Ques 1 .

What is Customer Loyalty Program?

It is basically an organized collection of customer data which is often used to offer

customers add on privileges and benefits or services to loyal customers in the form of
reward points, coupons vouchers or any other such benefits.

Customer Loyalty Programs are needed for:

 Rewarding the customer for being special.

 To create a bounce in enrolments/memberships
 Grabbing the eyeballs of new customers to new attractive offers
 To generate and show a keen interest in existing customers

1. Amazon Loyalty Program:

In terms of its value proposition, Amazon’s marketing is fueled by its Prime customer
loyalty program. Unsurprisingly, Amazon’s success with Prime is almost the stuff of
legends. Its membership base grew by over 50% last year. Macquarie Capital estimates
that about 25% of US households have Prime accounts, and that 51% of US ecommerce
growth in 2015 has been due to Amazon.
While Amazon hasn’t released numbers about the revenue that Prime provides, in
Annex Cloud’s experience, we–speaking conservatively–see a 5 to 10% increase in
revenue from our customer loyalty solutions. Loyalty program members, furthermore,
spend 5 to 20% more than non-members, and purchase frequency for our loyalty clients
also tends to rise by 5 to 20%.
When customer loyalty software is augmented by a referral marketing program—which
is something that Amazon hasn’t fully explored—the growth is even better. One of our
clients saw a 300% increase in revenue after they switched from a simplistic, traditional
loyalty platform to one enhanced with brand advocacy solutions.
Prime is somewhat uncommon in that shoppers actually have to pay extra for
membership. Psychologically, it’s possible that this aspect creates a certain sense of
prestige and extra worth. Regardless, many, many Amazon customers think that the
convenience they receive is worth the money. After all, they get free and fast shipping
for millions of products, cloud storage, various free streaming movies and television
shows, streaming music, and a Kindle owners lending library.
These features, especially in combination with what some see as excellent customer
service, foster loyalty beyond the Prime program. Many of our customers have also seen
great success with paid membership loyalty programs akin to Amazon’s.
A vital point about all of these perks is that they’re continual. That is, instead of giving
shoppers one-time rewards for purchasing, Amazon loops its loyalty members into an
entire ecosystem with benefits that last a year (and much longer, if the membership is
renewed). The incentives for purchasing again are tangible and immediate, and
customers can use all features of the program at any time. There’s no racking up points
through purchases. Essentially, Prime is seamless.
To wrap things up, I have to emphasize the point that Amazon creates a holistic
experience for its customers. Everything shoppers want—even food delivery—can be
found on their website. While not many retailers can manage to provide everything
under the sun, everyone can work towards creating a more complete customer
experience. Review solicitation emails don’t just lead to more UGC; they also bring
customers back to the site.
What Could Be Improved

Even beyond loyalty, Amazon creates a holistic experience for its customers. Everything
shoppers want—even food delivery—can be found on their website. With its Echo
smart assistant and Dash refill buttons, Amazon’s seamlessness is extending to our own
living spaces. But not all of Amazon’s marketing programs are seamlessly connected. If
Amazon were to institute some sort of tiered rewards system based on engagement,
they could loop everything from the aforementioned review writing to shoppers’
Instagram activity into a central hub on their own website.
Account holders could be rewarded for taking actions like sharing and hash tagging
photos, following Amazon on social, referring friends to Prime membership, and so on.
By incentivizing these actions and connecting them all to customers’ Prime accounts,
 Amazon would amass even more user data, see dramatically increased engagement,
and reap the rewards in terms of higher repeat purchase rates and average order values

2. Starbucks Loyalty Program:

1. Offer program members the chance to enjoy mobile payments. We recommend

making it exclusive to them, as it will convince other customers to join your loyalty
programs.
2. Speaking of exclusive, provide the most loyal members (those who spend the most,
frequent your store/restaurant often, and promote your services) access
to exclusive rewards (be sure to make them meaningful, and a bit hard to obtain).

