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Sky VIP: Using Tenure To Build Customer Loyalty

by Simon Spyer on Aug 11, 2017 4:11:23 PM

Linking KPIs To Marketing Objectives

Sky VIP: Using Tenure To Build Customer Loyalty

 

 

Sky has just announced the launch of its first loyalty programme, SKY VIP.

Rather than the typical loyalty levers of spend and purchase frequency, Sky has chosen tenure.

Tenure is an often over-looked metric is customer marketing and in this post, we explore its value as a customer marketing lever, the pros and cons of Sky VIP and how we expect the programme to develop.

Sky VIP

Sky announced the launch of its new loyalty programme on 3rd August. It has 4 tiers based on how long someone has been a Sky customer:

  • Silver: 0 – 3 years
  • Gold: 3 – 8 years
  • Platinum: 8 – 15 years
  • Black: 15+ years

The benefits are rooted in the best of the Sky brand with customers promised benefits in three categories:

  • Value - added value services like free movies and free access to SkyGO Extra
  • Reward - event tickets, cinema previews and sports
  • Viewing - early access to new series

What's behind the launch?

Well, the pay TV market is under siege from Amazon Prime and Netflix with much programming available under simple, cheap subscription models. There are even signs of Amazon moving onto Sky turf with the acquisition of sports broadcasting rights.

The established pay TV players (Sky, BT, Virgin) operate in a highly price sensitive environment with low barriers to switching at the end of contracts. Programming is similar with, for example, Sky Sports available on BT subscriptions and vice versa.

The commercial rationale for Sky is therefore clear: reduce customer churn.

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Tenure as a marketing objective

In this context, it's interesting that Sky has decided to reward tenure.

The norm for customer loyalty programmes is to focus on an RFV segmentation and pull the levers within it:

  • Recency - come back again soon to be rewarded
  • Frequency - come back more often to be rewarded
  • Value - spend more to be rewarded

This segmentation fosters transactional relationships and doesn't build a sense of true loyalty. By focusing on RFV, many brands have implemented points-mean-prizes loyalty programmes.

Tenure is a more valuable metric for loyalty and CRM programmes. It promotes and recognises the length of the relationship between a brand and consumer. As such, it:

  • Is more egalitarian than RFV - long standing customers are treated the same regardless of whether they spend a little or a lot. It's worth noting however that Sky appear to be distinguishing on value too as their FAQs reveal "The rewards you’re eligible for will depend on which Tier you’re in, and the Sky products and services you have."
  • Creates a stronger barrier to switching (in line with Sky's marketing objective).

One can assume from Sky's tiers and their benefits packages that 0-3 years is the critical battleground for customers - once someone has passed their 3 year anniversary their chance of churning is presumably lower.

So It's The Perfect Loyalty Programme?

Not yet.

The objective and lever make sense and are refreshing. But the programme's execution has some challenges.

Sky VIP is in its infancy but we would note the following issues:

  • App only. It's strange that the programme can only be joined via the MySky app. Sky already has a plethora of apps (Sky Go, Sky+, SkyQ etc) and in a multi-channel world, it seems incongruous that customers should have to download a new app to register and enjoy SkyVIP.
  • Levelling up. There's no apparent way for customers to 'level up' to one of the higher tiers and could potentially have to wait 5 years to become eligible. That's fine if Sky thinks its proposition (in general and with VIP specifically) is strong enough to build such commitment - but the reality of the category is that this isn't the case for the majority of customers. As we've shown before, the best modern loyalty programmes play on 5 dimensions but it's unclear which of these SkyVIP really supports.
  • Limited communications. Sky may be soft-launching the programme but visibility is extremely limited. A basic customer expectation is typically to be 'the first to know' but Sky has failed to deliver this. A contact strategy should be build for each of the tiers with messaging and channels used differently for each.
  • Limited personalisation. Sky knows a lot about its customers yet the SkyVIP offer (value, reward, viewing) appears to be the same for sports-junkies, film lovers and young families alike. A loyalty proposition should really give a brand permission to start or deepen a relationship and every interaction should be personalised based on the brand's understanding of individual customer needs and expectations.

Sky still has a long way to go before it challenges Amazon Prime as the world's best loyalty programme

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This post was written by Simon Spyer

Co-founder & Insight Partner at Conduit, professional insight-monger, dad, lover of all sport and Spurs.

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