Basic Principles of a world-class Loyalty Programme (1/7) What is loyalty … ? Loyalty also means very intensive communication Loyalty is the perception of trust and commitment to an institution or a person. The loyalty term comes historically from the relationship to its government and nationality. Loyalty is a feeling of being indepted something to somebody. Loyalty doesn’t start with a first impression, but needs a long time to be built up. A company gets loyal customers, when these customers get more for their money, than they could expect before buying something. Loyalty is not a short term oriented feeling, which a customers gets when giving him just a present. Loyalty means for a company “having trust be honest to its customers”. Excellent products, services and a good quality builds up the ground for loyal customer but is not enough. The customer must believe to the brand and must become an active player for the company and its products and services (word of mouth). Excellent products and services are not enough to “create” loyal customer. In addition, a company has to build up a two way communication with its customer. The communication flow can be the following: Company asks - customer answers Company says thank you - customer enjoys Company improves - customers perceives Company asks again - customer gets more and more loyal

Basic Principles of a world-class Loyalty Programme (2/7) Basic principles of a good loyalty programme A good loyalty programme is interesting for the target customer A good loyalty programme is hard to copy A good customer loyalty programme works by improving the long-term relationship between the company and its target customers. To be interesting to the target customer, the loyalty programme must ... offer interesting rewards (a mixture of discounts, rewards and recognition) … that are achievable by the customer within their normal buying behaviour … offer good two-way channels of communication A loyalty programme is a powerful marketing instrument and should be hard to copy for competitors. The programme should therefore allow the company to leverage an inherent advantage that cannot easily be copied or improved upon by its competitors.

Basic Principles of a world-class Loyalty Programme (3/7) It is attractive for the company Customer information is the key enabler Loyalty is not just customer satisfaction To be interesting for the company, the loyalty programme must be … affordable with limited long-term liability … flexible enough to cope with changes in the customer’s behaviour or in the competitive market, and … able to terminate the programme without incurring heavy closure costs or alienating the customer. Although the best loyalty programmes are based on delivering superior value to the customer through the products offered, customer service and value-adding marketing communications are often forgotten. Most programmes start out by offering points for purchases which can be exchanged for rewards, to build an interactive relationship with the target customer. This facilitates the collection of customer information which can be leveraged to improve the company’s basic value proposition - better products, better customer service and more value-adding marketing communications at lower prices. Loyalty cannot be set equal with customer satisfaction. A satisfied customer doesn’t have to be loyal to a company. A loyal customer is one, who has the feeling of getting more from a company, than he/ she could expect. Satisfaction is therefore not enough to keep a customer loyal. AT&T had 95% satisfied customers, but lost 6% market share.

Basic Principles of a world-class Loyalty Programme (4/7) A good loyalty programme is based on trust and needs excellent products and services as a fundament A loyalty programme is not only a communication event, but must be based on its products and services. The best programme won’t have success in the marketplace, when the quality of the core products and services does not fit with customer expectations. The technology and quality of the products and services builds the ground, to build customer satisfaction and helps identifying and rising the barriers of exit. Customer satisfaction is a short term optic and needs an additional trusting element, before it becomes loyalty. The corporate branding and identity can give certain impact on loyalty on that stage. Loyal customer get partners, when they actively work together with the company for the long term success of both. This is the highest objective: Create a relationship and a partnership with your customers. By the end, a company has to be aware of several factors when designing or thinking about loyalty programmes. Price cutting or promotions alone are not creating loyal customers. Partner- ship Loyalty to a Brand and a Company Trust in the Brand Satisfaction / Good Feeling for the offered Services Quality and Technology of Products and Services

Basic Principles of a world-class Loyalty Programme (5/7) A good loyalty programme must be viewed as a long-term action A customer loyalty programme is a long-term activity, that normally doesn’t end. So, a customer loyalty programme can’t be compared with a standard single marketing campaign. The added value of loyalty programmes is therefore not the positioning of a certain product or service for a small period of time, but the integrated positioning of the whole full-service package of the company in the market. A long term loyalty programme is characterised by: ongoing / long term schemes providing added value brand integrated high degree of systems integration high data collection / usage flexible functionality customer driven and focused Launch loyalty programme single marketing campaigns no end loyalty programme time Source: Price Waterhouse, 1998

Basic Principles of a world-class Loyalty Programme (6/7) A good loyalty programme pursues several objectives A good loyalty programme enables the company not only to rise the customer retention, but pursues also several other objectives. (Identifying a customer profile or creating a customer masterview). The customer masterview enables the company to select and target the customer very specifically (e.g. for cross- and up-selling). In addition, a clear customer profile and masterview helps winning back defected customers with a customized offer based on their profitability. Objectives of a loyalty programme Call Details Customers Customer Addresses Business Customers Residential Customers Installed Products Installed Services Network Infrastruct Prod & Serv Prod & Serv Group Customer Contact Rec Billing Positions Example of a Customer Masterview Structure in a Data Warehouse of a Telco Source: Price Waterhouse, 1998 Customer Win-Back; Customer Acquisition Cross Sales, Up Sales Customer- Retention Long Term Offers Customer Profitability Target Selection Customer Masterview (see right) Source: Price Waterhouse, 1998

Basic Principles of a world-class Loyalty Programme (7/7) A good loyalty programme has en external effect and is supported by internal marketing tools A customer loyalty programme has always a direct market and customer impact. On the other side, a loyalty programme needs the full internal support from the organisational and technical point of view. A state of the art loyalty environment consists therefore of a customer profitability analysis, a customer segmentation and targeting tool, a campaign management and a state of the art data warehouse with several data mining tools. A lot of these functionalities are part of modern sales automation / sales productivity environments. Marketing tools Customer data and information Consolidation of customer data Marketing support Analysis of customer profitability Additional customer information Customer segmentation Integrated campaign management Source: Price Waterhouse, 1998