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Enterprise Marketing Management (EMM)

Definition - What does Enterprise Marketing Management (EMM) mean?

Enterprise Marketing Management (EMM) is a type of software that is used to provide, monitor and
maintain a promotional structure across a large organization. Enterprise marketing management software
provides a single platform that serves all of a business's marketing needs, including:

● Campaign management across all channels (social media, Web, mobile, traditional)
● Customer experience management (pre-sale research, post-sale follow up, and so on)
● Analysis of campaigns, including conversions and other important factors
● Management of marketing resources (budgets, people and so on)

Enterprise marketing management is closely related to enterprise customer relationship management

(CRM), but with a greater focus on the marketing aspect as far as generating and creating new leads rather
than just maintaining the existing customer base. There is no firm benchmark that separates an EMM
solution from regular marketing software, but the perception is that enterprise marketing management is
more robust and can be scaled to meet the needs of a much larger organization. That said, like all
enterprise software, EMM is defined solely by the promotional materials of the companies selling it.

Enterprise Marketing allows companies to take campaigns to the next level by changing their sales focus to
exponential growth instead of simply holding onto their existing customer base. The main goal of
Enterprise Marketing is growth and it utilizes a powerful combination of marketing strategies to reach this
objective. Enterprise Marketing does not rely on your marketing team alone; instead Enterprise Marketing
utilizes a cross-departmental team that collaborates together. Some of the participants required for
successful Enterprise Marketing don’t fall under the typical “marketing” roles, and you’ll often find that IT
managers, product developers, and other members of the executive team are a part of the united efforts of
Enterprise Marketing.
How is Enterprise marketing different?

With Enterprise Marketing, the approach is on a grander scale, as compared to a typical marketing
program. What makes Enterprise Marketing different is its ability to combine forces across an organization
to increase sales and attract larger audiences. Multi-channel marketing, brand awareness and brand
diversity are a few of the heavy hitters that make up an effective Enterprise Marketing strategy.
Multi-Channel Marketing

Cross-channel marketing, or multi-channel marketing, is a method of marketing aimed at targeting

customers through numerous marketing channels at once. For example, a synergized campaign across
social media, emails, landing pages, and mobile applications greatly increases the brand’s exposure to
consumers. Because such a large team is focusing on marketing, with a wide array of specialized skills, it
is attainable to be effective across so many channels at once.

Another advantage enterprise marketers have over smaller marketing teams and startups is that they aren’t
dealing with the same budget restrictions. For a startup or small marketing team, a limited budget can
create a bottleneck when proper testing can’t be done. Enterprises have proven offerings, audiences,
funnels, and other data to start from, and can reach a mass audience quickly to validate assumptions.
Enterprises can also execute cross-channel campaign management at a greater scale, and may be willing to
pay more than is feasible for smaller companies to win a lead.
Of course the funnel, copy, and creative must also be aligned, but budget is a key advantage to being an
enterprise.

Although enterprises typically have the budgets to fully utilize cross-channel marketing, this doesn’t mean
that marketers should utilize these methods blindly. It’s vital that every channel is tracked through
analytics and data in order to maximize ROI. This way, there is a baseline to compare against, and a
measurement of success over time. Even with an expansive budget, metrics tracking is critical to properly
implementing Enterprise Marketing, and creating an effective cross
channel marketing strategy. Because you are monitoring the data from several marketing channels, and
analyzing the results, you’ll be able to pinpoint the greatest return on investment. From there,
you’ll be able to reallocate budget to new campaigns and promotions that are proving to have higher
conversions.

Brand Awareness

Building up your brand’s awareness is crucial to furthering the brand’s conversion rate. As with all
marketing, the goal of brand awareness in Enterprise Marketing is to attract the attention of current and
potential customers. The bulk of the brand awareness efforts should be geared towards the brand’s target
audience. However, limiting your campaigns to your known target audience could hinder growth efforts.
As you experiment with messaging, consider your target audience as a starting point that can be expanded
to a larger reach. Enterprise Marketers need to stay creative and on trend by collaborating with influencers,
rolling out new promotions and campaigns, and staying current with website best practices is crucial to
making sure your brand is keeping up with the times.

Social engagement is also an imperative part of Enterprise Marketing, and it should be a top priority when
it comes to creating brand awareness. Social engagement is key to building relationships with consumers.
Engaging with consumers adds a human touch to your brand, and consumers appreciate genuine human
interactions over chatbots with tailored responses. Social engagement is an easy way to build brand loyalty
among consumers, especially if the competition has been neglecting their social engagement duties.

