Sunday, 27 September 2009

Divide and Conquer

lg_couponCoupons.  Despite their long history - first appearing in the early to mid 1800’s and being used to great effect by Coca-Cola in 1887 - they are however strange beasts.

Every brand seems to want to give them – research suggests almost all of us use them – yet no consumer wants to be seen with them.

One of the reasons for this is that as we have a tendency to upward social comparison, we are more likely to want to align with those better off than ourselves – and as people tend to associate coupon usage more with less well off people, coupon usage overall has a negative image.

The modern word “coupon” derives from the French couper which means “to divide with a blow or stroke, to cut” which led to the word coupon which means “a portion that is cut of” - essentially describing how the coupon is actually presented.  However, the meaning of the word coupon today has less to do with physically how it is made available and more with how it is used – the association being more one of a discount.

Coupon perception can though span between money saving discount and deserved benefit, although at this end of the scale it’s typically called a voucher – probably more to disassociate it from its “cheaper” cousin. 

Whilst many of us may shy away from using a 20p off coupon, we wouldn’t think twice about a coupon which gave us a perceived exclusive benefit.

As an example, I was travelling on a flight recently and purchased priority boarding as part of my car park booking - a benefit which essentially allowed me to whisk through security and customs and something which many frequent flyer programmes offer as a feature. 

When I arrived, people were standing in a very long queue, which was even snaking down the entry stairs, and yet I had a “coupon” which allowed me to ride up the escalator and go through a dedicated channel with no hold-ups.  The cost of this privilege - £3 – the benefit (to quote a popular card brand) – priceless.

There is a very fine line between an unmerited discount and deserved benefit and it’s all in the positioning – how it is “sold” to the consumer and the reason for achieving it.

Clipping a coupon from a magazine for buy 1 get 1 free is obviously a mass campaign and smacks of penny pinching or smart consumer depending on who you talk to.  However, earning benefits based on purchase behaviour, perceived position or who you know turns it into a deserved privilege.

Another advantage of focusing on a benefit rather than a discount is that it tends to attract the more affluent consumer who, whilst not accounting necessarily for a larger share of the footfall or penetration will typically account for a larger share of the revenues – they will be loyal rather than shopping around based on who has the special offer.

In promotions I’ve worked on with FMCG brands where the campaign focuses on delivering a benefit, not a discount, there is a definite skew in participation and redemption to more affluent groups. 

Whilst less affluent groups tend to show initial interest, it is the more affluent who follow through to redemption.  However, providing a deserved benefit can be harder within an acquisition campaign than a retention one.

It is obviously hard to position something as a deserved benefit when quite obviously it is delivered via a non-discriminating channel such as a door drop or magazine coupon - however there are brands that have achieved this. 

Threshers famously managed to reposition a discount coupon to a deserved benefit by simply using viral elements so people thought they had access to a benefit that wasn’t intended for them. 

GHD created a programme called Blessed which was positioned more as a members only club than a mass loyalty programme.

Closer to home, I’m currently working with a hotel group which has created a programme which uses advocacy to drive through acquisition.  It’s positioning of secrecy which bestows privilege to those invited, allows them to offload inventory at discounted rates, without ever appearing to be discounting their brands.

It’s not the discount itself that is bad, it is how the discount is positioned and the perception as to why it has been granted that is key.

For them, the whole proposition is one of deserved benefit rather than cheap discount and they get to know their customers and potential customers at the same time.  (I’d love to tell you who they are and how you get access, but I'm sworn to secrecy – unless you’re a friend of course…)

Ironically, despite the negative image coupons have, usage has increased in the last year or so as people look to reign in their spending – however this is a false positive for brands.  These consumers are buying simply on price and won’t stick around for long or at all after the coupon has been used.

Better to make people want your brand, rather than paying people to take your brand - coupons can be used to do both, it just depends on how you position them.

Whilst the original definition of a coupon referred to the division of the physical paper, used correctly they can be used to divide good customers from bad – now that's got to be a challenge worth conquering.

Sunday, 20 September 2009

Back to the future

back-to-the-future I’m very excited.  I’ve just got the new Dan Brown novel “The Lost Symbol” and already I’m a third of the way through it. 

Without giving away the plot to those who haven’t got it yet, it’s safe to say that it includes the usual mix of secret societies, mythology, symbology and real life locations in a way that really brings the novel to life – and starts you questioning reality based on fiction.

