LOYALTY SYSTEM AND METHOD FOR CUSTOMER RELATIONSHIP

MANAGEMENT

FIELD OF THE INVENTION

This invention relates to a loyalty system and method and more particularly, but not exclusively, to a loyalty system and method utilising a mobile telephone.

BACKGROUND TO THE INVENTION

Loyalty and customer relationship management systems and methods are well known and widely used.

One loyalty program and method known as the Infinity program uses bank enabled credit/debit card terminals to process transactions at point of sale. The transaction data is downloaded via radio pads to a high speed data base, run by Infinity. All customer records and data are stored and can be recalled in various ways. Infinity also offer a digital SMS service in terms of which an SMS can be redeemed at a retailer, from a cell phone, via the credit/debit card terminal.

In Marketing magazine of 2 March 2005, it was reported that:

"High-street retailers have not enjoyed the best of times lately as a poor Christmas period saw many of the leading brands register significant financial downturns. In this environment, keeping hold of existing customers becomes the first point of business. The most common answer to this issue in recent years has been loyalty schemes. However, the validity of these programmes is now being questioned, with some analysts suggesting that current methods are tired and that retail brands should be looking at other incentives for their customer base.

David Blunkett, then Home Secretary put loyalty cards in the political spotlight late last year, by highlighting the data held by loyalty schemes and comparing it directly to the Government's proposed compulsory ID card programme.

Holding up a Nectar card, he said: 'Store loyalty cards keep continuously updated details such as the size of a person's household, whether they're employed or not and the ages of their children. If you hold a store loyalty card - and the odds are that you do — you have already consented to all this information being repeatedly shared with other companies without any requirement to ask again for your approval. '

As one would expect, Blunkett's action drew fire from LoyaltyManagement UK (LMUK), which owns Nectar and whose chief executive Rob Gierkink rightly pointed out that to draw a parallel between voluntary loyalty schemes that people opt in to and a mandatory state-run ID card was simply ludicrous.

While Blunkett's words may have done more harm than good in terms of the consumer perception of loyalty schemes, they did ram home the fact that the data held by these programmes is comprehensive and, therefore immensely valuable — not only to those who operate them, but also to partner brands that want access to the unprecedented customer insight generated.

What is on offer certainly sounds good, especially when the detailed information every loyalty card operator or partner is likely to collate is broken down. Each swipe sends information on what was bought, where, and the payment method into a databank that, in all likelihood, also holds the personal information customers give when they sign for a card. This is why the Boots advantage card application form asks for your employment status, number of children, and whether you wear spectacles or contact lenses; Nectar asks how many people live in the house, the ages of under- 18s, the number of cars owned by the household, and their total mileage; and Tesco's Clubcard form includes questions on diet and details about partners, albeit in an 'optional' information box. Given that 85% of UK households have at least one active loyalty card, it is a no-brainer for brands looking to change purchasing behaviour.

A powerful pull for brands comes from the fact that operators such as Tesco have proved if you use the data intelligently, the points-mean-prizes approach can work phenomenally well. Its Clubcard enables it to track £4 out of every £5 spent at the shop, and the data it holds has reformed its entire retail strategy to take it from number two 10 years ago to the unassailable number one behemoth it is now. The Clubcard's impact was clear only a year after Tesco introduced the scheme in 1995:Clubcard holders were spending 28% more at Tesco and 16% less in arch-rival Sainsbury's. In response, Sainsbury's launched its Reward card that year and had built up a 10m following by 1998 before joining the Nectar scheme in 2002. introduced by Air Miles founder Keith Mills, Nectar works on a consortium concept. Heavyweights such as BP, Baclaycard and Debenhams - which has just recommitted to the scheme — were part of a launch contingent of affinity brands that now totals 17.

Over 60% of households now have a Nectar card, and 42% have been active over the past 12 weeks according to Nectar (LMUX) client services director Brian Sinclair.

