Tuesday, 29 July 2014

Changing the choice context can change the game

I saw a number of presentations from various UK startups in the last few weeks and one really caught my attention.

Playmob is a startup focused on linking charitable giving to the purchase of game items/actions.  When CEO/Founder Jude Ower presented she described the positive effect that linking a charity donation to the purchase of a virtual item had.  In one example she detailed how 80% of people who purchased the virtual item had never purchased one before and of those, over 30% went on to purchase more virtual items.

I found these stats pretty amazing.

The 80% alone would be a good result - getting people who hadn’t previously purchased virtual goods to buy them.  You could argue that they weren’t really buying the goods and instead just used the opportunity to be charitable - however, with 30% going on to purchase again, this suggests a change of decision.  

The introduction of the charity element had somehow changed the decision context and caused them to purchase an item they had apparently previously ruled out.

Obviously, as marketers, influencing customer choice is something we do all the time - this is the basis of sales promotions and loyalty programmes.  What intrigued me though was the sheer number of people influenced who had never purchased virtual goods before.  It seems they simply need a little push to flip their decision.

In another charitable example, there was a study by Karlan and List called "Does Price Matter in Charitable Giving?” and they identified that match funding for charitable donations - whereby every $1 the donor gives is matched by another $1 - increases the amount given per donation (by 19%) as well as increasing the number of donations (up by 22%).  What’s really interesting here though is that the amount matched doesn’t actually impact these numbers - whether it’s 1:1 match of a 3:1 match (e.g. $3 matched to every $1 donated), the resulting uplift is the same.

This suggests that when it comes to decisions to do something, it is not just a black and white binary decision - there are lots more variables at play.  

Sure, there will be a segment who will always say yes and a segment that will always say no.  But in the middle, there is a floating segment who just need a little extra nudge to flip a no to a yes.  It also suggests that people don’t commit as much as they could - with the match funding lifting the actual amount donated it suggests that people had a little more headroom but that this only went so far.  The promise of even more match funding would not influence them to go past their personal headroom target.

The decisions people make  - such as whether to buy a virtual item or not - depends on them making a number of decisions that lead up to the final choice.  In doing this, people tend to make compromises and tradeoffs to compare the likely outcome.  Evaluating the cost vs the benefit and looking at the different options in terms of the value they add.  What’s interesting here though is that it’s possible to change the choices people make by introducing additional options, even if they don’t actually go for that option.

This seems to be what Playmob had tapped into.  The game producers already had a model for getting some players to purchase items (typical less than 3%), but they needed something to change the context to influence others.

The decisions people make however really depends on the context of the choices available.

Using the example of a circle, that same circle appears large when surrounded by small circles and small when surrounded by large ones.  In the same way, a purchase choice such as a virtual reward may appear to be unattractive in context of the value it adds to the game, but becomes more attractive when combined with another, real-world benefit such as a charitable gift.  Likewise, in charitable giving - whether to give and how much to give can be manipulated by the introduction of an additional variable or choice such as match funding or gift aid.

Placing more variables into the mix can ultimately change a persons choices in more complex ways.  A good example of this was published in the research report entitled “Choice in Context - Tradeoff Contrast and Extremeness Aversion” by Simonson and Tversky.  

It had a study which provided two groups with two different sets of choices for the purchase of a new microwave oven.  In the first group they had 2 product choices which varied by price and quality, but with the same discount.  The second group had the same choice but with one additional product added with better quality, better price but less discount.  See table below:-

 

Microwave Choice Group 1 Group 2
Emerson (0.5cu. ft. / $109.99 / 35% off 57% 27%
Panasonic I (0.8cu. ft. / $179.99 / 35% off 43% 60%
Emerson (1.1cu. ft. / $199.99 / 10% off n/a 13%

 

What’s intriguing here is that in the first group, the lowest quality product won out with 57% of purchases.  In the second group however, this same product only attracted 27% of purchases because a potentially better product was introduced into the mix.  Participants were forced to make choices using a different context and with different tradeoffs and so in this case, the 2nd product won out overall with 60% of purchases.

Simply by adding in another product - albeit one more expensive - the researchers were able to increase the overall sales revenues by encouraging a greater number to select the higher priced item.

This also worked in reverse.  In a similar study, they introduced a lower quality choice into the mix and demonstrated how this encouraged the participants to then increasingly select the higher value/cost option.

So choice is not a static context - just because your products and offers have influenced some customers doesn’t mean thats the best it can be.  Changing the choice context can shake things up a little and create an additional nudge for customers - whether that’s making their first purchase or increasing/uplifting their planned purchase.

