Framework to Designing Benefits For a Consumer Loyalty Programme

3 E FRAMEWORK TO

DESIGNING BENEFITS FOR

A CONSUMER LOYALTY PROGRAM

Prepared for Apeejay School of Management

by NetCarrots Loyalty Services

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Function of the Whitepaper

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2

1. Is NOT to take a position or espouse a philosophy

2. Is to assist with Education on a framework we’ve profitably used for many years

3. Learning happens best with learning and analogies

4. Hence half this paper is, but, a STORY

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Detailed write-up on slides at:

http://responsemerchant.blogspot.in/2011/12/story-explaining-4-e-framework-to.html

What is a Consumer Loyalty Program

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Loyalty programs are

structured marketing efforts

that Reward,

and therefore Encourage,

Loyal buying behavior

— behavior which is potentially beneficial to the firm

Sharp, Byron and Anne Sharp

(1997)

Visible Examples in India

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1. i-mint (now called Payback) 9 million members and

1,500 network partners

2. Hero Honda's passport program Over 3 million members

3. BPCL's PetroBonus fuel card program Over 2 million members

4. IOCL’s fleet (XTRAPOWER) & retail (XTRAREWARDS) cards Over 3 million members

5. Maruti Suzuki Auto Card, Over 370,000 cardholders

6. Kingfisher Airlines King Club Over 2 million members

http://en.wikipedia.org/wiki/Loyalty_program#India

Framework for Benefits Planning

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Advances in Consumer Research, by

Misra, Malik, & Bhaskar (2009)

Economic Benefits

Value Appropriation between

Business & Consumer

due to savings of Scale

1. Retailers advertising “Buy Two, Get half off on Third”

2. Fixed Entry Price in an Amusement Park with unlimited rides upon entry

3. Free Shipping for an order size above a certain quantity

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Emotional Benefits

“All things being equal, one would

rather do business with a friend.

Sometimes, all things not being equal, one would still rather do

business with a friend!”

Experience vs. Cash

Rewards Items

Greeting Cards

Events

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Ego Boost: (A sub-set of Emotional Benefit) Fulfills Esteem Needs on Maslow’s Hierarchy

1. Separate queue for Gold & Platinum Tier members and preferential boarding

2. Recognition Events for Best Customers / Donors

3. Car check-in for premium guests of luxury hotel chains

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Self Actualization

Esteem Needs

Belonging Needs

Security Needs

Basic Needs

Shoe Store Owner: Maalik

Customer: Kharidar

Competitive Owner: Hareef

Story 10

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Chapter One

9 pairs of Shoes from March to November

10th Pair Free!

11

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MAR 1 PAIR

APR 2 PAIRS

MAY 3 PAIRS

JUN 4 PAIRS

JUL 5 PAIRS

AUG 6 PAIRS

SEP 7 PAIRS

OCT 8 PAIRS

NOV 9 PAIRS

DEC FREE PAIR!

Chapter Two

10% Discount offered by Competitor in October

Stakes too high to Defect 2 more pairs before

free pair

Eavesdropping

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Chapter Three

Puja Thali Welcome at Divali

Emotional Connect

Wife not Impressed

Eavesdropping

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Chapter Four

Value Creation Home Delivery

Engaging Family Home-Shopping for

Wife

Free Sandals Scheme for Wife

Ego Boost Picture on Christmas

Cards

Consistency Another Puja Thali

Acting on

Voice of Customer

(Eavesdropping)

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7 Key Take Away’s

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1. Business can only discount for customers of value, not all customers

2. Economic Benefits indispensible for most consumer loyalty programs

3. Economic Benefits set foundation for other benefits

Emotional and Ego benefits are relevant on the back of Economic Benefit

4. Ego benefits catalyze Advocacy

Wife will now be sold through husband

5. Good programs follow Principles of Win:Win

Home Delivery: Value for Customer + Lowered costs for business

6. A pure Economic Offer will typically fail against an equivalent Economic Offer with Ego and Emo benefits

7. Most Important: Eavesdropping

Voice of Customer is crucial to plan benefits

LETS BEGIN A WIN:WIN RELATIONSHIP!

Ashish.Merchant@netcarrots.com

+91 98671 50505