No. 3 / December 2012 Distributed within The Guardian

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A SUPPLEMENT DISTRIBUTED WITHIN THE GUARDIAN ON BEHALF OF MEDIAPLANET WHO TAKE SOLE RESPONSIBILITY FOR ITS CONTENTS

Bryan Pearson, President of LoyaltyOne and author of The Loyalty Leap off ers his best tips to achieving customer intimacy

LOYALTY AND REWARDS

PHOTO: COLLOQUY

3STEPS TO

CONNECTING WITH CONSUMERS

THE POWER OF CUSTOMER DATA

Meet the needs of your customersUnderstand what’s important to them

Analysing dataHow to gain a 360 degree view of your customer

The importance of a loyalty strategyDeliver rewards and connect to people

Coalition loyaltyThe benefi ts of multi-partner coalition schemes

2 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET

Key trends for winning loyalty in a digital age

Today, when it comes to companies winning your heart, so much depends on what is in your hands, says Carlos Dunlap of COLLOQUY.

Just think about the items you interact with most — a mobile phone, a tablet and perhaps a laptop. Across all of these screens, you engage with communities through

Facebook, Twitter, TripAdvisor, Yelp, Foursquare and many more. In short, people network to meet their exact needs. Any email or communication that is irrelevant can be zapped away with the touch of a button.

Brands and organisations, thank-fully, are learning to connect with consumers on their own terms. They are tailoring operations to suit the way people live, and connecting in meaningful ways. At COLLOQUY, we have seen these trends:

Employee empowerment

1More companies now train and trust their employees to make

snap decisions to resolve service is-sues. This makes sense since one an-gry Tweet can reach thousands of peo-ple in minutes. Virgin Atlantic even trains its staff on the cost of servicing

customer complaints. If that means a gift from duty free, it will happen.

More security

2In May 2011, the EU updated the Privacy and Electronic Commu-

nications Directive, requiring web-sites to get user consent before stor-ing cookies on their computers. As of October 2012, most UK users were al-lowing third-party cookies according to Computer Weekly. This implies businesses are gaining trust, but we know the demand for greater trans-parency, and relevance, will continue.

Immediacy

3Mobile technologies have cre-ated an on-demand market-

place that is universally accessible via a multitude of devices. Compa-nies from Sainsbury’s to Starbucks are developing apps for a variety of services, including mobile pay-ments. These apps translate to a speedy check out, they may let you jump a queue at a crowded venue, and they serve up off ers based on your preferences and GPS location.

Entertainment

4Call it the emergence of “play-sumers”: Shoppers want

brands that are fun, so games and contests are entering the fray. For in-stance, M&S Money last Christmas launched a contest that gave its club members the chance to win one mil-lion M&S points, worth £10,000 — and it won some awards itself.

So next time you click on, consid-er all of the opportunities at hand. And if you do not like what you see at the moment, no worries — there are plenty of savvy companies that un-derstand what is important to you.

Carlos DunlapEditorial Director, COLLOQUY

‘Coalitions yield data that is more descriptive, predictive and actionable than anything a retailer stores’

Caroline PapadatosSenior Vice President, International, LoyaltyOne

PAGE 6

LOYALTY AND REWARDS, 3RD EDITION, DECEMBER 2012

Managing Director: Chris EmbersonEditorial and Production Manager: Faye GodfreyBusiness Developer: Dominic Webber

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The economic downturn has fuelled the shopper’s passion for loyalty schemes and prompted retailers and brands to analyse more closely the data they collect to boost their customer relation-ships and sales.

Economic downturn boosts loyaltySince 2008, loyalty has become a valuable currency for consumers as household incomes have been squeezed. Shoppers are work-ing harder to earn and redeem rewards online as well as on the high street.

Figures from global leader in loyalty management Aimia, which owns the UK’s top coali-tion loyalty programme Nectar, reveal the importance of loyalty schemes in the current econom-ic climate. Two thirds of Nectar’s 18m collectors openly collect

points to save money, eight out of 10 accumulate points wherev-er they can and one third collect more points now than they did four years ago.

For companies operating in a challenging and often compet-itive marketplace, an effective loyalty strategy will be one of the most powerful weapons to in-crease sales, drive customers to different parts of the business and keep them faithful. “Loyal-ty may seem all about cards and points on the outside but ulti-mately it is about customer re-lationships and managing these effectively in future,” says pres-ident and CEO of Aimia, Europe and the Middle East, David John-ston. “Consumers are demanding more of a value exchange when they share their data and loyalty schemes are popular because this trade-off is very transparent and they get relevant rewards.”

