IMA Europe Conference Milan Loyalty Disruption? 18 May 2017 Prof. Cristina Ziliani, Ph.D - Loyalty Observatory UniPR
The Loyalty Observatory at the University of Parma Founded in 1999 43 academic journal papers 4 books 18 sponsors 16 conferences 2500 attendees 850 companies 110 speakers The Loyalty Conference 2
Loyalty Marketing today
This Is Why Starbucks Might Not Be the Best Stock to Buy Right Now 21st April 2016 Investing # StockWatch 4 Reasons Amazon Stock Will Keep Doubling Every 3 Years Dunkin' Brands shares jump as loyalty program hits milestone Monday, 22 Aug 2016 4:33 PM ETCNBC.com Ron Antonelli Bloomberg Getty Images Dunkin' Donuts Shares of Dunkin' Brands rose nearly 2 percent on Monday after the company revealed that its loyalty program had reached a new milestone.
We will grow thanks to our loyal customers. Acquisition is too risky and uncertain (Brian Moynihan, Bank of America CEO) I congratulate Bank of America. Retention is a sound and forward looking strategy (Warren Buffett)
Loyalty «disrupted» Marketing Retention vs Acquisition customer-based success measures systematic individual customer information collection widespread adoption of CRM loyalty programs
Milestones in the history of loyalty marketing 1895 - Sperry & Hutchinson Company creates stamps to reward repeat purchase 1980 - American Airlines launches Aadvantage and air miles 1990 s - adoption in European retail plastic cards basic segmentation: card holders vs non-holders rewards take the form of points, gifts, reductions, status no use of data overconfidence in program impact on behaviour first entrant advantage exits B2B (trade partner programs)
2000 s diffusion across industries and countries evolution of loyalty program model rise of loyalty intermediaries consulting firms develop loyalty divisions data collection and analysis begin use of loyalty data for marketing decision making begins (Tesco)
Loyalty Programs across industries - 2000 Penetration Fuel Air miles Affinity Hotel Grocery Restaurants Utilities Coalitions Telephone Credit cards Department stores Time
Supermarket loyalty programs across countries - 2000 penetration Russia, India, China USA Canada Scandinavia Benelux France Italy Spain Austria Malaysia, Thailand East Europe UK time
Burning points retailer A others OSSERVATORIO FEDELTÀ Loyalty program model lifecycle village stand alone coalition affinity retailer A others Earning points
Coalitions Numero annuo di lanci di programmi di tipo coalizione
Media for loyalty marketing 2001 to 2012 website 100% direct mailing 94% coupon at till 87% e-mailing 90% 91% customer magazine 2012 83% text messages 2009 68% kiosks 2001 91% telemarketing app 37% social media 75% digital coupon 51% digital loyalty program 72%
2010 s maturity AND morphing Maturity of «traditional» loyalty programs B2B schemes shift from sell in to sell out and database building goals Digital Revolution New promotional scenario New players
2016 - maturity The average US family belongs to 30 loyalty programs (Colloquy, 2016) Consumers who shop regularly with a loyalty card are between 70% and 90% across Europe (Nielsen 2015) CPG manufacturers launch brand loyalty programs Overall, coupons, gift cards and loyalty points together account for more than $165 billion in purchasing power in the US, almost as much as total e-commerce sales
The Information Revolution (AKA Big Data) The explosion in the variety and quantity of information available to individuals and organisations, regardless of its location Social and Mobile Disruption from the Latin verb «dis-rumpere»: shatter, sever, cause to break apart
limited Impact of digital Revolution disruptive OSSERVATORIO FEDELTÀ The Digital Revolution creates a totally new, convergent, scenario coupons coupon wallet cashback apps group deals/flash sales customised offers Flyers/FSI wallet payment wallet wallet loyalty wallet mobile rewards app branded currency subscription based services Personalised experience (reccomendations/content) card points new services and new players new hybrid promotional formulas customer data based personalisation interface turns (from physical) to digital Price promotion Source: Osservatorio Fedeltà UniPR Non-price promotion
Branded currency All forms of currency points, gift cards, coupons etc. that allow a shopper to exchange with a retailer for its goods and bear the retailer name as an umbrella Retention potential of new means of payment Starbuck s evolution from gift card to «mobile payment tool & loyalty program» 1 bn $ in app 20% transactions through app
Payments industry disruption New technological advances in tokenisation of card details, NFC readers, standards, biometric authentication New entrants: device manufacturers, tech companies, retailers, telco, startups