Starbucks offers their members access to 3 exclusive features:

 Monthly Double-Star Days (once per month, Gold members can earn 4 stars/$1
spent)
 Personalized Gold Card (quite a nice touch)
 A Reward Every 125 Stars

3. Let your program members enjoy privileges such as being able to order and pay
ahead. Not only does it make clients feel special, but it’s also more convenient for
them (they don’t have to wait for the order) and you (wait times and lines are
reduced).
4. Remember to make your loyalty program budget-friendly, and ensure it targets the
right customers. We’re talking about the patrons who actually look forward to
spending their money on your services/products, and who don’t only do it just to
gain access to rewards.
5. Personalize some of the rewards, so that your program members will truly feel like
your brand cares about them. In turn, that will make it easy for you to build a brand-
centered community of loyal consumers that will promote your services

Well, Starbucks Loyalty Program did it just right by offering their patrons access to:

 Member Events
 Free Birthday Rewards
 Special Offers
Scope of Improvement :

1. Show progress toward free drinks: The progress of the loyalty program should be
shared with the customer on regular intervals to keep them motivated. The
research findings show that customers would be more motivated if they knew they
were getting close to an award.
2. Give advance notice of status loss: The timing of the notice, or series of notices,
could be predicated on the number of drinks needed (a larger number would need
longer notice) and consumption patterns. Emphasizing the substantial progress, the
customer had made toward keeping gold status would produce the same goal-
gradient motivation described above, and would be far more likely to get a
customer back in the store quickly than telling them they had to start over
3. Give expired members a head start. If a customer went to the trouble to register
on line and then consume enough coffee to earn a gold card in the first place, they
are likely someone with above-average interest in coffee in general and in Starbucks
in particular. There may be some reason their consumption fell off so dramatically
that they lost gold status – a new workplace, a competitive store that was more
convenient, etc. Whatever the reason, it doesn’t make sense to alienate this
customer by sending them back to zero. If the “last chance” email(s) don’t get the
customer up to Gold status, don’t give up, try another neuro-incentive:

Ques 2.

Customer lifetime value (CLV), sometimes referred to as lifetime value (LTV), is the
profit margin a company expects to earn over the entirety of their business relationship
with the average customer.
The customer lifetime value must account for customer acquisition costs (CAC), ongoing
sales and marketing expenses, operating expenses, and, of course, the cost required to
manufacture the product and services the company is selling

Customer lifetime value is a powerful piece of business intelligence that informs an

efficient strategy for business growth. Also known as CLTV, LCV and LTV, these
calculations also provide a benchmark against growth goals and a vivid indication of
company value. Customer Lifetime Value, which can be expressed in a detailed or more
general formula, is typically defined as the value (in current dollars) of the net profit you
can expect from a given customer’s purchases over the entire life of the customer
relationship.

With a CLV calculation, you’re learning, in essence, what your average customer is
“worth” to your company. Let's say a customer CLV is $60K. If it cost, you $15K a year to
service this customer and it cost $20K to aquire this customer. How long do you want to
keep this customer? Obviously no more than 3 years or you'll only be breaking even and
starting to lose money. Understnding this type of data helps a company be much more
profitable and also helps to define the ideal customers for the marketing and sales team
to focus on.

This information is helpful to the business owner or CEO as they develop strategies
for:

 Acquisition -

Customer Lifetime Value (CLV) helps you allocate your customer procurement budget
based on what the new client will actually bring to your firm. You’ll develop a better
understanding of what you can spend to acquire customers.

 Advertising and marketing targeting -

Use CLV data to help build more accurate and detailed customer personas. Customer
lifetime value helps you spend advertising and marketing dollars wisely, focusing on the
customer segments(s) that deliver the highest profit to your company.
  ROI -

CLV provides an excellent indicator and accurate measurement of marketing campaign

performance. Get maximum return from often limited resources.

 Impact of management strategies -

Learn the effect of certain high-level decisions on the value of customer assets. The CLV
data can be used to encourage a company culture emphasizing long-term customer
satisfaction, rather than solely focusing on short-term sales.

