LOYALTY AND REWARDS THE NEW AGE OF SHOPPING. No. 2 / Jan 12 REPORT. Follow the leaders How SMEs can obtain customer loyalty through reward schemes

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1 AN INDEPENDENT SUPPLEMENT DISTRIBUTED IN THE GUARDIAN BY MEDIAPLANET WHO TAKE SOLE RESPONSIBILITY FOR ITS CONTENTS No. 2 / Jan 12 LOYALTY AND A SPECIAL REPORT FOR 2012 REWARDS THE NEW AGE OF SHOPPING Think outside the box to offer customers a unique shopping experience and encourage loyalty Adding brand value How retailers are building loyalty without slashing their prices Follow the leaders How SMEs can obtain customer loyalty through reward schemes PHOTO: SHUTTERSTOCK

2 2 JANUARY 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET CHALLENGES In 2012 there will be an increased focus on long-term loyalty, but customer retention can be a real challenge, says the Chartered Institute of Marketing s head of research Mark Blayney When loyalty is its own reward Consumer loyalty is the key to business growth because regular customers will spend more, recommend friends and be your best advocates. Creating loyalty is about deeper customer engagement using technology, interaction, and creative ideas to connect an individual with your brand. Yet the emphasis on price by some companies has meant some loyalty schemes are little more than discount programmes. Pricebased online voucher and coupon schemes can actually devalue existing loyalty schemes. Knowing your customer Successful loyalty programmes recognise the dif- 1 ferences among customers, but businesses need to understand their customers motivation. When developing an effective loyalty programme, targeted messaging and marketing such as special deals, special treatment at point of sale as well as recognition of customer value must all be considered. The ideal situation is to get to a point where you can offer genuine one-to-one marketing. It is not complicated to use customer data to identify trends and learn more about consumers so they get a relevant and high quality experience. Aligning your marketing and sales will provide a more consistent customer experience. Harness technology Social media allows marketers to become far more proac- 2 tive in encouraging dialogue, feedback and reviews as well as implementing recommendations and referral schemes. As a marketing tool social media Mark Blayney, Head of Research, Chartered Institute of Marketing. can show consumers how you differ from your competitors and is a valuable source of intelligence. Mobile will also have a greater impact in New payment methods and mobile banking will creep further into the mainstream. Square and Google Wallet are currently making the headlines with others close behind. This growth will allow more targeted location-based offers via mobile coupons. There are potential security risks with mobile so companies must respect customer data and privacy. However, if the campaign is innovative and well-planned and executed; the rewards will be plentiful. WE RECOMMEND Carol Marlow Managing Director, P&O Cruises PAGE 6 With travel loyalty schemes, customers need to see evidence that they are still regarded as special We make our readers succeed! LOYALTY AND REWARDS 2ND EDITION, JANUARY 2012 Managing Director: Christopher Emberson Editorial Manager: Faye Godfrey Business Development Manager: Dominic Webber Responsible for this issue Project Manager: Tom Latham Phone: tom.latham@mediaplanet.com Distributed with: The Guardian Print: The Guardian Print Centre Mediaplanet contact information: Phone: Fax: info.uk@mediaplanet.com

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How did they find you? Was it a local press advert or a recommendation which attracted a customer?

Right: the in-store touchscreen virtual mirror at fashion chain Republic, retailers are looking for ways to add to the shopping experience PHOTO: SHUTTERSTOCK Don t waste your marketing budget Add

Show that you care Make your best customers feel special.

