Friday 31 December 2010

Loyalty in 2011 - A marriage of location, gaming and social

Predicting where things will be in the next 12 months is notoriously difficult as you don't know what you don't know, and an unexpected innovation can pop up at any time. However as respected journalist and technologist John Battelle said in his blog recently about the "next big thing":-

Often times what's directly in front of you is, in fact, the next big thing.

Something however that doesn't need any amount of prediction is that there will be a peak in the sales of commemorative tea-cups, plates, tea-towels and other Royal memorabilia in 2011. With the recent engagement of Prince William and Kate Middleton it seems we'll have the first Royal Wedding in a quarter of a century as well as an additional bank holiday for us Brits to enjoy it. 2011 will be the year of wedding fever, nostalgia, bunting and street parties.

This does neatly segway into another type of engagement however - customer engagement and the associated loyalty we look for from it. What 2011 looks like for loyalty is a little harder to predict - there are no fixed dates or big events. There are though some key trends that we are seeing in the wider market which will all impact on loyalty in some way - taking us one step closer to solidifying that customer engagement into wedded bliss.

No self respecting bride however would consider walking up the aisle without taking account of the Victorian tradition of taking something old, something new, something borrowed and something blue - and neither shall my loyalty predictions.

Something old - Coalition

Coalition programmes have been around for decades, starting with the original stamp collecting programmes. However they have really come of age now with existing programmes going from strength to strength and new programmes rolling out worldwide. Group Aeroplan has recently launched Nectar Italia and Nectar Chile and Loyalty One has taken stake in Dotz in Brazil. Now American Express has bought Loyalty Partners who run PayBack in Germany. Ed Gilligan, American Express Vice Chairman said of the deal:-

“The loyalty coalition model is growing rapidly in many parts of the world [and] Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings"

It's not just the growth of new programmes, the existing ones are also gaining strength, with Nectar UK recently following up it's new partner Homebase with leading utility company, British Gas.

This is a high growth, and increasingly competitive area so expect to see more of these programmes coming to a country near you.

Something new - Geo/Local


You can't have failed to miss the explosion of Groupon in 2010. It's meteoric rise culminated in Google trying to buy it for a reported $6bn and when that fell through they then managed to secure $0.5bn in additional funding. While Groupon has an interesting (but not unique) business model, what really makes it interesting is the local merchant aspect. Representing about 1/3 of all sales within the US, these independent retailers are a large pool to fish in, but the challenge has always been economies of scale.

What Google ad-words did for online marketing however, services like Groupon are doing for offline. Barclaycard Freedom is another example of scheme engaging the thousands of small independent retailers and although this has yet to become well established, I think the prospect of creating services that engage local merchants will grow.

The reason for this is simple - relevance. All brands need to be relevant to get cut through and it's much easier to be relevant when the marketing is from a local restaurant or retailer than when it relates to an increasingly sterile national (or global) brand. It also provides larger brands with the ability to target marketing spend more effectively, rewarding spend at locations that have room to grow without simply rewarding spend everywhere.

As Fast Company recently reported on Google's move into this area and it's recent move of Marissa Mayer from Search Products to Geo/Local, Google said

"Marissa is moving over to an exciting new role covering geo/local, which is crucial to our users and the future of Google" (emphasis added)

It's not just Google, Facebook or Foursquare that get this; location is going to be a key variable in our marketing toolkit in 2011.

Something borrowed - Gamification


Well 2010 was when gamification really burst upon the scene and along with it a lot of controversy about the term itself. However, despite the controversy most people agree that the idea of utilising gaming dynamics to help create motivation is worthwhile.

It's interesting that currently early adopters have been either online communities/e-commerce sites or offline automotive companies with both Ford and Nissan using gaming mechanics to improve driving techniques within their electric vehicles.

I think 2011 will see this become more mainstream, with full blown traditional loyalty programmes such as hotel, airline or retail loyalty utilising gaming mechanics explicitly. As I've blogged about a number of times this year, this one trend has the possibility to really lift levels of engagement within a loyalty programme and looking forward, to possibly remove the redemption currency itself (and the associated liability)

You don't get very far however within gaming mechanics before the need to go social kicks in - the real power being based on the bragging rights that come from achievement - and so this is the theme of the final predication.

Something blue - One word. Facebook.


Facebook has come of age. It now has the majority of the Western world assimilated into it's network. It has the lions share of their online attention (recently beating Google) and a depth of information on individuals that rivals Wikileaks.

Retailers like JC Penny and Best Buy are integrating their e-commerce offerings directly into Facebook and brands such as Oreo cookies are now driving all of their traffic to their Facebook page. The reason for this is simple - brands want to fish where the fish are, and Facebook represents a very big ocean.