Benefits for allJohnston adds that loyalty schemes also help companies to re-engineer their businesses by encouraging consumers to take actions that save the organisa-tion money. This could include persuading customers to switch from paper to online billing.

Customers are no longer be-ing rewarded just for the transac-tions they make but also for the different interactions they have with a brand across different marketing channels. This trend will accelerate in 2013, powered by the increased use of mobile de-vices such as tablets and smart-phones that are becoming useful shopping aids.

Johnston expects to see a growth in what is known as showrooming activity where shoppers visit a store and use their smartphones to compare prices before purchasing at a lower price online. According to a YouGov survey conducted for Aimia, about one third of men and one in five women already shop this way.

STEVE HEMSLEY

info.uk@mediaplanet.com

Loyalty is the retail currency of the future

David JohnstonPresident and CEO, Aimia, Europe and the Middle East

NEWS

COLLECT POINTSLoyalty schemes like Nectar offer the customer the opportunity to earn points that they can spend in a number of different waysPHOTO: AIMIA

Nectar sign up boosts loyalty for British Gas

When research by energy provider British Gas revealed its customers wanted to be rewarded for their loyalty it joined the UK’s largest loyalty programme Nectar.

British Gas, along with its en-ergy competitors, suff ers from a low level of trust and heavy customer churn so it needed to diff erentiate itself and engage more with existing and poten-tial customers.

Nectar is a loyalty coalition of brands including Sainsbury’s and Ebay and British Gas saw its involvement as a way to build lasting customer relationships.

Awarding Nectar points boosts retention rates and peo-ple are given points for taking actions that save the company money, such as taking their own meter reading or choosing to pay by direct debit.

The campaign reached its fi rst year enrolment target of 2.35m customers within the fi rst eight weeks and direct mail response rates are up by 160 per cent.

STEVE HEMSLEY

info.uk@mediaplanet.com

■ Question: How can a business retain customers and increase sales in today’s tough times and the years ahead?

■ Answer: With a loyalty strategy that connects with people however they shop and delivers relevant rewards.

CREATE A LOYALTY

STRATEGY

1STEP

Use your points or miles anytime and anywhere with PointsPay®

Are you a consumer? Do you run a rewards program?

www.pointspay.com

6 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET

1

2

3

While loyalty schemes abound, few programs deliver the reward attain-ability and choice that comes from a well-managed coalition. It stands to reason that if customers can col-lect everywhere they shop and get to a reward faster, they will engage and change their shopping habits to earn. Around much of the world, promi-nent brands are rethinking their pro-prietary programs to harness the val-ue of multi-partner coalitions.

Most in the UK are familiar with coalitions in concept if not in name — Nectar counts more cardhold-ers than any other UK program. But many would-be partners still cast a suspicious eye on the coalition mod-el, fearing it dilutes the brand or sales.

With this, I want to dispel the three biggest myths in coalition loyalty:

Shared data is lost data?Merchants sometimes fear that data sharing in a loyalty

coalition means depreciating their data asset. In reality, when partner data is augmented with multi-cat-egory transactional behaviours, the

insights become richer. Coalitions yield data that is more descriptive, predictive and actionable than an-ything a retailer stores. A company gains a 360⁰ view of their custom-ers — shopping behaviours, travel patterns, mobile usage, social ac-tivity and media responsiveness to start, as well as qualifi ed data about non-customers who can be targeted with relevant messages and off ers. Shared data is smart data.

Shared brands are diminutive?

Retailers love to have their logo in customer wallets, but

that’s not how brand loyalty is built. If the true measure of a brand is awareness, activation, off er re-sponse, customer and revenue growth then coalition ultimately makes retail brands stronger. It is a brand accelerator, acting as a plat-form, like Intel Inside or Microsoft. The coalition brand invites cus-tomers to enrol and engage with

all the exclusive brands on the in-side. It has only one purpose: to in-crease the number of people en-rolled and build the mechanism to collect and redeem with partners. This leaves partners all the fl ex-ibility to promote their brand to a broader base of customers with greater scale, impact and relevan-cy than they could do on their own. Coalitions are the call-to-action.

Shared customers are errant customers?

Not true. Coalitions around the world have proven that

members who shop within a coali-tion are more likely to consolidate their purchasing with merchants inside the network, leading to in-creased spend and basket size. This “network eff ect” increases the cu-mulative spending of customers, but it also capitalizes on increased frequency of shopping across the coalition by building and maintain-ing high top-of-mind awareness. In every case, a shared customer is a more active and engaged customer.

In truth: Coalitions are the way forward for creating shared value and marketing co-creation.

■ There is one unassailable truth in marketing: people love rewards.

