Speaker 1: Last year when I was in San Francisco, I received feedback that my presentation was a little bit like consulting things, so this time I did it with more creatives and stuff. We have tons of examples, so you're not going to get bored. On the other hand, we're going to get excited because we're going to talk about loyalty programs and its connection with subscriptions, knowing that many of us here have some sort of revenue stream coming from subscriptions, but today we're going to talk about that. So basically, this is important to have in mind. There are many profitable growth levers. What we're going to talk today is about loyalty. Why loyalty? Because last year we talked about subscriptions, so we need to come up with a new topic here. So we're going to see it in a very enjoyable way. The interesting thing here is to see the lifetime of a customer cycle and how we can use different rewards and incentive strategies. So what we're seeing on this slide is how do we actually make sure or how do we address the different tactics in creating engagement from a single session into multiple sessions into creating retention from the mid-term to the long-term. This is a different way of seeing retention because, as I was saying, I'm not going to be focusing on CRM strategies or paid marketing or something like that, only on those incentives or those strategies that have an economic factor or something to give customers away. But what we're going to see today is basically how to create long-term retention, which is basically with loyalty programs. We can see from the left-hand side to the right-hand side that it all starts with having referral programs or real-time offers or having incentives or what we call like get-wise and then having some other kind of incentives, which are challenges or quests in which you actually ask customers to do something. We can spend hours talking about that, but the most important takeaway here is like about like 85% of companies normally focus on short-term engagement tactics. This is very important because if we don't change this mindset, particularly in this economy where customers are super price sensitive, we're going to still be seeing the same results over time. So as I mentioned, we already have discussed subscriptions last year, today we're going to focus on loyalty programs and its connection with subscriptions. So the first tip or the first reflection that I have for you guys is the ultimate objective of a loyalty program is to maximize customer lifetime value and not retention. This is very important because there are many companies that are having these discussions with their CEOs or with like the top management and then first, most times they don't believe in loyalty programs. Sometimes they see loyalty programs as a cost driver or something that it's, you may have it but sometimes it's very difficult to prove the results of that. Today we're going to see how we prove the results of that because most of times it's the problem that it's not well implemented, right? But the most important as you guys are seeing here is like the loyalty program should be not seen as a CRM strategy or as an engagement cost, but as something that you develop for some specific customer segments to deliver incremental value. And this is coming from analyzing and doing consulting from different firms. Actually when I was working at Uber, we launched Uber Rewards and then moved to Uber One, the subscription that you guys, perhaps you guys already have or something. What I'm showing you here is how do we construct like world-class free loyalty programs, right? Because there are other loyalty programs that are paid and sometimes confused with subscriptions or memberships. But these are the most important elements. I will say like these four. The first one is tiers in which it's important to identify that these tiers can deliver different benefits. For instance, transactional benefits or experiential or recognition or emotional ones. I'm going to see tons of examples within the next few slides so you guys can have an idea of what I'm talking about here. And then we have the points system, which is basically the most common one that most loyalty programs have. They have the earn system and the burn system. The earn system in which you can accumulate points or coins or tokens or stars or whatever loyalty program that you are subscribed so far or based on events, right? So maybe you accumulate points because you complete a milestone or you have your birthday or something like that. You can also see it that way. And obviously the burn system in which some loyalty programs, they have like a points store in which you go there and then you see different products. So what you can see with the American Express or World's Program or some other big banks or airlines in which you can redeem the points for different products that they have. That's a point store approach. And then the store value approach in which you can convert those points into cashbacks or something that you can transact with within the same payments ecosystem or outside that, you're also going to have promotions or campaigns. We're going to see a few examples of this and then the membership element. But here I'm talking more about the sense of belonging, the sense of exclusivity and some successful elements that some loyalty programs have about socializing. So let's start with the first one. Here we have a few examples of how tiers work. The concept or the idea about having tiers is just to create this aspirational relationship with customers. And this is very important because what we're seeing in this timeline of incentives and rewards over time is that you need to add more emotional value to the customer in order to create different kind of retention. If you want to create short term retention, it's very easy. Just give your customer money or give cashbacks or points or whatever, something. But if you create these elements like aspirational elements, like