1995 2015
LOYALTY as program Loyalty Marketing LOYALTY as Service and Experience LOYALTY as CRM 1980-2000 2000-2015 2015 - today Source: Osservatorio Fedeltà UniPR
Customer Relationship Management: Profiling Best in Class Companies 23 Silhouette=0.53
CRM subdimentions Cluster 1 Low performers Cluster 2 Best in class PROSPECT measurement 2.24 4.55 ACQUISITION 2.28 4.56 REGAIN 2.17 4.71 Customer measurement 3.26 5.48 RETENTION 3.67 5.24 CROSS SELLING and UP SELLING 2.43 4.80 REFERRAL 1.47 3.01 TERMINATION 1.95 3.18 Values on a scale from 1 to 7 Customer Relationship Management : Profiling Best in Class Companies CRM processes evaluation scale from Reinartz, Krafft e Hoyer (2004)
CRM best in class Use loyalty KPIs at all organisation levels and in all departments Are multichannel, specifically use offline to drive online Spend more of the marketing budget on loyalty Train employees to manage customer segments differently based on value Reward employees for customer retention Consider the website pivotal for retention Began CRM 2,5 years in advance compared to others Believe that personalisation is the most effective retention Use both digital and traditional media in a targeted way to contact customer 50% 40% 30% 20% 10% 0% 16% 39% 24% 26% 21% 18% 18% 21% 7% 9% 0-5% 6-10% 11-15% 16-20% oltre il 20% Best in class Altri Are very open to partnerships with new intermediaries and e-commerce pure players
Customer Experience is the evolvement of a person s sensorial, affective, cognitive, relational, and behavioural responses to a firm or brand by living through a journey of touchpoints along pre-purchase, purchase, and post-purchase situations (Homburg et al. 2015) Customer Experience Management aims to achieve, as a final goal, longterm customer loyalty by designing and continually renewing touchpoint journeys. This is done by designing touchpoints that are connected, consistent, contextaware and branded
Is the Customer Experience Management concept clear for companies? YES for 19% of respondents for 27,5% of those who sell online for 6,8% of those who don t and WE ARE GOOD AT IT 13% of respondents agree
2016 - Customer Experience Management Data capture at touchpoints Touchpoint based strategic management capabilities Organisation al customer insight sharing Customer information integration at touchpoints Source: adapted from Homburg et al. 2016
Data capture at touchpoints BRANDS RETAILERS SERVICES Loyalty Program 50% 79% 59% e-mail marketing 52% 58% 71% customer service/call center 51% 53% 72% website 48% 56% 45% social networks 53% 37% 56% sweepstakes 50% 38% 48% store associates 33% 51% 39% app 40% 41% 39% coupon 34% 38% 31% % is sum of frequencies of 6s and 7s to question
Customer information integration We integrate customer information from different customer facing functions (e.g.: marketing, sales, customer service) We integrate customer information with data from external sources at the individual level We integrate customer information from different touchpoints at the individual level (e.g..: telephone, mail, e-mail, web and personal contact) We integrate information from different sources for each customer TOTAL BRANDS RETAILERS SERVICES 17% 11% 18% 33% 10% 8% 10% 14% 15% 11% 14% 23% 13% 8% 12% 29% Overall customer information integration capability (% of companies) 14% 9% 14% 25% information integration scale from Jayachandran et al. 2005
Insight sharing across the organisation TOTAL BRANDS RETAILERS SERVICES Customer insight is shared across departments/functions 8% 3% 8% 24% Customer insight is shared across organisational levels 13% 8% 10% 23%
Touchpoint based strategic management capabilities: where are we? 18% CAPACITA COMPLESSIVA 6% Respond immediately through touchpoints when a competitor targets their customer base 14% Use touchpoints for conducting market research 17% Disseminate customer satisfaction results collected through touchpoints across the organisation 23% Use touchpoints to discover changes in customer product preferences 26% When a function discovers something relevant about a competitor through touchpoints, it alerts other functions immediately 18% Have high touchpoint base strategic management capabilities strategic touchpoint management capability 13 item scale adapted from Kohli et al., 1993
Why should companies embrace Customer Experience Management? Touchpoint based strategic management capabilities are strongly positively correlated with company performance: Sales Margins Overall economic performance Controlling for company size, industry and loyalty orientation
Thank you for your attention! cristina.ziliani@unipr.it @Oss_Fedelta