4 brands making customer loyalty programs work

CMO talks to four brands running customer loyalty programs to find out what they’re doing to buck the trend and meet the changing needs of technology-savvy, mobile and less faithful customer

The Share the Love: 2014 Consumer Study into Australian Loyalty Programs report released in February showed an alarming quarter of consumers leaving loyalty programs in recent years.

Disillusioned by the speed of earning or redeeming points, or unappealing offers available, many of these individuals simply stopped using cards or apps, and walk away. According to report authors, Citrus and Directivity, this mass exodus is a clear judgement on brands and something all should be striving harder to curb.

“Make no mistake – if members have defected from a program, they’ve defected from the brand,” CEO of Citrus, Peter Noble, warned. “Loyalty programs are big business and a key touch point for a brand so marketers need to ask themselves: Remove a quarter of your membership and what impact would that have on your brand?”

We talk to four brands running customer loyalty programs to find out what makes them tick and what they’re doing to meet the changing needs of more technology-savvy, increasingly mobile and arguably less faithful customer.

Consumer loyalty versus price sensitivity: Thirsty Camel

In a highly price sensitive market like liquor retailing, customer loyalty is inevitably going to be driven by discounts and special offers. The team at six-year-old national retail brand, Thirsty Camel, also has the added complication of a cooperative network of 450 stores that don’t share a centralised point-of-sale system or database.

Group marketing director, Leah Grinter, said the answer was a simplistic customer loyalty program that tapped into the highly price conscious mindset of customers and delivered transaction-based offers.

The ‘Hump Club’ loyalty program rolled out two years ago and is available in all states Thirsty Camel operates in: Victoria, Tasmania, ACT and regional NSW. Customers sign up using their mobile number as a unique identifier, and can either access discount vouchers via SMS, or print vouchers from the Web portal to redeem at their local retails.

Last December, the company also launched a new app for both iPhone and Android devices to allow customers to redeem offers. To date, Thirsty Camel has attracted 60,000 members in Victoria and Tasmania.

While the recent Citrus and Directivity survey suggests half of all individuals take issue with brands sharing their personal information with third parties, Grinter said it has been able to overcome this by storing information in one platform and providing valuable, customised offers based on an individual’s town or local venue/retailer.

One of the early lessons for Thirsty Camel was around the types of offers members will most likely to respond to. “We started by sending out product-specific offers, but what we found is that our open offers have the highest retention rate, of between 10-12 per cent,” Grinter explained.

In addition, the decision to be mobile phone-oriented was also re-jigged after customers and retailers asked for a Web-based platform. Today, 70 per cent of offers are redeemed as printed vouchers via the Web.

“When we did some research with members last year, 75 per cent wanted an app, but we’ve not seen the take-up yet,” Grinter continued. This insight echoes the Citrus/Directivity survey, which showed just 12 per cent of loyalty members only want an app despite the widespread use of smartphones.

And even though the Hump Club was positioned as a mobile-led program, 27 per cent of customers surveyed also expected a physical card. This again echoes the recent Citrus/Directivity research, which found 57 per cent of loyalty members still prefer a traditional card over a mobile-based app.

“We do have lots of fun with the brand, and for our customers it’s about having that identifier to being in the club,” Grinter said in response. As a result, Thirsty Camel is now looking at whether to introduce a key ring for members to meet that desire for a physical membership identifier.

With 65,000 transactions last year and millions in additional retail sales, the Hump Club has already proven successful. The next step is to better understand customers and their habits through behavioural and purchase data.

“I see an opportunity for a ‘surprise and delight’ capability – for example, we could reward Jim Beam loyal customers with free samples and offers by using their data,” Grinter added.

More on customer loyalty programs: How Supercheap Auto used big data to model customer loyalty
Why Fitness First is dropping its customer loyalty program and turning to data

Today’s customer loyalty game

Building B2B customer loyalty: BlueScope Steel

Australian steel company, BlueScope, launched its ‘Constructor’ loyalty program for B2B customers as a way to increase its share of wallet with small to medium-sized organisations. Thanks to the success of the program, it is now looking to expand out to appeal to more medium and larger-sized customers.

