5 ways Telstra transformed customer loyalty
9th of Oct 2016
A couple of weeks ago I was on a breakfast panel at the start of the Telstra Vantage summit with GMD Martijn Blanken – speaking about whether customer loyalty as we know it is coming to an end, and how can we better create loyal customers.
It’s a topic on the minds of many marketing and business leaders, particularly as Millennials (born 1970 to 1995) grow in their share of consumer spending power and show that they are more sensitive to price than previous generations. This is impacted in some ways by their level of education and ability to access information to compare their options which those before them never had. The implication for brands, is that they need to find a deeper driving motivation that transcends price for coming generations to use their brand.
Later in the day, we heard from Telstra’s Head of Digital Media, Andrew Cordwell and General Manager of Loyalty and Partnerships Fady Taouk as they took us behind Telstra’s “digital curtain” to reveal just how it’s Thanks loyalty program was able to drive significant positive change to their net promoter score.
1. Shifting Marketing’s Identity From A Cost Centre To A Profit Centre
As Fady tells it, historically, the majority of the marketing budget at Telstra was invested in mass market media, and only 4% into CRM, digital and loyalty. The remaining 96% was ploughed into press, TV and radio.
Culturally, this meant that marketing was seen as a cost centre, not a profit centre, often referred to as “the colouring in department”. This made it impossible to unlock capital investment that would allow the organisation to leverage the great assets it has access to. This is an all too familiar story for so many corporates. Fady described this approach as an “over investment”, and (hopefully) a likely relic of marketing’s distant past.
Fast forward to today where 40% of Telstra’s marketing budget is now spent in customer loyalty and digital. This is a massive cultural adjustment and a key component of this shift has been the ability for the marketing department to access capital. Teaching an entire department how to build CAPEX business cases is not a small task, but it is one that has paid off in this case.
2. Solving The Loyalty Challenge
As CEO Andy Penn has stated more than once in the media, Telstra needs figure out how to move from being an ICT company, to being a technology company as a key part of its strategy to remain relevant into the future. It is a question the company is grappling with in multiple ways through a combination of acquisition, investment in early stage startups via MuruD as well as later stage through international investment programs or later stage acquisitions in industry verticals of strategic importance such as health via Telstra Health.
3. Creating A Winner Loyalty Program Premise
What I love about this statement (apart from being aligned with the broader long-running theme of “connecting people” within the Telstra brand), is that it shows clear alignment to the millennial mindset – where individuals are more likely to value experience over monetary rewards.
Fady explains that in the past, speed to market often won out over getting access to data. All to often, the marketing department would fall back on a paid model and there was a cultural mindset of “paying to fix the problem”. But reframing problems as opportunities to create loyalty has already been successful approach for Telstra’s marketing teams. For example, the thousands of old Telstra phone boxes were originally seen as a “waste of technology and space”, but were ultimately transformed into wifi hotspots and a mini media outlet once the team began to think about this old company asset in a different way.
What this meant in practice for the Telstra Thanks program was the concept of leveraging existing assets (in this case, their vast access to content and partners) by providing access and a level of exclusivity to that access across a range of Movie, Music, Sport, Arts and other entertainment for Telstra customers.
4. Collaboration As a Means To Amplify Success
To bring the “Thanks” customer loyalty collaboration to life, Telstra looked at what value they could offer to partners, and what value they could derive in return.
So for instance, with music tours, the value proposition would be to get your tickets first via Telstra. Telstra gain exclusivity while the tour promoter is able to sell 40-50% and reduce their entire marketing budget by the same amount. Or in a data sharing example, sporting partners provided member data to Telstra which means access to information on the individual’s favourite team and the amount of spend going to live games.
Pull those things together with other data sources (using email as a unique identifier to match records) and you can quickly see how Telstra has then built out a super-segment that allows their direct digital marketing to become highly personalised and cognisant of an individual’s total spending power and preferences.
After building capability, “Thanks” as a customer loyalty program touches 30% of Telstra’s customer base each month and results in 4.5 million redemptions per year. This smart thinking team has creating a self sustaining program that means just 5% is spent on marketing, while the remainder goes back to the customer in the form of rewards.
In fact, in 2015, Telstra delivered 330 million data driven contacts which drove $1.1 billion in incremental value that could be traced directly back to marketing activity. That’s an 8:1 ROI – a veritable coup for any marketing team.
The underlying premise that Fady adhere’s to in this concept of data sharing is “don’t waste a customer contact if you don’t have to”. Why? Message blindness, marketing opt outs (as it relates to email marketing), lower conversion rates – the list of negatives goes on. So what should you do to create a successful loyalty program?
5. Advice For Mapping The Digital Customer Loyalty Journey
- Understand your own data assets (e.g. phone records, location based, retail footprint, purchase behaviour transactions)
- Collaborate with internal divisions as well as external partners to help understand what that data means
- Turn it into an actionable campaign that benefits the program and its collaborators
- And lastly, really ask yourself: “Are you really sweating your existing assets hard enough?”
So…Can Customer Loyalty Programs Move The Needle?
NPS for those in the program are 30% higher, program members are twice as likely to recommend, they have a 5% lower churn rate and spend $23 more per year.
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