Stop Paying To Reacquire Your Own Customers Invest in Building the Next Generation of Loyal Shoppers

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Stop Paying To Reacquire Your Own
CustomersInvest in Building the Next Generation
of Loyal Shoppers

• Presenters
• Mark Hodes, Senior Vice President, Customer
  Marketing, TicketsNow
• David Rosen, Senior Vice President, Loyalty Lab

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Agenda

• The Customer Loyalty Imperative
• The Evolving Face of Loyalty
• Case Study TicketsNow
• Five Loyalty 2.0 Trends

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The Customer Loyalty Imperative

• Media marketing saturation dilute all but the
  sharpest communications
• Epidemic levels of Attention Deficit Disorder
• Top of Mind primary store relationships are
  worth between 5 and 20X other places I shop

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High Return on Investment

• Efforts invested in best customer management far
  outstrip other marketing efforts
• 10 increases in marketing effectiveness result
  in x increases in customer value

Gupta, Lehmann Stuart, Valuing Customer,
Marketing Science Institute, No. 01-119, 2001
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Loyalty is a crowded space

• Loyalty programs are increasingly everywhere as
  brands want to better track and reward customer
  behavior
• Just look at the number of programs your family
  is a member of today.
• Fact is it only costs 100,000 to deploy a
  quality multi-channel loyalty program now.
• The typical consumerbelongs to 7 or 8 programs.

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And the Definition is Changing

• Great brands must encourage deeper customer
  engagement
• Consumers (especially younger ones) are
  suspicious of getting inundated by promotions
• Consumers expect better brands to be open,
  grassroots and authentic

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The new loyalty paradigm

• Broadens the definition of customer lifetime
  value its not just transaction dollars
• Extends the description of the customer lifecycle
  --customers actions influence each others
  lifecycle development
• Recognizes and responds to the obvious and subtle
  differences in customers
• Better differentiates between advocates and mere
  purchasers

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A New View of Customer Loyalty Loyalty 2.0
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Case Study Reinventing Loyalty at TicketsNow

• Original Case for Loyalty
• Re-evaluation
• Redesign
• Lessons Learned

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TicketsNow

• Participate in the Secondary Ticket Marketplace
• Estimated size is 10B
• Network of suppliers who provide content
• Sell thousands of events across Sports, Concert
  and Theatre
• What makes us unique
• First to market with Internet ticket marketplace
• Largest network of supplierstypically resulting
  in broader inventory
• Strong fulfillment capabilities due to tight
  supplier integration and customer care
  investments
• Event Experience v. Ticket Transaction
• Technology platform market responsiveness

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Marketing Challenges

• Commodity Product
• Comparison shopping
• Lack of brand loyalty
• Thin margins
• Tight control of customer acquisition costs
• Volume is key
• Event Dynamics
• Difficult to project demand
• On-field performance determines demand
• 80/20 rule applies
• Retention is critical to business performance

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TicketsNows InCrowd

• Tiered Loyalty Program consumer and business
• Reserved - 1K to 3K annual spend
• Club - 3K to 8K annual spend
• Skybox Greater than 8K annual spend
• First Mover Advantage
• Benefits Include
• Free Shipping
• Specialized Care
• Concierge Services
• Tiered Offers

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The Case for the Original InCrowd

• Conceived of the InCrowd because of
• Lack of loyalty in the category
• Dominated by heavy spenderswho were not being
  recognized and rewarded
• Nobody was doing it

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The Creation of The InCrowd

• Original objectives were
• Recognize best customers
• Construct a clear migration path
• Create long-term continuity
• Original constraints were
• Must be self-funding
• Align costs carefully
• Original program was designed as
• Exclusive by invitation only
• Not disclosed to customers until they qualified

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The Original InCrowd Structure

• 3 Tier recognition and benefits program
• Originally by invitation only to those spending
  1,000 or more in the last 12 months
• Reserved - 1,000 - 2,999
• Complementary shipping
• Club Level - 3,000 - 7,999
• Exclusive 800
• SkyBox - 8,000
• Concierge Services

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Original InCrowd Evaluation

• Initial results were mixed
• 25,000 Invited
• 4 enrolled
• However, program was ROI positive even with such
  a small population

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Decided to Change

• Decision was framed as
• Soft benefits only precluded higher take rate
• Incremental cost was minimal
• Impact from benefits swamped impact from
  exclusivity