What's interesting though is not the use of Facebook, brands have been doing this for a while now. It actually that Facebook is for many brands starting to replace their own online offering. I think in 2011 we'll start to see loyalty programmes actually launching their online offering directly within Facebook or at the very least, using Facebook Connect for security.

This will bring three huge benefits. The first is simplicity. Members will be able to login and service their loyalty accounts without any effort - no credentials to remember. The second is interaction. Members will be able to see posts from their loyalty programme directly within their social feeds - no email, no direct mail and much more immediate. The final benefit is social proof - members will be able to see what other friends are doing, what other friends have bought and what other friends have redeemed for.

Combine this with the potential that Facebook brings to virtual goods in the form of social gaming - something that Amex has recently introduced into the Membership Rewards programme and that Citi qucikly followed by introducing them into the Thank You programme - and you have a major change in how loyalty programmes are designed and deployed.

Whether proprietary or coalition loyalty, the marriage of these three main trends of location, gaming and social will change the face of loyalty over the next 12 months.

Image credits: Google T-Shirt, Badges,

Thursday 23 December 2010

Give and ye shall receive (it's guaranteed)

christmas-gift-giving.jpgVisa Europe reckons we'll be spending nearly £14,000 per second this Christmas Eve - and it might be even more than that based on the disruption the snow has caused to peoples plans.

All that money ringing through the tills just so that we can give.

For the most part that's giving without any expectations of getting something back; buying presents for the kids or close family and friends. However for others you may give simply because you previously got given - returning the favour year on year.

What if though, rather than giving gifts as a selfless act, you instead gave gifts specifically for what you could get back. What if you knew before hand that buying a certain gift for a certain person would guarantee an even better gift in return.

Would you be more tempted to buy them a gift?

Well hopefully this isn't a scenario you'll experience this year at Christmas, but it's certainly one you might be experience in the near future - as a consumer.

Recently reported by AdAge, the Palms Hotel in Las Vegas is giving away access to specific services and amenities to customers they feel have influence. As Palms' chief marketing officer, Jason Gastwirth puts it "allow[ing] high-ranking influencers to experience Palms' impressive set of amenities in hopes that these influencers will want to communicate their positive experience to their followers."

In essence, "giving" not in return for what they have already been given. Nor even "giving" based on what they think a customer may be able to give back. Instead they are "giving" so that a customer will tell others about it, increasing everyone's value.

This is no longer a "Random Act of Kindness" so beloved of loyalty marketing - this is a highly engineered act of bribery, sugar coated as a gift.

Whether you feel this is right or wrong though - this will surely work, and the reason for this is all to do with the customers clout.

More specifically, this is the customers Klout score as measured based on their online social activity. Described by Klout as :-

The Klout Score is the measurement of your overall online influence. The scores range from 1 to 100 with higher scores representing a wider and stronger sphere of influence. Klout uses over 35 variables on Facebook and Twitter to measure True Reach, Amplification Probability, and Network Score.

With the Klout score a brand can be more assured that a member has the capability to make some noise - they just to give them the reason to do so. (Or in the case of a customer service issue, even more reason to get it resolved well)

While it is easy to be cynical about this, it does add another dimension to loyalty programme design. Traditionally programmes have been very insular, rewarding individual customers for their individual behaviour, but only after they have demonstrated it.

Some have become a little smarter, looking at an individual customers behaviours and rewarding them based on predictions on their future behaviour - many frequent flyer programmes for example will now "fast track" new members who appear to look like top tier members.

It's a natural extension then to begin rewarding customers based not only on their predicted ability to be advocates, but also based on their actual capability. This is fine line between "rewarding the behaviours you seek" and blatant bribery, but used well, I think this becomes a key tool within an overall loyalty offering.

Maybe the saying in loyalty should now be:-

[Before you] give, [checkout their ability to give] and ye shall [be guaranteed] to receive.

Not quite the Christmas Spirit, but possibly a more prosperous New Year.

Merry Christmas. ;o)

Sunday 12 December 2010

Did the Grinch steal Christmas (TV)?


I miss the Christmas movie.

As a child, when we only had three TV channels, no VHS and single screen cinemas, the Christmas movie was for many people the first time the movie had been seen.

We'd cherish the Radio Times to see what was on and then plan ahead to watch all the great movies.

How times have changed.

I now have IPTV on 3 different boxes, I can choose to watch a film on demand through BT, Sony or LoveFilm. Invariably I've already seen it at our 10 screen cinema, purchased it on DVD or loaded it onto my iPad.

I watch more films, but they don't have the same special magic they used to. I still buy the Radio Times, but that's largely because it's the Christmas thing to do - I have an EPG on my TV and TV Guide on my iPad.