 Retention efforts -

Decide what you should spend to retain specific customer segments. This helps you
manage your customer relationships toward profitability. Measure customer loyalty,
including factors such as purchase frequency and probability.

 Individual-customer profitability -

You can calculate the profitability of a single customer. This info can be used by the
sales team, for example: to focus their efforts on the most profitable new-customer
demographic for a particular product/service and to point out upsell opportunities
within the current customer base.

 Company profitability/valuation -

CLV is a key data point in determining the valuation of your company. Knowing the value
of your customer base, and expected growth, is useful when seeking additional rounds
of funding or evaluating buy-out offers.

Some examples illustrating the customer life time value

1. AMAZON:
Consumer Intelligence Research Partners estimates that Amazon Kindle owners
spend approximately $1,233 per year buying stuff from Amazon, compared to $790
per year for other customers. So Amazon pays close attention to Customer Lifetime
Value (CLV). Amazon Prime has been developed to enable Amazon to efficiently
compete on price and to increase customer lifetime value. According to a 2013
 study by the Consumer Intelligence Research Partners, Amazon Prime members
spend $1,340 annually. And that was 3 year ago. It’s more now. By applying
Customer Lifestyle Value (CLV) to the development of Amazon Prime, Amazon
knows how to get the most out of their most profitable customer segments.

2. BONOBOS:
Is a leading e-commerce driven men’s apparel brand focused on delivering great fit,
a fun approach to style, and superb customer experience. Bonobos has always been
a data-driven, customer-focused retailer. With Guide shops, Bonobos has service-
oriented e-commerce stores that enable men to try on Bonobos clothing in person
before ordering online. Bonobos discovers that Guide shops bring in customers with
the highest lifetime value across all of its marketing channels. Insights into which
channels are attracting Bonobos’ highest-value shoppers has helped Bonobos
increase the predicted lifetime value of its new customers by 20%

3. NETFLIX:
An average Netflix subscriber stays on board for 25 months. According to Netflix,
the lifetime value of a Netflix customer is $291.25. Netflix knows that customers are
impatient and some customers cancel because they don’t like waiting for movies to
arrive in the mail. Due to this they’ve added a feature where you can stream movies
on the web, which not only satisfies your movie urge, but it keeps you busy while
you are waiting. By tracking these stats and behavior, Netflix has reduced their
churn to 4%

4. U.S. AUTO PARTS:

Realizes the competitive advantage of loyalty and decided to invest. The company
debuted the Auto Parts Warehouse loyalty program, known as APW Rewards. U.S.
Auto Parts began to leverage capabilities such as increased rewards for high-margin
products, personalized post-purchase enrollment offers, a status tier, and triggered
email campaigns based off of a person’s repurchase history to maximize customer
lifetime value. U.S. Auto parts increased its spend per member by 20%, its
repurchase rate by 14%, and its enrollment rate by 45% after updating the loyalty
program of its flagship brand.
Ques 3(A).

In setting up a website, sometimes it is the individual pages that get the most attention.
Besides, users usually only see one page at any given moment. The entire site is never
seen explicitly displayed on the screen. From a design standpoint, the design of the
entire site is, however, often more difficult to achieve and is more important than that
of the pages itself. The following aspects are key in determining the success of the site
design:
 Every page on the site must indicate clearly and consistently the site that is being
visited and what may be done on this particular individual page. The company logo
at the top left (or in any case, at a consistent location) is the most broadly accepted
way of accomplishing this.
 There should be a portion of the homepage that contains links to the most
important sections of the site. This section involves the global site navigation.
Roughly 20 per cent of the users are link-dominant: they try to browse to find
their way around websites. Naturally clear and concise descriptions of the links
are a must.
 Approximately half of all Internet surfers are search-dominant. They try to obtain
all of the information they are looking for via the search function. For this reason,
every page should contain a search function.
 The homepage is a suitable location to place announcements regarding changes,
new products and services, press releases and so forth. The condition, however,is that
the content supplied is refreshed on a regular basis.
 There are three questions that are important in order for a visitor to determine his or
her position on the site:
1. Where am I?
2. Where have I been?
3. Where can I go?