the ones that I'm seeing here, for instance, with the Merrill Bond Boy loyalty program, you have this perception with customers that they want to do some sort of progression to aspire to a new level that unlocks different benefits. That for them is seen also as a gamified experience, but something that they can actually in a way showcase or to use for their own purposes. We have other ones like the Sephora one there and then we have the American Airlines one. I'm going to debunk a little bit on this one in a few minutes and other ones from the other industries like the rentals one on Hertz. And then if we go on to the next one, we can see how points-based programs are structured. These perhaps are the most popular ones and the ones that you can see more often is if you want to start with something about loyalty, you may start with something like this. And actually, you can see that one of the most successful loyalty programs is very simple and it has to have this kind of ideas of only points, which is the Starbucks one in which you accumulate stars is one of the most successful loyalty programs that you can see. And then the ones that are normally innovating and bringing a lot of stuff into a table. And then you see there another one, for instance, from the North Face or from McDonald's, which they are very basic ones. You only accumulate something and then you can redeem it within the store, within the ecosystem and the benefits that you can have. But you can see in both cases, they have this earn system and this burn system, whatever. If they have like a points store or like some sort of redemption into their own products or somebody else's products or like a store value, as I mentioned, to transfer that into actual money that you can use elsewhere. And then the third element from what we saw is the points promotions one. You are probably very familiar with this, so I'm not going to spend much time on this. The thing here is like be very creative, right? It can be point grants, it can be point accelerators. It can be some points that are happening because a specific event, as I mentioned, it can be a birthday. It can be when you accomplish a specific 10-year milestone or when you grow selling or something like that. This is very important because you have a fixed mechanism or the baseline mechanism in which you do points based on certain amount of money that you spend or certain transactions. But this one is where you actually manage on a discretionary level for some specific customer segments that you want to grow, right? And then on the last one, we have the membership element. And then I'm going to do a specific differentiation of the concept membership and subscription as we saw last year in San Francisco. Membership, what I'm referring here is making customers believe that they are being part of something. It's not the same having a subscription for some sort of utility programs or utility services in which the relationship with the company is only transactional. What I'm talking about membership is that customers actually have this emotional connection in this sense that they are part of something, right? And these companies like Adidas and Nike are very successful with this. You subscribe or you are part of this membership or loyalty program, and then you complete milestone and then you socialize with other clients or with other community members. This is very powerful. One of the most successful emotional loyalty programs are actually based on these kind of companies that create these emotional connections. And some of them, they also use influencers and other mechanisms to create some sort of like aspirational or access to exclusive events or something. So the most important here, as I mentioned here, is creating these bonding effects within the tiers or within the program as you decided it has to be with recognition or status. But here with a membership element, it creates something bigger. So it's important. And I'm seeing some other programs that are moving into this direction with social rewards. We also saw something like this with the first discussion we had with Hopper. They are doing something like this to create a sort of like a long term retention. So my second thought here or my second tip here is that in order to obviously what we've discussed so far is having a good product, right? But the most important part after having a good product is actually having the right system to run this product, right? So the most important part here, what I'm mentioning within these points is having alignment within your teams. It's not only about the product team. It's not only about the data science team, or it's not only about the operations teams or whoever is in charge of the loyalty function. The most important part here is just to having in mind all these elements. Where is the design function? How are we creating the onboarding, the concept, the features, the tiers? How we design the strategy, the vision, where do we want to be within the next few years? These loyalty programs obviously require lots of patience. If you want to have short term results with these programs, definitely this is not a strategy that you should be pursuing. You should be pursuing incentives or do X or Ys or referral programs as those are the most common tactics that are implemented in the industry. And obviously, the tactics and the monitoring, super important and considering the infrastructure required for that. Third thing or third lesson to come across is just make sure that it can be common sense, but make sure that you have validated the different kind of features that for you are considered leaders, fillers, or killers. And the most important part here where you're seeing here, I'm putting the example of looking.com here is how you come across with this kind of analysis. Here I'm coming obviously with a framework because I love to do frameworks, but obviously I put the image next to it so you guys don't get bored. Obviously here the