CM-World Africa 2006 - Dr. Stefan Schwarz - Ensuring viable investments in loyalty strategies

Ensuring viable investments in loyalty strategies

Customer Management World Africa 2006

6 – 10 March 2006, Gallagher Estate,

Midrand Johannesburg, South Africa

Dr. Stefan Schwarz

09 October 2016

Ensuring viable investments in loyalty strategies 2

In a lot of the mobile markets growth through acquisition is increasingly difficult

New customers are

‘unknown’

• Value opportunity

• Ways to increase value

Retention is a growing area of focus for the business

Escalating acquisition costs

Conditioning disloyalty

Market saturation

Low cost tariffs

Free handsets

Content

Why do customers leave?

Let’s ask them

Richard, Recruitment consultant • had a mobile for 6 years,

• with Vodafone for 3 years

• On Vodafone tariff - £17.99 for 100 minutes free calls anytime

custo

mer

valu

e

Lana, Artist • Had a mobile for 10 years

• With Vodafone for 5 years

• Used to spend £30-35, now with 3 on £35 tariff

Steven, Director • Had a mobile for 18 years

• With Vodafone 8 years, been on all networks

(unhappy with BT & Orange coverage)

• Spent on average £70 a month

Karen, Office Manager • Had a mobile for 7 years (always contract)

• 2 years on VF on 1000 anytime

• spend £120-150 a month, 50-100 SMS a day

• “Couldn’t live without my phone”

09 October 2016


Why do our customers leave?

Low Value Customer

Richard,

Recruitment Consultant

• had a mobile for 6 years,

• with Vodafone for 3 years

• on Vodafone tariff - £17.99

for 100 minutes free calls

anytime

09 October 2016



Medium Value Customer

Lana, Artist

• Had a mobile for 10 years

• With Vodafone for 5 years

• Used to spend £30-35 a

month 200 free minutes off-

peak to landline tariff

• Now with 3 on £35 tariff for

750 free minutes a month

09 October 2016



High Value Customer

Steven, Director of

Commercial Vehicle Group • Had a mobile for 18 years

• Been on all networks

(unhappy with BT &

Orange coverage)

• With Vodafone 8 years

• Spent on average £70 a

month

09 October 2016


Karen,

Office Manager • Had a mobile for 7 years

always contract

• 2 years on VF on 1000 anytime

• spend £120-150 a month

• Sends 50-100 SMS a day

• “Couldn’t live without my phone”


Ultra High Value Customer

What is the financial effect of retention?

09 October 2016


How retention affects the customer base

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

year

cu

sto

me

rs

25% Churn

year

25% Churn - Customers after 10 years:

6,200,062

09 October 2016



0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

year

cu

sto

me

rs

25% Churn

20% Churn

year



6,200,062

11,821,790 190.7%

09 October 2016



0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

year

cu

sto

me

rs

25% Churn

20% Churn

15% Churn




6,200,062

11,821,790

21,675,675

190.7% 349.6%

09 October 2016



0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

year

cu

sto

me

rs

25% Churn

20% Churn

15% Churn

10% Churn

year





6,200,062

11,821,790

21,675,675

38,389,148

190.7% 349.6%

619.2%

How can loyalty programmes help to retain customers?

Let’s again ask what customers think!

VOXPOPS

Design principles

09 October 2016


Relationship principles

A good start!

09 October 2016


• A common language

• Two-way communication

Dialogue


09 October 2016


• Regular Contact

Staying in touch


09 October 2016


Relevance


• Through understanding

09 October 2016


Recognition


• …and special treatment

09 October 2016


Support in difficulty


• Responsive

• Helpful

09 October 2016


• Plans

• Milestones

Shared experiences


• Memories

09 October 2016


Trust


• Living up to promises

09 October 2016


Spontaneity


09 October 2016


Financial loyalty

Offers perceived primarily as "cash value",

such as points, discounts, or premiums.

Loyalty

Emotional loyalty

Brand affinity; this product feels ‘right for me’

Structural loyalty

Contractual or physical links to the brand

eg. Post-pay contract

Three dimensions of loyalty

Emotional loyalty, whilst hard to create, can have the greatest long term influence

09 October 2016


The road to emotional loyalty

• The levels of the pyramid categorize the degree of emotional loyalty each category buyer has with a brand.

