Saturday, 29 November 2008

Woolworths is dead – long live Woolworths

I think the news of the demise of Woolworths is probably a little premature – there is no doubt it's in trouble and the Woolworths of the future may bear little resemblance to the current chain – however I don't think that this is the end. The Woolworths brand has strong affection with many people who may not have shopped there recently but certainly remember it from their formative years. It's always been a strange store, selling a variety of goods from the famous pick and mix, through children's clothing, stationary and music/films, however in some senses this is probably what's caused its demise. With the pound stores taking one audience and the supermarkets taking another, Woolworths has struggled to know what it stands for.

WH Smith was in a similar position 2003, having no real focus and being undercut on all sides by the supermarkets. This changed however when they started to focus on their core offering - their books, magazines, news and stationary - and reduced focus (and retail space) on entertainment products such as CDs and DVDs. Understanding what customers valued in the store allowed them to ensure that the stores stocked what they wanted and to concentrate on when customers wanted it - leading to an increase in their store locations at places like airports and train stations. These decisions have changed WH Smith's fortunes – it may still have some way to go and the current climate isn't going to help, however WH Smith chief executive Kate Swann was clear in her vision when she said in 2004 "I want people in the UK to get to the point where they say, 'Of course I go to Smith's for stationery; of course I go to Smith's for books; of course I go to Smith's for my magazines.' That's what I want Smith's to be for."

Starbucks is one company for which it's clear what they stand for and that's great coffee. Before Starbucks came along it was possible to buy a coffee in the high street, but Starbucks redefined what coffee stood for. They set a standard for it, built a business around it and were very clear that it was all about the coffee. Every decision they made whilst growing into a global brand was centred on their belief in their product and how it should be enjoyed. Whilst others for example were creating flavoured coffee beans, Starbucks refused to adulterate their product and stood firm by their beliefs in keeping the product pure. They didn't always get it right though and in their early days their stance on not using low-fat milk initially bemused customers who had to go elsewhere to enjoy their "skinny" latte.

They learned though that there is a balance to be struck between giving the customer what they want whilst ensuring the business is focused on what its core values are and what it stands for.

Woolworths on the other hand has lost its way – it doesn't seem to stand for anything in particular and is a jack of all trades – master of none.

It was once well known and well respected for its children's clothes. After securing rights to the Ladybird clothing brand in 1984, Woolworths went on to launch a hugely successful range of children's clothes in 1986 which was supported by PR, TV and press advertising. Despite going on to acquire this brand in 2000, Woolworths have never really leveraged it to the full. Rather than building on this they went on to launch Big W which further confused customers as to what they stood for and subsequently failed and was axed in 2004.

Customer loyalty cannot be bought – either through discounts or points – in all surveys on customer loyalty, top of the list after convenient location is that the retailer stocks what they want - if a brand gets this fundamental wrong, all other efforts will fail. Any new buyer of Woolworths will need to first take a step back to understand what Woolworths stands for, what its key values are and then build a business around this. Reducing or removing product lines which run counter to this and focusing on what the customers want within the context of these values.

Only in this way will Woolworths be able to set itself apart on the high street and reinstate itself as a brand that customers understand and say, "I go to Woolworths for…"

Tuesday, 25 November 2008

Without trust there is nothing

I was reading a new report this week from Forrester about how customers rate European banks. Across 7 different European countries, the UK stood out with the weakest scores to the question of whether customers felt their bank does what's best for them – with just 21% agreeing to this statement. Given the current credit crunch you could be forgiven for expecting this type of response as people lose faith in their banking institutions, however this is an annual survey and the results for 2008 are only marginally lower than for 2007. The report went on to discuss how customer advocacy improves a banks chances of winning new customers by word of mouth and that of those customers who think their main bank is a good customer advocate, the majority of these go on to be promoters.

Backing this research up, a recent study by Carlson Marketing of the financial services industry showed that customers with stronger relationships are 75% more likely to recommend to friends, 42% more likely to remain a customer and 57% more likely to buy additional products. As detailed within this study a key element of stronger relationships is trust which is defined as a belief that the company has the best interests of the customer at heart, and can be depended upon for respect, openness, tolerance and honesty.