DISPELLING MYTHS

Choose to believe: three coalition myths

WORKING TOGETHERCaroline Papadatos of LoyaltyOne says the ability to share data is just one of the many benefits of coalition loyalty schemes PHOTO: SHUTTERSTOCK

Caroline PapadatosSenior Vice President, International, LoyaltyOne

INSPIRATIONMeasuring the benefi ts of a loyalty scheme

Retailers must work hard to benefit from loyalty schemes, says Chris Jacobs, a loyalty consultant at Business Assyst.

Loyal retail customers spend between 30 per cent and 50 per cent more each transaction than the average customer, vis-it a store three times more of-ten and spend four times as much each year.

A loyalty scheme not only rewards customers for being faithful but by identifying pur-chasing patterns it allows a re-tailer to segment its customers and communicate with them in a more meaningful way.

Gathering valuable dataYet before launching a scheme, a retailer must know who its typical customers are, average spend and how frequently they visit. Without this information it is diffi cult to measure wheth-er a scheme has succeeded in its goal of getting people to shop more regularly and spend more when they are there.

Once a retailer has decided on a loyalty programme that suits its brand, the scheme should be trialled in a small number of stores. This will indicate quickly whether it brings the expected financial return and any teething prob-lems can be ironed out.

The most common mistake retailers make is thinking that launching the scheme is the hardest job. In reality, the re-al work starts once the loyalty programme begins generating valuable data.

Loyalty schemes tend not to work for price-driven retailers or those that consumers visit infrequently, such as opticians. These businesses should con-sider joining a loyalty coalition programme so they can still ob-tain important data.

STEVE HEMSLEY

info.uk@mediaplanet.com

CONSIDER WHETHER A COALITION

SCHEME COULD BE RIGHT FOR

YOUR COMPANY

2STEP

8 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET

Consider that years ago, back when the concept of customer intimacy sounded like something that could get you fired, I was fighting an uphill battle just trying to get merchants to understand something a lot less sexy: the power of customer data.

I recall one presentation, when a skeptical retail executive scoffed at my results. “How many of our cus-tomers were captured in this study?” he asked. “Two hundred, 500 or 1,000?” I told him: “Roughly 689,375.”

Twenty years later, that mer-chant and I are still working to-gether, though the landscape has changed markedly. Loyalty is now a multi-billion-dollar, global indus-try spanning almost every industry. And customers have much higher expectations regarding the value exchange that occurs when they share information.

For instance, I have a friend who used to shop at the same grocery store almost every week. And every week, she complained: the store lay-out was cumbersome, the employees were ill informed, and she was often overcharged on sale items.

Yet every week she returned, using her loyalty card that recorded all of her purchases, even though the cou-pons she got in return were rarely for products she purchased.

My friend was hardly loyal, though I have a hunch the merchant thought she was. In fact, I bet a lot of companies define “loyal customers” by repeat business and longevity.

But it would be a mistake to con-fuse repeat business with customer loyalty, or intimacy. Repeat business may be the simple result of location, price, service or product. It also is driv-en by routine, needs and availability.

Customer intimacy, mean-while, is when a customer choos-es to stay with a brand even when an equal or potentially better al-ternative is available. How is cus-tomer intimacy achieved, then? My guide includes four basic, but im-portant, steps:

■ Build emotional loyalty: Know

what your best customers love about

you and build on that.

■ Assure you are relevant to your customers: Resonate with your

customers through a differentiated

experience.

■ Use data responsibly: When

consumers share personal information

with you, they are entering into a value

exchange. Give them something of

worth in return for the data they give you.

■ Make the loyalty leap: Get

organisation-wide commitment to

redirect your focus from the product

to the consumer.

These four steps should enable al-most any merchant to hold on to its customers, even in the face of wor-thy competition. Take my friend. She eventually dropped her nearby supermarket in favor of a merchant that is further from home and no less expensive, but it responds to her shopping patterns with offers and services that are relevant.

It took a leap of faith on her part, and some responsible data use on the part of the new merchant, but now she is much happier.

Bryan Pearson is president of LoyaltyOne and author of the bestselling book The Loy-alty Leap: Turning Customer Information Into Customer Intimacy. For more informa-tion, visit www.pearson4loyalty.com.

Today, loyalty marketing and information sharing are as common as coconuts in the produce aisle. But getting from customer information to customer intimacy has taken many leaps — in technology, in confidence and in consumer understanding.

INSPIRATION

At Footfall123, the loyalty marketing specialists, we run loyalty campaigns for thousands of businesses - everyone from big brands like L’Oreal and Kraft Foods down to single location coffee shops, even FC Barcelona! We have simple to use software which lets businesses quickly and simply set up a loyalty programme via normal plastic loyalty cards, emails, mobile apps, even Apple Passbook.