'We've haven't lost a brand partner yet,' he states. 'Three sponsors have already renewed their agreements — and UK companies in 2005 won't make that sort of commitment unless they have found real commercial value in it. Sinclair claims that Nectar's last points mailing generated more than £40m in incremental spend for its partners through a straightforward mechanic that offered collectors bonus points if they spent more than usual. Sainsbury's was one of the founding brands to sign up with Nectar but the benefits have not translated into its overall performance. It commands a market share of about 15%, 2% less than Asda and 13% less than Tesco. To add to its woes, last year it recorded a financial loss for the first time in its 135-year history. Not that Nectar is to blame for this downturn, according to Sainsbury's chief executive Justin King. In his October business review, he said: 'We remain committed to the Nectar scheme. [It] is valued by many customers and the priority is on ensuring that the results it delivers justify the investment:

The results referred to by King are derived from the collated customer data. 'By combining this quantitative data with qualitative data we have a more rounded view of the customer that allows us to constantly improve our offer: explains Sainsbury's Nectar manager Leigh Rengger. 'We are also able to tailor offers and communication directly to the people who will benefit most — with Nectar we have 75% more malleable customers than under the previous Reward scheme: Professor Joshua Bamfield, director of the Centre for Retail Research, has doubts about the efficacy of collaborative schemes, however. While affinity brands do get some benefits from sharing, he is not sure 'that partners receive the data when and how they need if. He concedes that his observation comes from informal conversations rather than anything more substantive. Yet he makes a valid point when he says: 'The big issue is whether a brand that wants to differentiate itself can do so with a raft of other brands. '

Nectar's Sinclair admits that 'the most challenging part of maintaining a coalition like ours is getting big companies to play together nicely'. 'But,' he adds, 'we've implemented database principles through a data protection statement that informs how our data can be used:

Tesco guards its data mere jealously: it does not release or sell customer details either to its partners or to any third-party organisation, although customers can earn and spend Clubcard points with its nine partners, including Marriott, Avis and Powergen. This, Sinclair believes, could be one reason that Clubcard has lost about 10 partners to date, including Whitbread brand Beefeater, which switched to Nectar

last month. Sinclair is at pains to point out that he thinks highly of the Tesco scheme, but that it is not without its issues when it comes to hanging on to partnership brands.

For Professor Bamfield, the nit-picking among scheme operators fails to hide the fact that most of them are 'boring'; he goes as far as predicting that at least one major retailer will have junked its scheme in the next six months. They wouldn't be the first.

Safeway introduced its ABC card in 1995 — and had ditched it by 2000.

Yet the Co-op's trials of a system that involves customers paying for groceries and accruing loyalty points by having their fingertips scanned at the till, are far from dull.

The fingertip reader, which will link directly with the customer database, will negate the need for cards and has the potential to offer realtime data. According to Bamfield, the scheme Co-op currently has in place, and which reinvents the dividend, is also effective and has grown two or three times over the past six years to contribute to the group's success.

Another retailer that has opted for a different approach is Somerfield. Its Saver Card rolled outlast year as it ditched the familiar points-based strategies to offer instant rewards at point of purchase via key fobs and coupons. Ian Fay, Somerfield's direct marketing controller, says it's been a runaway success. He declines to reveal his targets, but says that the scheme has delivered incremental sales.

Fay claims Somerfield's suppliers are showing a great deal of interest in gaining access to its data. 'At the moment, we're not interested in selling it — we wouldn't go down the brand versus brand route — but we are looking at testing a couple of brand-partnered pushes in six months or so, ' he says.

With LMUK's Sinclair also claiming that some 200 companies have approached

Nectar since March, there is a clear indication that most brands, regardless of size or category are still hot for loyalty.

However ludicrous Blunkett's analogy between ID and loyalty cards appeared, he was spot on with one thing: in marketing, as in politics, the key to power is knowledge."

In MarketingMix magazine, Volume 22 No. 4 it was reported that:

"The concept of customer loyalty has become one of the most vexing issues facing brand managers across the world. Superficially, the logic and the numbers stack up. If organisations can find ways to improve customer loyalty, then overall profitability should improve. And we all know that it costs between seven and fifteen times more to create a new customer, than it does to keep those that we already have.

From a customer's perspective, you require a calculator to work out whether beans, bucks, miles or points are going to offer you the best return for your loyalty. But, from a programme operator's perspective the issues are even more complex. Your first decision should be whether you choose an open loop or a closed loop programme.

The main differences between open and closed loop programmes are fairly simple.

Closed loop programmes are essential programmes run by the operator with the risks and rewards being for the account of the operator.

The operator's brand is typically the sole hero in the programme and there are very few, if any, third parties involved in the earning or redeeming of rewards. Open loop or multi partner programmes differ in that the concept of sharing customers is introduced and rewards can be earned and redeemed at more than one of the partners.

