coalition program driving into India-all of them trying to build on the Points formula! First build a robust loyalty program & then seek to leverage partnerships & coalitions.

Mr. Ajay KelkarCo-Founder & COO Hansa Cequity


















ome to the oldest scriptures in the world, the Vedas, India is a storehouse of knowledge that transcends time and

space, applicable to the modern context. Many believe the essence of the Vedas is found in the Bhagavad-gita, a literal record of Krishna's words.

I believe Krishna can be a powerful role model for business. An inspiration for brand architecture students and practitioners as a god-child, a loveable prankster, a model lover, a divine hero, a master strategist, a benevolent ruler/statesman, and the Supreme Being, all segments of believers are addressed. An inspiration for environmentalists with the killing of the demons Pootanaa and Trinavarta (air pollution), taming of the serpent Kliy (water pollution), Krishna lifted the Govardhan hill preventing the devastation of pasture land and advising his people to take care of their animals and their environment that provide them with all their necessities.

At the Loyalty Summit 2014 in Mumbai, I shared the following personal Krishna inspiration on CRM/Loyalty to a public forum for the first time.

Its starts with the premise that the ultimate brand-customer relationship can be likened that to the relationship of two lovers. The brand continues to woo and entice the customer with overtures using a mix of Economic (rational), Ego, and Emotional (Eco-Ego-Emo) benefits with a view to secure her loyalty.

In one of the many episodes (leelas) narrated by grandma during our childhood, Krishna, the model lover, engages with and endears himself to the gopis of Vrindavan in a unique and memorable way.

Upon hearing the sound of Krishna's flute, the gopis sneak away from their households and families to the forest to dance with him They discover he is dancing (raas) with his supreme beloved, Radha. Disappointed, they form a circle and dance around them, seeking his attention.

True to form, Krishna addresses their disappointment by creating multiple personas of himself and engages individually with each gopi, making her feel that she is dancing with her own Krishna. He goes on to extend the night to extend the experience.

What better lesson in Personalized Engagement, the core foundation around which much of CRM is preached and practiced today ?

10 | The Loyalty PostJanuary-February 2015

Industry Connect

We have it in us!

Praphul MisraChief Executive OfficerNetCarrots Loyalty Services

Technology

Are you earning

fromBIG VALUE

BIG DATA?

Are you earning

fromBIG VALUE

BIG DATA?

Of late I have had many companies ask me to provide ROI workings for investments in CRM, campaign management, customer engagement and so on. My standard response is: What is your current ROI ?

Model development is a science which starts with a host of assumptions and judgements on business. ROI on CRM is no differentit builds on business assumptions and more importantly, on predictive assumptions about customer behaviour. As with models, the more variables and time series data is made available, the more accurate the workings. However, establishing the base level is the first single most important step. What you don't measure, you don't know, and what you don't know, you cannot improve.

I get that businesses want to maximise their ROI. But here's the deal: value is derived from the rate at which the business can absorb customer information, derive meaningful insights from such data and apply those to its operations.

Reducing the time to value depends on the speed of processing datanot in terms of the speed of the CPUs deployed for analysis but the extent to which a lot of data can be put to use to define your customer communications in good time.

Businesses tend to limit their exposure to data that is the easiest to collect and analyse, like customers' transaction data. I call that small data. What about the whole world of data out there ?

Sure, analysing past transactions data can tell you about customers' product preferences, time of shopping, preferred channel and store, and a host of other information. Such analysis can point you to the most appropriate product or service offerings for them. But more dynamic (albeit unstructured) socialmedia data can tell you what interest groups your customers belong toperhaps a culinary group or an Indian classical music group. Dynamic GPS data can tell you that your customer is two stores away from your store right now. Overlaying your customers' current location on other customer information can spell big success in converting offers into sales.

In fact, the more dynamic data you can process in real-time, the more certain you can be of creating value. For instance, a customer might be checking out two pairs of trousers on your webstore when you

drop him an offer to Buy 1 Shirt, Get 1 Free. Chances are high that the customer will take you up on that offer.

Transitioning from analysing static data (or batch mode) to analysing dynamic data can yield all the more meaningful insights. When you move from small data to big data, you get to know precisely what customers want, when they want, and hence, how to become more relevant to them. What sort of personalised store window can y ou create for

Big data conceals customer insights that can help businesses reduce their time to big value. Provided they can reveal and action those insights.






















Technology

customers that will keep them coming back for more? You can literally make every customer segment and an increased number of segments come alive across the organisation, boost customer engagement and derive greater value from your existing customers. Instead of focusing on customers' generic needs, you focus on the specific needs of different customer segments.

Consider the example of a mobile operator. Every mobile operator marketer knows that users want good network quality and the cheapest po ssible telephony services. Those are generic insights. But not every mobile subscriber could use a plan offering no free SMSs and unlimited data per month across family numbers. Or a plan offering unlimited talk time with 20 different local numbers. Different customer segments can use different plans. As customers, you and I have different pain points and sweet spots. When customers get what they want, your ROI starts nudging upwards. You increase your customers lifetime value through greater engagement and relevance in your communication, and thereby reducing customer churn rate.

Travelling the journey from generic to sharp customer insights involves tapping into new sources of customer data, acquiring new analytical skills and developing a data usage culture across the organisation. Along the way, you will develop a customised ROI model for your business. One that takes cognizance of the nuances of your industry, your product, the channel you operate in, the sort of customers you de al with and the various segments they can be categorised in, etc.

Essentially, ROI workings cannot be the same for two businesses. Calculating the ROI of any customer engagement initiative is not theory, it is a practice. Collect data, analyse it, apply it, measure the outcomes, tweak your strategyover and over again. And the practice must permeate the enterprise.

Granted, it takes times to acquire the

passes. But you can start to create value early

neither perfect data nor high-end analytical capabilities. Start with the data in your

possession. Creating value is a three-step process:

You need to understand the important relationships within the data you already have (every business has transactional data, at the very least) and you might want to start with your most valuable customer segment and gradually understand how to drive their exemplary behaviour in other customers.

You need to uncover the value in these existing data sets (perform analytics). An expert can help you deploy new data exploration and visualisation technologies which can reveal interesting linkages and behaviour between variables and among different customer segments.

You need to consume the insights revealed. That is, link the new insights to existing business processes so that the right action to drive customer engagement is taken at the right time.

As statistician, engineer and management consultant Dr W Edwards Deming, also known as the father of the evolution of quality, famously said: If you do not know how to ask the right question, you discover nothing. Begin by learning how to ask the right questions.

Maximising value and reducing time to value is every marketers dream. The best you can do is to start working towards it today. Instead of focusing on justifying investments in understanding customer behaviour, ask how you can create a model that collects all the customer data that could hold value and learn how to analyse this data fast. Because again I'm reminded of a great line from Deming: In God we trust. All others must bring data. There's nothing as dependable as data.

Mr. Brian AlmeidaPartnerStrategic Caravan International Pvt. Ltd.

bandwidth to process data dynamically and

experience before the moment of opportunity deliver the ultimate personalised customer


in your analytics adoption curve. You need

14 | The Loyalty PostJanuary-February 2015

Focus On Channel Loyalty





Engaging

Channel Partner


Amongst all of this, providing accurate data becomes an important component in terms of building relationship with the channel partners. Having a solid information retention plan is essential to ensure a healthy and agile system. Obtaining regular reports about sales and prospects ensure t

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