The Grinch didn't really steal Christmas TV - instead it was our desire to have everything now at the touch of a button, and the medias desire to supply it.

I'm not saying any of this is a bad thing. We've essentially traded the Christmas Movie that was created through scarcity for the everyday convenience of entertainment on demand.

What's interesting though is how this plethora of choice for something we really wanted and valued can actually result in us valuing it less.

Seth Godin discussed this in a recent blog entitled The inevitable decline due to clutter where he discussed the trend within digital to just keep giving consumers more of everything - more messages, more offers - because essentially it's free. However he points out that:-

Once you overload the user, you train them not to pay attention. More clutter isn't free. In fact, more clutter is a permanent shift, a desensitization to all the information, not just the last bit.

commsfreq.gifWe saw exactly this effect in some research we carried out a couple of years back. When looking at communications within retail, there was a increase in relationship strength as communications increased - suggesting that building a dialogue with customers is a positive thing to do.

However this quickly turned into a decrease as these communications became too frequent. Customers were tuning out of the communications as they got overloaded and at the same time, were tuning out of the brand.

If you want to keep customers coming back, want to keep them interested, then you need to keep things special.

  • Change the experience - Mix things up a little. Email is great and it's cheap, but finding other ways to communicate, even if it's just an occasional quality DM piece can really cut through.
  • Keep it relevant - It's better to send nothing than to send something irrelevant. If a customer consistently finds nothing of value in your communications they will simply cease to value them.
  • Facilitate, don't just communicate - As the clutter increases, people shut down the overload and start to look internally to friends for opinion. Be part of that conversation.

A great example of someone doing this currently is Coca-Cola. They have always "owned" Christmas, having Santa Claus in their advertising since the 1930's, but there is always a risk that people become "desensitised" to it.

This year however they have had their Coca Cola Truck touring Europe and this has managed to do all three things.

It has changed the experience, bringing the advertising to life. It has kept it relevant, doing something we'd expect from Coke at a time of year when we want it. Most importantly though, it has facilitated the conversation, with friends snapping pictures of the truck locally and posting them to Facebook (here's one a friend of mine took)


Having driven past it on the motorway, there is something almost magical about seeing it in real life - even if it is just a truck. I may have been even more excited than my kids - but it's nice that some things are still special.

Grinch image by Mykl Roventine (Flickr)

Saturday 27 November 2010

Easier to critique than create (3 steps to a great idea)


There was an interesting blog post a couple of weeks ago entitled "1.0 is the loneliest number" by Matt Mullenweg where he discussed how to bring something to market. Arguing that ideas need oxygen to grow and if they stay in development for too long then they are actually dying. Matt says:-

If you're not embarrassed when you ship your first version you waited too long. Usage is like oxygen for ideas...every moment you're working on something without it being in the public [domain] it's actually dying, deprived of the oxygen of the real world.

Using Apple as an example, Matt highlights how the iPod was first reviewed as "No wireless. Less space than a nomad. Lame." and "$400 for an MP3 player!... it wont sell, and be killed off in a short time...". The iPad has received similar reviews for it's lack of flash support or camera or weight - but as Matt says, it shipped. This now means Apple have a chance to understand how it works in real life - it now has the oxygen it needs to develop.

The reason for this is that it's easier to critique than it is too create. Creating something new is hard, however once the idea has been floated, it is much easier to then shape this - adding to it, extending it - helping it to grow.

As with many things, the 80/20 rule normally applies here with only 20% of features being used 80% of the time. This means you don't have to wait for it to be perfect or for it to contain everything - you simply need to get it out there. As author Jay Heyman says:-

“Perfect is the enemy of good – if you keep prodding, tweaking and tampering with something good, trying to turn it into something perfect [..] it is possible you might never get there at all, in effect turning a good idea into no idea.”

You also can't beat first mover advantage; the fact that Tesco was first to launch it's loyalty programme gave it a distinct advantage over competitors subsequent attempts.

The increasing connectedness of consumers however also means that this critique is more readily available and almost immediate in it's feedback.

At Loyalty World this month, Nectar provided details on their new iPhone app. Members wanted it - the app has been downloaded 280k times and was #3 in the free download chart within 4 days. Members used it - up to 57% of users opt in to mobile offers, generating £4.4m in incremental sales in just 2 months.

But what was their feedback?

Well Jan-Pieter Lips, MD of Nectar indicated that the feedback had been "great start". This wasn't a negative though - this was recognition that consumers expect to be able to feed into the development of products and services. Consumers are now used to having their say on almost everything a brand does and increasingly are expecting the brands to listen.