• All category buyers can be classified in regard to the degree of emotional loyalty they have for each brand in the category.

Presence

Advantage

Bonding

Relevance &

Performance

Source: Brandz

Active familiarity based on past trial,

saliency or knowledge of brand promise

Relevant to consumer’s needs. Felt to deliver

acceptable product performance, and is on the

consumer’s short-list.

Felt to have an emotional, rational, status

or saliency based advantage

Rational and emotional attachments to the

brand to the exclusion of most other brands.

They are likely to be advocates of the brand.

Definition

09 October 2016


Churn rates amongst bonded customers is significantly lower than those with lower emotional commitment

GERMANY

ITALY

UK IRELAND

SPAIN

85%

62%

59%

8%

0% 20% 40% 60% 80% 100%

Presence

Relevance &

Performance

Advantage

Bonding

75%

34%

44%

14%

0% 20% 40% 60% 80%

Presence

Relevance & Performance

Advantage

Bonding

82%

45%

59%

9%

0% 20% 40% 60% 80% 100%

Presence

Relevance &

Performance

Advantage

Bonding

47%

35%

37%

12%

0% 10% 20% 30% 40% 50%

Presence

Relevance &

Performance

Advantage

Bonding

75%

30%

55%

8%

0% 20% 40% 60% 80%

Presence

Relevance & Performance

Advantage

Bonding

Source: Brandz

09 October 2016


It feasible to aim for the higher ground. Some markets are proving successful at achieving bonding with some customers

GERMANY

ITALY

UK IRELAND

SPAIN

Bonding

Advantage

Relevance &

Performance

Presence

No Presence

Average

Brand

67%

9%

9%

10%

3% Bonding

Advantage

Relevance &

Performance

Presence

No Presence

Average

Brand

33%

21%

17%

17%

10% Bonding

Advantage

Relevance &

Performance

Presence

No Presence

Average

Brand

32%

23%

17%

17%

8%

Bonding

Advantage

Relevance &

Performance

Presence

No Presence

Average

Brand

48%

15%

10%

23%

2% Bonding

Advantage

Relevance &

Performance

Presence

No Presence

Average

Brand

6%

36%

24%

19%

14%

Source: Brandz

09 October 2016


The 6 truths of loyalty

• The greater the emotional loyalty, the greater the financial value

• Value leaps when bonding is achieved

• All bonded consumers, are not created equally

• Bonding is extremely difficult to achieve

• Bonding is a key driver of brand leadership

• Bonding keeps loyal customers loyal

Vodafone’s Global Loyalty Project

09 October 2016


We carried out an in-depth audit and evaluation of customer loyalty and retention programmes

Best practice Cases

Competitor Programmes

Orange: Orange WednesdayOrange: Orange Wednesday

O2: Bonus Programme

T-Mobile: Happy Digits

O2: Bonus Programme


Amena: Club Amena, Renove Amena, My Amena

Movistar: Plan Estrena, Programa de Puntos



TMN: Pontos TMN

Optimus: Pontos Optimus

TMN: Pontos TMN


Cosmo: Cosmokarta

TIM: Advantage

Cosmo: Cosmokarta

TIM: Advantage

Mobinil: First Class, Friends & Family, AppreciationMobinil: First Class, Friends & Family, Appreciation

Tim:Milleuna

Wind: Mondo

Tim:Milleuna

Wind: Mondo

CountryCountry Competitor ProgrammesCompetitor Programmes

Italy

Germany

UK

Portugal

Greece

Egypt

Spain

Nether-

lands

Australia

New

Zealand Telecom: Fly BuysTelecom: Fly Buys

Telstra: Reward OptionsTelstra: Reward Options

T-Mobile: Extra SavingsT-Mobile: Extra Savings

Orange: Orange WednesdayOrange: Orange Wednesday

O2: Bonus Programme


O2: Bonus Programme






TMN: Pontos TMN


TMN: Pontos TMN


Cosmo: Cosmokarta

TIM: Advantage

Cosmo: Cosmokarta

TIM: Advantage

Mobinil: First Class, Friends & Family, AppreciationMobinil: First Class, Friends & Family, Appreciation