What makes us different is that we offer a system with the performace of a Tesco Clubcard at a price a small business can afford. Using the system businesses can tell how much revenue has been put through the system, who has visited the business, how many times, and to which branch.

advancedL’Oreal

“The success from our loyalty programme was only possible using Footfall123. We are very happy with the results achieved, and are now considering using Footfall123 across our other L’Oreal brands in Spain”

L’Oreal Spain Marketing Director

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€665,000T H R O U G H T H E P R O G R A M M E

50,000LOYALTY CARDS

One small step for marketers, one giant leap for customer intimacy

DECEMBER 2012 · 9AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET

A LEAP OF FAITHBryan Pearson, author of The Loyalty Leap offers his 4 basic steps to achieving customer intimacyPHOTO: COLLOQUY

Why it’s time for Loyalty 2.0

This isn’t surprising given that loy-alty — or more accurately, profi table loyalty — is the lifeblood of any busi-ness. But what is surprising is how often companies talk more about what they’re doing rather than fo-cusing on the customer response.

My favourite defi nition of loyalty comes from Dr Tony O’Reilly when he was running Heinz. If a shopper couldn’t fi nd one of his products on the shelf, he expected them to drop their basket and go elsewhere. I like this not only for its ambition, but also because it nails two important truths. First: real loyalty is some-thing active and passionate (which is what distinguishes it from habit). And second: the acid test of loyalty is how people react in the moment.

As we accelerate towards a mo-bile-fi rst world, both of these are going to become ever more impor-tant. In the process, as we’ve argued in our recent white paper, some sig-nifi cant cracks will appear in the standard loyalty marketing model.

It’s not that current programmes don’t work. They clearly do. But the more they proliferate, the more shoppers come to see them simply as an entitlement. At a time when

mobile is dramatically heightening people’s expectations, such schemes struggle to surprise or delight.

Not only do smartphones give us an unprecedented level of con-trol over the shopping process, they also change our relationship with brands. Increasingly, we expect to be empowered in highly personalised and contextually relevant ways. To keep pace, loyalty programmes need to evolve in three particular areas:

■ Whilst spend will always be important, there are other

scarce resources which should be

rewarded; particularly, in a mobile-

fi rst world, a shopper’s location.

■ In addition to points, recognition, information and

entertainment should become key

parts of the reward structure.

■ The emphasis should switch from passive collection to active

participation, with communications

using mobile best practice to drive

immediacy of response.

This shift from entitlement to em-powerment will be the defi ning char-acteristic of Loyalty 2.0. Inevitably, mobile will be the key driver: partly because of enabling technologies like wifi , NFC and image recognition, but mostly because of the demands of the smartphone-enabled shopper.

PHIL GAULT

Director of Strategy for mobile

marketing agency, Sponge

If you’ve ever played Buzz-Word Bingo, the game in which you score points by predicting which phrases will crop up in a meeting, you’ll know that ‘customer loyalty’ is an absolute banker.

ACHIEVE CUSTOMER INTIMACY

3STEP

loyalty systemsBusinesses then use this information to get in touch with their best customers to give them extra rewards, and send extra enticements to customers who visit less regularly. What’s more a simple loyalty system can be up and running in days.

As loyalty marketing specialists we have experience spanning a number of sectors including retail, leisure and hospitality. If you are thinking of launching a loyalty programme, let us help.

Have a look at what we’ve done for some of our clients 0207 078 8333

hello@footfall123.com or visit www.footfall123.com.

Byron Hamburgers

“Footfall123 helped support our charity fund raising for our Movember campaign, ensuring that our rewards got to the right people.”

Marketing Manager

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15CUSTOMERS WHO USED

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10 · DECEMBER 2012 AN INDEPENDENT SUPPLEMENT BY MEDIAPLANET

Window on the world of loyalty

But what about the individual con-sumer who signs up for a program? Is the Nectar card holder just like the AIR MILES Collector in Canada or the Dotz participant in Brazil? How do those individuals compare to the Del-ta frequent fl yer in the United States — a market where consumers hold over two billion memberships in loy-alty programs?

To shed light on the global consum-er mindset, COLLOQUY, the research arm of LoyaltyOne, conducted a one-of-a kind global study on shopping be-haviour. The goal was to identify sim-ilarities and diff erences in attitudes about key consumer issues: the defi ni-tion of brand loyalty, loyalty to domes-tic versus foreign producers, econom-ic outlook, technology and other sali-ent concerns.

