Dollars Shift to Loyalty

Nov 15, 2004

By John Hennessy

Writing for Incentives magazine, Leo Jakobson states that TiVo is accelerating the shift of marketing dollars away from traditional mass-market advertising and toward
more targeted methods of reaching potential buyers, among them, loyalty marketing.

“As it becomes harder to reach audiences, an inevitable result is that companies have to get better at targeting their messages,” says Sam Gragg, assistant vice president of
customer marketing, customer management solutions for Teradata. Mr. Gragg notes that television ads now account for one-third of the U.S. marketing budget for McDonald’s,
down two-thirds from five years ago.

Stan Roach, vice president of marketing for SoftCoin says, “There’s no question we are seeing a trend toward embracing consumer loyalty programs in the last 12 months.
There are many reasons, but certainly one is the increasing difficulty of doing mass marketing.”

Moderator’s Comment: What can retailers and their marketing partners do to take advantage of the need for more targeted
promotions? Are retailers missing out on this shift in spending?

As marketers shift spending away from television and other mass advertising, retailers should be stepping in with targeted alternatives to capture these
dollars. The right programs will help marketers sell more, more efficiently by reaching the right shopper with the right offers at the right time. This will also benefit shoppers
as targeting results in fewer, more highly relevant messages.

Retailer frequent shopper programs have the potential to give marketers the targeting and accountability they seek and shoppers the relevant offers that
will get them to buy. Supermarkets lead retailers with both programs and shopper data points, but other retail channels, such as office supply and home improvement, can leverage
their purchase data to create effective target marketing programs for their marketing partners.

John Hennessy – Moderator

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