Making money out of loyalty 22 ND APRIL, 2014 / TERO TASKILA

The purpose for the Loyalty programs is to make money  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 Many forms / typically “buy 10, get 11 th free” Easy to implement Challenging to increase frequency and upsell Requires investment and set up Balance sheet implications Generates cash Struggle to remain relevant Partnership requirement Discount program Subscription Points program Earning potential high low high Easy to implement Difficult to sell Very specific and narrow clientele

How does the point sale work? When customer “burns” points, loyalty program purchases the service from partner Loyalty Program maintains the points-database Partner pays to loyalty program for the points given to customer Customer purchases from the partner and receive points Loyalty program drives traffic to partners through marketing 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 Staying relevant and offering timely promotions and opportunities to redeem Getting customers’ attention Average European participates in 7-9 loyalty programs. Managing cards, coupons and online accounts is challenging. Getting enough wallet space Good programs have 30-40% activity rate, most driven by top tiers Keeping people active

Promotions are important Own website Newsletters Brochures Advertisement Partner promotion Visibility at POS

Larger partner footprint will increase your wallet share Everyday activitiesGroceriesPetrolCommutingTelecommunication Necessary, but less frequent InsuranceBankingElectricityHobbiesOccasionalCultureEventsTravel

Loyalty programs possess wealth of information which can be monetized Customer demographics Surveys Targeted marketing Behaviour analysis and adjustment Add-on sales Purchase details Product Amount and payment type Point of sale (location, distance travelled) Time Location Frequency Customer Address Gender Age Family situation Purchasing power Habits & interests

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

airBaltic changed ownership structure – altering the financial conditions to maintain an existing Frequent Flyer Program We 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 The Baltics did not have any consumer loyalty program worth mentioning We set our sights to learn from the best (aeroplan, nectar) – and be the best Case example / BalticMiles

Strategy and Planning Program parameters identified Supplier strategy outlined Staffing requirements defined Local Market Coverage Plan Recruited new partners and brands Locally sourced rewards Determined launch campaign Implementation Results Delivered on time and within budget Program parameters delivered 9 Core Markets 7 Languages 7 Currencies to support core markets Local team in place (Latvia) Shared services structure with rewards partner (Loylogic) for support Contract signed January 2010 April 2010 February March Program Launch Designed, implemented and launched a global rewards and loyalty program within 4 months One year after launch – 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  Managing and monetizing data is the key  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!