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Performance Improvements

• Dynamics of participation and customer
  acquisition were very favorable in January
• KPI impacts
• Cost per acquisition went down
• Repeat rate went up
• Lower cost acquisition channels improved
• Self directed went up
• Email went up
• Participation from InCrowd members quadrupled

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Lessons Learned

• Biggest lesson ? The 80/20 rule is firmly in
  place
• If you dont do something with the 20, you are
  at serious risk
• First mover advantage
• If there is heavy price-shopping or a dearth of
  loyalty in the category, dont sit back and hope
  it corrects itself
• Do something tangible and meaningful
• Occupy the first mover space
• People who spend a lot of money with you quickly
  build an expectation that you will recognize and
  reward them
• If you dont, they will take their business
  elsewhere

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5 Loyalty 2.0 Trends to Spot

• 1. Identify, Segment and Differentiate Customers
• 2. Make Boundaries Flexible and Extendable
• 3. Enhance Your Brand Among Best Customers
• 4. Align Directly with Company Success
• 5. Promote and Facilitate Two-Way Engagement

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Today Identify, Segment, Differentiate

• Segmentation primarily based on observed behavior
• Spend More Earn More
• Spend lots more, become Platinum

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Loyalty 2.0 Identify, Segment Differentiate

• Recognizes and adapts to deeper levels of
  consumer affinity
• Clubs join tiers as special places
• Magnitude changes in
• Offer targeting and eligibility
• Communication strategies
• Earning means
• Rewards

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Loyalty 2.0 Clubs Play Important Role with Tiers
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Today Flexibility and Extendibility

• Segmentation and targeting build on rigorous test
  and learn discipline
• Coordination of PLCC, Co-brand add considerable
  muscle to multi-tender programs

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Loyalty 2.0 Flexibility and Extendibility

• Earning and Burning features grow by extending
  program to strategic partners
• On-brand partners tap into the insights,
  community and buying power of great programs
• The more valuable the program to members, the
  more likely they will be to engage

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Utilizing Partners
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Today Enhances Brand

• Best customers raise their hands to be recognized
• Giving retailers/marketers explicit permission to
  turn up the dial
• Significantly higher pay attention rates from
  loyalty members

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Loyalty 2.0 Enhances Brand

• Shifts focus from self promotion of retail
  brand
• To member promotion of retail brand
• Recognizes and rewards members contribution to
  positive share of voice
• Commenting
• Reviewing
• Referring

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The Role of Customer Reviews
These plants made it through Hurricane Katrina,
Hurricane Rita and the hot weather that followed.
We were asked to conserve water so no sprinklers.
These plants were troopers with no watering at
all - they bloomed their hearts out when
everything else was crispy brown. I'm putting in
my order for twice the number this year."
-Source Bazaarvoice
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Today Aligned With Company Success

• having a loyalty program means having
  customers not approached by all the other
  online competitors.
• CEO Jim McCann
• During the quarter, more than 2.6 million
  customers placed orders online, of which 53 were
  repeat customers. The company attributes the
  repeat customer rate to efforts to expand gift
  offerings and services such as its floral
  category Fresh Rewards loyalty program.
• -Quarterly earnings call

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Loyalty 2.0 Aligned With Company Success

• Ties point-earning/benefits to deeper
  understanding of LTV
• Increased gross margins
• Lower cost to serve
• Lower acquisition costs
• Higher conversion rates
• Ratings and reviews

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Forums
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Today Promotes Two-Way Engagement

• Best programs leverage detailed transactional
  data by giving back a more personalized
  experience
• Generates meaningful, though limited insights at
  registration
• Questions
• Preferences
• Pressure is on to listen and respond

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Web 2.0 Promotes Two-Way Engagement

• Loyalty 2.0 heavily focused on dynamic, two-way
  interaction
• Drives significant consumer insights through deep
  set of tools
• Collaborative message boards
• Forums
• Frequent, targeted market research

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Disney Movie Rewards
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Key Takeaways

• The highest return on customer investment is
  greater retention and deeper engagement
• Identifying and differentially responding to best
  customers is a requirement for successful
  relationship marketing
• However, advances in technology and new ways of
  thinking allow us drive loyalty and true
  profitability far deeper
• Leaders of the Loyalty 2.0 revolution will
• Better respond to what their best customers tell
  them
• Allow best customers to lead brand advocacy
• Recognize and reward all behaviors that
  contribute to higher customer profitability