By Marta Bright
Only slightly larger than California, Sweden has a population of 9.3 million people—less than a quarter of the Golden State’s nearly 40 million inhabitants. While their country is more sparsely populated, Swedes share Californians’ passion for the automobile—67 percent of the country’s drivers rely on their cars to travel distances of 100 kilometers (62.14 miles) or more.
This love of driving added to the waning global economy and post-9/11 travel safety concerns to put an enormous strain on the government-run Swedish rail system (SJ, short for Statens Järnvägars). Deregulation allowed neighboring European operators to enter the market and compete for passengers. SJ’s aging railcars needed to be repaired or replaced. And with rail traffic accounting for a mere 7 percent of the transportation market, SJ lacked the revenue to make the necessary railcar upgrades—and by mid-decade the rail system was nearly bankrupt.
SJ needed an aggressive plan to revitalize customer service and provide a comfortable, convenient form of transportation. “We had to begin seriously differentiating ourselves to the public,” explains Claes Lindholtz, director of customer programs and customer analysis at SJ. “We also had to change our internal culture and start thinking like customers instead of like a government organization.”
Siebel Loyalty, Siebel Loyalty Manager, Oracle Marketing Analytics, Siebel Sales, Siebel Contact Center
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Starting in 2005, under the direction of CEO Jan Forsberg, SJ launched an initiative to create a leading customer loyalty program that would boost customer satisfaction and get people out of their automobiles and onto the rail system.
Reward and Incent
Loyalty reward programs—structured marketing efforts that reward and encourage buying behavior—typically offer customers benefits such as free upgrades on air travel and discounts on point-of-sale purchases, as well as points that are redeemable for merchandise or other goods and services. According to Fred Reichheld, author of Loyalty Rules! How Today’s Leaders Build Lasting Relationships (Harvard Business School Press, 2001), a mere 5 percent uptick in customer retention accomplished through a loyalty program can result in a 75 percent increase in customer value.
According to Melissa Boxer, vice president of marketing and loyalty at Oracle, enrollment in loyalty programs is increasing. Companies can gain a significant advantage by closely integrating these programs with other buying activities and connecting them with other customer relationship management (CRM) touchpoints—such as order entry and order fulfillment. “I think companies that don’t start thinking about customers—how to understand, recognize, and reward loyalty in an intimate way—are at risk of losing them,” says Boxer.
Successfully executing a loyalty program requires a solid understanding of customer spending habits and preferences. Programs must be tailored to meet individual needs, and the systems used to manage the programs must be flexible enough to support the right level of targeting and personalization. “It’s a double-edged sword,” says Carmine Cutone, a director at Deloitte Consulting. “It’s one thing to have the data about your customers, and a lot of solutions have great data capture capabilities but then fall short on the reporting or the analysis of that data.”
SJ lacked the ability to target specific customers or separate customers by segment to identify frequent riders. So finding the intersection between data capture and reporting was essential to getting SJ’s loyalty program on track. After reviewing 10 potential solutions, management selected Oracle’s Siebel Loyalty to power the SJ Prio customer loyalty program.
With preconfigured processes, the system could handle a range of standard functions, such as membership enrollment, renewal, and cancellation, as well as points-related services including purchase, transfer, and reactivation. It also provided redemption services such as fulfillment, cancellation, and claim and dispute resolution processing.
The SJ Prio program has three fee-based membership tiers—White, Gray, and Black. The White (entry) level program offers basics such as ticketless travel, while the Gray (medium) level includes perks in addition to ticketless travel, such as free tea and coffee and free movies on overnight journeys. The Black (premium) level offers all the benefits of the White and Gray levels plus added benefits such as free internet access on trains and access to luxury lounges.
Riders receive a loyalty card, and each time they use their card, they earn points toward benefits—free tickets, upgrades, meals, or penalty-free ticket changes. In exchange, SJ gathers and analyzes valuable customer information. “Anytime customers use SJ, they can refer to their loyalty card number, so whether they’re booking times or looking for vacation ideas, we can capture that one-to-one information,” explains SJ’s Lindholtz.
