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Loyalty

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by

Nadir Bostancioglu

on 11 February 2013

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Transcript of Loyalty

Opportunity or Threat? Loyalty Why do Companies need a Loyalty Program? 2 Sides of The Loyalty Benefits
Special Treatment
Proper Recognition(Clustering) Most Common Loyalty Programs In the beginning, loyalty programs consist of frequent flyer programs and consist of small number of itineraries to offer. Differentiation and urge to create new trends(uniqueness) created many loyalty programs to emerge. In time, many loyalty programs are converging into a blend of each particular value proposition. That is, nowadays, many programs offer points, rebates, discounts or a combination of the program offerings. History of Loyalty Programs Originating in Germany
First modern frequent flyer program created at Texas International Airlines in 1979, yet couldn't last long because of the lack of computer resources
First "the modern day" loyalty programs created by American Airlines in 1981 Customer Expectations Company Expectations Create a difference
Grow Profitability of Customers
Guide customers to desired behavior Airline Loyalty Programs in Turkey Hotel & Car Rental Agreements
First seats
First in & First out
Extra luggage weight Effects of Loyalty Programs Reduces the consumer's decision making complexity Reinforce the choice of the customer Customer Recognition Reinforce brand value
Increase Spending per award
Create Trust & Loyalty If Done Right; If Done Wrong; Confusion
Many angry customers
Distrust What is Loyalty Programs in Airlines? Loyalty could be achieved, if he/she frequently buys/prefers your products instead of your competitors. The first item than comes to mind is the flight. The New Era of Loyalty Programs Today's loyalty programs consist of many layers, on which they operate in many markets in order to penetrate every potential customer segmentation. However loyalty could only be the first step to create a commitment. If the customer likes your product and is reluctant to try another alternative, then you could express that a long term loyalty has been achieved between two parties. Airlines could create integrated loyalty programs in order to reach out more customer segments. With differentiation you could penetrate every market segments if you want to. Rebate Programs Acquire financial benefits from the purchases that
are saved up and redeemed after a set threshold or time period Pros Cons Relatively simple to communicate
Although discount based, avoid "discount
on every purchase mentality
Rebates forces customers back in the store
Cheaper to administer
Can allow tiered offers to VIP customers Doesn't provide instant gratification
Rewards profitable/unprofitable customers
alike
Rebate thresholds could be expensive
Could effect your margins
Can alienate infrequent customers
Easily emulated by competition Discount Programs As is implied by the name, it offers customers a specified
percentage off(or a dollar amount for large purchases) of the
retail purchase price Pros Cons Very simple for customers
Instant gratification
Deeper discounts can be used tactically
Usually easy to administer Discount implies that regular prices are too high
Difficult to exit
Can be easily duplicated
Can alienate infrequent customers
Discounts affect margins dramatically 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. Pros Cons Basic premise is simple to understand
Can be difficult to match
Can allow more targeted, flexible and
imaginative promotions
Avoids price discounting
Can be used for Ancillary Items The proliferation of points programs is confusing
The "halo effect" of programs where thousands
of points are required to earn a benefit devalues
all point programs
Required investment in redemption opportunities
More complex to put together and manage
More expensive than cash back Targeted Rewards Recognition Perceived Value Accumulation of Points Credit Card Experiential Awards Be Careful to whom you sell! Not all the customers are equally profitable
Generally, 20% of customers tend to produce 80%(varying by industry) of the profits
Did you know that the bottom %30 can eat up half the profits generated by the others?
The idea of "firing" your most unprofitable customers is becoming more attractive Understanding the economic value of your customers, not just loyal customers, can save you tremendous amounts of revenue and effort. "Loyalty is based on learning enough about customers to respond to what it is they need most and then inducing them to buy more. Not loyalty based on a logo or loyalty based on a discount." Eric K. Clemons Measurement
of Loyalty Programs Simplicity Benevolence Trust Transparency Social Media The Basic Benefits of using a loyalty program to obtain customer information are summarized as; 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 Atlas Jet - Jetmil/Jetmil Elite Onur Air - On-Air Special Lounge at Ataturk Airport
Domestic flight extra luggage weight
Free upgrade(if available)
Credit Card Advantages THY - Miles & Smiles Credit Card Advantages
Different Options for mile gaining
Many Partner Companies Advantages Sunexpress - Sunpoints Free Car Parking Option
Special Discounts
Car Rental (Sixt) Pegasus - PGS Plus Mobile number is your membership no
Could pay everything at the system
Earn while spending your points Some Interesting Facts Qantas - Loyalty program is a 2 billion dollar market
5 year time from 20 to 250 people for marketing Datalex - %70 of customers decide what to buy while they are visiting the store. Tesco - Tesco Club Card
make the customer as a retailer/agency Google - A big threat for future online-sales %72 access their social media on flights
Full transcript