Closed loop programmes are often predicated on the myopic assumption that organizations can actually own their customers. In this era of ubiquitous information, where consumers tend to vote with their feet, owning customer is a misguided concept.

Consumers today are effectively being shared between a wide variety of brands, depending on where and when they are using particular products and services.

The costs indicated with a closed loop programme are fairly simple to define up front.

They include the cost of capturing the customer's data, communicating with the customer, managing the transactions and interaction with the customer and obviously, the cost of the reward for the customer. And don't forget that internal stall will also need to be trained so that they are able to seamlessly interface with customers.

Notwithstanding the benefits offered by economies of scale, as the programme grows, so the fixed costs become more significantly and in time, the programme cannot be sustained.

Take the cost of communicating to a large retail customer base of one million people, as an example. If you were to send each of them a magazine, a letter and an SMS four times a year, you wouldn't have much change for R60 million. In a closed loop programme, that cost goes straight through the income statement.

In an open loop programme, the costs can be shared proportionality with the other partners. The key of course is to only partner with organizations who do not sell products and services almost without fail, the operator of a closed loop programme eventually has to change the benefits structure of the programme because the cost per customer becomes too high. Take the announcement in late 2003 by SAA that benefits on its voyager programme have been changed.

By increasing the cost of a mile from R5 to R7.50 and the number of miles required to earn a return air ticket to London from 70,000 miles to 11,000 miles. SAA simply moved the attainability horizon even further away.

Then of course there is the final coup-de-grace in a closed loop programme. In effect, you are giving a discount to your existing customers. By definition, a closed loop programme is probably not going to attract sufficient new customers to offset the costs associates with launching and managing the programme. In all likelihood, just the cost of the reward will render the closed loop programme model too onerous to operate. The only way out is a significant increase in market share, which in most sectors is highly unlikely.

The benefits of the open loop programme far outweigh those of the closed loop option. The key in the open loop model is to ensure that only partners who can add value to the customer experience are chosen. It is important to choose partners who are able to clearly understand that they are part of a marketing alliance that is designed to create, keep and leverage customers. Partners must also be chosen because they can offer access to a defined customer base through a variety of communication channels. If one of the partners sends out a regular monthly statement or newsletter, that becomes a way to leverage the relationship in a mutually beneficial manner. Sharing the cost of the communication to a customer reduces the cost of participating in an open loop programme. Naturally the offers must be relevant, not intrusive and permission-based.

A final, but critical issue to consider when launching a loyalty programme is the ability to shape customer behaviour. An effective loyalty programme must deliver an increase in revenue per customer for it to be successful. Reinvesting a percentage of the incremental spend generated from higher volumes of business per customer makes good sense.

Which leads to the difference between a discount and a reward. Something that we will cover in a future article"

OBJECT OF THE INVENTION

It is an object of the invention to provide a loyalty and customer relationship management system and method of the type described above.

SUMMARY OF THE INVENTION

In accordance with this invention there is provided a loyalty and customer relationship management method comprising the steps of marketing and promoting goods and/or services for sale via a computer network, assigning loyalty rewards including but not exclusively limited to digital certificates to a purchaser of such good and/or services; transmitting a loyalty reward and/or voucher over a wireless network to a wireless communications device which processes the redemption of the reward via a mobile phone and/or point of sale device including but not limited to a debit / credit card terminal .

The invention extends to a loyalty and customer relationship management method comprising the steps of: marketing and promoting the purchase of goods and/or services over a computer network; and receiving a wireless signal at a wireless communication device, the signal, including a loyalty reward and or voucher which is then used to record the purchase of the goods and/or services.

There is provision for the computer network to be linked to the Internet.

A further feature of the invention provides for the wireless communications device to be a mobile telephone or any other device that may receive signals over a mobile telephone network or wireless data network.

A further step of the invention provides for the redeeming of a voucher at a retailer by entering a purchaser's cell phone number and/or an encrypted number associated with the voucher into a computing means for verification of the voucher.

The computing means may be a retailer's point of sale device, computer terminal or a bank terminal.

A still further step of the invention includes storing of a purchaser's details and corresponding voucher/s in a database.

The purchaser's details includes at least the purchase's cell phone number.

In accordance with a first aspect of the invention there is provided a loyalty system comprising an Internet site offering goods and/or services for sale; a payment means for receiving payment from a purchaser for the goods and/or services; a voucher generating means for generating a voucher in order to track and record the purchase of goods and/or services.

