Carrying forward the Segmentation Discussion:-
Deficacy of Loyalty Cards
Loyalty programs:-These are structured marketing efforts that reward, and therefore encourage, loyal buying behavior — behavior which is potentially of benefit to the firm.
Deficacy of Loyalty Cards
Loyalty programs:-These are structured marketing efforts that reward, and therefore encourage, loyal buying behavior — behavior which is potentially of benefit to the firm.
Various Loyalty Cards
In marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card or debit card, that identifies the card holder as a member in a loyalty program. Loyalty cards are a system of the loyalty business model. In the United Kingdom it is typically called a loyalty card, in Canada a rewards card or a points card, and in the United States either a discount card, a club card or a rewards card. Cards typically have a barcode or magstripe that can be easily scanned, and some are even chip cards. Small keyring cards (also known as keytags) which serve as key fobs are often used for convenience in carrying and ease of access.
A retail establishment or a retail group may issue a loyalty card to a consumer who can then use it as a form of identification when dealing with that retailer. By presenting the card, the purchaser is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases. Hence, the card is the visible means of implementing a type of what economists call a two-part tariff.
The card issuer requests or requires customers seeking the issuance of a loyalty card to provide a usually minimal amount of identifying or demographic data, such as name and address. Application forms usually entail agreements by the store concerning customer privacy, typically non-disclosure (by the store) of non-aggregate data about customers. The store — one might expect — uses aggregate data internally (and sometimes externally) as part of its marketing research. These cards can be used to determine, for example, a given customer's favorite brand of beer, or whether she is a vegetarian.
Where a customer has provided sufficient identifying information, the loyalty card may also be used to access such information to expedite verification during receipt of cheques or dispensing of medical prescription preparations, or for other membership privileges (e.g., access to a club lounge in airports, using a frequent flyer card).
United States
In the U.S., several major supermarket chains and at least one major pharmacy require the cards in order for customers to receive the advertised loyalty price. These include Smith's, Kroger and Safeway (each through both their own name and many of their regional chain names), Albertsons, Winn-Dixie, Harris Teeter, Ingles, Giant Eagle, Tops, and CVS/pharmacy. Cards from other, even competing chains will generally work at other stores to receive the advertised loyalty price, because only a few companies make the cards, but stores generally will not allow this since it will not allow a customer to be tracked, though a customer can make it work if they use a self-checkout. Even though this will work to receive the advertised loyalty price, any points and/or future discounts someone may be trying to earn from using the card at another store will not be added since a different chain would use a tracking system with a database independent of the other chain. However, some stores may also allow a customer to use the store's card if a customer does not have theirs on hand (Kroger does not allow this although customers can enter their phone number to bring their card up if they forget it, or have another customer's phone number entered) or if the customer is new and agrees to sign up right away. Many of the stores allow accumulation of fuel discounts. Some have tie-ins with airline frequent-flyer programs, and some agree to donate a percentage of sales to a designated charity. Most notably, Wal-Mart does not have a loyalty card plan (though someone who purchases a gift card can generally get a 3 cent discount per gallon of gas at the fuel stations located on Wal-Mart premises).
United Kingdom
The loyalty card market in the UK is one of the most significant in the world, with most major chains operating some form of reward system. Passcard has been claimed to be the first reward scheme or discount card, created around by Gary Wilson in 1981 and later known as Passkey.One of the first loyalty cards backed by a major chain is believed to be the Sainsbury's Homebase Spend and Save Card in 1982.
Of the "big four" supermarkets, only Sainsbury's and Tesco operate loyalty cards. Both Nectar and Tesco's Clubcard scheme have been criticised for not offering value for money. When Clubcard or Nectar points are used for money off supermarket shopping, they roughly equate to a 1% discount, although offers can increase this discount by as much as 4 times for certain rewards. Some retailers with banking operations also award points for every pound spent on their credit cards, as well as bonus points for purchasing financial services. A report in The Economist suggested that the real benefit of loyalty cards to UK outlets is the massive database potential they offer.
India
i-mint is India's largest coalition loyalty program, claiming 9 million members and 1500 network partners, with 120 billion INR of sales generated through i-mint-cards in 2009. In June 2010, German loyalty program Payback took a controlling interest in i-mint. Hero Honda's passport program claims over 3 million members.BPCL's PetroBonus fuel card program has 2 million members.Indian Oil's fleet card program XTRAPOWER and retail program XTRAREWARDS claim a combined customer base of 2.5 million. The Maruti Suzuki AutoCard, launched in association with Citibank and Indian Oil had 370,000 cardholders as at October 2008.Kingfisher Airlines FFP(Frequent flyer programs) King Club had 2 million members as on October 2010.It is the most generous FFP in Airlines.