Another way to help build brand awareness for your company is through retargeted advertisements. This is
a great way to get people who have visited your website in the past or who’ve previously shown an interest
in your products and services a subconscious “ping” to remind them about your brand. The end goal is to
prompt users to make it back to your website. Ideal candidates for ad retargeting are users who’ve visited
your website in the past, consumers who’ve used a search engine to look for your products directly, and
those who have previously opened an email sent out by the brand whether or not they’re on your
subscription list.

Enterprise Marketing Software Management

Enterprise marketing is so expansive that it can be overwhelming to coordinate all of the teams involved in
the process. Enterprise Marketers are also dealing with a much more expansive list of
products, brand extensions, product launches, and sub-brands than your average marketer. Fortunately,
there are software solutions to help your teams collaborate together effortlessly, allowing them to combine
the capabilities of content, multi-channel marketing, social media marketing, and analytics and data
management all under one dashboard.

Marketing Automation Software

There are many marketing automation software systems available to help you manage your Enterprise
Marketing strategy. Here’s a few to start:

• Hubspot

• Marketo

• Pardot
All three of these software systems are designed to make your life easier when dealing with everything
that goes along with Enterprise Marketing. Depending on your business needs each of these software
systems offer an array of marketing tools to help further your bottom line sales goals.

Marketo — For marketers who are looking to focus on getting their cross-channel marketing up to speed,
Marketo would make a great choice as they offer automation of a wide variety of marketing channels
including email marketing, customer base marketing, and mobile marketing.

Pardot — Pardot, offered by Salesforce, is a marketing automation software that focuses on B2B
marketing automation. The nice thing about Pardot is that it has packages that cater to both small and
large, enterprise sized businesses.

HubSpot — HubSpot offers a package that will help keep your marketing, sales, and customer service
duties under control with their fully automated systems. Their customer hub makes building relationships
through engagement easy and they offer SEO, blog, and advertisement software integrations.
Enterprise Level Content Management

Another great way to help manage your Enterprise level marketing is with a fully functional, GDPR
compliant content management system such as Zesty.io. With Zesty.io you’ll get advanced multi-channel
functionality which is a top priority when it comes to Enterprise Marketing. Not only should an enterprise
marketer with a diverse or international audience be focused on GDPR, but their CMS should have
multilingual content versioning. This is great for multi-channel marketing as many businesses want to
expand their reach abroad across different marketing channels. Time management can seem like an entire
job in itself when it comes to Enterprise Marketing, choosing to opt for a content management system is a
huge time saver as you’ll be able to increase your organization tenfold. Organization is key when it comes
to fitting in other duties associated with marketing such as content creation and generating new campaigns
for the brand.

Why Should Enterprise Marketers Care About GDPR?

If you’re an enterprise level company, you’re probably selling overseas. Abiding by the new General
Data Protection Regulation (GDPR) regulations in most of Europe is now required. Every marketer
should stay up to date on how to handle and collect data from their customers: from cookies to advertising.
We’ve put together a beginner’s guide to help your campaigns stay afloat:

Remember, the General Data Protection Regulation (GDPR) is a major factor to consider when choosing
marketing software and even a new web content management system. This regulation is now standard law
across 28 European countries and those who aren’t in compliance could face big penalties and fines. It’s
imperative that your Enterprise Marketing software is in compliance with these regulations on usage,
storage, and transfer methods when dealing with consumer information for EU residents. Make sure that
your SaaS solution has full security measures in place when it comes to consumer data with the ability to
generate reports quickly and efficiently.

Other Considerations

Progressive Web Apps (PWA) is becoming increasingly useful when it comes to multi-channel marketing.
For those who aren’t familiar with PWA, it utilizes advanced web capabilities in order to deliver an
application-like experience to users. PWA’s are gaining in popularity due to their
ability to work for all users, regardless of their browser and viewing tool of choice. Just like an app, PWA’s
can be installed directly to the user’s device which is great when it comes to keeping your brand on the
radar.

The Five Keys to Successful Enterprise Marketing Management

Enterprise marketing management (EMM) has a vital role in multichannel marketing today. It is the engine
behind effective marketing and offers the potential of true customer-focused, knowledge-based marketing
and operations.

EMM can mean many things to many marketers, but it typically consists of strategic and marketing
planning, financial management, marketing resource management, data integration, information storage,
campaign management, customer analytics, Web analytics, personalization, interaction management,
channel management, and marketing performance.

When executed properly, EMM pulls the entire marketing chain together into an integrated process that
provides an unparalleled customer view across channels, new capabilities for one-to-one marketing, and an
efficient way for marketers to get a handle on the relationship between resources and return on investment.