4 4 JANUARY 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET NEWS 1STEP TOP TIPS FOR SMES CRAVING CUSTOMER LOYALTY KNOW YOUR CUSTOMER S WANTS AND NEEDS Tony Cram, Programme Director, Ashridge Business School Identify the loyalists Use a loyalty and reward scheme to identify your most regular and profitable customers. What do they like and dislike about your service, and act on their answers. How did they find you? Was it a local press advert or a recommendation which attracted a customer? Use a simple Excel spreadsheet to analyse how repeat customers were initially recruited so you know how to find more. THE NEW SHOPPING EXPERIENCE Above: Westfield shopping centre in London. Right: the in-store touchscreen virtual mirror at fashion chain Republic, retailers are looking for ways to add to the shopping experience PHOTO: SHUTTERSTOCK Don t waste your marketing budget Add value to your service rather than just cutting prices which tends to bring in price-sensitive customers who will switch to a rival as soon as they see a better deal. Show that you care Make your best customers feel special. Simple things like getting their name right and providing them with advance information about special deals will make them realise they matter to you. Build up trust New customers attracted by a loyalty or reward scheme will not know you, so trust must be built step-by-step. If you say you will call them at 3pm or send them some information that day, make sure you do. Face up to Facebook Social networks can appear irritating and time-consuming but sites such as Facebook let you communicate, build loyalty and gather feedback on what you and your competitors are doing right and wrong. Question: Discounting helped retail sales end 2011 on a high, but can stores build loyalty without continually cutting prices? Answer: Yes, by working with customers to improve the shopping experience Retailers with reward and loyalty programmes in 2012 must address customer cynicism to get shoppers returning again and again. For too long, say industry experts, consumers have felt stores are simply trying to bribe them with rewards and special offers to make them spend more. The retailers wanting loyalty this year must demonstrate how they add value to the shopping experience. Driving customer loyalty Consumers must be encouraged to look for the unpublished soft benefits of a loyalty programme. These include having more relevant products on the shelves and better customer service as well as the more obvious benefits such as cash-backs and discounts, says Stuart Evans, UK general manager at specialist loyalty agency ICLP. He urges retailers to exploit the data they hold on customers and Adding value brings the real retail reward Stuart Evans UK General Manager, ICLP use the insight it provides intelligently. Data informs retailers of the value of a particular customer over time, whether they shop instore or online and if they are buying the same products today that they did a year ago, all key ingredients to winning long-term loyalty. A loyalty programme is like buying a new car. If you leave it on your drive and don t make the most of it, it will soon get spoiled and lose its shine, says Evans. Recent innovations Waitrose added a loyalty card to its mywaitrose members scheme in October and is analysing in-depth data to discover shoppers likes and dislikes. Card members get exclusive access to competitions, tailored offers and can even win back the value of their shopping. Technology is enabling retailers to demonstrate less obvious loyalty benefits to customers. John Lewis is taking on the online price comparison sites with free wi-fi in its department stores so customers can compare prices and look up product information. It is also working on an iphone app aimed at in-store customers. New ways of satisfying your customers More retailers will integrate social media into their loyalty strategies in 2012 in a bid to focus more on improving the retail experience. Fashion chain Republic has attracted shoppers to its store at Westfield Stratford City in London using an in-store touchscreen virtual mirror in its changing rooms. Shoppers try on clothes and share pictures on social media so friends and family can comment on how they look. Understand what matters In the current economic climate retailers will also boost loyalty if they deal effectively with complaints. A survey by accountants PriceWaterhouseCoopers found that 72 per cent of consumers are unwilling to shop again at retailers who fail to resolve their issues rewards or no rewards. STEVE HEMSLEY info.uk@mediaplanet.com

5 PANEL OF EXPERTS AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET JANUARY Susana Miranda Hansford Internationalisation &Operations Loyalty Programmes Manager, Group Marketing Melia Hotels International Robin Korman Senior Vice President, Loyalty Marketing, Wyndham Hotel Group Richard Harris Head of Membership, American Express Services Europe Question 1: How can loyalty and rewards truly benefit you as a consumer? Consumers receive relevant offers thanks to the segmentation and personalisation technology used by loyalty programme owners. Loyalty schemes can stretch household budgets and enable people to earn additional rewards as they purchase. Ultimately, consumers are benefitting from the aggressive competition in many industries which has meant on-going promotions are crucial to most loyalty programmes. Consumers who consolidate purchases to a single programme can earn greater benefits in a shorter time than if they fragment their purchases among many programmes. Most programmes also offer promotional bonus rewards for increasing purchases, for example Wyndham Rewards offers a free night after two stays in one of our participating hotels. Always ask to join a loyalty scheme don t leave points on the table. Savvy customers can build up a wealth of rewards on everyday spending and use it to increase their purchasing power and offset future spending. The Office of National Statistics says families spend about 14,000 a year on goods and services that could be purchased using a card. Consolidating spending onto an American Express Platinum Cashback card could earn them 200 a year for example, without changing how they shop. Question 2: What advice can you give to SMEs setting up loyalty schemes? To lower investment costs and segment members, smaller companies should structure any programme in tiers. SMEs should also discover how different rewards drive attitudes and behaviour within the loyalty programme and towards the company itself. Ideally, they should consider forming strategic alliances around reward programmes to provide their members more benefits and reduce costs. Consumer research is critical to define what your best customers value in terms of rewards. Direct your marketing heavily into retaining your most prolific customers and keep any programme simple. Make it easy for users to understand and to redeem points. Always focus on the emotional value of what your programme can do and the positive impact the points customers collect will have on their lives. Our research reveals that 84 per cent of people believe companies should reward them for their on-going customer loyalty. Any reward scheme must be relevant, simple and valuable to the consumer. It is also important the points never expire so the consumer can choose when to use them. We know people only collect rewards if they see a real and tangible benefit from them. They must be perceived as worth collecting. Question 3: What s in store for loyalty and rewards in 2012? Loyalty programmes will Ask the continue to provide more Experts! targeted and location-based offers. We send text promotions such as Come in for drink at (hotel name) and the next one is on us to members who are within 10 miles of one of our hotels. Businesses will also get valuable insight from consumers on social networks by asking questions and running opinion polls. Also, more programmes will go mobile. The consumer will have to contend with a proliferation of loyalty and rewards schemes in unexpected sectors. On the positive side, there will be even more tools available to loyalty programme members to manage all their point balances and even exchange between disparate programmes. We expect to see more innovation in mobile loyalty applications, with smartphones the primary devices for managing accounts. This will be another year of austerity for many UK consumers and we anticipate that more people will begin to see the benefits of using a rewards-based card. Last year American Express gave back more than 20m in cashback to its card members. This is a competitive market so any company offering a rewards programme must be innovative and help people benefit even more from their dayto-day spending.

