Loyalty Presentation - CM Forum April 15

Connecting
Consumers
The evolving role of Loyalty
Ronan Gilhawley
Consumer Markets Workshop
April 2015

© 2015 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
1
The evolution of ‘Loyalty’
Making the customer
connection
Attracting and engaging the
customer
Enhancing the value of loyalty
Where to from here?

2
The evolving consumer
The ‘typical’ consumer is becoming a more dynamic, evolving and fragmented target
for organisations to address
Increasing affluence
Value seeking
behaviour
Urban migration
A cultural ‘melting pot’
The informed
consumer
Time poor
convenience
shopping
International
competition
Evolving business
models
Focus
Groups
Mystery
Shoppers
Consumer
Surveys
Basket
Analysis
Connected
Consumers
Evolving
Competition
Socio-
Economic
Factors
Demographic
Factors
Credit Card
Feeds
Market
Research

3
Meeting consumer needs - #1 changing expectations
To meet target consumer needs, retailers need to continuously refine and adapt their
offer and the way in which they engage with their customersBasisofbrandloyaltycreation
Brand
Service Convenience
Range Price
Basis of brand loyalty creation Available value proposition levers
Sophisticated
Fundamental
Retail propositions
Note. ‘EST’ Model : McMillan & Dolittle
Easy-est
Hot-est
Big-est
Quick-est
Cheapest
Quality of service
Most fashionable
Range & selection
Speed of service
Lowest prices

4
Meeting consumer needs - #2 the disruptive impact of technology
Omni-channel retailing is creating an increasing sense of complexity in where and
how organisation interact with consumers
Technology has introduced new medium for communicating, influencing,
and transacting..
Blogs Email SMS
Mobile
apps
Social
media
Customer
Mobile
apps
Reseller
website
Aggregator
websites
Company
website
Physical
store
TV /
radio
Outdoor
ads
Print
media
Mail
Telepho
ne
…with different consumer segments interacting through different medium in the
path to purchase
Awareness Consideration PurchaseFamiliarity Service
Store
Social media
Comparison Site
Mobile
Blog
Website
Email
Reseller
Engage Recommend Compare InteractAccess Transact PublishTarget

5
Meeting consumer needs - #3 the polarity of scale and intimacy
With increased scale & complexity, retailers increasingly need to invest in analytics to
mine insights into who their customers are and how they connect with them
Source: Making the connection – Rethinking the role of loyalty management (KPMG, 2014)

6
Rethinking the role of loyalty
Loyalty is increasingly key in understanding who your most valuable customers are
and how best to connect to them, in an adaptive and evolving manner
1. Define
• Have you defined the
customers that are/would be
most valuable to your
organisation?
3. Engage
• How do you engage with
these customers throughout
the customer lifecycle?
2. Connect
• Have you developed a
mechanism to reach out
and connect with these
customers?
4. Evaluate
• Do you evaluate your
engagement and the results
it has on customer lifetime
value?
5. Adjust
• Do you adjust your
engagement and value
proposition to reflect the
results of your evaluation?

7
Making the customer
connection
Attracting and engaging
the customer
Where to from here?

8
3 ‘Ages’ of Loyalty
Loyalty has evolved from its origin as a marketing promotion tool to a data driven
capability supporting increasing levels of personalisation in engagement and offer
ENGAGE
your customer
Learn from your
customer
INSIGHT
COMMERCIALISE
your learnings
Ratings
Trends
Merging external
and internal data
Data
Insight
Value
The 1st Age
Loyalty as a
promotional tool
The 2nd Age
Loyalty enablement
of customer
segmentation
The 3rd Age
Loyalty driven
personalisation
Loyalty program value levers Evolution in maturity of loyalty capability

9
1st Age : “Thank you for your business, please come again”
The majority of loyalty initiatives are characterised by the use of basic customer
identifier information to push promotional messaging or to accumulate discounts
Scope & focus Sources of information
Nature of Offer
Examples
 Customer identifiers
– email address,
– mobile number,
– postal address
 Transaction history
– Frequency of visit
– Total spend
 Promotions by a variety of medium e.g.
EDM, text message
 Promotions typically discount, BOGOF, or
exclusives
 Membership is may be card or app based
 Reward can be member based, or points
accumulation based
Focus on customer
engagement
Broadcast
marketing
communications
Tailoringofengagement
Personalisationofreward