Although many banks score badly in the area of trust, the UK based Nationwide Building Society has recognised this and actively looks to build trust with customers and potential customers. Its TV advertising highlights how other banks have preferential rates only for new customers – unlike Nationwide which has a fair pricing policy for all; it's ATMs highlight how there are no cash withdrawal fees and all its call centers are UK based. In 2001 the Nationwide launched an initiative to articulate the society's values to customers which included putting customers first, delivering best value and exceeding expectations. Since this time they have more than doubled their current account customers, tripled their credit card portfolio, significantly grown savings balances and doubled their annual profits. Not bad for a bank which is focusing on doing what's right for the customer, not just what's right for the bottom line.

The largest direct bank in the US, ING Direct announced recently that it will suspend foreclosure on all occupied family homes until March 2009 and suspend all evictions until January 15th. Their CEO, Arkadi Kuhlmann is quoted as saying "We help customers buy homes with mortgages only if we believe they are suitable and affordable. Consequently, once we get customers into a home, we work hard to help them stay there. We hope this foreclosure suspension will provide some relief during the holidays to those experiencing financial hardships. I call on others in the mortgage industry to step up and help homeowners with foreclosure relief during these difficult times". Now obviously banks are not charities and if someone cannot pay for their home the bank will have to take steps at some point to recover their investment – however what ING shows is that this can be done whilst also recognizing that these are real people with real lives – this is sure to build trust as ING stands out from the crowd.

Spanish Bank Caja Navarra takes this one step further with its Civic Banking product. Unlike any other bank I've come across, Civic Banking tells you exactly how much money they make from you. Customers understand that banks are businesses and that business are there to make profits, however most customers don't actually understand how a bank makes money. Providing this clarity allows the customer to enter into an agreement with their eyes wide open, understanding what the bank is giving them and conversely what the bank is getting back. This isn't simply done however to provide transparency, the bank donates a percentage of the profits on the customers behalf to social projects. This allows the customer to see not only how much the bank is making, but also how much it is then giving away. The projects that the bank donates a percentage of profits to are not simply large charities but instead can be very small, localised projects, nominated by the customer and setup by the community. In one example a water saving project had requested £7,000 and this had been donated by just 113 people. Caja Navarra really do engender trust by providing true transparency and showing a genuine corporate social responsibility.

Given the importance of trust within relationships and the rewards that can come from this for financial institutions, there has been a noticeable hush from almost all banks since the credit crunch. For many this is probably due to still being in a precarious position and as the old adage goes, "when you have nothing to say - say nothing". However for many banks things have changed with government support stabilising them and so now is really the time to begin rebuilding trust.

LTSB in the UK are the noticeable exception to this with much of their recent outdoor activity focused around the message of a "bank you can bank on". While many of the larger banks in the UK have been focusing their advertising on savings messages - promoting great rates in the hope of attracting much needed savings balances - LTSB has been focusing their message on one of trust, reassuring customers and prospects that they are a bank you can bank on. If LTSB get it right all indications are that the savings balances will follow naturally.

Trust is a key component of customer advocacy, the visible expression of customer loyalty. Banks have historically scored low compared to other industries when it comes to trust and so now is the time to really put the customer first and start to rebuild that trust – the much needed profits will follow.

Saturday, 22 November 2008

I am not a number - I am a free man (or woman)

Marketing to baby boomers is an interesting issue. Previously brands trying to attract an older audience could simply put an older person in the advert with an attractive pen or carriage clock and watch the customers pile in… well that was probably never true, but more recently the "older" generation has changed – it no longer considers itself "old" – age is just a number.

This really came home to me a couple of weeks ago when I was looking over some work we did for a financial services brand in the US. The brand had successfully communicated what it was about – telling people that it had products and services aimed at an older audience – the problem was its target audience of over 50's didn't consider themselves old and thought it was for someone "older".