idea is just to make sure, for instance, if we were trying to do the loyalty program of booking and then we run a different research method and then we define which are actually the benefits that customers are expecting or we are expecting a super high adoption and the perceived value is high, you need to focus on those. Why? Because believe me, I've done also a lot of consulting for different startups that they want to implement loyalty programs and they are still in the build trap. They're always building a lot of feature, feature, feature, features everywhere, and they don't realize or they don't go and ask customers if they actually value that. So when you create a loyalty program, just as when you create a subscription, it's important to have some of these kind of things. And here I'm just giving some ideas of which kind of research methods you may use, like the max-diff or conjoint or different ones that are about measuring if customers are actually willing to pay for those. Moving to the last section, the other tip that I can give you guys is, and this is very important, it's how do I measure this scientifically? Because believe me or not, but it's very common to see different loyalty programs that are implemented without long-term control holdout groups. This is super, super common in the industry. And I will say that, as I'm stating here, is like the most common reason why loyalty programs fail are not necessarily because top management is not involved enough, but mostly because they didn't design the experiment the right way. What I'm trying to explain here is just as easy as during the first two years of the program implementation or three years of the program implementation, try to have at least like 5%, 10% control group, because you got to do the comparisons against that control group. Try just to be mindful to not do a lot of comms about the loyalty program that it can create noise with the control group. But that's the very simplest way to do it. And then that way you're going to prove that the loyalty program is successful in the different metrics that we're going to see in the next slide, which are basically these ones. Here are only the main important ones that I take into consideration for mobile apps. And I'm not going to go into the detail into each of those. But the real thing here is just to make sure that every time that you're doing comparisons against the treatment group and the control group, between the enrolled group and the non-enrolled group, but they have visibility of the program, you use this kind of metrics and then you're going to prove to the top management what I've been discussing about creating loyalty retention, believe me. We did a lot of experimentation, for instance, at Uber, when we were comparing Uber Rewards with Uber One, with the different tactics that you normally receive on a weekly basis. By far, the loyalty program was delivering the best incremental value, sometimes up to more than 150% than the other engagement tools. So it takes time. So don't expect to have results within the next month or after your launch. This you need to start having readouts every six months, every year or so. And then perhaps the most important slide, because I'm about running out of time. The best-in-class loyalty programs are actually what I call the dual engagement principle. It's basically what I'm showing here, is you have a long-term engagement structure in which you have some free elements and then you have other elements that are paid. And this is the bridge between subscription and a loyalty program. And the most successful companies that I have seen, and I have also friends that have implemented this, that have told me that this works, is some of the ones that I'm showing here. It's basically these structures. Perhaps the most common for us is the one from American Airlines, but it's important to have that in mind. In the end, if you need to consider something about this presentation, it's perhaps this last framework. It's just to make sure how each element of the loyalty program has a connection with the kind of relationship that you want to have with your customer. When you want to implement tiers, it's because you want to develop sort of emotional connections. When you want to have points, obviously transactional one, but you can see the underlying customer need behind that. When you're talking about covering an aspirational, a progression, a recognition, tiers are good for that. When you would like to create this sort of emotional connection with your customer and you want to tackle that customer need, it's important to use that element. That's what I have found and that's the way how most successful loyalty programs are designed now. It's just to make sure that I don't only go for the customers that are very price sensitive, but I also go after that, creating some sort of deep connection with them with different kind of tactics. There are many gamified strategies in which you can use that, but in the end, it's all about that. This is the last slide that I have for you guys is maybe some of you already know that, but the loyalty program can be a great asset for the company. You see how some companies like Delta or American Airlines, some of these programs are actually become one of the main sources of revenue of the company, like American Airlines program is worth more than the company itself. If you measure in terms of the revenue from flights, because they expanded into a lot of other use cases, did a lot of alliances, which is very important for our loyalty program that we didn't discuss today, but it's super important just to have that in mind. Don't forget that loyalty programs are powerful. If you use your loyalty program strategy, free loyalty program strategy with your subscription, with your paid subscription, you can create something that can last for decades and then keep your customers happy as you keep evolving, which features are the ones that they like the most. Thank you.