麦肯锡—Design a low risk rewards program.ppt

JH990709JHZXT466DS_P1,JH990709JHZXT466DS_P1,1,SUMMARY,Can create significant benefits through introduction of a rewards programmeUsageRetentionSupport of targeted retention programmesCountering competitive threatBut reward programmes can also easily lose moneyInsufficient change in customer behaviourOver-ambitious and expensive programme designUncertainty over value createdMajor risks can be mitigated by following a conservative design and rollout approach,JH990709JHZXT466DS_P1,2,BACKGROUND,Duopolistic mobile telecoms providersGrowth in contract customers stagnatingLosing market share in prepaid customersChurn rates of 2-3%/month and risingEstimated value of 25%churn reduction would contribute an additional 8%to EBIT p.a.(steady state),Key challenges,Hyper-competitive market,Aggressive selling by client and competitor through mostly dual service providers3rd operator expected to enter market in 6-12 months,Inferior market image,Growing customer perception of better value with competitor(service,price,network quality),Diminishing product profitability,Huge(and growing)handset subsidies by both competitors up to 100%,Limited churn reduction experience,Pre-McKinsey plans would have thrown considerable value away for little churn impact,JH990709JHZXT466DS_P1,3,PROJECT APPROACH,JH990709JHZXT466DS_P1,4,3 KEY QUESTIONS,1.2.3.,Should we launch a rewards programme?What is the value-maximising programme design?Will the programme pay for itself?,JH990709JHZXT466DS_P1,5,UNDERLYING ANALYSES,1 700 face-to-face mobile telecom customer interviews(weighted by value and type of contract)Key questions on:Interest in reward programmesPreference for type of reward and redemption frequency,Customer research,15 McKinsey CSS involved in reward programmesAttendance at London conference on reward programmesKey questions onProgramme value for moneyBusiness objectivesBest practice programme structuring,Expert interviews,Cost:benefit analysis300 telephone interviews for programme membersKey questions onSatisfaction with programmeWillingness to move to another programme,Existing programme evaluation,JH990709JHZXT466DS_P1,6,3 KEY QUESTIONS,1.2.3.,Should we launch a rewards programme?What is the value-maximising programme design?Will the programme pay for itself?,Have reward programmes been successful elsewhere?Are customers really interested?What customer benefits can a rewards programme bring that targeted retention initiatives on their own cannot?How would a rewards programme affect the competitive landscape?,JH990709JHZXT466DS_P1,7,WELL-DESIGNED LOYALTY PROGRAMMES CAN LEAD TO SIGNIFICANT IMPROVEMENTS IN USAGE AND CHURN,Source:Team analysis,McKinsey,Churn reduction,US cellular provider 1,US cellular provider 2,US cellular provider 3,US cellular provider 4,UK mobile phone provider 1,UK mobile phone provider 2,UK mobile phone provider 3,Usage increase,International department stores/financial institutions study,Cautionary note:Uncertain at what cost these results have been achievedUncertain how results were calculated(and therefore whether they are valid),JH990709JHZXT466DS_P1,8,UP TO 60%OF HIGH VALUE CUSTOMERS ARE INTERESTED IN REWARDS PROGRAMME,MOBILE TELECOM PROVIDER SURVEY,Contract customers,Prepaid customers,The percentage of interested customers is higher for High Value customers,Actively avoid,Actively avoid,Partially participate,Partially participate,Fully participate,Fully participate,High value,Medium value,Low value,%responses,High value,Medium value,Low value,Source:1 700 customer interviews,JH990709JHZXT466DS_P1,9,A REWARDS PROGRAMME CAN COMPLEMENT OTHER CRM INITIATIVES VERY WELL,Anticipated additional benefitsOffering points can be more cost-effective than offering targeted programme incentives directlyTime lag between points offer and redemptionBreakageValuable customer information can be collected(especially on low information segments