Gap is the classic example of this. Forgetting that the brand is where it is because of it's loyal customers, they failed to consult them on their recent aborted logo change. Within just a week of launching it's new logo, the brand backtracked quickly saying:-

“Ok. We’ve heard loud and clear that you don’t like the new logo. We’ve learned a lot from the feedback. We only want what’s best for the brand and our customers. So instead of crowdsourcing, we’re bringing back the Blue Box tonight.”

You can argue how much of this feedback was as a result of genuine concern/dislike for the logo versus simply a "lynch mob" mentality, but either way, once in the spotlight, it's hard not to pay attention.

Whether it's launching a product, app or loyalty programme, the advice would seem to be:-

  1. Get your product out to market quickly - Making sure it is "good", but not waiting for it to be "perfect"
  2. Listen to consumer feedback - Let consumers tell you what's important, what's missing and what's a priority
  3. Apply feedback and repeat

It's certainly easier to critique than to create so let your customers help out - turning a good idea into a great one and at the same time allowing them to feel part of the process.

Saturday 20 November 2010

Is access control modern day protectionism?


There is a real tension boiling up between content owners and content consumers.

In a recent US legal case Ticketmaster was successful in getting Wiseguy Tickets prosecuted for "conspiracy to commit wire fraud and hacking" with maximum prison sentences of five years and a $250,000 fine.

What was the crime? It was finding ways to by-pass Ticketmaster's CAPTCHA technology which was put in place to try and stop people from automating the process of buying event tickets. They were basically using multiple computers to buy tickets for events in an automated way so that they could do it more quickly and do more of it.

Now you can argue that Wiseguy Tickets were essentially ticket touts, purchasing tickets to sell on and depriving "normal" consumers of an opportunity to buy them - but this wasn't what they were prosecuted for - they were basically prosecuted for hacking.

Even though they essentially only gained access to the same screens and information that everyone else could see, the means in which they gained access - bypassing Ticketmaster user controls - constituted computer hacking.

As Jennifer Granick, Civil Liberties Director at Electronic Frontier Foundation said in a press conference:-

"Anyone who disregards — or doesn’t read — the terms of service on any website could face computer crime charges. Price-comparison services, social network aggregators and users who skim a few years off their ages could all be criminals if the government prevails.”

In a separate case, record label EMI is suing MP3tunes which is a cloud storage solution that allows users to upload their music and then play this from any device/location, arguing:-

“[MP3tunes] does not own the music it exploits; nor does MP3tunes have any legal right or authority to use or exploit that music"

To top all this off, a new law - the Combating Online Infringement and Counterfeits Act (COICA) - is currently in the process of being passed in the US which will essentially "give the Attorney General the right to shut down websites with a court order if copyright infringement is deemed “central to the activity” of the site — regardless if the website has actually committed a crime."

In contrast to all of this however, there was a recent example reported on by Bank2.0 of someone who "disregard[ed] the terms of service" of a company - and actually got thanked for it.

The company was the second largest bank in Russia, VTB24 and they were in the process of building their own iPhone app, but budget constraints meant they couldn't invest in it until 2011. They were surprised then to see a tweet stating:-

"Great to see VTB24 finally has their iPhone app!"

On further investigation - and initially suspecting fraud/phishing - they found the app had been developed by a customer who had re-used their existing WAP site to create a working API for the iPhone app.

When asked why he'd done it the customer replied:-

"Well, I wanted iPhone banking and you guys didn't have it"

In story that could have been written by Disney, VTB24 have since hired the developer and now have a live iPhone app - and everyone lives happily ever after.

What's interesting about this example though is the fine line companies walk. On the one hand, Ticketmaster is prosecuting users for "leveraging" their website for another purpose, and on the other a major Russian bank is hiring the person "leveraging" theirs.

Ultimately, when something is let out into the wild - whether it's an internet site or a new product like Xbox Kinect (hack 1 / hack 2 / hack 3)- people will always want to extend it and re-purpose it. Companies may need to protect their content - but increasingly they will struggle to protect how it's consumed.

If companies start using legislation however to define and constrain this re-use to protect their business model, rather than trying to solve the actual business problem, it could harm innovation for all.

Whether it's music, tickets, banking or loyalty programmes, providing ways for consumers to retrieve, consume and share information is ultimately going to be a better policy to embrace than trying to build more and more protection around it.

Tuesday 16 November 2010

Less is more when it comes to Path

New social photo sharing service Path has just launched amid a lot of social chatter and mixed, but largely positive reviews.

The big difference however with this service which is creating a lot of debate is the fact that Path is limiting friends to just 50, citing amongst other reasons, Dunbars law of social connections.  However the reason and the amount are irrelevant, what's interesting is the limit itself.

As every other service keeps on providing more, with email providers giving more storage, smart phones giving more apps, foursquare giving more badges and facebook just giving more of everything - it's strange to see a service setting limits.