This isn’t just a one-off benefit though as can be seen by the Playmob example.  Having given users a reason to purchase by changing the choice context, they then went on to continue purchasing as this initial choice had broken down the barriers to future purchases, possibly through the forming of a cognitive bias such as the commitment bias.

In the context of loyalty marketing, using the reward currency to provide additional options and to change the choice context can be an excellent way of encouraging consumer trial or repeat purchase - simply by sprinkling a small number of points on different product options.  Also, like the match-funding example, the value of the points given isn’t directly related to the change of behaviour.

Changing the choices changes the context and ultimately can allow you to change the rules of the game.

Friday, 30 May 2014

Tesco Bag-For-Life outlasts customer life time

Tescobag

What’s interesting about modern grocery shopping in the UK today is that the disposable plastic bag, so vilified by many, has been replaced with “lifetime” bags - thick plastic bags that last a long, long time.  

If you purchased one these bags you’d tend to be a regular customer because:-

  • a) You bought enough to warrant a big bag
  • b) You liked the brand enough to buy a “permanent” bag
  • c) The bag is re-usable so it probably means you intended to come back

What’s interesting though is that these bags also tell another story and they tell me that Tesco has a problem.

I don’t need to read a newspaper or their annual report to see this problem.  I don’t need to run customer research to see this problem.  I simply need to shop at Aldi and look at the bags that customers are carrying.

These bags may not literally last for a customers lifetime, but they do seem to have lasted longer than the customers lifetime with the grocer that sold them.

Coming out of my local Aldi, every other customer was carrying a rival supermarket bag.  What was more interesting was that 9 out of 10 of these was for Tesco.

Now this over-indexing of Tesco is probably due more to rival supermarket proximity than anything else, but it is indicative of a wider problem - previously loyal customers are shifting their loyalty.

It’s also closer to home for me personally - I was up until recently a highly loyal Tesco customer.  I saw the value in their loyalty programme and I received significant value back every year from the programme.  I used their supermarket, their home shopping, their insurance products, their fuel and their credit card.

Yet I left them to shop at Aldi.

I’m also not the only one judging by the bags people use, and more scientifically, based on the results of the latest Kantar survey.  This shows Tesco’s market share has dropped nearly 1 percentage point in the last year (down from 29.6% to 28.7%) and is down 3 percentage points from its peak of 31.8%.  Given each percentage point is worth around £1.27bn, that’s a lot of sales value.

This isn’t due to lower sales overall - the market grew by 2.2%.  It’s also not due to customers trading down - both Sainsburys and Waitrose held onto their market share.  For me, this is more of a customer experience issue than a pricing one.

Obviously there is no denying that Aldi are significantly cheaper on many products than Tesco and it isn’t hard to see that these real savings today add up to more than loyalty rewards later.

However, that’s not the reason I continue to shop at Aldi - I actually like shopping there more than I like shopping at Tesco and the reason for this is fourfold:-

  1. Store Format - At Tesco the stores are now just too big.  It’s great if I want something specific, but for a standard shop it just makes the trip take too long.  Walking down endless aisles past thousands of products I don’t want or need.  Aldi have smaller stores making the shop quick and simple.
  2. Paradox of Choice - When selecting products, there is too much choice.  While this can be a good thing, when presented with 10 different types of sliced bread there is a tendency to pick something you recognise to help expedite the process.  The net result of this is that you pick brands you’ve used before or heard of and brands have a premium.  At Aldi there is limited choice, very few branded goods and typically one option for each.
  3. Service - I’m not talking about customer service specifically, both brands have well trained, personable staff.  I’m talking about the way the tills work.  Aldi is specifically engineered for speed.  A whole shop is scanned at tremendous speed with packing done elsewhere at your leisure.  This means no real queues and no long waits.  Tesco checkout is just, well, slow.
  4. Gamified - This is price related and is a personal aspect, but I like to compare purchases and keep the shop under a defined value.  Given the shop is typically 50% cheaper than my previous comparative Tesco shop, there is a pleasure - almost like a game - in seeing the final till receipt value.

I've given up a number of things to shift to Aldi.  I’ve given up a loyalty programme; I’ve given up home delivery; I’ve given up choice.  Ironically though, I feel like I’ve gained time (due to the quick shop), gained satisfaction (in making a smart choice) and gained money in my wallet.

The fact that I then blow that extra cash on eating out that weekend in simply a bonus - There’s no waiting for me to spend the value I’ve accrued.  I don’t need to wait for a quarterly statement, or redeem for a voucher.

