g2_loyalty_051707

Slide 1: 

Is Loyalty Profitable? National Restaurant Association Convention May 17, 2007

Are loyal customers the best? : 

Are loyal customers the best? They purchase more frequently They spend more $$$ It costs less to retain them thanto acquire a new one Win loyalty and win profits

Restaurants are late to the table : 

Restaurants are late to the table Fewer than 25% have them Customers want them 50% would be more likely to patronize Restaurants fit the bill High purchase frequency Highly competitive market Idle capacity Caution—Be careful before you jump…

Customer loyalty = profitability : 

Customer loyalty = profitability Airlines Many frequent flyers actually lose money for the airlines Financial Profitability for credit card customers varies wildly Retail Difficult to identify incremental sales from loyalty programs Measure relationship between loyalty & profitability

Claim #1: Increases purchase frequency : 

Claim #1: Increases purchase frequency Huge impact in some industries Airlines—Up to 20x increase Credit cards—Up to 100+ Limited upside for restaurants Best case guess—2x to 4x Less incremental gains Caveat: Multiple restaurant participation Limited incremental purchase frequency

Claim #2: Increases transaction $$$ : 

Claim #2: Increases transaction $$$ Data is not convincing No direct correlation between purchase frequency and transaction $$$ Many airline elite flyers pay lowest fares Soft benefits can influence Evidence may suggest the opposite Expect a better deal as a loyal customer

Do the math… : 

Do the math… Average Loyal Change Visits per year 2 4 2 Average sale $75 $100 $25 Annual sales $150 $400 $250 Conversion rate 20% Incremental sales $50 Customer Retention 2 4 2 Customer LTV $300 $1600 $1300 Conversion rate 20% Incremental sales $260

Claim #3: It costs less to retain a customer : 

Claim #3: It costs less to retain a customer Acquiring a new customer is more costly… But compared to other industries, restaurant loyalists have lower relative value Typical Loyalist Behavior Restaurant Other Industries Visits per year 5 20+ Average sale $150 $400 Value of a loyalist $800 $8000 Value of a new customer $200 $300 Relative Value—Loyalist vs New 4 26

Keys to profitable customer loyalty : 

Keys to profitable customer loyalty Set measureable objectives - Frequency of visits, increase in transaction size, customer retention Understand customer behavior -Current and desired behavior Develop compelling value propositions -Rewards, recognition and privileges

Customer behavior drives value : 

Customer behavior drives value BestCustomers BetterCustomers GoodCustomers AverageCustomers Share ofCustomer Potential Value High Low High

Develop compelling value propositions : 

Develop compelling value propositions Rewards Recognition Privileges Hard Benefits Promo currencies Gift cards Soft Benefits PersonalizationPerks Personalized Communication

Focus greatest spending on greatest opportunity : 

Focus greatest spending on greatest opportunity Rewards Recognition & Privileges High High Low Best Better Good Average

Beyond loyalty—leveraging customer knowledge : 

Beyond loyalty—leveraging customer knowledge Customer loyalty programs can achieve significant benefits for restaurants—if structured properly One of the primary benefits is customer knowledge This can be leveraged to help you attract more valuable customers to your restaurants

Targeting high potential customers : 

Targeting high potential customers It is more important to reach the people that count… Than to count the people you reach

Building loyalty begins before the first meal : 

Loyal Customers 4+ meals per Year Returning Patron People who will value the Brand-Value Proposition Future Patrons who live, work or visit the Foot print Building loyalty begins before the first meal To develop Loyalty Marketing needs to Target New Patrons Who will Value the Brand % of Patrons 5% 30% 10,000’s 100,000’s or 1 in 10 1,000,000’s 30% 35% First Meal Patrons with a “Delightful” Experience Patrons with an “OK” Experience The Marketing Food Pyramid # Number of People 45% 55%

Building loyalty begins before the first meal : 

Loyal Customers 4+ meals per Year Returning Patron People who will value the Brand-Value Proposition Future Patrons who live, work or visit the Foot print Building loyalty begins before the first meal To develop Loyalty Marketing needs to Target New Patrons Who will Value the Brand % of Patrons 5% 30% 10,000’s 100,000’s 1,000,000’s 30% 35% First Meal Patrons with a “Delightful” Experience Patrons with an “OK” Experience The Marketing Food Pyramid # Number of People Nay Sayers

Profitability of loyalty communications : 

The Marketing Food Pyramid Loyal Customers 4+ meals per Year Returning Patron People who will value the Brand-Value Proposition Future Patrons who live, work or visit the Foot print % of Patrons 5% 30% 10,000’s 100,000’s 1,000,000’s 30% 35% First Meal Patrons with a “Delightful” Experience Patrons with an “OK” Experience # Number of People Returning Patron ROI = 50% 90% Influenced by Dining Experience 10% Influenced by Marketing $20-$40 Marketing Cost per Incremental Meal Implication ? email Loyalty Communications New Patron ROI = 100% 10% Influenced by Dining Experience 90% Influenced by Marketing $10-$30 Marketing Cost per Incremental Meal Implication ? Mail Loyalty Acquisition Efforts Profitability of loyalty communications

Identifying future patrons in your foot-print : 

18 ProductClonesProspects Clone profile Best geographies Target age groups etc. Identifying future patrons in your foot-print MarketingCommunications Prospects DM qualified In-footprint Current customers Geographic Demo/psychographic behavioral Advance Analytics PromotionDetail Clone your best customers and apply cloning model to prospect base 170 MillionMarketable Adults

G2—Prospect Universe Database : 

G2kc has developed a unique and powerful prospect database Comprised of all 160 million+ marketing eligible adults in the USA Through the combination of primary research and 20 years+ strategic analytic experience, G2kc has created a compilation of proprietary data: Disposable income – income that is available after major expenses Wealth – estimated household net worth assets-liabilities Purchase decision drivers – Price, Service, Convenience Differential income – income relative to neighbors Distance cross-reference – distance in miles between every US ZIP Potential value – Value to CONCEPT with 100% walletshare Pre-processed to remove standard suppressions such as pander files, opt-in do-not-solicits, etc., and is NCOA’d with each bi-monthly refresh G2—Prospect Universe Database

G2 prospect universe data elements : 

The database also maintains over 150 standard demographic, financial and psychographic information elements– e.g: G2 prospect universe data elements

Prospect Decision Drivers : 

Prospect Decision Drivers MarketingOptimization Price Reward Convenience Service Characteristics & Needs: Rewards “junkies” What’s in it for me Offer Types: Major Promotions Bonus Points Characteristics & Needs: Flexibility Easy Access Offer Types: Location Location Location Easy Access 10 Minute Guarantee Offer Types: Priority Seating “Select” wines Characteristics & Needs: Service Special Needs Complex Application Documentation Tracking Offer Types: “Only $$” Free Characteristics & Needs: Bare Bones No Frills Shops for lowest prices “No Twist” “Twist”

Cloning model application : 

22 Cloning model application Rank prospects by Product Clone score and select those most likely to become customers