For EMM to boost marketing performance, however, five factors are critical:

1. Integration of data at every touchpoint. Information is critical in the marketing decision process and
as such it must flow freely at every point in the process.
2. Collaboration—not just within the internal marketing value chain but also with the external value
chains of suppliers and vendors.
3. Availability of data, resources, materials, and documents. It is important that marketing resources
are available to all when needed to complete their job.
4. Proactive tracking and management of marketing strategies, tactics, campaigns, and initiatives. You
need to know where everything is; what is on time and what is late; who has too much work and
who doesn’t have enough; what has worked and what hasn’t.
5. Key marketing performance indicators defined within a balanced framework available to all. This
entails a disciplined approach to defining objectives and facilities to allow team
members to understand cause and effect. It also entails providing managers with information on
performance through either lead or lag measures.

These key elements combine to deliver true business benefits: building strong brands to sustain the
customer experience; understanding and predicting customer belief and behavior while optimizing
communications to them; and managing consistent communications across all channels.

If EMM is properly focused on these business needs and implemented with care, it can create a sustainable
and profitable competitive advantage for today’s multichannel marketer. Bill Marjot is chief marketing
officer for SmartFocus, a Boston-based marketing management software provider for direct and database
marketing.

The Future of CRM in India

CRM or Customer Relationship Management has become an integral part of any successful business,
significant as much as marketing and sales. With the advent of open markets, real time interactive broadcast
platforms, new age mass communication tools and digital social media handles that blur the boundaries of
geography, time, age and language, the consumer and its relationship with the brand has never been so
delicately personal yet strongly public. This sudden expansion of communication tools, cutting edge
technology and larger stage to communicate and influence, it is the sophistication of the CRM tools that
make a major difference in the brands valuation in the minds of its customers, it is thus not a surprise that a
concept that took seed in the 90’s has, over the past 15 years, undergone tremendous changes and evolved
as a single, most powerful tools to win through competition, recording a 70% growth in implementation
over 1st 10 years. The technology has today become a vital tool to connect with the new age consumers on a
more personal level.
As the markets evolved, the CRM too has grown from being a single tool on one medium to a
multi-faceted tech boom operating across platforms and modified to suit unique needs of consumers across
domains, from financial services, healthcare, logistics, travel & hospitality to even pharmaceuticals,
education and HR. The key developments, though commendable, are only a tip of the iceberg, given the
vast potential and opportunities in store for the future. Here is a brief insight into the future of CRM and its
significant effect on business.

CRM: The growth potential in numbers

According to Gartner forecasts, CRM market in India was valued at around INR 18 billion in 2014 and is
estimated to grow at a CAGR of around 20.9% over 2014-19*. A CAGR of 14.8% is estimated through
2017 alone. While the global market for Customer Relationship Management (CRM) software is expected
to grow to INR 2,639.7 billion by 2019, the Asia/Pacific has recorded tremendous growth of 18.7% in
2014.

Key trends that will lead to the massive number and redefine the entire brand consumer relationship, are as
listed below:

1. CRM strategies for the intelligent consumer

In the era of the well informed and tech-savvy consumer, who is self-assured and consumes content
through effective filtering of marketing messages, 2017 will see a surge in intelligent CRM technologies,
created to strategically target the right consumer at the right time, through the right platform. Additionally,
the CRM will also be a significant tool that will offer real-time targeting/analytics and insights into the
ever evolving mind of the modern consumer.

2. Artificial Intelligence (AI) to uncover market insights

With the boom of content, fast paced communications and real time exchange of thoughts, marketers today
are faced with a challenge of massive data. The use of Artificial Intelligence techniques will play a vital
role in analysis of this huge chunk of data, and help generate intelligent insights to further shape an
effective CRM strategy.

3. Social & Mobile CRM for sentiment analysis and influence

Despite the growing popularity of social media and mobile channels, CRM has so far not been well
integrated to fully harness the power of these platforms. A strong growth in this area, with a focus on
sentiment analysis and social influence will be dominant in the integration of CRM technologies in the
social realm of consumers, becoming a key to consumer engagement and
emotional analysis.

4. Integrated & Best in class suits

While integration has been considered one of the critical aspects of the CRM trends through years, it is
only now that it has been seriously gaining momentum as a valuable catalyst. With tools now available to
connect CRM with the expanding platforms of cloud, mobile, social media, marketing automation, and
other applications, including the cloud and IoT, integration is set to be the key differentiator for brands
while creating and implementing effective CRM strategies.