This seems to be an increasing problem for brands looking to market to older customers, especially where these brands already have an established older customer base which they need to retain, but want to continue to attract new customers. A brand tackling this head-on is coffee & tea merchant Taylors of Harrogate - the ground coffee market has a skew to over 45's, so how do you make the brand relevant to new customers without alienating the existing customer base.

Taylors have done this with the introduction of new campaign, "The Coffee of Choice" which has a more edgy creative feel than the traditional corporate Taylors of Harrogate site and matches perfectly to their recent above the line creative. A tie up with Classic FM is helping to ensure the message reaches their target audience, but the creative is helping to make the brand stand-out and seem more relevant. This has been combined with a great selection of ground coffees which are packaged by occasion and blend – helping to appeal to both the new coffee consumer and the more established coffee connoisseur.

Nintendo has been targeting this market as well, but unlike Taylors who had an established audience; Nintendo was trying to create a market from the ground-up. Since the launch of the Wii and subsequently the Wii fit, demand has outstripped supply and the console has been propelled to pole position, with sales greater than both the XBOX360 and the PS3. This is largely down to the introduction of the gaming console to new segments – including the over 50's – or as Nintendo puts it "moving into the blue ocean", based on the book Blue Ocean Strategy. The advertising for the Wii isn't aimed at any particular age demographic and instead shows families interacting and playing with the console – something that is attractive to both parents and grandparents. The DS handheld console however has different celebrity endorsements to appeal to specific market segments, using Fern and Holly and Girls Aloud for the hard to reach younger female market and Nicole Kidman, Ronan Keating and Patrick Stewart for the older demographic with Brain Training.

With 80% of the UK's wealth and representing over 50% of the population by 2020, the over 50's are not a niche segment that can be communicated to using a one-size-fits-all approach. In fact, age based demographics are becoming increasingly less relevant – to create relevance a communication really needs to be personalised and to personalise something needs behaviours. Having communications based on how a customer behaves rather than when they were born will always create greater cut-through.

The brands that win here will be the ones that truly know their customers.

Friday, 14 November 2008

Weather the storm with your brand un-tarnished

Many brands and retailers who are feeling the pinch may be in a slight quandary – do we lower prices to retain more of our customer volume or keep things as they are and try to maintain more of our customer value – in fact is it possible to both maintain volume and value?

Brad Farrell, skincare brand manager for L'Oréal Paris answered the question about price quite succinctly when he said at a recent event "We don't want to see huge price cuts that will create a lower-priced brand, because you don't want to tarnish your brand. When this is all said and done, you still have your brand reputation to uphold."

Commenting in the early 90's in the wake of the coffee wars, Jeff Caso, director of Nestle's coffee business had a similar sentiment, but highlighted the struggle many brands wrestle with: ''If maintaining market share involves jumping off a bridge, I am not jumping off a bridge. But I am not sure the other guys see it that way."

So for many brands, overt price cutting cannot be high on the agenda – but maintaining the status quo in the face of increased price based competition is tough.

Knowing Brand Loyalists

Interestingly customer value is not always tied directly to customer volume. In most industries, a high percentage of revenue (70-80%) typically comes from a small percentage of customers (20-30%). For some brands like Prada this can be even more concentrated with a reported 50% of sales coming from just 5% of customers. With such a large percentage of customer value coming from so small of segment of customers, the most important question for both brands and retailers should be "who are these customers?".

Many successful retail loyalty schemes such as Tesco Clubcard are reported to be able to track 70% or more of their purchases to individual customers, providing real insight on who drives value and what products/services they purchase.

Focusing attention on these key customer segments with communications and non-price related offers can help to maintain revenue levels even when a larger number of less valuable customers may fall away.

Adding Brand Value

Customer volume is still important however – they contribute to fixed costs and ultimately will have more to give in the future. So is it possible to put in place strategies which retain more price sensitive customers?

One way to do this is to look back at the 4P's of marketing – Product, Price, Place, Promotion. The first thing that strikes you here is that there are three other "P's" apart from just Price.