6 JANUARY 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET INSPIRATION Travelling the world is a great reward 2STEP DON T MISS OUT!

Answer: Yes, so companies must think differently and involve their customers more so they get the travel benefits they want Any reward scheme which taps into the nation s love of holidays is on to a

The travel and accommodation industry is no stranger to offering rewards for frequent flying or regular hotel visits, but many people do not redeem their reward benefits.

Yet, in these tough times, consumers could be missing out on a discounted holiday or extra perks when they do travel.

An example is P&O Cruises who will replace its old Portunus Club scheme with the Peninsular Club in April after its most loyal customers demanded a more exclusive programme.

6 6 JANUARY 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET INSPIRATION Travelling the world is a great reward 2STEP DON T MISS OUT! Question: Are travellers becoming weary of reward programmes that fail to excite them? Answer: Yes, so companies must think differently and involve their customers more so they get the travel benefits they want Any reward scheme which taps into the nation s love of holidays is on to a winner if it gives customers what they want. The travel and accommodation industry is no stranger to offering rewards for frequent flying or regular hotel visits, but many people do not redeem their reward benefits. They forget they are available, lose their loyalty card or never know how many points they have. Yet, in these tough times, consumers could be missing out on a discounted holiday or extra perks when they do travel. Traditionally, this has been a very price-sensitive area with customers often reluctant to stick with one brand because loyalty schemes have seemed complicated or have failed to excite them. MAKING WAVES: Top right: P&O Cruises are celebrating their 175th Anniversary this year, above right: Carol Marlow discusses loyalty schemes, above left: Dame Helen Mirren names the ship Ventura for P&O Cruises Photos: Mike O Dwyer Making the effort It means travel companies must work harder to win customer loyalty. An example is P&O Cruises who will replace its old Portunus Club scheme with the Peninsular Club in April after its most loyal customers demanded a more exclusive programme. The new club has six distinct loyalty tiers. Benefits include onboard discounts of up to 10 per cent, discounted laundry service, booking offers and early access to cabins. With travel loyalty schemes, customers need to see evidence that they are still regarded as special says Carol Marlow, Managing Director of P&O Cruises, which carries about 380,000 people a year, of which 60 per cent are repeat customers. Other brands have realised consumers want rewards that link different parts of their travel experience. Best Western Hotels now has a global partnership with Virgin Atlantic which rewards members of its Best Western Rewards scheme with Virgin Atlantic Frequent Flyer Club Miles. Every stay is worth 500 miles. Using social media Travel loyalty programmes will have more of a presence on social networks this year. Hotel businesses are getting an intimate look into what their customers want, need and think. By liking or following a certain business or company on sites such as Facebook or Twitter the customer is earning exclusive deals and rewards. Consumers can also earn cash credits by taking part in membership referral schemes. The website Secret Escapes has 750,000 members and features 700 hotels. Members can earn up to 50 credit by inviting their friends to join. STEVE HEMSLEY info.uk@mediaplanet.com

8 8 XXX AN ADVERTISING INSERT BY MEDIAPLANET wyndhamrewards.com/uk Free stays? Free airline miles? Free shopping vouchers? Be our guest. Join Wyndham Rewards and be part of the largest hotel loyalty scheme in the world. Stay at one of over 6,500 particpating hotels worldwide and you will get much more than a warm welcome. As a Wyndham Rewards member you earn points for every qualifying stay that can be exchanged for a whole world of rewards that give you something extra *. You can also enjoy guest privileges by being a member; free room upgrades, early check-in and late check-out and a free drink and snack on arrival. ** To sign up free today and start gaining member privileges go to wyndhamrewards.com/uk Also see details about our Winter promotion and how to earn a free night stay. * For terms and conditions of membership and details of the range of Wyndham Rewards redemption options available, visit wyndhamrewards.com/uk. **Subject to availability.

THE STATE OF CUSTOMER DEVOTION IN RETAIL PART TWO

THE STATE OF CUSTOMER DEVOTION IN RETAIL PART TWO A QUICK RECAP: PART ONE... THE OBJECTIVE We were intrigued to discover how customer s devotion to retailers is influenced by loyalty strategies. THE METHODOLOGY