Strategic approach on Strategic approach on loyalty and co-branding loyalty and co-branding programs – Sberbank programs – Sberbank approachapproach

June 2010

• Get instant reward at the

partner

• Short term & seasonal

Promotions

• Free merchandise or service

• Discounts

• Each time Banks have to

negotiate with the partner (not

efficient)

• Get instant reward at

variety of partners

• Interest-free Installment

• Each partner decides to

change the promotion

whenever they want

• Very Flexible

• Standard Cards

• Collect Points & Get Your

Gift

• High Operational Costs

• Limited options

• Take too long to collect

points

Gift Catalogues Co-Branded cards with one partner

Multi Merchant Co-Branded cards

Evolution of Loyalty Tools Around The Globe

1980 - 1990 1990 - 2000 2000 - Future

What is multi merchant program?

Everything you do with private label cards...

Everything you do with co-branded cards (dual cards)...

Everything you do with “instant credit” at point of sale...(retail sales financing)

White

Goods

Food

Retailers

Super

Markets

Automotive

& Gas

Electronic

Goods

Travel

Clothing

Education& many

more ....

Bonus card

What is multi merchant program?

IssuerInfrastructure Customers Merchants

Strong Brand

Data Mining

Marketing & Campaign

Management

Merchant Relations & Acquisition

Risk & Fraud Management

Products

Service & Fulfillment

Points from merchants

Loyalty PoolPoints from Issuer

Bonus card

Bonus card

Bonus card

Bonus card

How does it work?

• From all transaction in 28 million merchants around the world, cardholders earn 0.5% incentive of total transaction.

• From transactions made at partner merchants, card holders earn different percentages of incentives financed by partners, varying from 1% to 15% of total transaction.

• Cardholders can also earn additional incentives from campaigns or from offers made by bank for cross-sell purposes.

Regular Shopping

Regular Shopping

0.5% incentive from all transactions at MC merchants around the world

1% to 15% incentive from transactions made at partner merchants.

6

What are the current programs (examples)?

AEROFLOT-Bonus card

Clients are getting bonuses (miles), for spending money on everyday needs using the card. After that miles can be redeemed for a flight ticket.

MTS-Bonus card

Clients are getting bonus points from MTS - leading cell provider for spending money on everyday needs using the card. After that bonus points can be redeemed for a additional minutes, SMS or content.

7

What are the current programs (examples)?

“Podari zhizn’ ” (Give a life) card

Affinity cards, with a strong point on charity funding. Certain share of all spending on the card is transferred to the charity fund for children medical help.

Sochi 2014 credit card

Credit cards, made especially for the Sochi 2014 Winter Olympic Games – affinity program for the sport fans and Sochi 2014 supporters

8

Efficiency – Bonus vs. Ordinary cards?

Average transaction number increase:

Aeroflot Bonus: Visa Classic = 1,9 Aeroflot Bonus: Visa Gold = 1,7

Average amount increase:

Aeroflot Bonus: Visa Classic = 16% Aeroflot Bonus: Visa Gold = 7%

Example of Data Segmentation on Value

There are 4 potential profiles of estimated net worth value per quarter on every group, and its share.

-500

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Qua

rter

ly in

com

e pe

r clie

nt, r

ub.

PROJECTE

D LOSS

PROJECTE

D LOSS

CHURN

CHURN

MAIN

SEGM

ENT

MAIN

SEGM

ENT

BEST C

LIENTS

BEST C

LIENTS

26%26%

1155%% 47%47%

12%12%

+590

+590 руб

.руб

.

-337 -337 руб

.руб

.

+2170

+2170 руб

.руб

.

+11046 RUB

+11046 RUB

Возможные стратегии по кросс-скорингу Доходность – Риск – Отклик

Churn LOSS

BESTMain

Retention

Cross-sell

Wait

Up-sell & Cross-sell

11

How partners are selected?

Approaches on creating a partners pool for different segments

By transactional analysis and clients usage profile

By experts opinion and estimation of needs

for every segment

Approach characteristics:

• Maximization of coverage and usage • ROI maximization• LTV maximization• New clients get into program quicker• Need time to analyze all transaction• More complex to implement

Approach characteristics:

• Time-to-market – quick implementation• Lower costs• Initial return is quicker• Fragmentary coverage (real needs will be less covered)• Lesser usage and frequency

More complex and costly, but moreperspective and valuable

Fragmentary, but cheap and quick

Transactional analysis

Using the transactional data on cards for every client from the targeted segment, a list of mostly valued and preferable partner brands is extracted for this client. So-

called “Brand-ring” is formed

13

Forming a list of potential partners

Preferences of the clients are similar in some cases (Brand rings are frequently intersected)

The main goal is to find the brands, that will have maximal value and impact on ROI of the program, and have a high level of penetration into the segment, and coverage of the client’s preferences.

14

Формирование единого списка потенциальных партнёров (индикативно)

Transaction frequency

Level of penetration into the segment

Transactionincome

Groups of the brands, that are used together (indicative)

ROI = max

Group 2 Group 3Group 1

ROI = med ROI = minROI impact ROI = med

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Различные модели зонтичной системы -Единая программа лояльности для Банка

Sberbank BONUSSberbank BONUSSingle ring for most clients in all

segments

SBERBANKSBERBANKBONUSBONUS

VIPVIP

YouthYouth

MassMass

Single ring for every segment

2010-2011 yearSegmented offerings –2012 …