such as prepaid customers)The value of a targeted programme offer to a customer is enhanced due to increased choicePoints can be offered across all value segments,since the amount of points offered can be linked to customer valueThe programme could improve retention in its own right(points earned are a barrier to exit)Reward programme points could be used in an acquisition programme(a 1%increase in gross connections has considerable NPV impact)Loyalty points can be offered to groups difficult to reach through other CRM initiatives(e.g.corporate customers,customer who cannot be contacted,or low value customers),JH990709JHZXT466DS_P1,10,A REWARDS PROGRAMME ALSO PROVIDES THE MOST PRACTICAL COUNTER MEASURE TO A REWARDS PROGRAMME LAUNCH BY A COMPETITOR,MOBILE TELECOM OPERATOR,JH990709JHZXT466DS_P1,11,3 KEY QUESTIONS,1.2.3.,Should we launch a rewards programme?What is the value-maximising programme design?Will the programme pay for itself?,What rewards should we offer?What redemption rate or reward frequency will change customer behaviour?How can the earnings structure risk be limited?Should we go it alone or join a consortium?What is the best implementation and roll-out approach?How can we accurately measure programme impact?,JH990709JHZXT466DS_P1,12,SEVEN KEY DESIGN PRINCIPLES,JH990709JHZXT466DS_P1,13,1.APPLY THE BASIC RULES OF THUMB,Rule,Rationale,Use a low earnings:revenue ratio(1.4-2%),Best practice shows 1-5%ratio is sufficient to successfully modify customer behaviour,Points are lost after predetermined period(3 years),Limit long term accounting liability,Points are lost after customer terminates relationship(or is dormant for 3 months),Incentive to reduce churn and dormancy,Points are added quarterly,Incentive to reduce churn,Points are earned on both outgoing(billable)and incoming initiatives,Aligns customer incentives with company value drivers,Calls for redemption/customer queries are chargeable,Offsets cost of programme,Customers can only join programme after an initial period(3 months),Incentive to only take on serious*customers,*Not acquired via over-generous promotion,or having major financial difficulties(e.g.,received contract as Christmas present and could not afford)Note:Figures in brackets denote client programme choices,MOBILE TELECOM OPERATOR,JH990709JHZXT466DS_P1,14,2.MAKE REWARDS ALIGN ACCURATELY WITH VALUED CUSTOMER PREFERENCES,Customer research feedback(mobile telecom operator),*Customers by value categorySource:1 700 face to face customers interviews,JH990709JHZXT466DS_P1,15,3.ENSURE EARNINGS STRUCTURE IS LINKED BEYOND DOUBT TO CHANGES IN CUSTOMER BEHAVIOUR,MOBILE TELECOM OPERATOR,JH990709JHZXT466DS_P1,16,ONLY A VERY SMALL PERCENTAGE OF CUSTOMERS WILL BE ABLE TO REDEEM BASE POINTS FOR HIGH VALUE REWARDS,Air-ticket,ResortHotel,Accessory,Free minutes,Based on base points alone,breakage would be about 10%Benefits would be driven by evidence of retention and slight usage increases,0.0003%(30 customers),0.7%(6 900 customers),21%(200 000 customers),41%(400 000 customers),66%(650 000 customers),Points forfeited on FIFO basis,MOBILE TELECOM OPERATOR,Value,JH990709JHZXT466DS_P1,17,JH990709JHZXT466DS_P1,18,CUSTOMERS THAT PARTICIPATE IN THE BONUS PROGRAMMES WILL EARN POINTS MORE QUICKLY,Value,Note:Assuming a 2-year participation the Company X Challenge programme,Air-ticket,ResortHotel,Accessory,Free minutes,0.0003%(30 customers),0.7%(6 900 customers),21%(200 000 customers),41%(400 000 customers),66%(650 000 customers),Points forfeited on FIFO basis,2 500,500,100,50,20,3,6,9,12,15,18,21,24,27,30,33,36,JH990709JHZXT466DS_P1,19,BONUS POINTS CAN ALSO BE USED TO STIMULATE CUSTOMER BEHAVIOUR DIRECTLY IN OTHER WAYS,Sign on a friendSpeed up penetration of new technology(e.g.,SMS,facsimile,Internet)Competitions and rafflesParticipation in customer surveysOther(?),MOBILE TELECOM OPERATOR,JH990709JHZXT466DS_P1,20,JH990709JHZXT466DS_P1,21,JH990709JHZXT466DS_P1,22,*Programme