 The skeleton or the structure of the site must have meaning for the user. A site
without the proper architecture can lead to chaotic situations and create frustrated
visitors.
 A site should be designed according to dominant conventions on the web.
Users have become accustomed to certain patterns and the use of site design
and navigation.
 A site may not contain links to incomplete sections. The classic ‘under
construction’ message is not telling visitors something they want to know.
Ques 3(B)

1. Authorize.Net

Founded in 1996, Authorize.Net has come a long way to being known as one of the most
sought-after payment gateways. More than 400,000 merchants worldwide use
Authorize.Net payment gateway – that accepts online payments through credit cards
and electronic checks. You need to pay $49 as setup fees and $29 as montly gateway
fees. Experts say that Authorize.Net is a good match for Magento stores and shopping
carts such as osCommerce.

2. PayPal

Though, PayPal was incepted in December 1998, but it was developed and launched in
1999. It’s one of the most widely-used payment gateways that accepts both credit card
or debit card payments. It’s free to use for buyers. However store owners will have to
pay a simple transition fees of “3.4% + $0.30 USD”, when using PayPal for credit card
payments. The best part is that you only need to pay after making a sale. This payment
gateway does not require any setup fees, gateway fees, or monthly fees. Around
341,497 Internet sites use PayPal payment gateway.

3. SecurePay.com

This payment gateway began operating in August 1997. SecurePay.com offers online
shopping cart, electronic check services (called as SecurePay), accepts mobile payments,
and so on. In order to process credit card payments, you will first have to sign up as a
user on SecurePay.com. It charges “.25%-1%” plus “$0.25” per transaction. You will also
have to pay $400 for terminating your services, prior to the expiration of the service
agreement with SecurePay.com payment gateway.

4. 2Checkout.com, Inc

2Checkout.com has been in business for 15 years, and was founded in 1999. It offer
services in 196 countries and accept payments in the form of: credit cards, PayPal, and
debit cards. It has a low-cost fee structure and requires you to pay only “2.9% + 30¢” per
successful transaction. And, the best part! It doesn’t require you to pay any monthly and
setup fees.
5. First Data Corporation

This is one of the most oldest payment gateways having 30 years of payments industry
experience globally. It was initially incepted in 1969, but started providing its transaction
processing services in 1998 in US and markets worldwide. It includes credit card, debit
card, gift card, and many other prepaid card offerings. First Data Corporation is used by
around 6 million merchant locations around the world. However, this payment gateway
has a pretty transition fees. So, if you’re ready to invest, then First Data Corporation is
worth a try – considering the high-quality services it provides.

6. BluePay Processing LLC

Although, BluePay Processing is a new payment gateway and started operating in 2002,
but within a short span of time has earned good reputation among merchants. BluePay
accepts payments via credit card and e-checks. It claims to provide highest level of data
security in the payment gateway industry, and charges $15 monthly service fees.

7. PaySimple

Accepting all major credit cards and e-checks payments on your iPhone or iPad,
PaySimple can rightly be called the new-age payment gateway. It’s basic plan starts from
$34.95/mo. According to experts, PaySimple is a great payment gateway for small-and
mid-size online stores.

8. Fastcharge.com

If you’re a start-up firm and have a tight budget, then Fastcharge.com is the perfect
payment gateway for you. It doesn’t require any setup fee, and only requires you to pay
a nominal fee of $10 as monthly gateway fee. It takes less than an hour to set up.
Fastcharge.com was established in 2003, and serves more than 5200 shopping carts. It
only offers credit card processing.

9. Paynova

Paynova is a Swedish payment processing service, offering e-retailers with 21 payment

options. However, you’ll have to sign-up to access its services. It best suits the need of
small-size online businesses.

10. ChronoPay

Last on our list is ChronoPay, an ideal payment gateway for merchants, accepting
payments via bank cards (like VISA, American Express, JCB etc.). You can connect to
ChronoPay for free, however you will have to pay a commission based on your monthly
turnover.

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