However while this blog isn’t a book review what did intrigue me was a section in “The Lost Symbol” where one of the lead characters demonstrates how breakthroughs in science today were actually already documented in ancient texts centuries ago.  From string theory to multi-dimensional universes, all of these things were apparently discussed in ancient documents.

Now I don’t know how true that is, but the reason it struck a cord was because I’ve also been reading some older books recently including Hidden Persuaders by Vance Packard (first published in 1957) and Propaganda by Edward L. Bernays (first published in 1928).  What’s really interesting about these books is that barring a reference to steam ships in Propaganda and shortening in Hidden Persuaders, you’d be forgiven for thinking they’d been published recently.

In Propaganda, Bernays describes one of the problems facing society, saying:- 

“[] today, because ideas can be instantaneously transmitted to any distance and to any number of people, this geographical integration has been supplemented by many other kinds of grouping, so that persons having the same ideas and interests may be associated and regimented for common action even though they live thousands of miles apart” - 1928

Indeed he quotes H. G. Wells who had written in the New York Times “ Modern means of communication – the power afforded by print, telephone, wireless and so forth..[].. have opened up a new world”.

Bernays then goes on to describe some of the tens of thousands of groups listed in the World Almanac – which I guess would be the fore bearer to Facebook Groups – listing groups such as the “Association to Abolish War”, the “Anti-Cigarette League” and the “Ayrshire Breeders Association” – all of which can now be found on Facebook in one form or another over 100 years later.

Whilst we think that social networking may be something wholly new, in reality we have simply changed the channel – made it more visible and accessible – but we haven’t really changed the underlying activity.

In Hidden Persuaders, Packard describes some of the techniques being used by agencies in the 50’s to sell goods.  Given this was over 60 years ago, little has changed.  Yes, phrases like “the little woman” when referring to a housewife wouldn’t play so well these days; however when he describes some of the issues marketers faced back then, we’d do well to pay attention.

For example, when discussing the issue that “you can’t assume people know what they want” he uses the case of a major ketchup company who decided to change their bottle design based on customer complaints.  In interviews most customers indicated they preferred the new bottle the company was considering however when it was then launched it was overwhelmingly rejected in favour of the old bottle – what customers had stated when interviewed didn’t match with what they did in practice.

Almost 30 years later, one of the biggest global brands made exactly the same mistake when Coke launched it’s new flavour in 1985 after extensive customer research which indicated it was preferred - only to find it was wholly rejected by the public and had to be pulled.  This despite blind taste tests indicating they really did prefer the newer recipe.  The book Yes! 50 Secrets from the Science of Persuasion discusses this and indicates that it probably had more to do with the psychology of “scarcity” and how people react when they think something is in short supply or they are losing something.

Going even further back, in 1894, Richard Sears, co-founder of Sears said "We Can’t Afford to Lose a Customer” and so to help retain customers he used a number of techniques over the next 10 years including:-

  • Printing testimonials from satisfied customers
  • "Club Order Program" - Encouraging customers to combine their orders with friends or neighbours to share in discounts
  • "Customer Profit Sharing" - giving the customer a one-dollar certificate for every dollar spent.

searscertKeep in mind, this was over 100 years ago and we essentially have a company utilising a loyalty programme, peer based feedback and elements of social networking.

Sometimes I think we get so wrapped up in the technological advances that we forget that what's important is not how we say something – the technical channel by which it’s transmitted - but what we have to say and even more importantly what we actually do.

Times change, technology moves on – but basic human needs and desires remain the same – and success depends on meeting and exceeding these, whatever century we are in.

Sunday, 13 September 2009

It’s coming and it will be game changing

iphone_smsT-Mobile are offering free texts – for life!  

This is currently a specific promotion for customers joining the reward programme during the next month or so and who top up with £10 this month and continue to do this each month thereafter.

However, this is significant because it won’t be long before a competitor responds and free is difficult to beat. 

Look at the credit card market and the 0% offers.  They basically eroded their own market to the point where almost no one takes out a card anymore without some form of 0% deal, whether this is for balance transfers or retail spend.

Music downloads are another example.  Technology outpaced the publishers, providing music when and where people wanted it rather than how the music companies wanted to control it.  Once the horse had bolted and people got used to “free”, it has become a difficult thing to undo.

