Service is key

Keeping your customers loyal and coming back for more is the name of the game in business – particularly in the financial services sector. Here Dennis Driscoll, VP of Loyalty Services at Fidelity National Services, Inc. and Jef Harris, President of the Americas for ICLP (International Customer Loyalty Programs) Inc. discuss meeting this challenge head on.

FST. Retaining customers is often said to be cheaper than acquiring them. Can you start by explaining the benefits of increased customer loyalty?
DD. Retention of existing customers and their base of profitable business is often the foundation for growth through new product introductions and succeeding generations of your current products. As opposed to the challenge of gaining the attention of new customers, the retained customer recognizes and respects the messages and communication style of your organization and allows you to more easily reach a willing and receptive buying audience. You are able to deliver results at a lower cost of acquisition through retained loyal customers, and you can add to profitability through the efficient use of your current distribution channels that maintain connectivity with your retained customers. The existing loyal customer can be counted upon to be more readily willing to listen to your product message, accept it with a trusting attitude and share it with others who may not be your current customers.

Loyal customers expect to be rewarded with value and attention as a fair exchange for their continued support of your business. The two instances where they will not support you with their continued loyalty are when you do not have the products and services that they need and want and a situation where you may have what they need and want but fail to tell them that you have those products and services.

JH. Increased customer loyalty can impact the bottom line in a variety of ways, including improved customer retention, increased share of customer, safeguarding current revenue, and driving incremental and cross-sell revenue. But increased customer loyalty isn’t just about bottom-line gains. It’s about strengthening the relationship with valuable customers by leveraging program data to deliver targeted and relevant messages and offers. Increased customer loyalty means deeper customer engagement with your brand.

At ICLP, we believe in using program data to develop value-based customer segmentation (manage customers as an asset), create a differentiated and sustainable value proposition and change from program oriented to customer-oriented. A good loyalty program should allow you to identify and act upon changes in behavior and recognize and reward high-value customers. Another point to consider in the retain vs. acquire debate is that approaching ‘lost’ customers can be three to four times as effective in terms of loyalty value as prospecting for new customers. The rate for attracting converts might typically be 5 percent, while the one for re-attracting inactive customers might be as high as 15-20 percent. The data you have on your inactive customers is the key – purchase history, where and how to reach them and preferred communication channel.

FST. What kind of customer loyalty programs lend themselves to the financial services arena?
JH. The Total Relationship Banking methodology can be supported by and delivered through a single loyalty program that truly appreciates and understands the value of the holistic approach. ICLP recommends a single umbrella loyalty solution because it works at four levels: single points currency; tactical promotional offers; long term strategy; value and information exchange.

DD. The kinds of customer loyalty programs that lend themselves to the financial services arena parallel those of any other marketplace but may be even more important to this customer base because the business touches the customers in so many important ways every day. The loyalty programs start with a strong message of opportunity to earn from the transaction-driven products in the plastic-based credit and debit card business and very quickly follow a trail of need for expansion and solidifying the profile of profitable relationship products and services. Customer loyalty programs must live within their available funding and always are primarily measured solely on their ROI. Program design is based on this profitability and the product or service’s strategic importance to the financial institution’s short- and long-term goals. If a product is identified as a key ingredient present in the services desired by the most profitable relationship customers, it could be designated as strategic and funded in the acquisition process at a level greater than the economic contribution it initially generates.

It takes little creative thought to quickly recognize that loyalty programs in the financial services area can be expanded beyond individual product applications, to the reinforcement of multiple relationships and greater utilization or participation levels of individual products. It’s just a short step from there to involving customers in assisting the organization in acquiring customer referral business, recognizing employee contributions to customer service and increasing the community presence of the financial services provider.

FST. How can new communication channels be used to develop innovative programs?
DD. New communication channels can be used to develop innovative programs simply because today’s customer pulls you into the game. Any entrant into the use of a new communication channel is often introduced to that channel not by their own initiative but more often at the request and invitation of their best and most loyal customer. Obviously, e-mail is the most visible channel. From a simple exchange of messages the channel’s explosion to innovative use has been driven by a blindingly fast application of technology and creative application. Messaging has given way to text messaging, video response, ads, coupons and event-driven offers, and GPS devices track you down and anticipate your needs. Your favorite recreational beverage rewards program alerts you that you are approaching an establishment that will have your thirst quencher poured and waiting when you detour into its doors. Respond with a ‘yes’ and not only is your beverage waiting on a pedestal with your name on it, but the cost has been charged to your favored payment instrument, you’ve earned rewards in the beverage program and you are eligible for partner awards, too.

Systems track spending and purchase patterns to prevent fraud. The same technology can be adapted to anticipate purchase loyalty or to notify customers of opportunities that fit within their financial services needs. Reminder messages are triggered for and program update messages are targeted to an audience of one. Innovations allow a personal and pertinent communication exchange in an efficient and timely manner, driven and facilitated by the individual loyal customer’s own preferences.

JH. Roughly 45 percent of loyalty programs fail because they don’t evolve. As new technology emerges, and communication preferences change, it is imperative that loyalty programs utilize new communications channels. For SN Brussels Airlines, we developed and launched the world’s first implementation of mobile Frequent Flyer Program (FFP) features linked to the database, including, account balances (SMS and WAP), SMS gift miles, SMS information services, and SMS redemptions (i.e. wallpapers at 250 miles; ring tones at 750 miles).