10
2nd Age : “Getting to know you”
Programs such as Tesco’s Clubcard in the late 90’s pioneered the use of POS
transaction feeds to develop deeper customer insight, leading to tailoring of offers
Nature of Offer
Examples
Focus on customer
insight
Segmentation
based
communication
– Customer surveys
– Credit card feeds
– Basket analysis
 Browsing history
– Items purchased
 Predominantly points based programs
offering a opportunity for ‘personalisation’
in redemption
 Tailoring of promotional offers
predominantly to identified customer
segments
 Differentiated service through tiered
membership

11
3rd Age : “Permission to get creepy”
Technology is enabling a new means of marketing in a highly bespoke, individual
manner, personalising offers based on information specific to the individual
Nature of Offer
Examples
Focus on
commercialisation
of insight
Personalised
communication
Store service personalisation
EDM personalisation
Web content personalisation
– Location information e.g. GPS
– Basket analysis
 Browsing history
– Items viewed
– Sites visited before and after
 Tailoring of service experience based on
information relating to customer
preferences and history
 Individual tailoring of promotions e.g.
targeted time based, location based
promotions

12
Making it a reality
While most organisations acknowledge the potential of loyalty initiatives and most
run some kind of program, our research suggests few actually mine the data they get
88%
Of organisations run an
‘earn and burn’ loyalty
program whereby points
are accrued and
redeemed for a gift
56%
See the card as
primarily a means of
capturing a contact
point for
promotional material
40%
Collect the POS
data accompanying
a loyalty registration
but do no perform
regular analytics
with it
12%
Indicated that
results are
integrated into front-
line operational
decision making
such as buying,
merchandising, and
store operations
6%
Actively leverage
their loyalty program
to achieve specific
corporate objectives

13
Making the customer
connection
customer
Enhancing the value of
loyalty
Where to from here?

14
Three dimensions of Loyalty
The key to success in a loyalty initiative is to build currency and value into the
program
Range of
redemption
Scope of
spend
Depth of
data insight
Greater flexibility and freedom in how the
consumer benefits from a program equates
to greater value in the program ‘currency’
Broader capture of spend (including retail
and non retail) increases the frequency with
which a consumer interacts with a program,
derives benefit and contributes to data
By increasing the data captured in a
program to include dynamic data, benefits
include deeper behavioural insight, greater
ability to personalise offers, more
personalised engagement

15
Adding range of redemption to loyalty
Increasing the range of a program brings greater value in redemption and currency in
points, but brings with it added complexity and need for additional skills
Member
Database
Member
Benefits
Member
Accrual
In House
Store
Points
In House
Points
Currency
In House
Affiliates
Tied
Coalition
Coalition
Retail
Coalition
Lifestyle
 In house membership programs are
relatively easy to set up and are typically
run within the marketing team
 Increasingly the programs fail to ‘cut
through’ or differentiate the retailer
 A closed in store points system is
relatively undifferentiated from a member
program
 Inclusion of external affiliate partners, or
paying for access to airline points
increases value
 Managing the economics of ‘earn & burn’
partners requires greater financial
oversight
 Operating a coalition loyalty program
offers the greatest opportunity to create
value for customers due to their
openness
 However, operating these programs are
complex and data intensive
 Participating as an ‘earn & burn’ partner
will limit access to customer insights
In house ‘earn & burn’ programs
In house ‘membership’ loyalty
programs
Coalition Loyalty Programs