Product – The product itself can be modified to make it less costly without cutting back on the quality. Many brands use size as a tactic here – making smaller versions of the same product so that it becomes more accessible. This can also have the positive effect of introducing new customers to the product who previously couldn't justify it as well as potentially allowing higher margin pound for pound than the larger version. More accessible brands may be able to also achieve this through a change of packaging – using different materials to lower production costs whilst not compromising on quality. As highlighted in brandgymblog, Hellmanns Mayonnaise did this in Canada by changing the packing from glass to plastic.

Place – Looking at other distribution channels, whether its online or different retail sectors can provide different cost models that allow the product to be made more accessible whilst not devaluing the brand within its heartland. This can be a double-edged sword though – witness brands such as Burberry and Cristal – which is why many premium cosmetics and clothing brands like Levi's have actively fought to keep them out of discounters.

Promotion – Adding additional value to a purchase rather than lowering the price of it can be enough for many customers to swing the purchase decision back from a rational one to an emotional one. The Anchor Make-A-Moo promotion is a very good example of this which has allowed the brand to maintain market share in what is seen to be a highly homogenous market.

Using both these techniques so that you know who buys your brand and can target the added value is by far the best approach. L'Oreal has been very successful in this area through the implementation of a company wide CRM system. Commenting on this in their white paper, Daniela Giacchetti, Head Customer Strategy Officer said "this has seen a 57% decrease in the volume of direct mail [and associated costs]. Through more accurate targeting a 62% response rate."

Having a customer retention focus that combines CRM and doesn't rely on price discounting activities is why companies as diverse as Anchor, Tesco and L'Oreal may be better able to weather the storm with their brands un-tarnished.

Thursday, 13 November 2008

Short term gain or long term relationship?

Abbey have recently launched a credit card providing 3% cash back for 6 months on card spend for groceries and petrol. The press release around this stated "The increasing cost of living, combined with the credit crunch, means families need all the help they can get to cover the cost of their weekly shopping essentials - which is why we developed this cash back card".

This card is interesting on a couple of fronts.

Firstly it is blatantly targeting everyday transactions – the holy grail of card spend. If a card issuer can get a card to be used in habit forming sectors such as supermarket and petrol, then it's more likely to be front of wallet for other purchases. All card issuers encourage this activity, but it's normally more subtle as part of a statement communication or targeted marketing. This is one of the first such cards to be rewarding just this form of spend and is being done at a time when consumers are much more aware of their spend within these categories due to rising food and fuel costs.

By excluding other categories such as travel and expenses, the proposition rules out many customers in the traditional cash back segment of travel and entertainment who use their card to pay for business expenses. This card is squarely aimed at families who would normally pay for groceries and fuel by other means such as cash and debit – a previously overlooked segment within cash back loyalty.

What is a little worrying however is the promotion.

Anyone working within the card industry will know that 3% cash back is not a proposition that can be supported within the normal economics of a credit card. All merchants pay a card issuer for spend taken on a credit card, but this is no where near 3%. For Abbey to fund this offer of 3% its either in for the long haul and is hoping to make back its investment through a long term relationship with the customer, or it is hoping to make back its investment in the shorter term through a large number of customers revolving a balance on the card, paying interest and hence offsetting the costs of 3% being paid to a smaller number of transactors – customers paying off in full every month.

I wouldn't like to suggest which business case is driving this proposition. However, in a mature market with customers an increasingly scarce resource, the best route to healthy, long term profits is through healthy long term customer relationships. A loyalty proposition which encourages the right behaviours for the card issuer, the merchant and the customer provides a long term win-win for all stakeholders.

I sincerely hope the new Abbey cash back card is such a product – with customers at the heart of the proposition and a continued focus on meeting their needs so as to reap the rewards of a long term relationship.

Monday, 10 November 2008

Retailers Need to Start Thinking Imaginatively

I was reading an interesting article today on retailers and their use of mobile within the buying process. I was quite surprised when it said that 40% of those surveyed said they already had an information-led mobile internet site or were considering building one – I'm guessing that there were more within that 40% that are considering it versus those doing it as the mobile channel is not something I've experienced in a major way from online retailers or any retailers for that matter. 30% of retailers questioned felt the use of mobile was unimportant and almost 50% didn't feel that the success of mobile and e-commerce are interlinked.

