Lessons From A Loyalty Leader

For those who might have missed earlier, I'm Daniel Hagos, SVP and General Manager for Emarsys, Asia Pacific. So my role is essentially running the organization across Hong Kong, Singapore and Sydney. Sid, do you want to introduce yourself? Hi everyone. Good evening. I'm Sid (Sidhanth). I'm the ex-GM of marketing for Toys"R"Us. Quick show of hands, how many of you know Toys"R"Us or have shopped with Toys"R"Us? Okay, excellent. Lots of smiley faces. Which is a good thing, right? I did my job. So, good, I don't need to introduce the company. So essentially, I was with their marketing team for over seven years. I started off in the digital marketing and CRM space and then moved on to head the marketing for about four years till earlier this month. And now I've just moved on, I'm doing a very finance oriented role and I want to get into that. We worked with Danielle and the Emarsys team as part of Toys"R"Us with our loyalty program, and that was a good partnership and I'm really looking forward to this conversation. Right. Likewise and thank you so much for your time. So let's start at the top. What does loyalty mean to you? Loyalty is a very broadly used term, in my opinion. I think with respect to marketing, I look at a clear line between brand loyalty and loyalty programs. And the reason for that is quite often those are both mixed together. Brand loyalty I think is a lot more emotional, a lot more storytelling. People and customers are really coming in because they believe in the statement of the brand, the product, the service quality, so on and so forth. And loyalty programs are a lot more tactical, right? Like you're always coming in to try and get something in return, rewards, coupons, points, so on and so forth. So I think it's important to, to draw that line and to look at it in two different aspects. Also, I think with loyalty, there's, and I will speak a little bit about this in identifying who your customer is. Are they just a customer or are they your loyalty program member and then reaching out to them in the best way possible? Okay. And you spoke about loyalty, loyalty programs, and loyal customers. Do you think that businesses, marketers need to have loyalty programs or that they could just focus on their loyal customers instead? Because often I think there's an inclination to jump in and buy technology and build programs and do all of these things. But do you think you can just focus on loyal customers instead or that you actually really need to jump for a loyalty program? So a brand if you're a brand or a service, if you're doing your your job correctly and knowing what your customer wants, you will have a loyal customer base, more often than not. The difference between the customer and the loyalty program member in my point of view is one has chosen to come and and be with you and associate with you, not really expecting anything in return except that self gratification. And one is clearly expecting something in return as well. Now, to get that something in return, they're willing to share something with you, which is their data, demographic data, communication data, whatever it might be. And it's in a brand's best interest to try as far as possible to migrate those loyalty customers over to become loyal customers or to become loyalty program members as well, so that you can connect with them better and really offer them what they want. Now, let me give you an example, and this is quite a Hong Kong specific example. So I'm a member loyalty program, member of two very prominent brands in Hong Kong, Circle K, which is which is one convenience store and 7-Eleven which is a second convenience store. And I'm a member of both their loyalty program, so 7-Eleven with you and Circle K with the app and I've shared data with both. Now if you look at purely the numbers I purchase from 7-Eleven more because it's more convenient, but if you look at the data, it will show that I purchased at Circle K more often. Why is that? Every time I go to 7-Eleven, every day, I need to, at the checkout, pull out my phone, open the app. Oh, shit. I've been logged out. Sign in again. Forgot password. No need to do that. So what's supposed to be a three second transaction is now taking me 10-20s. What is the smart thing that Circle K has done is they've just linked their loyalty program with my octopus card, which is what I use 99.9% of the time to pay. So it's done. As soon as I pay they've got all of my transaction details already. So just by addressing that small barrier, one brand company has able to capture my data with more with no inconvenience versus the other where it's causing a bit of a roadblock. No offense to any 7-Eleven or Circle K audience members here. Okay, cool. And I know we were discussing this before and talked right now about friction and and understanding also the average order value. So you're saying with Circle K and with 7-Eleven, people can go there very frequently, go almost daily, go a few times a day if you need to, and therefore, it sounds obvious, the experience as a loyalty customer needs to be very, very smooth. Whereas if you were going to a luxury brand or to a big department store, the process of accessing your loyalty card or loyalty information could be more complex because you know you can take your time at the till, whereas 7-Eleven is like. "Hey, as we've all seen, if your octopus card isn't working, there's a queue of ten people behind you screaming. So you've got to be quick." But can you elaborate more on that and how you think brands need to be thinking about