Loyalty management more than earning and spending points

© 2015 Openbravo Inc. All Rights Reserved
Loyalty Management:
More than Earning and Spending Points

Presenters

About Us
 Openbravo is a world leader
in the Open Source enterprise
software space focused on
helping our clients achieve
superior competitiveness
 Openbravo provides the
Openbravo Commerce
Platform and the Openbravo
ERP Platform
 Present on all continents
 Global network of authorized
Openbravo partners
 Openbravo has offices in India, Mexico and Spain

Agenda
1. Introduction
2. Why loyalty programs have largely failed to grow
sustainable customer loyalty
3. How to effectively create loyalty
4. What to expect from your POS
5. Key Takeaways
6. Q&A

Trust

Loyalty Program ≠
Customer Loyalty

Commoditization of Loyalty Programs
Image credit: User:Mattes

Why to Have a Loyalty Program
The main benefit is not to reward customers for
their loyalty, but rather collect information in an
attempt to grow the customer relationship and,
ultimately, wallet share
Retailers expect the revenue contribution from
customers enrolled in loyalty programs to grow
substantially over the next years

Customers Interaction has Changed
Empowered customers More integrated channels
- Customers interact almost transparently with
channels
- Their expectations are quite high: they expect
excellent shopping experiences independently of the
channel
- Customers have a better knowledge of brands
and products
-They are willing to judge and be influenced by the
environment constantly interacting with brands
- Due to the wide knowledge, they are more
demanding customers than before
Retailers must efficiently respond to
these empowered and highly demanding customers

Cross-Channel Customer Engagement
To foster continued two-way interaction with
customers, a multichannel loyalty strategy needs
to be built on the efficiently execution of basic
retail customer expectations

Cross-Channel Customer Engagement
Customers are
cross-channel shoppers

Fractured Technology Enablement
There are studies that show how fractured is the technology
enablement, and the variance when customers use the
different channels to accumulate, track balance or
redeem points:
• Stores have the highest penetration (93% accumulation, 56%
balance, 89% redemption)
• Followed by online channel (67% accumulation, 48% balance,
44% redemption)
• And last mobile channel (44% accumulation, 30% balance, 22%
redemption)
Source: State of the Industry Research Series: Customer Loyalty in Retail by EDGELL Knowledge Network

Customer Advocacy
Advocates tend to be the most loyal customers, they are a unique
marketing asset
Advocacy to reward customers that not only buy more, but bring others
with them
True loyalists bring others with them and those who buy under the
recommendation of an advocate, have higher probability of becoming
advocates themselves [1]
Repeat customers also say product excellence is what truly drives their
loyalty
[1] 2 R. Fugetta, Brand Advocates Turning Enthusiastic Customers Into a Powerful Marketing Force, John Wiley & Sons, July 2012. Contains data
from various studies that reveal the motives behind the growing advocacy movement, including insight as to why buyers are willing to advocate their
favorite brands. The No. 1 reason revealed that buyers have no other agenda than "to help a fellow consumer."

Customer Advocacy
Emerging trend: in-store advocacy to support real-
time shopping experience
Chat right now
with an avid
cyclist and bike
expert

Best Practice Example

Best Practices from Leading Retailers
Strategy: Emotional connection
- Petsmart's groomers build a special relationship
with the pet and its owner
Secret sauce: Groomers are incented to be the
best friend to the pet and pet owner
Strategy: Non monetary value to customers
- Patagonia partnered with eBay to help customers
to resell their Patagonia clothing online
Secret sauce: Patagonia invested in a cause its
customers care and built out an execution plan
for it

Best Practices from Leading Retailers
Strategy: Non monetary value to customers
Nordstrom's loyalty program invest in non monetary
benefits such as custom shopping parties.
Secret sauce: Nordstrom has created a
program that members attach status value to
Strategy: Shopping convenience and in-store
activity based mobile coupons
lStop & Shop allow customer to use their
smartphones as mobile POS.
Secret sauce: gather valuable data and use it
to make personalized offers in real time based
on what is in their cart

Why transactional
loyalty programs
discourage customer
engagement

Fail of Traditional Models
Traditional models had 3 steps (Stimulus creation, purchase
decision in the POS -- the so-called “moment of truth”, and
Purchase experience). But they are no longer valid
The Zero moment of truth happens much before the
customer goes to the store
The so-called Showrooming concept

Factors of Lack of Customer Loyalty
A Gartner consumer survey showed that 62%
of respondents where members of one or more
retail loyalty programs. However, more than
one-third reported never using the programs
they were enrolled
The lack of customer loyalty is a result of several factors:
 Inconsistent execution on basic in-store shopping
expectations
 Along with similarity of retail loyalty programs
 Transaction based programs often disguise true loyalty

Fail on Meet Customers Basics
The effectiveness of the retailer to execute the
customer basics is a key gating factor on loyalty
programs
Loyalty strategies often do not consider how poor
in-store execution of basic customer expectations
will negate any efforts to build customer loyalty
Complex loyalty programs or difficult to redeem
are discouraging for customers and thus disloyal

Fail on Meet Customers Basics
Market survey asked respondents to rate the drivers of customer loyalty:
• Most important factors: product availability, customer service, product
choice and store experience
• Least important: social media engagement, cross channel presence and
personalized offers
In another question, respondent were asked to identify the top strategies to
build customer loyalty:
• Top choices: personalized offers, social media enagement and cross
channel integration
The disconnect could not be starker! The 3 top strategies match up
With the 3 least important factors impacting customer loyalty!

