FRONT ROW: ACHIEVING PREMIER STATUS WITH

YOUR LOYALTY STRATEGY

SEPTEMBER 19, 2013

LUXURY INSTITUTE BREAKFAST

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

A Global Leader in Loyalty and Customer EngagementLoyaltyOne is part of Alliance Data Systems (NYSE:ADS), an $8.7 B market cap company with global operating experience

Integrated credit and marketing solutions that drive sales for

our retail partners.

Multi-channel marketing services including data, database, digital marketing and agency services.

Global leader in the design and management of customer centric

solutions.

Retail Services

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

The quest for authentic loyalty…

• Highly favorable preference for your brand

• Heightened anticipation and interest in new products & services

• Forgiving when things don’t go exactly right

• Evangelizing good experiences with friends and even complete strangers

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“I’ve learned that people will forget what you said,

and did, but people will never forget how you made them feel.”

- Maya Angelou

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

The broader marketplace is saturated with loyalty programs

Number of Total U.S. Loyalty Program Memberships

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

… but this proliferation presents a sizable challenge to successfully engaging program members

% of Active U.S. Loyalty Program Memberships

Source: 2011 COLLOQUY WOM Study and Loyalty Census: 2.089 billion program memberships;U.S. Census data from the 2009 American Community Survey = 113.616 million U.S. Households

*Among household with income of $150,000+ (Luxury Institute 2013)

Loyalty Program Penetration

-- 76% of Total US Households

-- 72% of Wealthy Consumers*

-- 93% HH > $125K Income

Loyalty Program Usage

-- Enrolled in avg. of 21.9 programs

-- But only active in 9.5

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

Lack of program engagement stems primarily from a shortfall in perceived value

Travel Specialty Retail Department Stores Wholesalers Financial Services Grocery/Drug

26.2%28.5%

36.8% 36.9%

41.2% 42.5%

I am happy with the value I get from the program.

The degree to which respondents agreed to the statement on a 0-10 scale with 10 being strongly agree; represents the percentage of respondents that responded with a 9 or 10 (Top 2 Box).

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

Our findings indicate that affluent consumers’ demands of programs are not entirely unique

• High expectations of elevated service levels, particularly among top tier members

• Motivated by compelling soft benefits, most notably preferential treatment and insider access

• Feel entitled to and respond very favorably to meaningful hard rewards (particularly among $150,000 - $1,000,0000 HHI)

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

We see four key trends and emerging areas of innovation that present opportunities for Luxury Loyalty and Customer Engagement

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

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1. Extending the customer reach

Exploration of Multi-Tender Programs Attainability of Rewards / Status

• Reduced time-to-reward / value

• Deliver value in 3 visits or 30-60 days

• Time-to-reward of 3-6 months (retail)

• Lower tier / status thresholds

• Engage high potential customers

• Grow scan rates (40%-80%)

• Drive PLCC / co-brand acquisition

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

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1. Extending the customer reach

Specialty Retail Travel Grocery/Drug Department Stores

Wholesalers Financial Services

17.0% 17.5%20.9% 22.5%

25.4% 26.4%

38.6% 37.2%

51.4%48.5% 49.1% 48.0%

I am happy with the value I get from the program.

No - Did Not Receive a Reward Yes - Received a Reward

Reward redeemers are 2-2.5x more likely to rate their happiness with the program as “high”

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

Unique Program Structures

Greater Incorporation of Experiential Benefits

Connecting with Non-Transactional Behaviors

• Beyond points and “spend & get”• Simplification• Fungible currency• Payment vehicle

• Personalized experiences• Preferential treatment• Pain point elimination

• Beyond the moment of purchase• Engagement & healthy behaviors• Cause and common purpose

2. Moving Beyond Traditional Programs & Benefits

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

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3. Leveraging Mobile & Social Interactions

Sharing & Social

Shopping

Enhanced ConsumerExperience

Facilitating social interaction as part of the shopping and/or program

experience

Using mobile and social to enhance the shopping experience and

program engagement

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

Promotion optimization Data-driven promotional rules to drive the right

category and customer behaviors Optimize marketing mix by customer segment

Price optimization Pricing strategy and prices based on importance

and elasticity to priority customers Customer-driven zones and KVCs/KVIs

Assortment optimization Right products to maximize sales/profit based on

true item value & importance for priority customers (localized)

Innovation to meet customer needs

Business category & customer strategy Alignment of priorities Segmentation, Insights & Strategy Customer Engagement Plan

Business& customer

strategy

Promotion

Assortment Optimization

Price

44

33

22

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Targeted Marketing: 360°Customer Insights Prioritize Customers/Segments Customer Engagement Strategy/Marketing Plan Execute & Measure Across Channels

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44

33

55

11Integrated Solutions Platform

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Org. Alignment, Change Mgmt. & Tools

4. Using Data Across the Organization

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

A few closing thoughts…

• There is power in a balanced value proposition (meaningful hard rewards + compelling soft benefits)

• Demonstrate value early in the relationship and evaluate your benefit attainability

• Think beyond traditional structures and benefits to meet your customer needs and to amplify your brand

• Aggressively explore opportunities to truly impact the customer experience through Mobile and Social integration

• Unleash and infuse the power of your data throughout your organization … with prioritization and patience

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.

THANK YOU

All information contained herein is confidential and/or proprietary information of LoyaltyOne, Inc. and any unauthorized use and/or any disclosure is strictly prohibited.