5. Big Data and predictive analysis

Lastly, big data analytics have been helpful in providing insights and effective direction to the CRM
strategy for years, there has been a steady increase in need of smaller, more acute and in depth analysis of
smaller pockets of data, to generate a rather specific set of understanding. Thus a growing trend of smaller,
predictive reporting players will help set the pace of a more effective and cheaper support to CRM
strategies, helping brands highlight the particular sales opportunities and determine how to move prospects
through the funnel efficiently.
Cessation:
The future of CRM in India is set to be driven through intelligent data analysis and efficient market
insights, spreading across social, mobile and cloud platforms. With a more mature approach to the
intelligent consumers, the CRM will generate effective emotional connect, while enhancing business
processes through well targeted and tailor made execution, key to the 21st century marketing tactics for
consumer retention. While consumers can delight in emotionally intelligent and contextual communication
from brands, the businesses embracing the finer nuances of AI and Integrated CRM tools are set to achieve
and maintain a high level of business and consumer retention.

CORE BELIEFS

Loyalty programs are often part and parcel of a comprehensive customer relationship strategy. So welcome
to our loyalty marketing best practices section.

"As a customer's relationship with the company lengthens, profits rise. And not just by a little. Companies
can boost profits by almost 100 percent by retaining just 5 percent more of their customers" - F.P.
Reichheld

Introduction
Loyalty programs have been used in commerce for many years, originating in Germany where price based
competition was disallowed by governmental restrictions in certain industries. In the 1950s, S&H Green
Stamps rewarded grocery store and gas station customers with stamps redeemable for appliances and other
merchandise. The modern day loyalty program was launched in 1981 by American Airlines, and was
quickly duplicated by other airlines and other hospitality industries including hotels, car rental companies,
and credit card organizations.
Retail loyalty programs evolved when progressive retailers recognized that without a "customer
identification tool," they were unable to recognize individual customers and reward them for desired
behavior. This was in obvious contrast to banking and telecommunications industries, among others, that
have a customer database as part of their regular service offering.

Both businesses and consumers have recognized the value of loyalty programs. Only 12% - 15% of
customers are loyal to a single retailer, according to the Center for Retail Management at Northwestern
University. But that small cadre of shoppers generate between 55% - 70% of company sales. Some food
retailers find that as much as 65% - 95% of their sales go to members of loyalty programs (53% of food
retailers offer loyalty programs with 3/4 of program customers using their loyalty cards at least weekly and
88% at least once a month).

In general, loyalty programs are often developed with good intentions but unclear objectives. While
retail loyalty programs have many purposes, the greatest value that is created for retailers is the ability to
identify individual customers and to measure and understand their individual behaviors. This consumer
behavior data far outweighs the "currency" value of providing consumers the opportunity to build a reward
opportunity by shopping at one particular retail banner. This opportunity is often misunderstood by
retailers and consumers alike.

The basic benefits of using a loyalty program to obtain customer information are summarized below:

- Shift - Acquire new customers

- Lift - Increase the spending of existing customers

- Retention - Improve the natural churn rate of customers

- Profit mix - Shift spending to higher margin products

These loyalty program benefits form the basis for all loyalty program
Fundamentals of Loyalty Marketing
For loyalty programs, communications used to focus on tangible benefits - what we call the "ER" words.
That is to say, "Our program is..." 'bigger,' 'better,' 'faster,' 'easier.' These words have ceased to have
meaning. Everything works now. These are the table stakes. As such, the market has changed in that
consumers are demanding more. Rewards have evolved in the marketplace from being a nice little extra
for one's loyalty to being perceived as an entitlement (partly the result of the commoditization of loyalty
programs). Concurrently, consumers have shifted, to some extent, away from a desire for possessions to a
desire for experiences - partly due to changing demographics. Overall, consumers are looking for the
meaningful (which includes value and relevance).
Program Positioning

Program differentiation starts with the positioning of your program. Most programs don't have one - hence
why so many programs look and act the same. Examples of program positionings are:

• Air Miles: "Help Collectors enjoy life more, everyday"

• Citi: "Thank You"
• Tesco: "Every Little Helps"
• Hilton HHonors: "Rewarding Experience"

Your program's positioning affects everything you do from how you communicate, to what you offer, to
how you want to be perceived. We can't emphasize this enough. Develop a vision or positioning for your
program, before you even begin developing the mechanics. What do you stand for?

Building a Winning Loyalty Program Strategy

Regardless of how you develop your loyalty program - based on hard benefits (e.g. a currency) or soft
benefits (e.g. access, special privileges, exclusive partner benefits and offers) - make sure there is
alignment between your customer and the loyalty program i.e. the program supports the customer
experience and not the other way around.