On the surface their reasoning seems sound - this is a personal network for sharing photos with close and "real" friends.  The limit of 50 helps to reinforce this, meaning you can't simply import all your friends, followers and hangers on.  However, who's to say what a close friend is and how many of them you should have (ok, so Dunbar's 150 is probably about right), but in reality, this arbitry limit seems a little restrictive and big brotherish - a "we know best" mentality.

But it's none of these things - the limit of 50 friends is simply a gaming dynamic.

If you limit something, you create scarcity.  Scarcity means things are valued more.  Things which are valued more get used more and promoted more.

At a time when we feel everyone is a winner - with A grade exam pass rates seeming to ever increase and reward ceremonies giving a Gold for more and more obscure categories, it's nice to see someone saying no.

Scarcity can be a powerful mechanic and when worked well into a marketing programme can encourage increased engagement.  It can also be lost very quickly by making everyone a winner - this is a situation where you can't have your cake and eat it.

Not everyone can win Gold, not everyone can be Platinum tier and not everyone can be your friend.

I think Path is forcing users to make a choice on who the most valuable people are to them - and in turn are probably selecting the most valuable people to Path.

Creating scarcity can be a sure fire way of creating value.

Sunday 7 November 2010

What is gamification?

With the risk of sounding like a broken record - do I write another blog post about gamification.

Well in the last 6 months alone there has been an almost 300% increase in the number of blogs written about gamification and when you look at the twitter stats around the term gamification it's clear that the last 6 months have seen a significant uplift in chatter.

There was also a buzz around gamification at the Virtual Goods Summit and now it has it's own conference coming up, the Gamficiation Summit. The summit will feature authors such as Gabe Zicherman who co-authored the book Game-Based Marketing, released earlier this year that looks at how gaming mechanics can be applied within marketing programmes.

So far be it from me to buck a trend - this is obviously a topic which is both increasing in interest and dividing opinion.

People can't seem to talk about gamification without somehow linking in virtual gaming platforms like World of Warcraft or explicit real world gaming platforms like SCVNGR.

For me though this confuses the whole topic.

Gamification is not the linking of marketing efforts into games. It is not the evolution of marketing programmes into games. Instead it is the inclusion of gaming recognition mechanics into marketing programmes.

This is a subtle difference but it doesn't stop it from courting controversy.

Arguing that the term gamification is wrong, game designer Margaret Robertson from game design studio Hide&Seek says adeptly in her blog post

"Points and badges have no closer a relationship to games than they do to websites and fitness apps and loyalty cards. They’re great tools for communicating progress and acknowledging effort, but neither points nor badges in any way constitute a game".

Going on to say 

"games set their players goals and then make attaining those goals interestingly hard", contrasting this with loyalty programmes such as My Coke Rewards where she says "collecting enough My Coke Rewards for a Coca-Cola Telenovela Club Beauty Rest Eye Relaxation Mask is hard, but it isn’t interestingly hard."

This is very true. A loyalty programme such as a frequently flyer programme is not a game in the true sense. It does not have what Margaret describes as the "rich cognitive, emotional and social drivers".

However, whilst there are obviously people who love playing games for the games themselves and are drawn into the virtual worlds they create, if you took out the "points and badges" from these games so that there was no progress indicated, no achievements collected, no way to measure your performance against previous plays or your peers, you can bet the game play wouldn't last long.

These "great tools for communicating progress and acknowledging effort" do more than just communicate it - they positively encourage and motivate it.

It's these recognition and motivation mechanics that gamification is trying borrow and develop and not the ability to replicate the actual game play such as being able to "dump my sniper rifle for an energy sword"

The collection of points for rewards isn't gamification - it's simply one behaviour which is being encouraged and recognised. Instead, gamification is how this behaviour is integrated with other interactions, how these are orchestrated together and how overall goals are set, progress measured and achievement recognised.

It is possible to make attaining goals "interestingly hard" within the context of a marketing programme, and it doesn't need a virtual world or special powers to acheive it. Instead it simply needs to be interactive, responsive, timely and relevant to the participant.

Caution is still required here though. Just as I'd argue that a loyalty programme is not simply the provision of points for transactions which can be exchanged for rewards; gamification of a marketing programme is also not simply the awarding of badges and achievements for given behaviours.

Instead, the overall customer journey needs to be taken into account including how it is presented, communicated and shared. Awarding points or badges is the easy bit - making people actually want them, that takes great programme design.

As Margaret said, games should "make attaining those goals interestingly hard", and whilst the game play might be different, the sentiment should be the same.

Maybe there isn't so much difference between designing games and marketing programmes after all.