Manager of sales and marketing, Peter Zafiris, said the initial Constructor points-based program, which launched eight years ago, was invitation only. “What we were finding was that we had a lower share of wallet with these customers, so we hand picked 1200 from our 8000-strong customer base to try and drive more sales,” he told CMO.

Much like a credit card program, BlueScope offers a point per dollar spent up to the value of 120,000 points, which can then be spent through its catalogue. The easier the company made it for customers to enquire about rewards or access them, the more they understood the size of the prize. To do this, the team set up a regular newsletter, Rolling Steel, highlighting new product offers, specials, launches and triple points opportunities.

Another key learning was keeping the customer data up to date, Zafiris said. To do this, the company has outsourced database management and hired teleworkers to manage the customer database, which is then merged with transactional reporting data to personalise offers to customers.

Since the program’s launch, BlueScope has seen share of wallet across the 1200 customers more than double from 18 per cent to 42 per cent, Zafiris said.

With customers put into the program, we found we no longer have to lower margins to win the business

– BlueScope Steel's Peter Zafiris

“With customers put into the program, we found we no longer have to lower margins to win the business,” he continued. “They’re happy to be part of the program, but understand it comes at a premium. These customers are much more profitable.”

A key finding of the Share the Love report is the desire for loyalty member holders to share their points or offers with family, friends and others. Zafiris said this was a particularly relevant trend in the B2B space.

“What this has taught us is to be more flexible with B2B companies and give them as many choices [to share] as possible,” he said. For example, BlueScope’s loyalty team now helps customers organise charity days where products scored through points can be given away as prizes, or donated to local community groups. It is also giving customers the opportunity to transfer points into sponsorship of local clubs.

Technology is another increasingly important program foundation, and BlueScope has developed a website portal for its loyalty program so customers can view points and offers. It is also working on an app, expected to launch in May.

Given its financial success, BlueScope is looking to expand the loyalty program to 5000 customers in the attempt to improve share of wallet with larger-sized organisations. To do this, it is looking to add more layers of rewards to the program and offer up to 500,000 point limits.


Page Break

More benefits through digital innovation: American Express

For vice-president of brand, loyalty and membership rewards at American Express, Morgan Hunter, constant evolution is the key to success for American Express’ customer loyalty program, Membership Rewards.

The program, which has been around for more than 20 years and was ranked in the top 10 in the Share the Love 2014 report, allows members to accrue reward points for dollars spent on their card, which they can then use to redeem travel, shopping and entertainment rewards.

Points can also be transferred to other loyalty programs such as Airline Rewards Frequent Flyer and Hotel Rewards Frequent Guest programs dependent on what reward option an individual is enrolled in.

“Customers want choice, value and convenience when it comes to how and what they can redeem their points for, so having a loyalty program that delivers this is key,” Hunter told CMO. “We want our card members to have the flexibility to use reward points for the things they need and want most, whenever they want, that’s why we’ve introduced ‘Select and Pay with Points’ so card members can conveniently choose specific transactions they wish to redeem their points against.”

To keep rewards fresh and relevant, American Express focuses on developing more benefits and more choices. One example this year was extending its ‘Shop with Points’ capability with David Jones, allowing eligible card holders to now use rewards points as payment at the David Jones webstore.

The biggest area of innovation, however, has been digital. Investing in digital capabilities was necessary to reflect the significant role mobile is playing as more card members do things on the go, Hunter said.

One key offer launched through the new digital platform is ‘Made for you’, which leverages American Express’ proprietary Smart Offers technology and allows eligible members to save curated merchant offers to their card in one click, from the iPhone app or online portal.

“When they make a qualifying purchase at the merchant, they will get a statement credit to reflect their savings – no paper dockets or printouts necessary,” Hunter said.

Another new feature is ‘Places’. Based on customer spending history and location data, the American Express iPhone app will provide shopping or personal dining recommendations to members.