Now Michael Szego's check list:Four Phases of Database Development

● Program development
● Collect data and test
● Leverage knowledge
● Customer Management

1. Program Development

➢ Start with the Facts

➢ Create your Loyalty Program Strategy
➢ Define the program
➢ Identify Key Performance Metrics for the Loyalty Program
➢ Build Business Case for Implementation
➢ Develop Action Plan for Implementation
➢ Research
➢ Technology Assessment, Partners
➢ Retail
➢ Advertising
➢ Direct to Consumer Communication and Privacy
➢ Launch
➢ Post Launch Plan
➢ Exit Strategy
➢ Websites
➢ Data Management Plan
➢ Strategic Review Plan

2. Collect Data and Test

- Analyze results

- Basic reporting structure, Store level reporting, marketing initiative reporting - Offer tests

3. Leverage Knowledge
- Decide analysis, Integrate data across the organization

4. Customer Management
- Develop customer management plan
- Differential offers by profitability
- Churn reports
- Supplier program development

Loyalty Program Value Propositions

One common mistake Marketers make is in currency selection. Too many decide the value proposition prior
to customer research. Ask the question as to whether the currency fits the frequency and the size of the
transaction. And does the currency fit with the brand i.e. cash is a pure discount?

In general, many retail loyalty programs are converging into a blend of each particular value proposition.
That is, many programs offer points, rebates, discounts or a combination of the program offerings.

Rebate Programs/Cash Back

Although similar to discount programs, which are immediate rebate programs allow participants to accrue
financial benefits from purchases that are saved up and redeemed after a set threshold or time period.
These benefits can be tracked over time but often involve a rebate of a percentage of total purchases over a
month or quarter. The rebate is often in the form of gift certificates to drive customers back to the store.
Rebate can be in the form of a dollar value or a percentage value.

Rebate/Cash back programs have become increasingly popular because while avoiding immediate
discounts, consumers often feel they are accruing value. Although the program can be expensive, the
rebate dollars often drive customers back to the store.
Discount Programs
As is implied by the name, discount programs are programs that offer a specified percentage off (or a
dollar amount for large purchases) of the retail purchase price. This can be product specific or offered on
the total basket of purchases. The distinction from rebate programs is rather than accrue the benefits,
discount programs typically apply instant benefits to participants at the point of sale.

Discount programs are typically the easiest to administer loyalty program offering. However, discounting
products for members is expensive and it is difficult to exit such a program once it is
launched. An example of a successful discount program is Canada's oldest, best known, best loved reward
program - Canadian Tire Money - often suggested as a replacement for the nation's weak currency.

Points Programs
To avoid the negative connotations of discounting, many loyalty programs use a points "currency" to allow
participants to keep track of their earned benefits. Typically, consumers earn additional points by buying
goods and services from the issuing retailer and can include bonus products, bonus thresholds and partner
opportunities

Learning from Private Label

Fifteen years ago, they were saying that private label retail programs were dead. Well, they are alive and
well and there are a number of lessons we can take away from these programs. The first being that the "one
product fits all" approach is no longer effective. This may be shocking news to some, and it doesn't matter
what business you are in or the demographic of your customer; you do NOT need to treat all customers the
same.

Loyalty programs need to be designed with more targeted rewards; they need to communicate differently
with different groups of members based on their value; and they need to provide greater value at higher
customer value tiers, by rewarding best customers to encourage higher spending levels.

Two private label programs of note are the Neiman Marcus InCircle Rewards program and the Saks Fifth
Avenue SaksFirst program. Both have multiple tiers of earning, with earning accelerators built into each
graduated tier. Same true for the Neiman Marcus program, with the added benefit of catalogs differing by
redemption level. You don't have to recreate the Neiman
Marcus catalog to be successful, but we would suggest that you start discriminating among your
customers.

Customer Recognition
Inherent in the loyalty level tiers of private label programs is the idea of recognition - "I'm a Gold
customer." Customers wear their recognition badge with honor. After all, it says that "I am important." Just
look at frequent flyers. How many brag about the fact that they are a Global Services member (United
Airlines' top loyalty tier) or a "1K" flyer? The fact that you flew one hundred thousand miles in a calendar
year, to us, is a badge of shame. But how many United Mileage Plus members wear that badge with honor?

With each loyalty tier comes increased recognition. That recognition can be very tangible e.g. bonus
points, or intangible e.g. early boarding on flights.

Program Perceived Value

Your gross margin is going to dictate how much you have available for investment into your loyalty
program for both hard and soft benefits. As a rule of thumb, if you have a 10%+ gross margin, you should
be returning at least 100 basis points. Retail loyalty programs vary in terms of perceived value - the
magical threshold tends to be around a 3-5% perceived value. A point-per
dollar offer tends to have a higher perceived value than gift certificate or discount offers (even if they have
the same perceived value of approximately 3% - go figure)..

