Making money out of
loyalty
22ND APRIL, 2014 / TERO TASKILA
The purpose for the Loyalty programs
is to make money

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Extension of the marketing approach

One-off or Limited time-only promotions (acquisitions)

Rewards for the purchase (growth)

Tiered and / or points based program (retention)

Potentially making money through partnerships and
selling points
Aim to increase foot traffic or website visits to generate
more repeat purchases

Does not replace #1 reason for being loyal – product and
service
Points programs generate the most
cash and loyalty, but require investment
high
Points
program
Discount
program
Partnership
requirement
Subscription
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Requires investment and set up
Balance sheet implications
Generates cash
Struggle to remain relevant
Many forms / typically “buy 10, get 11th free”
Easy to implement
Challenging to increase frequency and upsell
Easy to implement
Difficult to sell
Very specific and narrow clientele
low
low
Earning potential
high
How does the point sale work?
Loyalty program
drives traffic to
partners through
marketing
Customer
purchases from
the partner and
receive points
Partner pays to
loyalty program
for the points
given to
customer
Loyalty Program
maintains the
points-database
When customer
“burns” points,
loyalty program
purchases the
service from
partner
Loyalty program makes money – mechanism same as currency trading
Some findings on loyalty programs

Customers prefer to have tier levels (and recognitions which comes with it)


Remember to communicate if your top tiers are about to lose status!
People tend to increase frequency or amounts their spending when the reward is getting closer

Opposite is true as well – if the rewards are far away (or perceived that way), you will not get users

If using points based program – big numbers work better than small ones

Give people opportunities to fast-track getting the status

for example Aadvantage Challenge
Loyalty programs struggle to stay
relevant
Getting customers’
Staying relevant and offering timely promotions and
attention
opportunities to redeem
Getting enough
wallet space
Keeping people
active
Average European participates in 7-9 loyalty programs.
Managing cards, coupons and online accounts is
challenging.
Good programs have 30-40% activity rate, most driven by
top tiers
Promotions are important
Own website
Newsletters
Advertisement
Brochures
Partner promotion
Visibility at POS
Larger partner footprint will increase
your wallet share
Everyday activities
Necessary, but less
frequent
Occasional
Groceries
Insurance
Culture
Petrol
Banking
Events
Commuting
Electricity
Travel
Telecommunication
Hobbies
Loyalty programs possess wealth of
information which can be monetized
Customer
•Address
•Gender
•Age
•Family situation
•Purchasing power
•Habits & interests
Purchase
details
•Product
•Amount and payment type
•Point of sale (location, distance
travelled)
•Time
•Location
•Frequency
Customer
demographics
•Surveys
•Targeted marketing
•Behaviour analysis and
adjustment
•Add-on sales
Improve the yield by utilising loyalty
programs
Targeted communication
for better conversions and
upsell
People pay more on
experiences – analyse
what matters
Monetize the data
Mobility is changing customer
behaviour
Platforms change (mobile phones are new cards)
Instant gratification
Prices, promotions and discounts are more transparent
Time based offering
Location based offering
Customers want engagement

50% of companies use gamification in 2015

30% of all e-messaging by 2016

5.5 Bn USD business by 2015

Most applicable for Loyalty and Marketing

AMEX, airBaltic etc. are using it
Case example / BalticMiles
•
airBaltic changed ownership structure – altering the financial conditions to
maintain an existing Frequent Flyer Program
•
We
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The Baltics did not have any consumer loyalty
program worth mentioning
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We set our sights to learn from the best (aeroplan, nectar)
– and be the best
did not want to have just another Frequent Flyer Program
Did not want to just offer discounted tickets
Low Cost airline pricing promotes loyalty better than miles issuance
We wanted to encourage loyalty
Designed, implemented and launched a
global rewards and loyalty program
within 4 months
Program Launch
Contract signed
January
2010
February
Strategy and Planning
March
April
2010
Implementation Results
•
Program parameters identified
•
Delivered on time and within budget
•
Supplier strategy outlined
•
Program parameters delivered
•
Staffing requirements defined
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9 Core Markets
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7 Languages
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7 Currencies to support core markets
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Local team in place (Latvia)
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Shared services structure with rewards
partner (Loylogic) for support
Local Market Coverage Plan
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Recruited new partners and brands
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Locally sourced rewards
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Determined launch campaign
One year after launch – 850 000 members in 163 countries
Loyalty programs should make money

Increasing revenue should be the aim

Higher yield, more frequency, commitment,
partners

Acquiring and managing partners for
better footprint in customers’ daily life
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Managing and monetizing data is the key
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Instant gratification and gamification will
come with increased mobility
“ Sports and loyalty have one
things in common – both try to
maximise fans to attract partners
Thank you!
”