The article went on to say that the "survey showed the use of mobile among retailers is high but the benefits of having m-commerce capabilities are yet to be recognised"

Theodore Levitt said in his article "Marketing Myopia - Harvard Business Review" in 1960 that "Management must think of itself not as producing products but as providing customer value. It must push this idea into every nook and cranny of the organisation otherwise the company will be merely a series of pigeonholed parts, with no consolidating sense of purpose or direction". That statement is probably truer today than at any time before as customers are dealing with retailers across many more channels and are expecting the same level of service and recognition regardless. The buzz words in retail are "Multi-Channel Retailing" – having one cohesive customer centric experience across all channels rather than pigeonholed parts.

For many retailers though this is still a pipe dream – their e-commerce solution is completely separate to their EPOS solution, vouchers issued in one can't be redeemed in the other; customers (and hence purchases) in the online channel are known, customers in the offline channel are not. For some retailers there is almost a rivalry between online and offline with no real cross promotion of either channel, acting as if customers are either on or offline – but never both.

Retail loyalty programmes can help bridge the gap in this regard, acting as a centralised solution to bring together customers and transactions from all channels – providing a single customer view and a solution for creating and delivering relevant promotions back to all channels whether these are via email, SMS, direct mail or POS receipt. Even here though many retailers get it wrong – running a loyalty solution only for offline and ignoring online, or further muddying the water by running two loyalty solutions, one traditional and one via their store/credit card product – never the twain shall they meet.

In an ideal scenario I should be able to walk into a retailer and seeing something I like, text the product code to an SMS short code to get real time product reviews – if I like it I can order it there and then to be delivered, or pick it up and take it to the till. At the till I should be able to swipe my card and have the cashier know who I am, what I like to purchase and make a recommendation for something else I may like that is coming in next week. On my till receipt is an offer for something that I would like which I can go online to purchase. Going online I can see a history of all my purchases across all channels and can see items I've viewed before whether online or in-store via my mobile requests. If I choose I can post these to my social network profile so that my friends can see what I've purchased and react to this, comment on it and if they like it they can purchase it (and I may even earn some commission on the referral).

None of that is particularly hard to implement, but it's about putting the customer at the heart of the buying process.

Theodore Levitt went on to say that "the belief that profits are assured by an expanding and more affluent population is dear to the heart of every industry. If consumers are multiplying and also buying more of your product or service, you can face the future with considerably more comfort than if the market were shrinking. An expanding market keeps the [company] from having to think very hard or imaginatively."

Well we're not in an expanding market anymore – so retailers who continue to have expanding profits will probably be those who are thinking imaginatively and putting the customer at the heart of their organisation.

Sunday, 9 November 2008

A Tale of Two Budget Hotels

2008 it seems is an interesting year for budget hotels.

On the one hand there is Premier Inn which has just been ranked highest in the latest JD Power survey for the Economy Segment 2008, with an "among the best" score in Overall Satisfaction, Reservation, Check-in/Out and Cost. Not only did it out rank the other economy hotels, but it also out-ranked many mid-scale segment hotels including Express by Holiday Inn, Best Western, IBIS and Park Inn.

On the other hand its competitor Travelodge has announcements of a different kind – the fact that it is cutting prices, selling some rooms next year for just £9 and dropping prices by around 10% on average. In fact it sounds like it's trying to change the sector to one more akin to budget airlines.

Premier Inn has so far not been drawn into this price war with no announcement about price cuts. In fact I was at a conference early this year when Gerard Tempest, Marketing Director for Whitbread Hotels & Restaurants was there speaking about loyalty for Premier Inn. He was discussing why Premiere Inn had made a conscious decision not to create a traditional loyalty programme providing points for nights stayed. Instead he discussed that their customer retention programme is based on delighting the customer. By having a consistent level of quality across their rooms, customers know what to expect in every hotel they stop in and so they are not unpleasantly surprised. This is then backed up by great customer service and a money-back guarantee stating that if you don't get a good nights sleep then you'll get your money back.

