My Coke Rewards

There has always been a rolling might to Coca Cola marketing and they are now stealing a march with the My Coke Rewards loyalty program as well. The enormous success of the program (see Promo) has created an equivalently enormous data store chock full of useful information. In awarding it the 2007 Interactive Marketing Award for "Best Loyalty Marketing,” Promo.com also noted that Coke has unleashed advanced technology to exploit this new information.

"Coke has invested in the collection and mining of consumer information. This data is already fueling customization on the site, and is also being used for e-mail and mobile promotions and other types of communication."

Coke is using Enterprise Decision Management (EDM) software with its new data store to automate operational decisions concerning promotional activities. Radan and Taylor (2008, ¶ 3) describe EDM as a new approach, that integrates Business Intelligence data analysis with business processes, combining operational and analytical processing. This is in contrast to the separation of data from business process inherent in data warehousing.

EDM is avant-garde and Coke is being applauded for its vision and mastery (see EDM Blog). Taylor (2007, ¶ 2) notes that data generated from loyalty programs can be infused with energy from an EDM “to improve marketing, store-layout and many other decisions.” One example he gives is its application to decide what rewards or rebates actually result in a change in customer behavior.

References
Radan, N. and J. Taylor (June 2008). Enterprise decision management uses BI to power up operational systems. Teradata Magazine. Retrieved on September 3, 2008 at (http://www.teradata.com/tdmo/v08n02/Viewpoints/EnterpriseView/Choices.aspx

Taylor, J (July 26, 2007). Growing your business with decision management. Retrieved on September 3, 2008 at http://edm.findtechblogs.com/default.asp?item=656748

Best Buy Reward Zone Loyalty Program

Researching the Best Buy Reward Zone program was informative. AllianceData published an article on the one year anniversary of Reward Zone (see Alliance). The Director of Relationship Marketing at Best Buy, Karen Maurice said that the loyalty program originated from recommendations by focus groups of customers four years prior to its launch in July 2002. Best Buy spent four years doing research, modeling how it would work and preparing a business case. Relationship marketing was able to make a case for “a rather large investment and said, ‘let’s pilot it.’”

Their approach was test based. The first release was to 50 stores in California. The results were impressive so they decided to rollout nationally. At that time the program was fee based, costing $9.99 per year. Even after the national rollout and especially during the first year’s renewal, Maurice says they were testing multiple approaches to see which had the most impact.

According to the Associated Press, (see wcco) in September 2006 Best Buy dropped the $9.99 fee and extended the program with an associated credit card. The customer earns more points and Best Buy can better understand their customer buying patterns. The credit card can also be considered part of the loyalty program. The popular Reward Zone was trusted enough to extend into other areas of the customer life style.

References
Associated Press (September 27, 2006). Best Buy Drops 'Reward Zone' Fee. Retrieved on September 3, 2008 at http://wcco.com/local/Best.Buy.Reward.2.361946.html.

Fergeson, R (2004). Happy Birthday, Reward Zone. AllianceData. Retrieved on September 3, 2008 at http://www.alliancedata.com/downloads/FMI%20Happy%20Birthday%20Reward%20Zone.pdf

Hallmark Crown Rewards

Duncan (2004, p 226) says that Hallmark does not rely much on demographics in its marketing analysis but instead “places much more emphasis on psychographics.” An artist with Hallmark explained that the relationship rather than the age is the essential element in their work. A program like Crown Rewards can help build an informative database of customer attributes and behavior patterns and add supersonic energy to their creative work, marketing communications, and strategic planning. It can even keep the company's market share intact, like it did for a Hallmark that was troubled in the early 90s.

They were hurting in the 1990s (see Hallmark History) because the world had changed and caught them unawares. They “had fallen victim to changing buying patterns in particular among women, who still bought 90 percent of all cards sold.”

Since implementing the program in 1994, the company has avoided the dire decline. Hallmark gains twice the revenue from Crown Rewards members than from general customers. Here is an internal study by Phillip Morris on Hallmark and its use of the consumer database and the uplifting effect the Crown Rewards program had on the Hallmark company (see Phillip Morris on Crown Rewards Database).