Tuesday 26 October 2010

3 reasons why 3x Tesco Clubcard Deals will work


Just over a year ago I wrote about how Tesco had introduced double points to the hugely popular Clubcard scheme, making it far more rewarding and really capturing peoples attention at a time when they were increasingly evaluating their retail choices.

Those in the industry questioned how long they could continue to offer double points given the cost of it and so thought it a short term promotional campaign rather than a longer term programme change. Now, 12 months later, we have the answer - it was both.

From the 6th December the Clubcard scheme is changing again, however it's not double points which are going, it's the 4x Clubcard Deals. Tescos state:-

We've decided to keep double points going, because it has been so popular and has made a real difference to how much value we've given to customers. So, your shopping will earn you twice as many points (especially useful when you do your Christmas shopping!) which means twice as much value back in your next statement.

It would be easy to be cynical about this and suggest that as they give with one hand they take with another. However while the scheme value will drop from the current high that the double points promotion brings, this is not a scheme devaluation. By keeping double points going and at the same time dropping the Clubcard Deals from 4x to 3x value, the scheme is still more rewarding than it was 12 months ago - but only just.

The table below shows example spend levels for a customer who earns points across a number of different areas. Assuming they also use their Tesco Credit Card to buy their Tesco shopping and Fuel, they are still 15% better off under the new rules than before double points were introduced.

CategoryMonthly SpendOriginal SchemeDbl Pnts Promo3x Deals
Car Insurance£25£1.00£1.00£0.75
Credit Card£1,000£10.00£10.00£7.50
Total Reward

Of course, the current double points promotion has significantly increased the reward value for customers so there will inevitably be a big drop for many. If you look at this as just a promotion however, the Clubcard scheme still appears to be more rewarding.

So what is going on. Why have Tescos complicated things by essentially devaluing rewards and increasing earning simply for the scheme value to stand still?

My guess is this has been done for 3 reasons.

1. Rewards too good to be true - Customers don't trust promotions that give too much value. When testing points rewards, you typically get no additional lift moving from double to triple points and increasingly, as you lift the points value, you decrease participation. This is basically because customers begin to see the offer as being too good to be true and feel there is some other objective at play and so shy away. Ironically, in order to increase the take-up of Deals, Tesco may have had to reduce the offer to make it appear less appealing.

2. Partner Participation - The Clubcard Deals are fantastic value, but it is rumored that partners have to fund 50% of the value. With some partners like Legoland seeing an increasing number of customers using Deals vouchers to gain entry, I suspect it is becoming harder for Tesco to keep these partners engaged and to keep the offers open and free from restrictions. There is probably a gain in this programme change for partners as well, lowering their participation costs.

3. Two points is better than one - Customers don't "do the math" when looking at loyalty schemes, they simply compare one scheme to another based on the earning rate. If they get 2 points per £1 on Clubcard and only 1 point elsewhere it immediately feels more rewarding, regardless of the ultimate exchange rate. Tesco had previously tested giving 2% rather than 1% when first launching Clubcard and had seen no uplift in spend with the higher return. However, in a competitive market, this increased earn rate is probably doing a better job of attracting and retaining customers, even if it doesn't actually result in any more uplift. This was evidenced by Tesco managing to hold and slightly increase it's market share in a tough economic climate and taking share from ASDA who was fighting on everyday low prices and had previously shown signs of growth at the expense of Tesco.

It takes a lot to communicate changes like this to customers and causes potential confusion and re-evaluation. You can bet Tesco wouldn't be doing this if it wasn't going to result in a return.

What I think is great is that Tesco is not content to sit back and just go through the motions. They really want to sweat their loyalty scheme to get the most from it, even if this means making bold changes to keep it on track.

Loyalty is far from a commodity for Tesco - it still has the power to change the playing field.

Sunday 17 October 2010

Is US DoJ Lawsuit actually a win for MasterCard & Visa

Credit card loyalty programmes took a potential dent last week when Visa and MasterCard settled a dispute with the US Justice Department. The dispute centred around the restrictions the card schemes placed on retailers about card acceptance and how they are able to promote or incentivise different payment methods.

To accept Visa or MasterCard, retailers have to essentially sign up to an "honor all cards" commitment. In principle this rule is a good thing as it means that wherever you see the card scheme logo, you can be assured your card will be accepted. The problem however is that increasingly not all cards are equal.

Card schemes typically charge merchants a fee for every transaction which ranges anywhere from 1-3%. This interchange fee is the cost of doing business if you want to take credit cards and as a retailer you cannot impose a surcharge to cover it. This basically means that whether I pay using cash, debit or credit card, I should pay the same price.