So what would make me go back to Tesco?

  • Better pricing/value exchange - that’s always a basic requirement.
  • Better store layout - Make my basic shop quicker
  • Better checkout experience - Speed up how the scanning/packing process

The number one thing though is to connect the satisfaction of shopping with the experience of shopping.  Tesco Clubcard doesn’t do that today for me - it’s not immediate enough, it’s not rich enough, it’s not connected enough.  Interestingly, Target Cartwheel which I’ve written about previously does seem to achieve many of these things.

Loyalty is still in the game and it still has a role to play - but at the moment for Tesco, it hasn’t kept pace with the market.  When your bags are lasting longer than your customers, you know there are issues to address. 

Tuesday, 15 April 2014

Airlines show how tablets create loyalty ESP

BA ESP sml

There’s a lot of talk within loyalty about the increasing volume of customer interactions and how these are being enabled through mobile devices, wearables and the Internet of things.

Indeed, Microsoft consider it so important that they’ve apparently setup a special task force to develop it further.  Whether it's Smart watches, fitness wristbands or intelligent eye-wear, there’s a whole host of new consumer channels, devices and ultimately data heading our way.

However the real benefit may not be in getting consumers to don these products, but getting the employees to instead.

Giving employees access to real-time information on a customer may be the thing that gives a brand the edge over it’s rivals.

As ever, the airlines are at the forefront of this revolution with many enabling access to customer information to front line staff through a variety of devices.  Delta for example recently announced that it’s equipping it’s flight attendants with tablets, highlighting the benefits by saying:-

"In addition to its functionality as an in-flight sales device and replacement for the on-board manual [it will] enable flight attendants to [..] provide information for personalized service, including customers' frequent flyer status and potential need for special services during flight."

British Airways was one of the first carriers to issue a mobile device to staff with the intention of improving customer service and interactions.  Called the Enhanced Service Platform or ESP for short, the naming of the device seems indicate their intention for staff to be empowered with what customers might perceive as an almost psychic capability. Their platform, developed in house,  is reported to allow staff to access details on key high spending customers including their previous travel arrangements, where they are seated, who they are travelling with and their loyalty status.  It can also be used to lodge customer complaints immediately.  

The service would seem to be valued by both the staff and customers with a flight attendant quoted as saying:-

“I’m ahead of myself in knowing where our corporate and high-value customers are sitting, and who needs help,” Kaur, a cabin-service director, BA’s highest rank of flight attendant, said in London following a flight from Istanbul. “They look at you and say ‘have you been on a special course?’”

It would also appear to get some great results with customer satisfaction for Gold members reportedly up 14% since the original rollout initiative.

Never happy to be a follower, Virgin Atlantic has gone one better by looking to equip it’s First Class concierge staff with wearables including the Sony SmartWatch and Google Glass to provide them with personalised information on the passenger they are interacting with.  One of the key aspects was the personal touch that the technology enabled, removing the barrier between the staff member and the customer.  Virgin reported that:-

“The trial helped reduce the number of times that a Virgin Atlantic agent had to go behind a desk to look something up for a passenger, which would break eye contact – apparently vital to ensuring a “VIP customer experience” [and] also negated the need for any radio communications between staff, as all the information needed for each passenger was available through the unit."

This is not just limited to airlines however.  

Retailers are also looking to equip staff with mobile technologies to enhance customer service.  In the UK for example, fashion retailer Monsoon has started equipping staff with an iPad that allows them access to the complete product range and stock, so they can help a customer locate an item wherever it may be.

AT&T in the US plans to go further and completely remove their traditional POS cash registers. Instead, AT&T store employees will be equipped with tablets and mobile POS systems to facilitate the purchase at the point of experience - when the customer is looking at and playing with the product.  AT&T Chief Marketing Officer David Christopher is quoted as saying:-

"It's a pretty radical departure from what we've done in the past, [..] We want people to try, play with and ultimately buy our products...If [shopping] was just transaction based, customers could do it on the web."

There does seem to be a difference however between how retailers and airlines are using tablets with staff.  

Whilst for the airline it is predominantly to improve the customer experience and to personalise the service, for retailers it seems to be to make the purchase process more streamlined and ensure they can get what the customer wants.  

For retailers however there doesn’t appear to be a desire to use previous customer purchase behaviour and preferences to actually personalise the shopping experience.  This would seem to be a missing piece of the puzzle as this is where loyalty data really comes into it’s own and would truly deliver on that retail loyalty promise of the “cornershop experience”.  A little of the BA ESP for retailers would probably go a long way.