In addition to helping Hallmark, the Crown Rewards consumer database also supports the marketing efforts by Hallmark retail franchise stores, such as Mark’s Hallmark Stores (see iPass Case Study). Besides access to the Crown Rewards database, Hallmark also sells access to its high-speed data communications network named Hallmark/iPass. It is also useful for Hallmark subsidiaries such as Crayola.

When we are creating an account for the Crown Rewards Program, Hallmark asks if its affiliated companies can e-mail about special offers (see Hallmark Registration). This extends the psychographic profiling capabilities of Hallmark to companies such as Crayola, which probably could not afford to maintain such sophisticated data analytics functionality on their own. (see Crayola History)

Hallmark is a great study because it shows a hidden motive – the data motive- in loyalty programs.


References
Duncan, Tom (2005). Principles of Advertising and IMC. New York: McGraw-Hill Irwin.

CVS ExtraCare Loyalty Program

The CVS ExtraCare® program was introduced in 2001 to obtain advantage over competition (see Highbeam). Many praise the program (for example, Stocks blog), but I’m afraid someone let an 800 pound gorilla into the room that had been occupied by the more genteel Walgreens, the struggling Rite-Aid and CVS.

Walmart is now the third largest pharmacy chain behind CVS and Walgreens (see Rubins) and it is methodically attacking the revenue base of its competitors. The Associated press reports (see TulsaWorld) that Walmart is showing strong results. Bill Simon, CEO at Walmart reports that results at the end of each “phase” on the onslaught have been "exceeding our expectations."

One of its first attacks was on the cross-subsidizing actions of its competitors (reported by Larry Abrams), where these competitors charged more for certain generics to cover price competitions with other, popular drugs. Walmart offers $4 prescriptions on generic (see Retail Wire).

CVS alone was comfortable enough to stand pat. This may unwind. Walmart also offers three percent below cost on prescriptions (see Google) and over time this is pressuring already thin margins. Facing this kind of well orchestrated brutality will put CVS and its loyalty program to the test.

On a happier note, CVS gives a commitment to protect privacy of data collected - see CVS FAQ - showing the other important aspect of loyalty programs, information.

American Airlines AAdvantage

The grandpappy of all frequent flier programs, AAdvantage was designed to keep American Airlines most frequent customers on the right airplanes, American’s. According to Lalas (TCS_White_Papers) the first frequent flier programs in the 1980s had the intended benefit of better understanding the popular airline routes.

Of course, AAdvantage increases customer retention with the promotional currency of a free airline ticket. Furthermore, Thomaselli (2005, p 2) reports that

“There's not a lot of expense to the airlines. It might sound like it's a big thing, giving away a free ticket to someone who has accumulated enough points. The reality is, very few seats are given away at the expense of a revenue passenger."

More than a defensive mechanism to keep customers, it was a reconnaissance to better understand its routes and customers. This enables more effective yield management on routes to predict sales patterns and ticket pricing strategies to fill up planes while optimizing revenue. Of course, there is also personalized marketing. Jackson (2007, p 31) reveals that American used its AAdvantage database to more effectively personalize its web site.

During these desperate financial times, Financial Week (on AA) reports on another advantage of the AAdvantage loyalty program. The informative database has tremendous value and American is considering selling it to raise cash to stay alive, reflecting its legless frailty and incapacity.

American has already been using the loyalty program database for its retail web site (see Retailing for Miles ). It incents members to buy products from it with the inducement of earning frequent flier miles.

Solheim (2008, p 1) says that American also profits by selling miles to other marketing organizations.

“Airlines discovered that they could make more money by selling miles to ‘partners’ than by selling seats.”

AAdvantage has almost 1,200 partners who buy miles at 1¢ to 2¢ per mile.

Reference

Jackson, Tyrone (2007). Personalisation and CRM. Database Marketing and Customer Strategy Management. Retrieved from EBSCOHOST on August 31, 2008.

Solheim, Mark (January 2008). What You Need to Know About Travel Reward Programs. Kiplinger Personal Finance. Retrieved from EBSCOHOST on August 31, 2008.

Thomaselli, Rich (June 20, 2005). Who really reaps mileage rewards? Advertising Age. Retrieved from EBSCOHOST on August 31, 2008.