Customer Penetration
In developing any program, set goals as to what you want each loyalty tier to do e.g. spend goal. It is not
unheard of to see 70% of sales being represented by loyalty program members. By having clear cut goals,
that will ensure that you are marching toward success. And in coming up with your penetration goal, keep
in mind, not everyone wants to join a loyalty program. A good 25% of the general population, in general,
has no interest in loyalty programs. The balance of the population's interest ranges from very passive
interest to active interest (what we call the "junkies").
IF your program is introducing a credit card component to the
program, use a penetration pyramid as a great tool to benchmark
success in enrolling members into the card program. Set goals for
program performance (penetration, spend etc) overall, and by
loyalty tier.

Depending on the size, credit worthiness and level of engagement

of the membership base, a well performing card penetration ranges
from 20 - 40% (card penetration varies by loyalty level - so make
sure you have goals against each level).

Experiential Awards
For loyalty programs, the communications used to focus on tangible benefits e.g., our program is: "bigger,"
"better," "faster," "easier." These words have ceased to have meaning. Everything works now. These are
the table stakes. Consumers are demanding more. Consumers have shifted from where we were leading up
to the Internet boom; away from a desire for possessions to a desire for experiences or services that
enhance their experiences. Going beyond points, discounts and cash back, many loyalty programs are
incorporating experiential aspects into their program - an idea we have been huge proponents of since the
early 1990s.

The experiential takes many forms but the common thread is that programs, whether this has been
developed internally or through partnering with 3rd party companies, deliver to its members unique
lifestyle driven opportunities/access (many of them, once in a lifetime events). Masters of this have been
American Express with their "Gold Card Events" and "Front-Of-The-Line" opportunities (advance ticket
access, complimentary tickets); Visa with their Signature events, such as Finish Line Suite access at the
Kentucky Derby; and now MasterCard Unique Experiences.

As programs become somewhat commoditized, incorporating "experiential awards" - whether purchased

or redeemed by the member - take on a renewed sense of opportunity to:

• Enhance differentiation from other programs

• Reinforce brand value
• Support the customer experience with the brand
• Strengthen member relationships
• Increase engagement with members
• Increase spend

Economic Value of a Loyal Customer

We've all seen firsthand, or heard the adage, that the top 20% of customers tend to produce 80% (varying
by industry) of the profits. Not all customers are equally profitable - this we know. But did you know that
the bottom 30% can eat up to half the profits generated by the others? Understanding the economic value
of your customers, not just your loyal customers, can save you tremendous amounts of revenue and effort.
As such, the idea of "firing" your most unprofitable customers is becoming more attractive. Even in the
supermarket sector, by some estimates, seven out of every ten customers cost more to serve than they
contribute in profits.

Understanding loyalty program economics is essential as running these programs isn't cheap. A study by
McKinsey & Company estimated that a program's first year can cost as much as $30 million, with annual
maintenance and marketing costs reaching $5 million to $10 million.

Program Measurement
The following elements are all tied to customer advocacy, which is tied to customer loyalty - all of which
affects your brand:

Simplicity = Make my life simple, don't confuse me with too much information

Benevolence = Understand my issue and take my side in getting a resolution Trust =

Doing what's right, honoring promises, and protecting customer's privacy

Transparency = Rates and fees are crystal clear, and comparisons are available

There are so many elements that you should track ongoing (and our consulting team can help you ascertain
what is important for success) - at a minimum, track these often forgotten elements. That will make sure
your program evolves as envisioned. It will also keep you honest.

Exit Strategies
All good things come to an end. While exit strategies should be planned for in the initial program
construction, let's face it, some programs aren't designed as they should be. As such, if your program isn't
achieving the financial returns envisioned, you may want to plan your exit strategy.

The number one goal in any planning exercise should be to "do no harm." The last thing you want is a
bunch of angry customers out there bad mouthing your brand - not to mention the fact that a loyalty
program with hard benefits or rewards is really a financial obligation to the program members. As such,
four considerations to build into your loyalty program from the start so you can use them to end your
program in a considered fashion:

1) Sunset Clause: This can take a number of forms, but the bottom line remains the same - the program
can end in a timely fashion, should you need it to. The first form is a definite end date written into the rules
of your program. While you don't want to emphasize the end date in your communications, this end date
can always be extended until the time you decide that the program needs to come to an end. Another
common Sunset Clause, which also happens to help with financial liability, is to establish an expiration
period for points earned. Like the first form of Sunset Clause, this too can be extended.