that friction and thinking about average order value as well? Yeah, I think as a brand, the first step in that entire process is to really know your customer journey and how that's going through. Now, as you said, with with these convenience stores, your frequency is really high, but your order value is really, really low. So, really you want to make that as seamless as possible for them to move on from that transaction. But you move into a higher segments, luxury segment and so on. There, it's almost where customers are, I'm not saying luxury brands have loyalty programs, but it's almost where customers are willing to spend that time and are proud of actually. The longer the transaction takes, the happier it is for them. They feel like they have this association with that brand. So knowing that customer journey inside-out for your different segments of customers is really important for providing that best experience, be it the loyalty program member or their loyal customers. And those are the two main loyalty programs you're part of Circle K and 7-Eleven, anything else? And Toys"R"Us, obviously. Yes, Toys"R"Us, obviously, still. I'm part of a few: Asia Miles, IHG. I'm from India, so I'm a part of a few loyalty programs back home as well. But I think the point there is it's a very transactional relationship. I'm part of the program and willing to give my data to them, in Toys"R"Us' case children's data as well. So it's not only your data. And I'm clearly expecting something in return from the brand. Some of these loyalty programs go one step further than just the points and coupons and so on. They have really attractive partnerships, they have a whole other range of products not related to their own that these members can buy. And that makes these programs a lot more attractive to join and be a part of which I think is a bit neglected at times. The way I see, and we were guilty of this are guilty of this as well, is you tend to always focus on those immediate transactional 'let's give a discount right now and keep that customer' but feedback research often tells us is 'money can't buy experiences' or even if it's small 'money can't buy a gift' is what members are really more satisfied with. So yeah, it was a bit of a long winded answer to the loyalty programs that I'm a part of but that's really what I'm looking for in a good loyalty program. Yeah, I agree. I think I'm only a member of a few loyalty programs. Cathay is probably the one that I'm the strongest with. But I think as long as the price isn't crazy, more expensive, but if it was slightly more to fly with Cathay, I'd fly with Cathay. And I think that's the sign of a really strong loyalty program if you could find the product elsewhere, but you would still stick with, the more expensive price to keep the point in the loyalty program. Lane Crawford's loyalty program is fantastic. Harrods in the UK, it's a similar thing where people won't shop around, they'll buy from that brand, buy from that store I should say, because they want the points.They want to they want to keep moving up, they want to maintain that gold or platinum or whatever the level is. Correct. And that's essentially how every program works, right? You show up and you earn. The key differentiator is what can you use those points for? And Cathay is a good example that you mentioned. So yes, you can use it to upgrade and so on and so forth, which is great for your travel experience. Personally, I just bought my Apple headphones using Asia Miles points and so it's those peripheral benefits that you can also get access to that sometimes tend to get neglected when people look at loyalty programs. And that's why those partnerships, I think is also a key focus point for some of these and brands should look at that. So unfortunately with launching a loyalty program, it's not something that marketing can do alone, there's internal advocacy. You have to do this. You have to speak to finance. You speak the legal, etc,. What does that process look like? What is the internal advocacy that you need? Who do you need to speak to? How do you run that? When we've spoken with clients about loyalty programs, they've always mentioned internal conversations about points being accrued, how points are being used. And it makes sense because; have you seen the Pepsi Netflix show? Has anyone seen that? It comes on my YouTube wall. I haven't actually clicked on it, but I will. Essentially they launched like a loyalty program and this kid was like, you'll get a jet if you collect a million points. He collected a million points and was like, "where's my jet?" So I understand why you need to go through the internal process, but what does it look like? I'll share some insight on a few tips that are work for me, right? So I think starting small and getting small concrete data driven wins is the first step when it comes to loyalty programs. But we're trying to win over an organization with anything. And then finding that champion is really, really important within the company. Now that can be a CMO, CFO or CEO or who is that, who's holding that wallet at the end of the day that's going to release the funds to operate this program? I think internal advocacy for the program and awareness for the program is really important. So speaking here, is everyone in that brand part of the program? So like if I take Toys"R"Us, every Toys"R"Us employee, whether you have kids or no kids, are they part of the program? So if you've not managed to sell it internally, then how would you sell it externally? You would need to experience that. Yeah. So