Tim:Milleuna

Wind: Mondo

Tim:Milleuna

Wind: Mondo

CountryCountry Competitor ProgrammesCompetitor Programmes

ItalyItaly

GermanyGermany

UKUK

PortugalPortugal

GreeceGreece

EgyptEgypt

SpainSpain

Nether-

lands

Nether-

lands

AustraliaAustralia

New

Zealand

New

Zealand Telecom: Fly BuysTelecom: Fly Buys

Telstra: Reward OptionsTelstra: Reward Options

T-Mobile: Extra SavingsT-Mobile: Extra Savings

CountryCountry ProgrammeProgramme MembersMembers PenetrationPenetration

Italy

Spain

Germany

UK

Portugal

Greece

Egypt

4.5m4.5m

3.4m3.4m

2.0m2.0m

1.0m1.0m

865k865k

63k63k

10.1m10.1m

53.6%53.6%

13.8%13.8%

16.3%16.3%

41.7%41.7%

34.6%34.6%

1.98%1.98%

54.6%54.6%

CountryCountry ProgrammeProgramme MembersMembers PenetrationPenetration

Italy

Spain

Germany

UK

Portugal

Greece

Egypt

4.5m4.5m

3.4m3.4m

2.0m2.0m

1.0m1.0m

865k865k

63k63k

10.1m10.1m

53.6%53.6%

13.8%13.8%

16.3%16.3%

41.7%41.7%

34.6%34.6%

1.98%1.98%

54.6%54.6%

Point-based Programmes

• Point based

programmes are overt

to the customer

• Customer can earn

points and later on

use them to redeem a

variety of rewards

• Points programmes

can show extremely

good results, but are

quite inflexible

(change & exit)

CountryCountry AgeAge DescriptionDescriptionRewardsRewards

UK 3 mth.Programme of targeted campaigns aiming at churn

reductionvarious

Ireland 11 mth.Managed programme of very targeted comms to reward

key customers (obj.: churn reduction, revenue retention,

satisfactiontelco related

Australia ongoingBroad variety of campaigns/activities/special offers that

aim churn reduction/increasing tenuretelco related

New

Zealand3 mth. Collection of campaigns targeted through NBA aiming at

churn reduction, usage stimulation, satisfaction, insightnon

Nether-

lands5 mth.

Red Carpet: A very focused HVC programme aiming at

churn reduction, securing revenue, satisfaction, womtelco related

CountryCountry AgeAge DescriptionDescriptionRewardsRewardsCountryCountry AgeAge DescriptionDescriptionRewardsRewards

UK 3 mth.Programme of targeted campaigns aiming at churn

reductionvariousUKUK 3 mth.Programme of targeted campaigns aiming at churn

reductionvarious

Ireland 11 mth.Managed programme of very targeted comms to reward


satisfactiontelco relatedIrelandIreland 11 mth.

Managed programme of very targeted comms to reward


satisfactiontelco related

Australia ongoingBroad variety of campaigns/activities/special offers that

aim churn reduction/increasing tenuretelco relatedAustraliaAustralia ongoingBroad variety of campaigns/activities/special offers that

aim churn reduction/increasing tenuretelco related

New



New

Zealand

New



Nether-

lands5 mth.



Nether-

lands

Nether-

lands5 mth.



Rewards & Recognition

• Rewards and recognition

scheme reward customers

with direct rewards

• They do not work on points

• Customers often feel much

more “surprised” and

recognized

• Change and exit is relatively

easy

none

http://www.marriott.co.uk/

http://www.amazon.com/exec/obidos/subst/home/redirect.html/ref=nh_gateway/102-2677883-8360103

Best Practice

From Outside the Telco Sector

09 October 2016


Best Practice From Outside the Telco Sector

http://www.amazon.com/exec/obidos/subst/home/redirect.html/ref=nh_gateway/102-2677883-8360103

http://www.marriott.co.uk/

09 October 2016


• Distinctive consumer benefits vs. the competition

• Fast tracking “high potentials” through the tiers

• Sub-segment development

Selected Best Practice

• Ongoing anti-churn tests

• Based on ongoing behaviour monitoring

• Realised importance of different points of contact

• Different offers to different customers

• “Drinking from the firehose” - massive quantities of customer data

• Using sophisticated selection criteria to define targetable segments

• Developing highly effective sub-clubs (such as parents) to lock-in high value customer groups.