2) Timing: From the time you announce your program's termination, allow members sufficient time to
redeem outstanding points - especially considering that some members may have made a significant
commitment to your program. Give them the respect and sensitivity they deserve.

3) Communication: Everything comes down to communication. This will have a significant impact on
how your customers and program members will perceive you going forward. A favorite positioning of ours
for program termination is: "the promotion." When communicating the loyalty program's demise, don't
refer to it as a "loyalty program" but as a "promotion." By definition "promotions" have an end.
"Programs" on the other hand have a long life. So, set the tone with your communication. Be clear and
precise with information as to the program's future, how to redeem outstanding points, and the timeframe
involved. Use all communication channels available
to carry this message. Cite program rules and emphasize your intention to continue to recognize and
reward good members in the future. Perhaps allude to future programs/promotions. Don't apologize or
offer excuses. Concentrate on the facts.

4) Be Generous: This is your opportunity to turn a negative into a positive. Consider topping up member
accounts to the next redemption level. You want members to continue to have good will toward your
organization. Consider a small gesture of appreciation e.g. an additional discount or coupon. Now is not
the time to be cheap. You are messing with member "bank accounts" (many program members consider
their point balances like cash), so don't leave them feeling gipped.

Breakage
For loyalty marketers, breakage is probably the least understood aspect of their loyalty program - after all it
relates to finance, not marketing. As it turns out, breakage and the effects it has on one's loyalty program
should be well understood - anything less is performing a disservice.

Breakage, quite simply, is the difference between points issued and points redeemed. It is the biggest
driver of profit for a loyalty program. To affect breakage, programs have three key elements within their
control:
1. Velocity of earning
2. Expiry policy
3. Rewards chart

While proactively managing breakage costs is critical; understanding its effect on revenue is even more
important. Accounting rules have implications. They typically state that the full amount of a point is not
realized at earning but the deferred revenue and breakage are recognized at redemption. Depending on how
your organization accounts for revenue recognition, there may be amortization implications as well.

Know your P&L. A point not broken is a liability. And a point broken doesn't necessarily equate into full
profitability.

Any program change which influences member engagement can affect breakage

• Change in accumulation levels

• Changes to redemption supply mix and quantities
• Change in pricing strategy - redemption thresholds/reward ratios
• Change in partner accumulation mix
• Changes in recruitment profile and source (POS or other - travel or retail)
• Allowance for pooling/transfer of points
• Marketing - targeting a specific member segment for marketing
e.g. are you marketing to inactive members? Are your low spenders redeeming?
• Fees - booking/transfers/reinstatement

The operative question for any loyalty program manager is, what is the philosophy behind the program's
operation. Is it being run at a break-even, loss or profit. Then the critical question becomes, given that
philosophy, how much breakage is optimal? If breakage is too low, it could mean that your program lacks
relevance (or will so, soon). If breakage is too high, you could be operating an unprofitable program. For
retailers, breakage can run approximately 25% (meaning that 75% of all points are redeemed). Qantas
Airlines has reported in the past that it's frequent flyer program has only 13% breakage (most airlines have
a higher breakage). Redemption good. After all, redemption leads to lower churn - redeemers churn 8-20%
less than non-redeemers - with multiple redeemers having the highest reduction in churn. The question is,
'what is the balance you need for a successful program?'

Examples of what can be done to influence redemptions, and thus breakage:

• Adjust communications to control redemptions

• Dynamically offer less costly awards via website and emails
• Use auctions to put select items "on sale" to shift away from costlier redemption items
• Adjust reward levels needed based on inventory
It is critical to understand the impact program components have on breakage and understand the breakage
impact of new strategies, as oftentimes breakage can make or break one's marketing campaign and
program. It is critical that loyalty practitioners spend some time with their finance partner to truly
understand their program's P&L and the divers of that P&L.

Gamification
Marketers spend a lot of money in order to have their brand and/or product found (i.e. search, display).
While this investment helps with acquisition, it doesn't help with customer engagement. Marketers
recognize that their sites tend to lack stickiness. To boost engagement with the brand and to maximize
acquisition dollars, Marketers are putting more energy and resources into making their sites more
engaging. One tactic being aggressively deployed is gamification. Gamification is the process of using
game dynamics and mechanics to engage an audience and solve problems.

Gamification is not necessarily about building games - it is about applying game based thinking to
motivate and engage consumers. Gamification is NOT social games (e.g. Farmville) or console games
(xBox) or casual games (e.g. Angry Birds). It is not gimmicks i.e. adding random badges, or creating an
arbitrary points system.