On 07th, Mar 2007 Kingfisher Airlines announced the king of all frequent flyer schemes- The Mega Mile Move(MMM)Offer.
Program management
Across the globe loyalty programs are increasingly finding the need to outsource strategic and operational aspects of their programs, given the size and complexity a loyalty program entails. Program managers are typically agencies with specialist skills in loyalty consulting, creative and communication, data analytics, loyalty software, and back end operations. The advent of Web 2.0 and SaaS online-based services has provided lower-cost options for small businesses to offer and manage their own loyalty programs.
Loyalty cards are becoming mobile (i.e. Members Discount Card, CardStar, CardBank and Loopt).
Criticism
Companies complain that these loyalty program discount goods to people that are buying their goods anyway, and that the expense of doing these programs rarely pays. Other critics see the lower prices and rewards as bribes to manipulate customer loyalty and purchasing decisions, or in the case of infrequent-spenders, a means of subsidizing frequent-spenders. Commercial use of the personal data collected as part of the programmes has the potential for abuse. It is highly likely that consumer purchases are tracked and analyzed towards more efficient marketing and advertising (in fact, this can be one of the purposes of the loyalty card.) To some, participating in a loyalty program (even with a fake or anonymous card) funds activities that violate privacy. There has also been concern expressed regarding RFID(Radio-frequency identification) technology being introduced to loyalty cards.
Loyalty and credit card reward plans might be viewed as modern day examples of a kickback. An employee who needs to buy something (such as a hotel room or an airline flight) for a business trip but who has discretion to decide which airline or hotel chain to use has an incentive to choose the payment method that provides the most credit card rewards or loyalty points instead of minimizing cost for the organization.
Churning:-
Churning may refer to:
General examples-Churning (butter), the process of creating butter out of milk or cream.
-Churning (person), the excessive talking or rambling on by a person.
Business world examples-the turnover of TV channel subscribers/number of disconnections, loss of customers; usually shown in percentages.
-Churning (stock trade), the excessive buying and selling of stocks by a trader such as a broker to generate large commission fees.
Churner:-Customers that are becoming less loyal are called churners.The churner status is defined as a function of the volume of commercial transactions.
Redefining the notion of customer’s loyalty by considering it from a customer-centric point-of-view instead of a product-centric point-of-view,here the customer lifetime value (CLV) approach is used.CLV is defined as the discounted value of future marginal earnings, based on the customer’s activity.
Hence, a churner can be defined as someone whose CLV, thus the related marginal profit, is decreasing.Since profit is what really matters in a commercial environment, standard statistical accuracy measures for prediction need to be revised and a more profit oriented focus may be desirable.
Eg:-Lets see the condition under which a customer has to be considered as being decreasing his/her loyalty, and hence as churning. The issue in a competitive environment is that most people have more than only one supplier. For instance, in retail banking, a customer could have a current account in a first bank and a mortgage loan in another. Most people have several current accounts even if they do not use it (so-called “sleeping” accounts). As a matter of fact, we need to find a definition of a churner applicable to non-contractual products, as opposed to contractual products. Contractual products are for instance insurance, mortgage, cellular phone (if high entry or exit barriers and fixed price), in other words all products with “contractual” cash-flows. On the other hand, non-contractual products could be catalog sales, cellular phones (if low entry and exit barriers and marginal price), etc.
Churning in 3G Marketing:-A churned customer is the one who has stopped using one service provider and has moved to its competitor.
Why customers churn-three general reasons:
Some change for price/tarrif reasons,others are unhappy or upset with their current service provider.Some change to get acces to better services and to gain community benefits. Types of churners:
Joiner-One who is rarely satisfied by staying with any one provider for long.
Leaver-The leaver does not leave because of something done by your competitor,the leaver is upset with you and wants to get away from you.
Changer-A changer leaves not because of anything you did,or what the competitor offered, but for their own internal reasons.
Profiling of the Customers-Immatured to Matured.
-Homogenity.
-Operating Principles.
Next Class:-Transition from Segmentation towards Targetting.
Fitment of SEC Grid.
