“American business has developed an insane imbalance between obsessive customer acquisition and negligent customer reten

1. “American business hasdeveloped an insaneimbalance between obsessivecustomer acquisition andnegligent customer retention”

2. Basic objectives for Loyalty programs • Retain best, most profitable customers • Make good customers better • Acquire customers with potential to become best customers • Reconnect lapsed users with the brand • Revitalize the brand’s relationship with its core franchise

3. Appropriate question is not will a loyalty program attract new customers or will it increase our retention rates. But will it grow the profitability of our customers

4. Principles of Loyalty Marketing • Relevance is the key to Loyalty Marketing • The magnitude of the reward is less important that the perceived value of the reward • Benefits - Intermittent scheduling of rewards (“surprises”) can be more effective than regular scheduling • Special treatment • Recognition

5. Loyalty Marketing reduces the consumer’s decision-making complexity • Loyalty Marketing reinforces the rightness or wrongness of the consumer’s choice • Loyalists represent an incremental sales force • Loyalty Marketing is information-dependent

6. What is Loyalty? The consumer is loyal to you is s/he frequently buys your product Desired Behaviour Loyal Behaviour Low High

7. The consumer is not necessarily desirable... Desired Behaviour Loyal Behaviour Low High • If you have had to subsidize their purchases • If s/he buys your product because of inertia or absence of an alternative

8. Commitment is an emotional bonding The actively loyal customer is the only (long term) profitable customer Potentially Loyal Behaviour Actively Loyal Behaviour High Commitment Passively Loyal Behaviour Low Low High Desired Behaviour

9. Extend the relationship from Product to Brand High Commitment Low Depth of Involvement reflects moving from a narrow relationship with an individual product to broad usage of the full range of products marketed under the brand Low High Desired Behaviour Product Depth of Involvement Brand

10. High Actively Loyal to the Product Commitment Low Low High Product Desired Behaviour Depth of Involvement Actively Loyal to the Brand Brand

11. AMEX An index of behaviours that reflect a CM’s attachment to AMEX - Tenure of membership -Total number of trans. per month - Months active - Total number of services currently active - Share of plastic spending - Survey responding and responses High Commitment Total $ revenue from all AMEX products and services - Total $ spending across all AMEX cards - Total $ annual card fees - Total revolving balances on Optima Low Low High Product Desired Behaviour Depth of Involvement An index of the number of points of connection with AMEX - Total number of types of cards held - Total number of basic cards - Total number of services currently enrolled in Brand