Vodafone Loyalty Programmes

09 October 2016


Within the wider context of customer interactions that impact loyalty we intend to focus on three elements

Objective Means

Reduce churn

Increase depth

of relationship

Usage: cross-sell

and upsell

Increased ARPU

Customer service

Rewards and

recognition Reduced churn

Outcome

Point based

programmes

Save programmes Increased satisfaction

NBA

Prepay – post pay

migration

Retail

Advertising

…..

…..

09 October 2016


Looking outside Vodafone, best practice loyalty programmes succeed on twelve dimensions

Dimension Best practice

Business Business plan To be conducted in detail and are regularly re-evaluated.

Value sharing To be kept simple to understand and explicit to customers.

Root cause This underpins all activity. It is understood on a segment level and used as basis for

programme structure and comms.

Brand Identity Consistent global identities are regularly reinforced.

Branding Loyalty programmes embody brand values. In many cases they are an articulation of

the strapline.

Differentiated This is weakest area. Explicit nature of most programmes makes them easy to copy.

Customer Experiential The experiential dimension is used to create differentiation and adds interest for

customers and keeps programmes fresh.

Differiential

marketing/tiers

Play a key role, often providing custoemrs with exponentially greater rewards at

higher thresholds.

Tailoring Currently the weakist area. Many brands seem to rely on value tiers to deliver

relevance.

Comms Data optimisation Currently not a strength of all programmes - but for most performs a fundamental role

in segmentation and establishing allowable investment, and configuring programme

and communications.

Motivating rewards or

offers

A wide range of appealing rewards is used by almost all programmes to involve and

motivate programme members.

Multi-channel Some exhibit over-reliance on traditional channels i.e. DM, outbound calls. There is

general trend to greater use of the web.

09 October 2016


Top-Line results: Some Vodafone programmes are close to top performance in some aspects but no programme excels in all aspects

0 1 2 3 4 5

Bus plan

Currency

Root cause

Identity

Branding

Differentiated

Experiential

DFM/tiers

Tailoring

Data optimisation

Motivating rewards

Multi-channel

Bu

sin

ess

C

om

ms

Cu

sto

mer

Bra

nd

0 1 2 3 4 5

Bus plan

Currency

Root cause

Identity

Branding

Differentiated

Experiential

DFM/tiers

Tailoring

Data optimisation

Motivating rewards

Multi-channel

Bu

sin

ess

Co

mm

s

Cu

sto

mer

Bra

nd

Highest dimension scores for Vodafone versus best practice average

Average dimension score range for Vodafone versus best practice range

09 October 2016


Principles for Development

Central Loyalty

Programme

Central

Development

Replicated

Homogenous OpCo Programmes for

consistency

Common Best

Practice Model

Heterogenous OpCo Programmes for faster

organisational learning

Central Development /

Enforcement

Central Best Practice Gathering /

Sharing

Contribute / Share

Central

Facilitation

09 October 2016


Application of Loyalty Programme Strategy

customer

value

customer

Lifecycle

UHVC

HVC

MVC

LVC

Loss

= moment of truth Customer lifecycle management identifies key moments of truth

…and over time

Variation of the activity

according to customer value

09 October 2016


There is an increasingly common understanding in Vodafone that loyalty is not just about…

…customer satisfaction

…trapping customers to make them stay longer

…just about points

…just for high value customers

…one thing to all customers

To effectively and efficiently increase tenure of Vodafone customers in order to maximise profitability

Role of loyalty activity

Ensuring viable investments in loyalty strategies

Customer Management World Africa 2006

6 – 10 March 2006, Gallagher Estate,

Midrand Johannesburg, South Africa

Dr. Stefan Schwarz

Documents

CM-World Africa 2006 - Dr. Stefan Schwarz - Ensuring viable investments in loyalty strategies