Transmission means for transmitting a signal including the voucher or such similar digital transaction record over a wireless network for a wireless communication device.

There is provided for the wireless network to be a mobile phone network.

The wireless communication device is a mobile telephone or any other device that may receive a signal over a wireless communication network.

A further feature of the invention provides for a storage means to store details relating to a purchaser linked to a voucher or such similar transaction record which can be redeemed electronically.

There is provided for the details of the purchase to include at least the purchaser's cell phone number.

Redemption at a retailer means allows for the purchaser to redeem loyalty points and or rewards over the wireless communication network.

The redeeming means includes a point of sale device or a computer terminal or a bank terminal or any other device for imputing a mobile telephone number or a code received with, or as, the voucher or such similar digital transaction record for verifying the voucher.

The redeeming means communicates with the storage means once the mobile number or the code has been entered to validate the voucher's details.

These and other features of the invention are described in more detail below.

BRIEF DESCRIPTION OF THE DRAWING

One embodiment is described below, by way of example only, and with reference to the drawing which shows a schematic diagram of a loyalty and customer relationship management system.

DETAILED DESCRIPTION OF THE DRAWING

With reference to the drawing, a loyalty and customer relationship management system is generally indicated by reference numeral 1.

The loyalty and customer relationship management system includes a web site hosted by a server computer 2 accessible over the Internet 3 from a purchaser's computer 4 as is known in the art. The server computer 2 includes transmission means for transmitting a signal over a mobile telephone network 5 to a mobile telephone 6.

In use, a purchaser accesses the web site hosted by the server computer 2 where goods and/or services are offered for sale by retailers and related service providers.

A payment means allows for a purchaser to make purchases of goods and/or services as is known in the art. In order to confirm the purchase of goods and/or services a digital voucher is transmitted electronically to the purchaser's mobile telephone 6 such as a cellular telephone, which digital voucher may be redeemed at the retailer or service provider from which the purchaser has purchased goods and/or services, or from any other retailer or service provider who is a partner in the loyalty scheme.

The voucher is generated electronically and transmitted to a predetermined mobile telephone number provided by the purchaser or the loyalty scheme partner. The purchaser thus receives a digital voucher on his mobile telephone 6. The purchaser redeems the voucher by visiting a retailer or service provider who is a partner of the loyalty programme.

The purchaser provides the digital voucher to the sales person at the retailer or service provider by transmitting the voucher to a predetermined number specified by the retailer or by physically showing or giving a code associated with the number to

the sales person or by providing his mobile telephone number to the sales person. The sales person enters the purchaser's code/mobile telephone number into an electronic device such as a point of sale device 7, or a computer terminal. In the case of the purchaser transmitting the voucher to a mobile phone number specified by the sales person, the code of the voucher or the mobile telephone number is automatically entered in the point of sale system or the computer terminal. The code or mobile telephone number is transmitted from the point of sale terminal or from the computer terminal to the storage means in the form of a database 2, to verify the authenticity of the digital voucher. Once the digital voucher is verified, the purchaser purchases the relevant good and or services from the retailer and the details of the transaction are recorded on the server computer 2. The purchaser may also receive non pecuniary value for redemption at another partner who is part of the loyalty program or customer relationship management program. Such non financial benefits may be in the form of additional rewards for loyalty to that retailer or service provider.

The voucher will in most cases be an electronic voucher in the form of a message to the mobile phone and may include text and/or a code for use in verifying the voucher when redeeming the voucher.

It is envisaged that the invention described herein will be convenient to use for both retailers and purchasers in a loyalty programme and for managing and tracking data which is generated via a customer relationship management program. Using the process set out in the art, the purchaser does not have to receive a physical voucher and redeems his loyalty points using his mobile telephone at a retailer's premises. There are at present various programmes which enable digital vouchers which have been transmitted electronically to a mobile phone, to be redeemed at a retailer or service provider. The invention is unique in that the entire process originates via a computer terminal where the purchaser identifies the products or services which they wish to purchase. The initial selection of such goods and or services is made via a computer terminal and from there the record of the goods and or services is stored on a database until the digital voucher is redeemed at point of sale.

The invention is not limited to the precise details as described herein and it will be appreciated by those skilled in the art that many variations are possible without departing from the scope of the invention.