While for the consumer these restrictions sound fair, what really niggles merchants is the fact that these fees are increasing. Card schemes are free to set the interchange rates at whatever level they want and increasingly they are charging more for "premium cards" and "reward cards".

Again the principle behind this seems fair - if you want to access a better class of customer who has more disposable income, you need to pay a little more for the privilege. The problem though is that increasingly the bar is being lowered for a "premium" customer meaning merchants pay more fees across more customers and don't necessarily get more benefits.

The retailers argument is that as they cannot surcharge for these cards or refuse to accept them they are essentially held hostage to whatever the card schemes want to charge.

This has now changed though. While the retailer still has to accept all cards within a given scheme they sign up to, they can now incentivise customers to use other payment methods including cheaper credit cards. This could mean for example that a customer may be offered a 2% discount for using a cheaper credit card or debit card, making them decide at the POS whether they want 2% off now or pay 2% extra and earn reward points.

The value exchange and payment decision is suddenly going to get very complicated.

However, it's not all that bleak. The Visa and MasterCard settlement is actually quite clever and probably more of a win for them than a loss.

The first rule of the proposed settlement states:-

[Allow merchants to] offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment

This means that the offer at POS will have to be something like "2% discount for using debit card" rather than a "2% charge for using rewards credit card".

Given that consumers will have already seen the price of goods published and will have been mentally prepared to pay that price, this I suspect won't have such a great effect. In addition, the amount of rebate that can be offered is also very small on a per transaction basis - anyone who's enrolled in a card reward scheme knows that you have to spend thousands to get a small amount back. On a $50 transaction, any free gift worth around $1 isn't going to be worth having - I'll just have the points thanks.

While larger merchants can probably combine this with their own loyalty scheme, offering say double points for transactions using a different payment card, it is likely that highly loyal customers already have the merchants own payment card - so little traction here either.

For smaller merchants this is likely to work even less. They are in a constant battle for customers against the larger retail behemoths and so unless you're the only merchant for miles, setting payment hurdles higher is likely to just make footfall lower. Their only saving grace is the proposed rule:-

[Allow merchants to] communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network, or other form of payment

This tugging on the heart strings for a small mom and pop store is likely to be more motivating than any discount on other payment mechanisms.

Also, don't expect consumers to win in this deal any time soon. Attorney General Eric Holder said:-

We want to put more money in consumers’ pockets, and by eliminating credit card companies’ anti-competitive rules, we will accomplish that.

However, any potential savings that retailers make out of this won't be passed on to the consumer in lower prices, they will simply go into greater profits for the retailer. The experience in Australia when they halved interchange fees showed that basically consumers get less rewards on the cards, pay more in bank fees and end up still paying the same price. While this settlement is slightly different, it certainly won't result in savings for consumers. If anything it will move money from consumers pockets in the form of points and into retailers pockets in the form of increased profits.

There is though I think a happy medium here.

For many merchants, especially the smaller ones, they don't have the ability to recognise and reward customers in a meaningful way either due to purchase frequency or the running costs around a loyalty solution. What this judgment does do is provide a wake-up call for banks that they cannot keep retailers at arms length and expect them to just payout for a loyalty programme which is basically there to create stickiness to the bank - not the retailer.

I think now is the time for banks to embrace retailers and provide added value back to them in return for accepting their cards. Banks have a wealth of data and very sophisticated loyalty platforms. The opportunity to create a win-win here for banks and retailers is immense and if the judgment delivers this it will have been worth it.

Sunday 3 October 2010

7 Principles of Loyalty

From time to time we're asked what makes a good loyalty proposition. Whilst each programme should be designed around the unique properties of a brand, it's customers and the relevant objectives, there are some common elements we use when thinking about different aspects of the programme.

1.Subscribe; not bribe – For people to feel motivated they should feel that they are making smart decisions. A loyalty programme should not appear as a bribe - something that would taint the brand - and instead should appear as added value which customers want to sign-up to.


As the book Scoring Points puts it, better a "chosen" than a "given", but it's also wider than this; not just about whether the customer has chosen it, but the customer also needs to feel chosen - they need to feel it's not a bribe. Within recognition for example, people are more motivated when recognised based on a stated behaviour they have exhibited rather than a one size fits all.

Nectar demonstrates this principle very well in it's latest innovation; their iPhone app. Customers are provided various points offers from Nectar partners, but rather than simply awarding these at POS when the customer makes a purchase, instead the customer has to say "I want it" - they have to subscribe to the offer; this ensures they value it more and that they see it as a smart choice.

2.Loyalty is a journey not a destination – A well designed loyalty programme is made up of many small individual behaviour changes which link together to create deeper engagement. The programme should make it clear what these behaviours are and look to encourage them through the reward and recognition design.