rewarded mobile telcom customers with airmiles linked to strongly branded programme of a specific airline,JH990709JHZXT466DS_P1,23,Overall premise:Build the next level of programme sophistication but hold in reserve until required,MOBILE TELECOM EXAMPLE,6.EVOLVE THE PROGRAMME STRATEGICALLY,JH990709JHZXT466DS_P1,24,7.CREATE RIGOROUS PERFORMANCE MEASURES,MOBILE TELECOM OPERATOR,Frequency,Method,MonthlyMonthlyMonthlyWeeklyMonthlyMonthlyMonthlyMonthlyWeeklyWeeklyMonthlyMonthly,Query of wizard systemQuery of IVR systemGraph of queue time distribution with averageTrack MSISDN SMSed and number on loyalty programmeCounts via loyalty systemsQuery of loyalty costsNumber of members overUsage query via ITQuery of CRM pilot dataQuery of CRM pilot dataLoyalty negotiated agreementsLoyalty systems,JH990709JHZXT466DS_P1,25,3 KEY QUESTIONS,1.2.3.,Should we launch a rewards programme?What is the value-maximising programme design?Will the programme pay for itself?,How difficult is it to achieve breakeven?How can the long-term liability be minimised?,JH990709JHZXT466DS_P1,26,A CONSERVATIVE DESIGN AND ROLLOUT APPROACH CREATES A GOOD CHANCE OF POSITIVE NPV,Seven design principles,Expected NPV over 2 years(%of total cost),1.2.3.4.5.6.7.,Apply the basic rules of thumbMake rewards align accurately with value customer preferencesEnsure earnings structure is linked beyond doubt to changes in customer behaviourEnsure programme administration and customer communication channels are simple and inexpensiveOwn the points currencyEvolve the programme strategicallyCreate rigorous performance measures,*Assumes 1%through basic programme;3%through foreseeable bonus scheme with 15%take up rate)*Assumes 5%for high value customers;2.5%for low value customers),Usage(4%increase*),Churn(4%decrease*),Total cost,Admin cost,Base points,Bonus points,NPV,MOBILE TELECOM OPERATOR,JH990709JHZXT466DS_P1,27,*Weighted average based on a decrease of 0-2.5%(Low Value customers)and 0-5%(other customers).Weights:low value 15%;other 85%,JH990709JHZXT466DS_P1,28,THE EARNINGS STRUCTURE DESIGN ALSO IMPLIES A LOW FINANCIAL LIABILITY,By making 50%of all points distributed discretionary or directly linked to usage increases,the long term liability is considerably diminished vis-vis giving away all points automatically,Yr 1,Yr 2,Yr 3(Steady state*),*All points given away as base points at 2%of customer revenue*Assumes no net adds to customer base at 40%reward programme penetration,Yearly liability,Additional liability of normal programme*(or to be used as ad hoc bonus points),Indexed earnings liability,100,176,185,Discretionary or bonus points,Non-discretionary base points,44%,31%,25%,100%,JH990709JHZXT466DS_P1,29,THE BOTTOM LINE,JH990709JHZXT466DS_P1,30,REWARDS WILL BE CONFINED TO A SHORT LIST OF OFFERS AIMED AT BOTH CONTRACT AND PREPAID CUSTOMERS,Rewards,Basic usage earnings,Usage bonuses*,Redemption threshold(points)*,Perceived Value(R),Quarters required to redeem,*1 Point is equivalent to R0,0064 of perceived value to a customer,or 1 minute of usage*Value offered to customers equivalent to 2%of revenue,as per best practice*Only redeemable if additional bonus points are earnedNote:Could potentially offer non-cellular low value awards via proposed alliance with CNA,10 off-peak minutes15 peak minutes75 off-peak minutes45 peak minutes90 peak minutesEar-pieceCell-phone batteryMembership of gold club for 2 quartersMTN event20%discount on hotel/resortHotel/resortHand-set upgrade*Air tickets*,1122448144-,225599-294-,441010-4-,-,111122512211-,1133559155-,224488-288-,441010-4-,3 0003 0007 5007 50015 00015 00030 0003 00015 00015 00075 000150 000375 000,20205050100100200N/A1001005001 0002 500,VH,H,M,L,VH,H,M,L,Based on customer preferences and best practice tips1 x per yearCell-related awardsBig-ticket items for HV-customersTravelLeisure,JH990709JHZXT466DS_P1,31,青苹果出品 必属精品http:/,囊括2007-2010几百G地产策划资料/企业管理人力资源全套/品牌策划资料/行业分析报告/PPT模板等。,