Free texts will go the same way.  Once people see SMS less as an individual purchase and more as a service, charging for texts will be dead.

Whilst putting “free” onto something can increase attention and gain new prospects –these don’t necessarily translate into customers.  Worse still, if the element of the product or service being given away as free doesn’t support a business model which can be charged for – and more importantly – which customers want to pay for, then this can simply erode marginal revenues for all.

However “free texts” aren’t really the whole story – they are not really free, they are just un-metered within an overall service provision.  This means they are becoming more akin to mobile data contracts or home broadband, where within the restrictions of “fair use” and a monthly commitment consumers can basically use as much as they like.

Seth Godin makes an interesting point in his latest blog post when discussing the issues around brands making something free

People look at the free revolution and say, "oh, that could never work. If I gave x, y or z away for free, I'd fail." They're right. They will fail... If they keep the model the same and just give away stuff for free.

So where is T-Mobile going with this?

Well there are two interesting issues within the mobile telco market.

1. Market Saturation – Everyone who wants a mobile has one – there are very few new new customers so brands need to increasingly look at ways to attract customers from other brands and then retain them.  Witness the plethora of loyalty programmes being introduced such as Orange Bright Top-Ups or O2 Treats which are looking to reward customers for their continued loyalty.

This new promotion from T-Mobile also works in that it has an attractive proposition - “free texts” – which will attract and acquire customers combined with a lock-in based on losing the benefit if you cease to top-up regularly.

2. Product Saturation – Increasing competition has meant the cost of voice minutes and now texts has been increasingly driven down to the point where customers have more than they need – brands can’t really differentiate in this area any more.

As pointed out in the blog I’m Cellular “As prices fell for a voice minute of use (just as with Long Distance before that), subscribers could afford to purchase more minutes for their dollar, but at a point their demand was sated and they had no desire to consume more.  SMS has certainly provided an unexpectedly large increase in data use, but that is, like voice, largely played out.

So the business model has changed and the new growth area has moved on – in this case it’s data – with data predicted to double revenues over the next 5 years.

The blog I’m Cellaur does highlight another potential issue:-

Although (like prepaid) these [flat rate] plans are simple for subscribers to understand, and very attractive in avoiding unpleasant surprises, they invite unrestrained use with no marginal revenues.

So the real issue for T-Mobile will be in how to continue to increase revenues in the future if everything is based on a flat rate fee. 

Well when people stop worrying about the cost of the service, they will start to concentrate on what can be delivered across the service.

As we’ve witnessed with the iphone and it’s unlimited data contract – expect a deluge of digital services such as music, applications, location tools, social tools and games.

And for all other brands – the prospect of free unmetered SMS and data opens up a world of possibilities for creating closer relationships with their customers.

Is “free” SMS really game changing and a win-win for all? 

I think it could be.

Tuesday, 8 September 2009

An open debate – acquisition vs retention

I always like a debate and I was recently having one with a colleague of mine  - I thought it such an interesting discussion that I’d post it here in it’s raw format…

8th September 2009 12:30 - Rachel

I think there's a piece on loyalty in advertising and DM... Previously they just blasted advertising messages to everyone in the hope some of it stuck... Or segmented communication based on some REALLY rudimentary data (I think geodem is an utter waste)... Now its backfiring - the value of media is in the knowledge and understanding of the intended target... Lifetime value HAS to be more valuable than response... Says that in the article in MediaGuardian that ABC (Audited Bureau of Circulation who validate newspaper and mag sales) measure web effectiveness by unique users per month, and for the online papers that's an issue as they think success should be measured in terms of repeat visits as someone dipping in once is of less interest to them than someone who comes back every day...

Anyway, there's an article there about something... Something really provocative to try and get a reaction out of the ad or media boys…

You also need to look at Twitter... [Some people] have sided with the masses who think things like the death of Michael Jackson being the No1 trend on Twitter within an hour is a sign of something profound, like those people who think they're 'protesting' about the abuse of electioneering in Iran by putting a green ribbon on their Twitter profile pic... People THINK it means something, that its a modern way of campaigning against injustice... But that's insane! Its incredibly easy to go to and put your email address down on a petition calling for more sanctions against China in response to more human rights abuses - but its NOT standing in front of a tank now, is it???

Some might call it the democratisation of the democratic process - but its set the benchmark at the lowest common denominator, and so stuff that REALLY matters is just gonna get lost in a load of junk. Someone's got to have that fight with the digi boys, and I dont seem to be able to get the words out...