because if they don't see what the benefit the customer is getting why would they part with it? So, getting that awareness and engagement within the entire organization is a really key point. You mentioned about points and accrual and so on. We've tried running separate P&Ls specifically for a loyalty program, treating it almost like a separate business within the entire organization, which has proven to be really successful because the second, more often the not, is clubbed with marketing. The headcount is clubbed with marketing, the budget is clubbed with marketing. Everything is clubbed with marketing, which at that point it gets really muddy at points to draw clear differences between what benefits did this program get to the business? This is all very easy if it's like a huge multinational corporation to separate them out, but with smaller brands, I understand that it's a lot more challenging, but as best possible, even if it's the same resource, if companies are willing to split that P&L and dedicate a portion specifically for the loyalty program, that helps drive performance and that performance in turn helps drive advocacy within the company. Okay and you touched on that briefly. What types of challenges did you face when you were having these conversations, when you were trying to roll out a loyalty program and maybe even advice for people as well? The biggest challenge that I faced is staying true to what the objective of the program is in the first place. You have different loyalty programs at different stages of maturity. Now are you using loyalty to drive RFM as we all know it? Are you using it just as a communication tool? Like, as long as I have your email address, I can send stuff with you and it's more to build awareness around campaigns and program. Are you using it for customer acquisition? And the strategy for each of these is quite different. And are you using it for all of the above? The strategy for each of these is quite different. And in my experience, what happens and often when we speak with agencies as well, is you start with one strategy and then at the end what you come out with is something completely disconnected from what the start was. So I think the biggest challenge or one of the biggest challenges is staying focused and true to what that objective is. The second one is, marketing is not enough focus on actually marketing the program itself. So what I mean by that is a lot of brands have loyalty programs, Toys"R"Us also. Actually, there's a good question. Everyone, I saw a fair number of hands up for Toys"R"Us, the brand, how many people know the Toys"R"Us loyalty program? Yeah. So you see that? That's a big challenge as well. While you're marketing the brand, how do you market the actual loyalty program as well so that customers know about it? Right. And that's often, very often neglected. And I think these are two key points that should be addressed. Okay. And talking about the loyalty program as well and I think you touched it really well. When there's a loyal customer base, but not necessarily a lot of people in the loyalty program. But if you have those of us have has a very strong, loyal customer base, what impact does that have on how you create and how you created the loyalty program? How do you how does it change how you think about your customers and the program that you're building? So just for context, with Toys"R"Us, it was a loyalty program that was built over close to 10-15 years. When I left, we were 25 million members across ten countries. So it's not a small kebab shop on the right. Pretty 5 to 10 years of lifetime value taking 60/70% of our sales. So those are big numbers when you put it all together. And what had the most impact on me was at some point we reached our fourth generation of shoppers. So you've had that loyalty going through four generations, I can't think of too many other brands that can have the same claim. So there was iterations, there were changes. Yeah. So we had grandparents, parents, and children all part of the same and if you include as a brand, if you include the US, then you had great grandparents and flowing through.Like I said there's very few other brands here in Asia that can sort of speak to the same thing. And then the impact there is, okay, there's there's all of these big numbers behind the loyalty program, but what quality or value are you really adding? And more importantly, because as a brand, you're dealing with children, you're dealing with families so you want to try and add that additional value and educate them on benefits of play. And this gets quite nuanced to our business. Benefits of play, if your child is three years old, what should they be doing? If your child six years old, what should they be doing? How did toys help as a child grow and so on and so forth? And that sort of education, part of it is something that was never focused on. But I thought it's quite an opportunity and it had quite an impact on me to try and focus on that and provide that education to our loyalty members. And I think it's important because the loyalty programs should be easy to understand, but you also do need to explain it and there's probably some handholding that needs to be done. Last question for me and then I'll open up for questions from the room. I was having a panel discussion with, now former Head of Marketing for Plaza Premium Group, and she was saying that they had gone through several iterations, several amendments of their loyalty program and was saying that there's a perception that a loyalty program is you take a long time planning