Real-time suggestions include places chosen by card members with similar spending habits; the most popular places within a specific category or location; new American Express merchants; and those with live offers available nearby.

On the iPhone app, American Express has launched ‘Local Champion’, which Hunter claimed goes beyond standard account servicing features in banking apps. Card members frequently visiting their favourite businesses can be recognised by those locations for their loyalty. For the length of time a member keeps their ‘Local Champion’ status, they are rewarded with one extra rewards point for every dollar spent.

"One of our objectives in launching new digital capabilities has been to enhance the experience of Card Members when it comes to being made aware of content relevant to them,"Hunter said. "Based on the offer enrolments and redemptions rates our Card Members have embraced the convenience of those enhancements. Since launch in November 2013 many of our special offers for Card Members have reached their enrolment cap in a matter of days, and the average redemption rate has exceeded 24 per cent."

American Express has also launched the American Express Pass for Apple Passbook in Australia. Card members can register and add the Amex Pass to their Passbook for access to their account information on their iPhone or iPod Touch including recent spending updates, push notifications for each transaction, real-time account balances and customer service information.

“Australians are more rewards focused than any other consumers,” Hunter concluded. “Australians like to redeem their points in different ways – whether for travel, merchandise, gifts, credit on their card, or gift vouchers – and it is for this reason American Express has continued to develop its Membership Rewards program to offer more benefits, more choices and more relevant rewards.”

Globally recognised value: Accor

Australian director of loyalty for global hotels group Accor, Renae Trimble, admitted the organisation is relatively new to the customer loyalty game for a hotels business, launching its program in 2008. Despite this, it has already attracted 14 million members worldwide to the points-based program.

Members can join for free and are tiered into Classic, Silver, Gold and Platinum status. Based on the number of nights stayed across the group’s 2700 owned, managed and franchised hotels, members then get access to points and various experience-led rewards. The hotels range from basic through to luxury brands.

“The key is getting the balance right between not making it too hard, and not too easy,” Trimble said. “Customers need to see and get value from the program.

“Depending on the market, you may know one brand over another. Australians for example know Accor, but in Europe they are more familiar with the Novotel brand. So it’s pretty easy for us to add even more depth to the program through having these brands.”

Customer feedback is vital in keeping the program alive, and Trimble said regular market feedback has driven changes and new directions. One lesson learnt early-on was ensuring communication to members was relevant and timely.

We know that active members spend more, stay longer, and can see that at an individual hotel level and in terms of revenue

– Accor's Renae Trimble

“We don’t want to over communicate, but we have to send out the right message to members,” Trimble commented. “This comes down to having accurate data and positioning offers that have genuine value for that customer.

“The single most important thing we learnt is that what works as an offer in the UK won’t work here in Australia. And that comes down to how we communicate. These offers are what drive people and their view of our value.”

Customer data is another component, and Trimble said the group strives to look at data in its totality, rather than in isolation. Accor also regularly surveys members, and looks at activity rates and Net Promoter Scores to determine customer satisfaction.

According to Trimble, another differentiator hotels have over other types of industries is that staff have regular opportunities to engage in face-to-face conversations with members and glean insights that way.

Like other loyalty programs, technology is also growing in importance for Accor. In 2013, the group launched a new website and additional booking functionality to allow members to use points, or a combination of ‘points plus pay’, for new bookings. Other new features include the ability to access richer content, view account information and personalise experiences.

Last September, Accor also revamped member benefits to give members at a Silver level or higher free Internet at any hotel worldwide. This decision was based on customer feedback, Trimble said, and represented a significant change in strategy.

The next step is to look at how to better package stays based on points and help loyalty program members with create the ideal experience for them.

“We know that active members spend more, stay longer, and can see that at an individual hotel level and in terms of revenue,” Trimble added. “Our commitment is that the customer is at the centre of what we do. We will continue to create a culture where people feel they belong and are recognised in a meaningful way, particularly at the hotel and individually.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO Australia conversation on LinkedIn: CMO Australia, or join us on Facebook:

Signup to CMO’s new email newsletter to receive your weekly dose of targeted content for the modern marketing chief.