Fail of One-Size-Fits-All Approach
The in-store basics customers expect vary by retail segment as shown in
the following figure where there are the top three factors customers
require for good in-store shopping experience:

Lack of Consistent Multi-Channel Communication
with Customers
Without consistent communication and solid in-store
basics execution, retailers cannot gain the trust of
customers and grow loyalty
JCPenney launched "no
coupon" strategy. They sent
mixed signals to customers and
caused a public backlash. The
company was forced to
apology across several social
media outlets.
Without consistent communication and
product fulfillment, customer trust will be
compromised.

“Loyalty programs are usually measured by short-term metrics,
not many retailers have the organization structure, incentive
alignment, resources and the ability to demonstrate ROI for the
longer-term investments required to deliver true lifetime value to
the customer” VP at Specialty Retailer
Source: State of the Industry Research series: Customer Loyalty in Retail
by EDGELL Knowledge Network

How to Measure Effectiveness
How to measure the effectiveness of Loyalty
Programs it is an important question
Customer Lifetime Value ranks as top metric to
measure loyalty program effectiveness

Campaign Management
POS Data
E-commerce
Loyalty Program
Externally purchased
consumer behavioral
data
Campaign Management is considered the heart of retail CRM and they need to
send consistent customer communications across all business units to accomplish
their objective
Analyze, develop, test, optimize, launch
targeted promotional campaigns to
specific segment of customers
It integrates cross-channel behavior information along with profile,
transactional and merchandising information for targeting the right
group of customers with consistent messages and offers.

In-store CRM
In-store CRM technology provides CRM
capabilities on the store floor
It is delivered via sales associates to support
assisted selling or via clientelling or to
customers themselves (e.g kiosks)
Stores will be responsible for the majority of revenues for many years. So Retailers
should not be limited to deliver the minimum in the stores.
Photo: Openbravo Web POS ticket

Offer Engine (Discounts & Promotions)
Offer engine is a key component for executing
campaign management and loyalty programs
Most software can provide real-time delivery of offers in at least one customer
touchpoint. But customers will demand that this extends across channels.
• Used for defining and launching
customer targeted promotions
across all channels
• Scheduled and defined
according to different business
rules
Photo credit: EPSON, smart printers

Gift Cards, Vouchers and Coupons
Gift cards and vouchers are complementary to discount
and promotions
Coupons are also widely used together
with offers, where a code needs to be
previously provided to the customer
Often they are used by a different person who purchased it, so they
may also be seen as a tool for customer advocacy.
Photo credit: Free Download Web

Customer Analytics
Customer analytics are a set of tools that allow a retailer
to segment its customer base for the purpose of analyzing
and targeting personalized campaigns
When used in a customer-focused way, can
create great value not just for retailer, but
most importantly for the customer as well
The success of a loyalty program depends on the use of customer
data to personalize the relationship between retailers and
customers and move beyond a mere transaction.
Photo: Openbravo Analytics

Loyalty Program Management
Loyalty program management includes store technologies
to enable loyalty card or account use at the POS and
increasingly across multichannel operations
It includes a management system that
maintains point balance, customer
spending and rewards accruals, and let the
customers to redeem their rewards

Loyalty Program Management
Most retailers choose one of these strategies for their
loyalty program management:
• Retailers that have their own loyalty program, so they choose a software
that can be managed within their existing enterprise solution and can be
delivered in the customer-facing application, such as POS (so there is no
need of integrating with thirds parties)
• Retailers that prefer integrating with an external Loyalty program, so the
same program can be shared by other customers. In this scenario, they
will need to integrate via API to the external Loyalty Vendor to be able to
offer loyalty in their POS
Photo credit: Seen at Barcelona Airport

Ensure Customer Basics In-Store
The key gating factor on loyalty programs is the
effectiveness to execute the customer basics
Examples:
-Channels consistency
sending communications to
customers, related to product
availability, consistent
discounts and promotions,
new range of available
products, etc.
-Providing stock visibility for
customers and store
associates
Photo: Stock visibility at Openbravo Web POS

In-Store Key Functionalities
Other In-store key functionalities:
- Offers access from the store by sales
Associate (e.g best deal discount)
- Complementary products
- Real-time or near-real-time offers capability
based on rules and algorithms
- POS application that manages gift cards,
vouchers, coupons
- Capability to print promotions in receipts
- In-store inventory management
- Search and assign customers into a receipt
Photo credit: EPSON smart printer coupon

In-Store Key Functionalities
Other In-store key functionalities:
-Loyalty program integrated with POS application
Photo: Loyalty Management in Openbravo Web POS (to be released soon)

Key Takeaways
- Loyalty programs are moving from being frequency based
(rewarding transactional frequency with discounts) to being
engagement based, and need to evolve to build mutually rewarding,
holistic relationships through transactional as well as emotional
fulfillment
- Cross-channel customer engagement is important today as
customers interact transparently with all channels and expect the
same level of experience. Very important to put effort aligning
customer communications to be consistent
-New measures and metrics need to be defined to truly represent
customer loyalty, such as customer advocacy and value of
customers' emotional connection with the brand and retailer. Strong
analytics capabilities are needed to build customer segments and
also in-store functionalities that ensure customer basics and an
excellent shopping experience

Graphene (credit: University of Bath)
Loyalty Management: More than Earning and Spending
Points
Thank you very much for your attention
Let’s stay connected!
Elena Martinez
Elena.martinez@openbravo.com
es.linkedin.com/in/emartinezhndz/en
http://www.openbravo.com/contact
info@openbravo.com
Thank you very much for your attention

Loyalty management more than earning and spending points

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