8th September 2009 12:38 - Mark

I like the second bit.  I read a book – Bowling Alone– which talks about this.  How people used to be genuinely involved in things but this has declined so it now has no real meaning.  Using the example of Greenpeace – when they started using DM their membership ranks swelled and could be translated as a “movement”, however when they stopped it all fell away – these people weren’t really bothered – well not enough to actually do anymore than put some cash in an envelope.

Looks like Twitter is the same – people like to jump on the band wagon – to feign concern, but like you say, will they actually do anything about it.  The danger is that people given an opinion without giving it thought – and if people read too much into this they may think that’s where public opinion lies when in reality it is not.

First bit I’m not getting…  I understand the principle, especially around frequency, but don’t see the line of argument. 

8th September 2009 13:10 - Rachel

Both of the points were meant to be about acquisition without retention... Into a product or even an idea... It's lazy marketing when penetration is the main measure... 8million people think I'm great, but not one of them would p*ss on me if I was on fire... Mates vs friends... But as you say, its REALLY dangerous if politicians start thinking it actually MEANS anything. And you only have to watch the news to see the weight that the media puts on these online petitions, and Twitter trends... It's a worry. But of course it suits them, because it moves super-fast and that suits 24hr news... It doesn't really matter WHAT you're saying, so long as you're saying SOMETHING, and of course if loads of people are saying it it must be worth saying...

I can't BELIEVE some b*stard stole my idea :oO

On the advertisers bit... I was just thinking that mass-market advertising has been feted as the most effective communication and persuasion tool forever (Have you read Vance Packard yet??), and now their lack of real knowledge and understanding of their consumers is backfiring on them. Cost-effective attitudinal micro-segmentation - deliverable only through the digital WILL be the most effective marketing tool of the future.

And even in digital, the payback will require an evaluation of lifetime customer value as it will still be too expensive for a single hit. So its all about retention... And suddenly the ad agencies are interested in loyalty marketing... And the Media Agencies are beefing up their digital production departments whilst everyone tries to work out how to make digital advertising work... But they've taken the same rules as press and applied them to web - produce an ad in a pre-specified format, find the websites that have the largest number of people who meet a set of pre-prescribed criteria as having a propensity to buy your product, and place your ad in their way... and that's SOOO missing the point...

8th September 2009 13:23 - Mark

Hmmmm… not sure I agree with you entirely.  Yes when you know your customer it’s all about retention – but to acquire them you need to find them and by definition this means you don’t know who they are and so are limited in your ability to segment to reach them.

I think digital is great for retention – one to one relevant comms – but for acquisition I think it’s sh*te – based on nothing but my own experience.  Digitial is a pull based medium, I go online because I want something, I search it out.  TV, Press, etc. is different as I watch it/read it to be entertained – I’m open to new things being pushed to me.   For me, digital is about cross-sell (people who bough this also bought this – that’s relevant), it’s about referral (thought you might like this because I do), it’s about discovery (I want a new TV – lets read reviews/search/comparison).

Example: T-Mobile offer free texts – I saw it on TV – I went online to look it up and I’ll be blogging about it this week – TV works, but needs to fit into the overall purchase process.  It’s no longer just Awareness, Interest, Desire, Action – there is a host of other stuff in the middle such as Research, Validate, Compare – before I get to Action.

Acquisition through awareness will always be required and I think mass-media (albeit increasingly segmented) will always play a big role in getting them – however retention follows quickly otherwise you’re back on the hamster wheel to re-acquire later.

8th September 2009 13:26 - Rachel


8th September 2009 13:44 - Rachel

I'm in shock... You just disagreed with me... On ACQUISITION!!!!!!!!!!!!! :oO

I think you're half wrong half right... I think you should look up something called "Groundswell" marketing... Its my new favourite thing ;o)

….. the debate continues – feel free to chip in.

Sunday, 6 September 2009

Is it loyalty or is it addiction?

farmtown I have a confession to make… I’m an addict.

This isn’t however a drug addiction (or any other kind of substance), but I do tend to partake at least once a day.  What am I addicted to… well I’m kindof ashamed to say, it’s Farm Town on Facebook.