Through personal experience I have seen first hand how this focus on the customer works. A female colleague of mine noted that if you're a lone female guest then they don't give out your room number verbally so that it can't be over-heard - it's only a little thing but it shows they are thinking all the time about their guests.

Once you've stopped at a Premier Inn they then send you a Guest Satisfaction Survey – on which they have a very high response rate despite its length.

I had reason to try out their customer service a few weeks back when I accidently managed to mis-book a room online – getting the date wrong and so not turning up for the date I'd booked and then having to re-book on the day I needed it when I realised the mistake. By the time I got to the hotel the manager had already made the decision to refund my mistaken no-show. No arguments despite it essentially being my fault – now with service like that who wouldn't recommend them.

It would seem there are two strategies going on here. Travelodge it would appear is hoping to attract customers on a budget – bringing in new customers who may be shifting from a family holiday to a weekend break or business customers downgrading from mid-scale hotels to budget. It would also appear to be working with a 45% increase in bookings for October compared to the same period last year.

Premiere Inn on the other hand is working hard to retain existing customers – providing quality and service for a competitive price. With their Good Night Guarantee they are also looking to reassure customers who may be looking to down-grade from the mid-scale hotels that they will not be compromising on the fundamentals. Premier Inn sales are 18% higher in the first 6 months of 2008/2009 fiscal year than last year so it would seem that their policy is also working.

What will be interesting is how these strategies fair in the longer term – with premium pricing and a focus on the retention of existing customers, Premier Inn may be in a better position as the economy starts to grow again – Travelodge on the other hand may find it hard to increase their prices once customers have become accustomed to them.

Friday, 7 November 2008

Boom and Bust Marketing

Despite assurances from Gordon Brown at the Labour conference in 2000 that we would not return to the days of boom and bust, here we are in 2008, tumbling out of a boom and right into a bust. There are probably many reasons for this that I'm not qualified to discuss, but it would appear one of the primary reasons is an overheated and overvalued housing market. A market which created a great amount of perceived wealth and was encouraged and hailed as an indicator of our successful economy.

There was no real recognition that it was essentially a bubble waiting to burst – like the internet bubble before it and the tulip market bubble way back in the 17th century. Opinions differ as to why they form – whether it's simply greed or herd mentality – but it's generally only in retrospect when the bubble has burst that we see it for what it was and people begin to recognise that demand goes down as well as up.

What's interesting is that while we see this at a macro level, its happening all the time in different markets. Through my work with various FMCG brands I was amazed to see that the number one measure of success for many brand marketers was penetration – the number of people who have the brand's product in their basket in a given period of time.

The movement of this measure in a positive direction has become critical to many and being the number 1 or 2 brand in penetration terms is the place most brand marketers want to be. Changing this measure can be relatively simple though – in the short term – by creating a sales promotion which targets a large number of people with a very compelling offer.

The problem is, the gain from this sales promotion is not real – many of the brand's existing customers have simply bought forward to take advantage of the offer and many others have only purchased it because of the offer. Sure it has introduced new people to the brand – some of whom will stay – but no where near the amount of people who were contained in the spike in penetration.

Now there is nothing wrong with this approach – generating awareness and creating trial is a key activity for any brand - the problem is believing that the spike in penetration is reflective of the actual customer base.

Where brands believe this, thus starts a never ending cycle of sales promotion – creating new promotions to follow quickly on the heels of the previous promotion so as to prop-up the penetration figure over time. This can be costly on two accounts – firstly the brand is literally buying this extra penetration with free product and secondly they are conditioning their existing customers to only purchase through offers.

As times get tough and budgets are reviewed, this constant over spend on sales promotion is going to result in some brands coming back down to earth with a bang as the penetration bubble bursts.

Ideally brands should be looking at how to maintain market share and grow this in a controlled and responsible way – not focusing on price reductions and volume lifts but focusing on brand values and recognising and rewarding existing customers. Sales promotion will always have its place to drive awareness and trial, but acquisition without a focus on retention is a slippery slope to boom and bust.

As Gordon Brown said a little prematurely back then - no return to short-termism – no return to boom and bust.

