5. Loyalty and Information Technology

1. 1 Offering 8 Communi-cation 2 Processes 7 Finance Key topics of the programme 3 Call Center 5. Loyalty and Information Technology 6 Structure 4 Cards  5 InformationTechnology  Frequently asked questions: • What is a customer loyalty system (CLS)? • What are the different customer loyalty tools available in the market? • How do the current IT environment and the CLS fit together; is it possible to integrate these two systems? • What are possible vendors of CLS-Software? • How should a CLS-System be linked with a corporate IT environment? • What is the relation between loyalty systems and campaign management?

2. 1 8 2 7 3 6 4 5 5. Loyalty and Information Technology For the administration of the loyalty programme, a customer loyalty system (CLS) is required. The CLS needs to be integrated with the operational systems of the company For each customer retention programme three main systems should be taken into consideration: A data warehouse, a campaign management system and a customer loyalty system. • The Customer Loyalty System (CLS) administers the bonus points (collection and redemption) and the members. The call center and the back office agents are working mainly with this operational system. • The Data Warehouse (DWH) is collecting the data out of the different operational systems and provides this data in the required format to the Customer Loyalty System. • A Campaign Management System provides a database marketing environment and enables the company to get the customer information. xx yy xy User: Marketing andcommunication User: Club managementand marketing Campaign Manage- ment System Data Warehouse (DWH) User: Call center andback office Customer Loyalty System (CLS) Partner- systems Fulfillment- Center

3. 1 8 2 7 3 6 4 5 5. Loyalty and Information Technology There are several suppliers of customer loyalty systems (1/2)

4. 1 8 2 7 3 6 4 5 5. Loyalty and Information Technology There are several suppliers of customer loyalty systems (2/2)

5. 1 8 2 7 3 6 4 5 First Generation Second Generation Third Generation Enterprise-wide Enhanced List Selection Customer Information GOAL Relationship Management and Management Systems Repository System Enterprise-wide; All Contact All Marketing Activities Direct Mail Customer Support Campaign Management ACTIVITIES Telemarketing New Product Development Market Research Field Sales Finance Media Planning Manufacturing Marketing Customer Files Middleware Relational Database Support Bureaus Scaleable Hardware TOOLS Analytical Tools Flat Files Integration Data Warehousing Merge/Purge Data Mining / Visualization Name & Address Transaction History All Customer Interactions DATA Demographic Overlays Marketing Communications All Operational Data Limited Transaction Data Airlines Financial Supports Banks / Credit Cards Airlines / Travel / Hotels Telecommunications EARLY ADOPTERS Direct Mailers / Catalogs Telecommunications Statistical & Nonlinear Self Adjusting Algorithms Statistical Techniques Neural Networks MODELING Advanced Pattern Regression Genetic Algorithms Recognition Fractals Stand-Alone PC Unix Servers SYSTEMS MPP Systems Mainframe LAN / WAN IMPLEMENTATION Six Months Eight - Twelve Months Two Years + Ease of Use / Fast Counts Interoperability Functionality Quick Installation Robustness Performance Externally Managed Scalability DRAWBACKS Stand-Alone / Proprietary Migration / Support Cost / Complexity Strategic Competitive Advantage Tactical Allocation of Marketing Optimize Allocation of Improved Response Rates BENEFITS Resources Enterprise Resources Reduce Cost of Direct Increase Marketing Accelerate Revenue Marketing Effectiveness Growth Source: Gartner Group; 1996 5. Loyalty and Information Technology Customer data and information A loyalty programm enables the company to get new information about the customer behaviour Customer information systems can be seen in three generations • The following information categories can be distinguished when launching a loyalty programme: • Basic information about the customer (eg. age, profession) • Potential information about the customer (eg. customer satisfaction) • Action information about the customer (eg. contacts, activities) • Reaction information from the customer (eg. response; usage)

6. 1 8 2 7 3 6 4 5 Metadata Campaign Management Query Customers DataWarehouse DataIntegration and Cleansing Processe.g. Validity Design… Select... EIS Operations OLTP Segment... Locations MARKET. MARKET. Financial Systems SALES Execute... EXTERNAL DATA ETC. Score... Transformations Source Data Quality Assurance Process Source: Price Waterhouse 5. Loyalty and Information Technology A Data Warehouse environment is also essential to getting the information needed A Data Warehouse links the existing operational systems to into one database • Best practice companies feed their transactional data into a data warehouse and use different tools and instruments for analyzing the data. The position of a data warehouse is showed below.

7. 1 8 2 7 3 6 4 5 Refine Offer 5. Loyalty and Information Technology A Data Warehouse environment is also essential to getting the information needed The Data Warehouse uses customer information in an closed loop. • The usage of customer information in a closed loop enables the company to improve their target marketing on an ongoing basis. Data warehouse, campaign management and customer loyalty systems play an important role in that. Optimise return on data enhancement and prospecting Integrate new Media Record Customer Contact Segmentation & Targeting Create Offer Communicate Offer Capture customer and transaction data Manage integrated customer database Service Offer Derive customer profitability & LTV, & report on marketing effectiveness Measure Results Fulfill Offer Fulfill on a one to one basis Mine Data Provide Customer Service Analyse data to reveal Segmentation and Targeting Opportunities Data Warehouse Manage Inbound and Outbound Telemarketing activities Source: Price Waterhouse

8. 1 8 2 7 3 6 4 5 5. Loyalty and Information Technology A Campaign Management Tool supports a company in building up their database marketing capabilities. What is a campaign management tool • A campaign management tool enables the coordination and tracking of several marketing campaigns (eg. mailing to 100’000 customers) concerning the response and the following activities for the contacted customers. • A campaign consists normally of several activities and focuses on a clearly defined customer segment. The future activities for a customer in a campaign often depend from the past responses of this customer. A database support therefore is very important. Typical functionalities of a campaign management tool: Design campaign Select campaign universe Target segments Execute Measure and record Iterate Source: DWH Issue campaign management or leading process

9. 1 8 2 7 3 6 4 5 Campaign Management Process Collect ideas and inputs Provide concept to board Run campaign Set targets and target groups Detailed planning Evaluate feedback Evaluate overall campaign Collect feedback Set priorities 5. Loyalty and Information Technology With a clearly structured campaign management process it is possible to properly coordinate different campaigns and to set priorities Example of a campaign management process • For a campaign concept (planning and co-ordination of different campaigns) a campaign management process is needed. • The campaign concept builds the basis to position the different campaigns, to set priorities and to assign budgets.