16
Adding depth of insight to loyalty
There is an obvious ‘hierarchy’ to data within a loyalty program, with higher sets of
data offering deeper insights and richer opportunities to add value
Who am I?
name, e-mail, address,
mobile number
What is my household?
Age, family, gender, income, residential
information
What are my interests?
Lifestyle information, travel history, hobbies, service
preferences
Who do I follow?
Social media interests and activities, browsing
activity
What do I spend & where?
Credit card feeds, POS feeds, transaction history,
channel history
What are my activities?
Health & wellbeing, gym visits, driving habits
Where am I?
Real time location based information
Transactional Activity
Online & social media Activity
Location
Information
Lifestyle Activity
Information
Survey based interests & hobbies
Socioeconomic & demographic data
Identifying Information

17
Expanding horizons beyond retail
The evolution of loyalty in adjacent sectors, notably insurance, has created a new
category of loyalty which increases the depth of insight and frequency of interaction
Auto Insurers Auto manufacturers Maintenance & spares
 Discounted insurance premiums
linked to ‘safe’ driving activity &
distance
 Information on distances
travelled, popular routes, driving
style, peak times of travel for
individuals
 Promotional discounts linked to
lifestyle preferences
 Data on demographics and
driving habits linked to brands
and brand preferences
 Ability to improve alignment of
brand to targeted demographics
 Proactive management of
maintenance intervals
 Impact of driving frequency &
style on vehicle wear & impact
on service intervals
 Improved frequency of
interaction with customer,
enhancing garage service
proposition
Health Insurers Gym memberships Retail
 Health dashboard, promotional
discounts, incentives to lead
healthier lifestyle
 Information on dietary habits and
lifestyle preferences
 Tailored insurance premiums to
match individual’s lifestyles
 Links to discounted fitness
apparel
 Discounted gym membership,
linking gym membership &
vitiation frequency to health
insurance premium
 Link to healthy eating habits,
Weightwatchers membership
 Grocery retailer participation,
focused on discounts on ‘healthy
food’
Health & Wellbeing
Programs
Linking health insurance,
physical activity,
pharmacy spend, healthy
basket analysis
Motoring Programs
Linking telematic based
car insurance to car
servicing and auto
retailing
Gymbetter
Safe Driver

18
Making the customer
connection
customer
Where to from here?

19
Where to from here?
In order to understand the role and value of loyalty within your organisation, its is key
to first understand what role and function you want it to serve
The two roles of loyalty
Marketing and promotions tool
Tool to drive changes in customer
behaviour
 Typically creates one off benefits such as sales
uplift resulting from promotional activity
 A channel for direct marketing and customer
engagement
 A point of connection to deliver promotional
messaging
 Loyalty owned by marketing
 Typical executions include: points, coupons,
discounts
 Focus on influencing ATV (Average
Transaction Value) or CLV (Customer Lifetime
Value)
 Refine retail offer (store location, range,
pricing, etc) based on insight into most
valuable customers
 Loyalty management as a function linking into
store operations, marketing, merchandising,
ranging decisions
 Increased range, depth, and frequency of
customer interaction

20
Where to from here?
While there is clearly a degree of complexity to the subject of loyalty, we have
identified seven questions that may help you tailor your approach
1
2
3
4
5
6
7
Tailoring
Loyalty to
your needs
Customer insight
Customer diversity
Valued customers
Goals to improve value
Measureable benefit
Ownership of the customer
Adaptive organisation
How well do you need to know your customer?
How diverse is your customer base and how much tailoring
of your value proposition is required to address these
different segments?
Do you understand which customers are most valuable to
achieving your organisation’s goals
Do you have clear goals for improving your value to
customers? And are these supported by structured
programs / initiatives?
Can you measure the return you get from these initiatives
and are these benefits sustainable?
How integrated and co-ordinated are the customer touch
points across your organisation
Do you know what your customers think of you? and Do you
have processes to continuously adapt and refine your
proposition in response to these thoughts?

© 2015 KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All
rights reserved.
The KPMG name, logo and “cutting through complexity” are registered
trademarks or trademarks of KPMG International.
Ronan Gilhawley
Partner
KPMG
10 Shelley Street
Sydney NSW 2000
Tel: 02 9335 7029
Mob: 0410 668 440
Email: rgilhawley@kpmg.com.au

Loyalty Presentation - CM Forum April 15

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