Swiss Airlines was looking to deliver extra value and drive interest in their existing loyalty program. ICLP utilized mobile phone technology to develop a mobile campaign that included, real-time account inquiry information, sales promotion opportunities with third party brands, and opportunities for gift miles. ICLP believes strongly in utilizing emerging technology to deliver consistently strong programs. This year, we are working with more clients to develop mobile marketing, MMS, SMS, mobile Java and Pocket PC activities as a part of their communications strategies.

FST. We’ve all heard of supermarket customers carrying multiple loyalty cards around ¬– how can financial services firms provide unique loyalty programs that differentiate the companies from competitors?
JH. At ICLP, we believe differentiation is the key to loyalty marketing in the financial services sector. We believe differentiation begins with: knowing who your best customers are and knowing what your best customers are looking for. Relevance reigns supreme when talking about customer needs/wants. When ICLP developed the value proposition for the Manchester United co-branded credit card, we created an array of ‘money-can’t-buy’ rewards specifically related to the club-signed merchandise, limited-edition prints, and access to off-limits team areas.

It is crucial to understand that opportunities to differentiate and create competitive advantage can only exist if they are built around the customers’ needs and interests (the buyer’s perspective) and not on what the company can make and sell. Detecting the best opportunities and tactical approaches relies on the flow of information: creative use of database analysis, customer feedback, benchmarking with the competition and other companies outside the industry, dialogue with loyalty experts, advice and preferences of employees in the parent company, lifestyle research, and good intuition and the ability to recognize trends. Remember – the opportunities of today are the loyalty drivers of tomorrow.

DD. Financial services firms can provide unique loyalty programs that differentiate themselves from competitors in several ways. The most obvious way is to start with recognizing what the rival and obvious differences are between themselves and the competitors and then building their program based on a focus within those strengths. Do you excel by having convenient locations, superior customer service, multiple communication channels, attractive rates, a strong community presence or a high-tech environment? Whatever the reasons for your success and longevity, you should exploit those reasons in the design, delivery and focus of your program.

You can differentiate your program by understanding who your best customers are, understanding what products and services they have with you and mining their individual purchase data to determine their interests. Then design and execute a rewards strategy that is meaningful at the individual customer level. Give them access to helpful information and custom messages that fit the profile of your mutual relationship. Keep them aware of opportunities that others with a similar profile find of interest. If they shop at electronics merchants, include the latest gadgets in your gift assortment and/or tell them where they can find information to keep up with the current new-product information.

The more you communicate information on your program and the more relevant it is to the participant then the more likely you are to be able to differentiate your program and separate it from the masses. The great comfort to you should be that the answers are right in front of you.

FST. Is running a program enough, or does the entire company need to commit itself to becoming more customer-centric in its operations?
DD. A program will not be effective and customer-centric in the operations if it isn’t supported and understood by everyone who touches the program and by your customers. It all starts with senior management and the message they send to all levels of staff. It is not enough to just approve and fund a program; senior management must actively participate in program communications to all levels of staff and the loyal customers. It’s a fact that if staff observes that the program is not important to top management and their immediate supervisors, then they conclude that the program probably shouldn’t be important to them either. The result is a diminished opportunity for the organization.

Middle management and immediate supervisors often see a program as invasive and diversionary with respect to their day-to-day mission and responsibilities. It could end up being characterized as “another marketing program” or “this month’s gimmick.” Getting them on board requires a message that clearly outlines the program as an imbedded strategic direction for the organization and includes an outline of the program features and the benefits to customers and the organization.

All this critical commitment starts with a solid plan to communicate to staff before the program starts. Tell them how it works, what their responsibilities will be, how they and their work unit will be affected, and what the customer and business implications will be. After launch, keep them informed about the program’s progress toward milestones, and keep them involved in the program. Focus the messages on the long-term nature of the program. It’s a marathon, not a sprint.

JH. The whole company needs to support the loyalty initiative, which means not only sales and marketing but customer service, IT, finance, etc. In addition, a board sponsor is required to keep the program funded and top of mind in the C-suite. True loyalty goes beyond marketing tactics. True loyalty means a customer-centric approach company-wide. One of the key benefits of developing a loyalty program is the quality of data collected. Companies that succeed at developing true loyalty utilize data for a 360° view of the customer, and make that data accessible for all members of the organization, so regardless of touch point, a customer receives personalized service.

FST. Can you tell us a little about what your company offers in this space?
JH. ICLP is the world’s leading specialist loyalty marketing agency. We manage and profitably influence millions of customers for hundreds of clients around the world. Established in 1987, ICLP is a full-service global loyalty agency, with 12 wholly owned offices around the world, including two in the US. Our client list reflects unparalleled expertise not only in the financial services sector, but also in the travel, retail, luxury and IT sectors. We create, retain and grow profitable relationships on behalf of clients, and deliver world-class loyalty marketing solutions via our three core competencies: consulting, creative and client services

The programs we design enable our clients to track, understand, measure and modify the behaviors and attitudes of their customers. What separates ICLP from other agencies is the fact that we are a true loyalty agency, with a strong focus on loyalty strategy. ICLP is also a recognized thought leader, publishing loyalty trend reports and white papers, and speaking at conferences around the world.

DD. Our company has offered loyalty programs to our customer base in financial services for 16 years. We currently operate slightly fewer than 3000 programs for our clients. Our programs are individually designed, and we operate them turnkey for our clients. We operate points- and cash-based programs for credit and debit cards for consumers and businesses. Within the last year, we’ve introduced house-holding of earnings among credit and debit programs and have announced the automation of relationship rewards programs.

We also operate rewards programs that focus on reactivating dormant credit and debit card accounts and administer employee incentive programs for our financial service clients. Our product and service offers include a number of value-added benefits and insurance products that we’ve offered for more than 20 years.