COLLOQUY’s research focused on consumer survey responses in six economies, half in developed markets and half in emerging markets.The re-search revealed that consumers, es-pecially on the basis of developed ver-sus emerging markets, have diff er-ent outlooks and expectations. One size does not fi t all when it comes to loyalty program participation. Con-sumers in the three developed econ-omies could be characterized as tired, turned off and tuned out. They have high expectations for innovation and

reinvention from the loyalty programs in which they participate. Emerging market consumers, conversely, are energetic, engaged and enthusiastic. Their distinct commonality was opti-mism. Here are highlights from the in-triguing insights consumers revealed about themselves:

■ Brand loyalty definedConsumers almost universally defi ne

“brand loyalty” as telling friends or

family to shop at a particular store,

except in China, where loyalty is defi ned

as shopping with a specifi c company

for more than three years.

■ Foreign vs. domestic brands Shoppers in emerging nations

welcome and trust foreign brands. In

China, nine out of 10 consumers said

global brands are more trustworthy

than domestic brands. Consumers in

developed nations are twice as likely to

trust their own brands versus those of

other countries.

■ OptimismThe study revealed fundamental

differences in sentiment about big-

picture issues like the economy and

future prospects. How does that

translate into shopping behaviour?

China, Brazil and India consumers are

fi ve times more likely than U.S. and

Canadian consumers to say they’ll

use credit cards for “things you can’t

afford now.”

■ Influence on purchaserJust 12 per cent of Americans and

10 per cent of Canadians said they

feel strongly that it pays to be loyal to

a favourite brand. Compare that to

the 29 per cent of consumers across

the three emerging markets who said

brand loyalty is benefi cial. Additionally,

emerging market consumers are

twice as likely as those in developed

economies to say that a rewards

program infl uences decisions about

where they do business.

■ Mobile There’s certainly an uptick in mobile

usage for loyalty programs in developed

nations. Still, loyalty program members

in emerging countries are up to eight

times more likely than their developed

country counterparts to engage via

electronic media channels to respond

to a reward offer.

■ PrivacyNo less than 68 per cent of Brazilian

consumers said they’re concerned

about protecting their personal

information, compared to 50 per cent

of consumers in developed countries.

Chinese consumers are relatively

unconcerned at 33 per cent.

Is there something about which we can all agree? The research says, yes — it’s special treatment. Consumers in all surveyed countries said they val-ue perks, privileges and recognition benefi ts, and that special treatment infl uences their shopping behaviour.

Phaedra Hise, Senior Editor, COLLOQUY

NEWS

■ The secret isout on the popularity of customer loyalty programs. They span the globe, transcending culture, religion, politics, age and sex to attract consumer participation in developed and emerging economies alike.

Robust analysis of how existing and potential customers are act-ing and what they want is vital if people are to receive tailored and relevant off ers that keep them loyal for years.

Central to this is analysis of big data, that huge amount of infor-mation collected from various sources including retail transac-tions and social media comments made on Twitter or Facebook.

It gives an organisation an ‘outside in’ view and a great-er breadth and depth of knowl-edge of existing and prospective customers. It means companies can raise awareness and react to what customers are doing and al-so how competitors are acting.

With so much data availa-ble, organisations must be clear about what information they want and why they need it. They must also be able to match and integrate data across their organ-isation. Is the person complain-ing about the organisation on Fa-cebook the same person with the same name signed up to the loy-alty programme, for example?

One company analysing Big Data well is car maker Volvo which has in-vehicle sensors that generate data. This is loaded in-to a central database, integrated with CRM data and analysed by Volvo and its dealers to improve customer engagement, car de-sign and safety.

All organisations must iden-tify the right data they need to solve business problems. They must then be able to integrate and match data collected from various sources, build an eff ec-tive IT infrastructure and have the right skills internally to ex-ploit what all the information is telling them.

STEVE HEMSLEY

info.uk@mediaplanet.com

Tailored offersto keep customers loyalNigel Turner, VP of information management strategy at Trillium Software explains why big data analysis is crucial to customer loyalty.

Sometimes upside down is the right way up.

uber* is a boutique customer loyalty consultancy. We pride ourselves on daring to be different; constantly challenging the norm and unafraid of going against the grain to deliver results. We work with brands to drive revenue through strategic customer loyalty activity and results based research that we know will work. We are completely independent and offer expert advice without being restricted by loyalty technology. Our fresh eyes, innovative approach and experience in designing and running loyalty & CRM programmes that work gives us the edge in our market. We implement simple strategy that really makes a difference.

Choosing the right solution to acquire new customers and retain existing ones is just the start: making it work requires experience like ours. We’d love to talk to you and share our unique perspective.