it, you take a long time defining it all and then you sort of launch it into the world and that's it, it's done. You don't touch it for life. But did you have to make tweaks? Did you have to make amendments? You know, if so, when? And what would they look like? Yeah I think that's one of the biggest gaps which brands face and often we are guilty of the same is this whole concept of launch and leave, right? So you launch it and you're right and then after that it gets thrown in the back and then although there's all of this data and everything collecting, there's really no follow up then from there. Yeah. We address that at some point. So what we do is quite often we speak to those members, get firsthand feedback from them on what needs to be addressed. Is it the benefits, is it the discounts, the exclusivity that they get, exclusivity product selection that they get and so on, and try and address those points. The second one is, we managed to save a lot of marketing budget with families and child talent for photoshoots and so on and so forth just by opening it up to loyalty members and they were happy to have their kids on our advertisements and so on and we give them toys in return. But my point there is to try and make the best use of your most loyal customers because they want to be a part and endorse your brand as well. So I firmly think it shouldn't be launch and leave. I think as often as possible, try and speak to your members, get them involved with events and activities that your brand does. I speak about this from a very traditional sort of brick and mortar retail business, but it has applications for ecommerce brands as well. I think it's a really good point too, to actually listen to your customers, ask them questions, get feedback from them, make tweaks based on their feedback, as opposed to sitting in a meeting room and doing it right? Yeah. I mean, quite often you ask customers what they want and then that gets into a presentation and then it's sitting in your computer the entire time. There's no action being taken, right? So rather than asking ten questions and not addressing any of them, you rather ask two questions and address at least one of them. And I think that's important, right? If you're not speaking to customers. Ask the right questions. Ask what you can actually take action against. Okay. Okay, great. All right. Thank you Sid. Any questions from anyone in the room? We as EcoFlow is only a start up company and our best number of loyalty or users is really small and we only started, like, one year ago. My question is, we are now trying to separate users into different tier groups based on the purchase amount or the behaviors. And any suggestions about running a loyalty program with different level and stage from no stage? Yeah. So which, which company or brand? EcoFlow. And what do you do? The product is like the portable power stations, solar panels and help them to build. So B2B? No, B2C. Both B2B and B2C, but loyalty program is based on the B2C. Okay and how are customers, how do they buy and how do they purchase? Through the website or the distributors. Okay and so now your question is you've got this customer data. How do you segment them? I mean, how we want to make the customers into different grade and levels, stage? Like a gold stage, diamond stage. How to define the different level of customers. The different levels, yeah. So I can tell you how we did it. Normally, what people always focus on is just transaction value. How many times are there? How many times a day? We try and get in how many kids do they have? Because that gives me the future value of that customer and based on how old they are and so on and so forth. Secondly, how often are they interacting with the brand; purchase, clicks, visiting the store, so on and so forth. In terms of grading, actually tiering, out of ten of our geographies, we only did that in one. The challenge we faced with this is the second we opened it up into multiple markets, it hits multiple market PNLs and going back to your question on point accrual and all of that, this was one of the big challenges that sort of also personally, one of my big challenges is how do you get to that multi market PNL? Which is why I would go back to, if you have a strong loyalty program and you're really responsible, really serious about it, separate out that PNL from from the rest of it because it gets easier to manage. Okay. So I think rather than just pure transactional value, how else are your customers engaging with you and looking at future lifetime value or future value of that customer with your particular brand is a good way to look at it. Is it only one one product? So we have like a term products and we have an app so users can interact with our product and different behaviors. The behavior itself can be the grade. Yeah correct. So if you take Asia miles as an example, right? They don't grade their members purely based on how many miles they're accumulating. They're looking at how many sectors are you flying through, what else and so on and so forth. So in your case, it doesn't just need to be the value, but how many ancillary products have they bought? How do they fit into the ecosystem and so on? Great, thank you. What we found was that like in a loyalty program, there's certain types of businesses that if you're supremely successful in loyalty program, your customer like you kind of diminish that customer. So let's say I run a luggage company, right? If I've got three luggages already and I've bought one for every member of my family, that's kind of it for