For SJ—or any business running a customer loyalty program—accurately tracking customer activity is essential to assigning awards or benefits. After all, rewarding low-activity patrons at the same rate as your best customers would undermine such a program. So connecting loyalty activities to a proven CRM solution can be the difference between a successful program and one that never leaves the station.
According to Oracle’s Boxer, leveraging a CRM platform transforms simple points- and discounts-based programs into something more elaborate and rewarding—both for the business and the customer. “Second-generation loyalty programs are more about customer experience and customer intimacy, where the goal is to harness great information and use it to drive relevant interaction across multiple channels,” she says.
Boxer sees the connection between CRM and loyalty software as a competitive advantage for Oracle. “We offer the ability to tie in the recognition part of the reward program,” she explains. “We can do that because Siebel Loyalty is part of our overall CRM platform, so we can help customers like SJ understand who their best customers are, recognize and reward them, and treat them strategically.”
With loyalty built into the Oracle CRM platform, customers can tie information to other assets that are in the CRM portfolio, including sales, service, and marketing. If, for example, SJ wants to encourage certain customers to take an earlier train versus a later train, program managers can use a targeted e-mail campaign and drive that promotion into the marketplace within a matter of hours.
Deep understanding of customer behavior can lead to much more-effective marketing campaigns, says Deloitte’s Cutone. “The kind of information you want to use to design campaigns must be very specific for certain segments,” he says. “The more programs and discounts you offer to your most profitable customers, the greater returns, even if that segment group is actually smaller.” This is precisely what SJ is accomplishing with Siebel Loyalty Manager, and the analytics support the efforts.
In addition to getting customers to think twice before getting behind the wheel (47 percent of SJ Prio members indicate that they plan to increase their train travel), the program is cutting down on paper-based marketing. “We pride ourselves on being an eco-efficient company, and some of the successes we’ve had with our targeted e-mail campaigns are really helping us stay true to our goals,” he says.
The rollout phase of the SJ Prio program took place between 2005 and 2007. When the program went live, it took less than two years for SJ to hit every major milestone it had established. In fact, by the middle of 2009 it had hit every milestone—a full 18 months ahead of schedule.
The SJ Prio program is a huge success, with 95 percent of targeted customer segments enrolling in the program, accounting for more than 600,000 members. A full 75 percent of enrolled customers are active participants, and 47 percent consistently indicate in survey responses that they are definitely using rail travel more frequently because of the program. In addition, 50 percent of registered SJ Prio members use self-service kiosks and SJ’s Web-based application portal to purchase tickets. And when SJ wants to get the word out about a new offer, it is achieving an impressive 40 to 60 percent open rate with its direct e-mail offers.
With such a successful program, it’s not surprising that SJ has received numerous customer service and IT awards, including the Swedish Golden Relationship Award for Best CRM Realization (2008), the Swedish Golden Key Award for Best CRM Initiative (2008 and 2009), and the Gold Box Award for Best Loyalty Program Sweden (2009), as well as being runner-up in the 2009 Gartner CRM Excellence Awards. Most recently, SJ was also presented with the Loyalty Innovation Award at the Loyalty 2010 Conference.
On average, SJ is gathering 12,000 leads per campaign, the majority of which are created using Siebel Marketing and Siebel Loyalty. Out of those leads, 10 to 25 percent are converting into registered SJ Prio program members, and among those members 73 percent rate their experience as positive. Loyalty program costs are averaging less than 0.01 percent of revenues, and penetration into target populations—commuters and business travelers—is showing 60 and 45 percent, respectively. Overall, SJ has accomplished a staggering 95 percent penetration into the SJ Prio program group.
“We’re cutting through the clutter,” says SJ’s Lindholtz. “Our knowledge about our customers is improving all the time, which is helping us expand and remain competitive.”
Deloitte’s Cutone says that Siebel is probably the best, if not the only, offering of what he calls “truly enterprise” CRM. “Loyalty is just one part of Oracle’s larger CRM suite,” he notes, “and that’s really important because visibility into every facet of a customer accomplished through a single CRM system allows companies to understand more and react accordingly.”
Lindholtz is just happy that it all came together with relative ease and that the team pulled together so well. “I can’t offer enough praise to the people who worked on this project. Everybody really rose to the occasion to make this happen, and we could not have accomplished this without them.”
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