I realised I was addicted when I came home from holiday and within an hour had logged on.  Interestingly I’m not alone either – I've seen many people using their laptop in public and on the screen was Farm Town.  In fact, for those of you that haven’t heard of it, count yourself lucky, you’re not one of the 18.5m monthly active users, 6m daily users or the 1.1m fans. 

This got me thinking.  How was I so easily hooked in and how does it continue today to attract – no demand – my attention.  In fact, what has actually gone through my mind is how could I unlock and leverage this level of stickiness and loyalty for use in customer retention programmes.

At this point it’s probably worth explaining exactly what Farm Town is and in my opinion, why it is so sticky.

Farm Town is an online game which allows you to build and develop a virtual farm – going through the motions of ploughing, planting and harvesting and then earning an income from crops sold.  In this respect its a Tamagotchi style application as it requires regular attention to harvest crops before they go bad – so in order to continue to take part you have to continue to log on. 

However, as you build up money you’re able to extend your farm and buy buildings, animals, fencing etc. to personalise your farm as well as being able to grow more crops – and earn more income.

There are many reasons at play for why this game is addictive.

At a high level the stickiness of Farm Town is based on goal directed behaviour – using various mechanisms to set out different goals requiring specific interactions that draw people deeper into the game one step at a time.

To achieve this the game uses a form of tiering to unlock features. 

In the early days for a new player, it is possible to rapidly rise through these tiers and begin to unlock different crops, buildings etc.  This starts to create a feeling that the higher levels are achievable so you put more effort in to get there – however the higher the tier, the more effort is required.

This to me is one of the key aspects of the design which makes it so clever, the tiering is always achievable, but the more you do, the harder it is to get to the next tier.  Having experienced getting to higher levels and and the crops or buildings this unlocks – essentially setting you apart from other “newbies” – you want to achieve more – to keep climbing the ladder.

I’ve seen similar stickiness in an FMCG loyalty programme I’ve worked on where participants were able to partake in online games for little or no points and redeem points for prize draws.  It might be expected that where consumers are not forced to make a purchase to take part or where they constantly “redeem out” by taking part in prize draws, that there would be an element of wear out.  In practice though we saw the opposite of this.

Where we see increased online interaction - whether this is no points or low points interactions – we see a direct correlation to increased retention.

What I think makes Farm Town more powerful is that taking part is rewarded not with more of the same, but with more!  Increased interaction provides increased privilege.

The tiering is also clever in that it essentially creates two currencies.  Growing and harvesting crops earns “coins” which are the base currency to purchase more crops, extend the farm, add paths, buildings, fences and trees.  Money isn’t everything though – I’ve earned over 1m “coins”, but I still can’t purchase what I want as I need to earn “experience points”. 

This second currency of experience points is earned by working – helping others by harvesting or ploughing their fields or building your farm with additional buildings, paths and fences.

Now this bit is very clever, because if it was all about the money you’d simply plough the whole farm, plant crops and maximise revenue.  However to get higher earning crops you need experience and this means giving land over to farm buildings and to helping others. 

By combining 2 different currencies, one which measures “transactional behaviour” and one which measures “engagement”, it leads the participant to interact in a way which creates deeper engagement.

Some loyalty programmes attempt to do this – just look at frequent flyer programme tiering with it’s use of base and bonus points.  However, I’ve never seen a programme that has so visibly recognised the difference between transactional behaviour and engagement.  The recent Huggies programme  “Enjoy the ride” was a great example of an engagement currency – but then missed the opportunity to combine this with a transactional currency.

The social interaction cannot be ignored either. 

You get increased benefits by having neighbours and increased earning if you work your neighbours farm – this ensures that people want you to be their neighbour and you want to be theirs. 

Having neighbours or seeing other farms as you work them means you begin to see people who are at higher tiers, who have bigger farms, who have crops you can’t plant – all of this acts as “social proof” which further spurs on activity.

I think this is one area that many loyalty programmes today still haven’t grasped.  Many brands are so nervous about connecting consumers together that most programme interactions are largely centralised and push based.  However the power of social proof – or in effect the ability to compare your performance to that of others – is well known to stimulate increased activity.

What I think the developers of Farm Town have done very cleverly is to create a really well designed journey which drives early engagement, rewards interaction, encourages peer comparison and recognises increased experience.

Obviously for many people the simple pleasure of building a farm is what drives them to participate – it might not be an addiction - but whether they like it or not, they are being played as much as they are playing. 

PS. In case you’re interested, this is my farm ;o)