1. 1 Market and Customer Management - Customer Loyalty 04 Programme Positioning.ppt Positioning the Loyalty Programme (1/4) Positioning the programme Positioning the loyalty programme in the mindset of target customers is one of the most difficult problems to overcome. Best practice companies use a combination of advertising and promotions to position the programme. Ford Motor Company’s subsidiary Ford Bank offers credit card holders the chance to save points towards a discount off a new vehicle, with up to GBP 1,800 off the price of a new Fiesta. The loyalty programme (to the credit card) builds long-term loyalty to the credit card especially amongst customers who wouldn’t normally buy a Ford. Ford calculates that it breaks even if one of every six new cars sold is bought by someone who otherwise wouldn’t have bought a Ford. In contrast, Hoovers free flights give-away persuaded tens of thousands of customers to buy a Hoover just to get a free flight to the USA. Hoover couldn’t honour its promotion, was quickly taken to court by disgruntled customers and faced a barrage of hostile press. The company was forced to close its factory in the UK in 1997. Customer Behaviour Tar-geting Positioning Programme structure & offers Cost and benefit structure Communicating the Loyalty programme Loyalty programme objectives

2. 2 Market and Customer Management - Customer Loyalty 04 Programme Positioning.ppt Positioning the Loyalty Programme (2/4) Example of a programme positioning in the service industry The following positioning example shows the ideas, which were done for the positioning of a loyalty programme in the service industry. In this example the two dimensions “profitability” and “risk of customer defection” were most important. Each field in the matrix concluded in different positioning programmes. Customer Profitability Today Risk of Customer Defection NoYes Highly profitable +/- profitable Not profitable Customer Behaviour Tar-geting Positioning Programme structure & offers Cost and benefit structure Communicating the Loyalty programme Loyalty programme objectives

3. 3 Market and Customer Management - Customer Loyalty 04 Programme Positioning.ppt Positioning the Loyalty Programme (3/4) The number of programmes determine the positioning The loyalty programme can be positioned due to a customised offering for specific customer segments. A basic question therefore is, how many loyalty programmes a company wants to start for their segments. As an example, FFP programmes have specified loyalty programmes for their premium customers. These customers have free access to the airport lounges and several other advantages. The example below (right side) shows another example of the structuring of loyalty programmes for different target groups. Programme for Premium Customers Launch basic programme Programme young & trendy Programme for Small Companies Additional programmes for other target groups over a period of time. Example of different loyalty programmes Pros and cons for more than one loyalty programme Advantages of more than one programme (vice versa) Customized and effective marketing and targeting. Costs reductions due to segment specific offerings. Disadvantages of more than one programme (vice versa) Risk, if there is not enough information about the customer segments. Intransparency for the customer, when he gets confronted with several offers/ programmes. Risk of an internal cannibalisation of the programmes Risk, that the communications is to broad and costs too much money. Customer Behaviour Tar-geting Positioning Programme structure & offers Cost and benefit structure Communicating the Loyalty programme Loyalty programme objectives

4. 4 Market and Customer Management - Customer Loyalty 04 Programme Positioning.ppt Positioning the Loyalty Programme (4/4) There are several possibilities for positioning a programme European Telco The programme positioning can be done with a variety of features. Some of the positioning possibilities are listed below: cost advantages quality advantages innovation time / time to market exclusivity others An European Telco differentiates its loyalty programme based on the customer turnover and positions their offerings in the different target groups as follows (see below): 010%20%30%40%50%60%70%80%90%100% 500.- + 300 - 500.- 250 - 300.- 200 - 250.- 150 - 200.- 100 - 150.- 0 - 100.- Percentage Turnover Percentage Customers 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Four different segments Premium Customers: Keep them loyal for every price Profitable Customer: Keep them loyal and intensify cross selling Average Spending: Bundlings and Cross Selling Not interesting customers: Without cross selling, no profits with the loyalty programme Customer Behaviour Tar-geting Positioning Programme structure & offers Cost and benefit structure Communicating the Loyalty programme Loyalty programme objectives