Tuesday, 4 November 2008

The best things in life are free

One of the questions I’m asked quite often is how do we measure engagement within a loyalty programme - how do we know people are "getting it".

There are obviously a number of indicators to a loyalty programme working well including enrolment levels and tracked spend, but the number one measure of engagement is normally expressed in terms of redemption. Where 30-60% of customers are redeeming within a programme we’d class this as working well - over 70% probably too well and under 30% not well enough.

It’s a simple measure but it makes sense.

For someone to go to the effort of carrying a card and swiping it they must feel there is an achievable reward in the future. Driving loyal behaviour is a balance between having rewards the customer wants (the goal) and how achievable the rewards appear (reward divisibility). The level of redemption within a programme validates the number of people seeing this benefit and working towards achieving it - low levels of redemption suggest low levels of engagement.

This measure was called into question though earlier this week when I was reviewing a US retail loyalty programme. This programme had 80% basket penetration (% of visits with loyalty card used) yet only 5% redemption. Given the low level of redemption you’d expect low engagement and hence low levels of card carrying/usage. Customer research carried out for the programme also showed that customers were not aware of the benefits of the programme even though they had apparently worked towards them and received them. So here was a programme which customers didn’t really know about, didn’t redeem for and yet had high levels of usage.

Digging into how the programme worked revealed some interesting findings however. The employees of the retailer were trained to ask for the card on every transaction and where the card wasn’t being carried could use the customer’s phone number to link the transaction.

I know from my own experience at retailers like Wickes in the UK that when they suddenly ask for your post code at point of purchase you simply provide it - sometimes a little uneasy as to why they asked - but they asked so you provide it. I've also seen the same effect on a programme we ran where we simply asked a customer if we could put that purchase on a specific card type and managed to significantly move the needle on spend towards that card - for free - just by asking.

It would appear the same thing is happening here - customers have high levels of inertia and are taking part in the programme just because they are asked to on every visit. Although this makes the programme successful in terms of the amount of spend tracked through it and the data this affords the retailer, it could be significantly more successful if customers actually valued the programme, saw achievable rewards within it and changed behaviour to reach them.

That said, it is a great example of what can be achieved by engaging employees in a programme - something that is key to all successful loyalty schemes - and best of all its free.

Saturday, 1 November 2008

Customers Pay the Price for Quality and Service

I had some push back on my article "The customer is always right (unless they’re wrong)" where I commented that I felt price ceased to be a major reason for churn for existing customers. It was pointed out to me that although this may be true to a point, brands still needed to reassure their customers that they were receiving a fair price, even if they wouldn’t really know either way. This is evidenced by brands such as Tesco continuing to provide messages on "value" and comparisons to other retailers.

I was then reading an article on Retail Week by Mark Price, MD of Waitrose with the title "Cash-strapped shoppers might be chasing after value, but they can still appreciate quality". He raised the question that in these challenging times and the sudden need to realign around price, how a brand such as Waitrose, with a tradition of quality for over 100 years can reassure about price (and real value) without losing their quality credentials.

He then went on to outline how Waitrose is meeting this challenge by actually investing in their products rather than cutting back and cutting costs. They have invested in the quality of their own brand lines meaning these now stand up well against other own-brand and branded products. This has then been backed up with advertising saying that if you don't enjoy your Waitrose product they will refund and replace it.

To fight the challenge that consumers will naturally think that a "quality" product is automatically going to be more expensive they have introduced subtle ticketing in-store to communicate that they are the same price.

Most interestingly they are also investing in their staff - an area many businesses actually cut back on in hard times, reducing training and staff numbers. By investing in customer service training they are now seeing a 10 percentage point gap on mystery shopping scores between themselves and their closest competitor.

Mark finished of his article stating that they have improved their quality, value and price perceptions over recent months and are holding on to their customers. Waitrose it would seem are doing a good job of retaining their customers by building on the things that customers value – good quality and service – whilst reminding customers that they are still competitive on price.

I still maintain that price is not the number 1 reason for churn despite what customer research may say - but it would seem all brands in these more trying times need to consistently reassure customers that the price paid is fair for the quality and service delivered.