me, right? So what I found in some of the businesses that I've worked with has been the super loyal members or the super gold members and presumably these are businesses that have like a lifecycle like luggage or like certain types of other products. What happens? And like, let's say even Toys"R"Us when if I've only got one child, my child's now 12, right? You're kind of at the end of that cycle. In that kind of a business presumably, I can't change what I'm selling, what do you do with these top tier people that's kind of maxed out on your product already? What do you do then? Because you want to keep them. You can't infinitely expand on your product SKUs. Yeah, it's kind of a tricky one because they are such an important group. Yeah. So just first question back, if you don't mind me asking, why do you want to keep them? If they've reached, if they've maxed out on what your product or brand has to offer them and you you believe they're not going to come back to to shop with you, ultimately you want customers to shop with you, right? So if you believe they're not going to come back to you, so why would you want to keep them? It's not that I don't believe that they would come back, but I don't know how I could get them to come back if they've already got, let's say, 5/10 of my luggages. Right? Because they represent such a big revenue component. You know, every Black Friday, every whatever peak season, there are my top revenue group. So it would be a business. I guess there's an opportunity cost to kind of let them go. I wouldn't know what to then do with them if they're like maxed out. Got it. So let me give you an example. Take BMW, for example. I'm not sure Hong Kong, but I know this in India. Very similar category, high end. You're only going to buy one household, maybe 1 or 2 cars, and then you're probably done with it, right? But they still want that loyalty program. I'll come to the why in a bit. But what they do is there's a separate sort of — club or whatever they call it and even within that, there's different tiers depending on how many cars, which model of car you bought, how much you drive and so on. There they actually incentivize. They have a miles program there. They incentivize the member to drive more. Inherently, if you drive more, you'll get bored of the car faster and so you go back and buy the next car, right? But the benefits that they provide has got nothing to do with cars. Well, something, sometimes. But what they're really providing is other merchandise which may or may not be related to cars. They provide holidays and so on, experiences, holidays. But what's the criteria there? You need to drive to that location. So you experience the car and then you you drive to that location as well. So they're not expanding the number of cars that they sell to the customer. They're providing ancillary Utilization. benefits about how they can use that actual product. The underlying theme there being is you use the product more, you'll get bored of that product faster, and then they're coming back and buying more of the same. That's point one. Point two is the more they get engaged with the brand, they're more likely to advocate that to others, friends, family, so on and so forth, which is potentially doing your marketing for you versus a brand that did not have that loyalty program at all, where it's just bought and kept in the side. So I think rather than just expanding the number of SKUs that you sell to a customer, there are other ways that brands can engage with their loyal creme top tier members. Technical question. So just wondering regarding AI models, because in topic, I saw AI the word as well, but then wasn't talked about much. Any predictive AI models for, let's say, the current customers that we have with their historic spending and that their chances of being or having a high lifetime value is more with AI? And also with that are there AI models that can help us map out the customers segmentation that's not in our customer database anymore and so we can maximize the marketing return investments or marketing campaign is more targeted? I'm not sure that this such a model existing today. Not necessarily linked to loyalty programs, but customer loyalty. It's a really good question. So predictive segmentation is something that exists, something we have within Emarsys as well. AI models, I'm not nearly smart enough to be able to answer that question. But the predictive segmentation we do. The way it's used is exactly as you said. So you could have, say, high spending customers, or high valued customers, and you'd have a level of customer below that for lack of better words. And you could find customers that are likely to become loyal customers and you can build that into the segments. So for example, with Nike Hong Kong, we do a lot of work with them and when they're launching a product drop or launching a campaign and they say, okay, I want to send this to all of my VIP customers, but I also want to send this campaign to all of the customers who are close to becoming VIP customers so they can expand that segment as well. It also means that you can do smart things like let's say you have a group of inactive customers, and based on browsing behavior, based on engagement, there's a small section of them that we think are likely to convert. Don't send them promotions, don't send them win back campaigns, don't send them discounts, because if you just leave them alone and keep sending them the current communication that they're getting, they're going to convert as well. So we can do that within the platform.