Gamification is leveraging innate human motivations. It is a strategy that engages users in a manner that
they want to be engaged. It is about understanding the user's wants and motivations. Gabe Zichermann
describes it this way: "While most earn and burn programs rely on a steady diet of amazing rewards, scaled
back over time to increase efficiency, gamified loyalty programs focus on non-cash rewards to engage and
drive user behavior. We call it the SAPS model of rewards (Status, Access, Power and -- only then -- Stuff)
-- and it radically changes the cost model for delivering loyalty."

In order to better understand how gamification works, Forrester Research developed a nice "Engagement
Loop" framework. As said before, Marketers need to start by understanding user motivations, and then
pair the right actions, rewards and achievements to keep this loop moving around and around.
So what tools do Marketers have at their disposal to influence behavior/actions (users need to clearly
understand what they are expected to do and how)? They have:

• Appointments/Countdown - Action to be completed in a specified time frame e.g. Groupon's countdown to

buy
• Avoidances - Do action to avoid punishment e.g. loss of something they have
• Challenges - Missions to accomplish
• Exploration - Appealing to curiosity, explore new elements
• Group Play - Multiple users accomplish a task and players rally each other to remain engaged
• Lottery - Sweepstakes or game of chance
• Ownership - Users driven by a desire to own something
• Progression - Measure of completion - motivating users to reach 100%. Completion of a specific task or
progression through the game e.g. levels reached

Rewards for accomplishing tasks can be:

• Content Access - Giving users access to things they didn't have access to before. e.g. Gilt - if you are a top
customer, you receive 15 additional minutes in the auction prior to anyone else. (Note that they don't get
free shipping or discounts)
• Experience Points - Non redeemable and mark user's progress e.g. leaderboard
• Notifications - Real-time feedback for actions e.g. receiving x points for logging in
• Redeemable Points - accrued point redeemable for tangible goods
• Virtual Currency - Credit traded for something and mirrors real-world currency
Achievements - common signs include:

• Status/Badges - Things that allow people to establish their position in a hierarchy e.g. virtual image (badge)
representing a certain milestone.
• Content - Access once certain actions performed
• Experiences - unlocked upon achievement
• Leaderboards - status by being at top of leaderboard
• Levels - Indicates status
• Power - e.g. Rank gives privilege of moderating an area of the game
• Rank - Score or scale-based representation of a user's reputation
• Virtual goods - Users attain through redeeming points

Future of Loyalty Programs

As loyalty programs become ubiquitous, we believe some interesting dynamics will evolve in the loyalty
marketplace:

1) Differentiation; Companies will continue to look for ways to differentiate their loyalty programs, while
balancing program revenue and costs to achieve favorable economics. Kimpton Karma Rewards is an
excellent example of program differentiation - focussed on enhancing experiences with meaningful offers
vs.the earning of points.

2) Segmentation: Newer loyalty programs will be more segmented e.g. targeting life stages, lifestyles and
interests. Existing loyalty programs will become more tiered i.e. concentrating resources on high potential
and high value customers.

3) Holistic View: Loyalty programs will begin to take a more holistic view of customers - focusing on
broadening customer relationships (i.e. "relationship rewards") - offering awards and recognition for
broadened existing relationships - resulting in a strengthened hold on their customers. This takes on
increased importance for program administrators as the customer's sense of entitlement rises. Amazon
Prime is an excellent example of this holistic approach: free two-day shipping, free photo storage, free
streaming movies, music and ebooks

4) Instant Gratification. Whether that is instant point redemption at merchant partners, or removing
friction from the customer's experience e.g. free wifi for guests.. Making it easier to redeem your points,
program sponsors will begin to develop merchant relationships whereby loyalty program members will be
able to convert their loyalty points on-site at the merchant partner for discounts, merchandise and/or
services.
5) Multi-tender. Retailers that in the past have tended to tie their loyalty programs to a private label or
general purpose credit card, will begin to experiment with multi-tender loyalty programs. As a result of the
Great Recession and legal requirements, the cold hard truth is that two-thirds of adults under age 30
currently have no credit cards at all. Retailers wanting to capture the Millennial market will have to become
more inventive in order to capture this shopper. Using cash or debit will no longer preclude consumers from
participating in a retailer's loyalty program efforts. American Express' Plenti, Walmart’s Savings Catcher
app, and Target's Cartwheel app (discount loyalty programs) are all evidence of this emerging trend.

6) Mobile. As the retail commerce experience becomes more connected to messenger platforms and mobile
wallets, loyalty will become more critical to get consumers to shop and pay with their phones.