Increasingly, recognising wider interactions as part of this is becoming more important as it allows a programme to start the journey earlier in the buying decision process. When designing a programme, consider all elements of the customer journey, how to highlight and recognise these to customers and how to move people along and up using the tools within the programme.

3.Recognition: it’s own reward – Don’t underestimate the value of recognition in it’s own right. A simple “thank you” can be very powerful and for some the mere act of accumulating points can be motivating in itself. Harness all avenues to recognition including new forms that are coming out of the increasing trend of gamification within loyalty.

This can also provide a great way of engaging less frequent or less valuable customers by providing recognition as a reward in itself and not tied to expensive rewards which they cannot accumulate or access.

4.Show me the value – Customers need to see a value exchange; they need to understand that their activities are an integrated set of steps to a given goal and that this goal is achievable. However, don’t confuse value with money. Whilst monetary value is important, value can also be achieved through social currency and privilege.

Whilst highlighting to customers what rewards are acheivable, it's worth remembering that many customers will underestimate the amount they spend (and could spend) with you and so early on, rewards may look out of reach. Focus on the reward itself and what other people are achieving (social proof) and not simply on the cost.

5.Much cheaper to be relevant – Standard mantra for CRM programmes is Right Message, Right Time, Right Channel. This still holds true and behaviour change can be much more effective when the message is relevant.

The principle also applies within the programme design itself as designing a programme to acquire and retain the right customer segments can be much cheaper than a mass programme for all.

6. Facilitate (don't initiate) advocacy – Take every opportunity to turn the scheme inside out and make it social. Word of mouth is very powerful but it must be genuine and not purchased. Giving people ample opportunities to share means they actually will. With many retailers seeing traffic more than double with the integration of Facebook “Like”, this can be a very powerful mechanic.

Don't expect customers to simply share the scheme though - it's unlikely many customers will say "join this great loyalty programme". Instead, build in the ability to share achievements - whether this is a reward they have redeemed for, a purchase they've made or a tier/level they've obtained. People are more likely to share achievements and share them more regularly than they are to make formal recommendations.

7.Create reasons to stay (and stay loyal)– This is not about locking people in, but instead is about ensuring they understand the value they have (and will lose) if they leave. Points do this very well, with people building up deferred value they don’t want to lose. Many programmes also use recognition mechanics like tiering which help people to build up more invested value if they concentrate more of their purchases with the brand.

One area to watch out for though is a programme design which actually causes disloyalty. For example, if your tiering structure allows people to "top out" and the customer sees no benefit to continue, they will start to shop around to build up loyalty standing with other brands - essentially playing the tiering field.

Keep in mind that points and tiers are not the only tools for creating a sticky programme - privileges, social connections and content can also be very compelling, as can increased game playing elements like leader boards, levels and status.

I've no doubt people have their own versions of these principles - and additional ones that they use. Feel free to share and discuss.

Saturday 25 September 2010

After 25 years - Amex games card loyalty


Back in 1985 there was a revolution in computing which although small at the time went on to dominate our everyday lives - this revolution was Windows.

For many, Windows 3.1 was the first version that will be remembered and this was also the first version that could be extended to support TCP/IP - or essentially the internet. 

While it has been full-steam ahead for both Windows and the internet since this time, there has also been major change with the likes of Apple and Google increasingly innovating - whether this is new operating systems, new hardware or new ways of distributing applications.

There was however another revolution that started 25 years ago - credit card loyalty schemes.

In 1984 Diners Club launched "Club Rewards" which allowed card holders to earn frequent flyer miles or merchandise rewards based on card spend. This was closely followed by Sears who launched the Discover Card. Although quite revolutionary at the time as it had no annual fee, higher credit limits and most importantly for wider acceptance lower merchant fees, the big innovation was the inclusion of a cash-back rewards programme - giving card holders 2% of spend back.

What's interesting however is that while Windows 1.0 would be unrecognisable for many today, the Diners Club and Discover Card loyalty programmes they pioneered are pretty much the same used on all loyalty credit cards today.

In fact the latest programme from Chase called Ultimate Rewards has all of these features including a new one "Pay Yourself Back" which allows you to offset any qualifying spend on your statement with points - something which is essentially what Discover introduced 25 years ago - namely cash-back.


It was great then to see Amex breaking the mold and doing something different.

Their new scheme Social Currency has partnered with foursquare to allow card holders to check-in to retail stores to share purchases with friends.

Using a dedicated iPhone app, members can then share what they purchased, what they want to purchase and photo's of the event/product.

Keeping with the foursquare gameplay, members are rewarded for taking part with a selection of unique badges based on their behaviour such as the "Thrifty Spender" badge or the "Chinatown" badge.

I've discussed recently that loyalty is changing and that adding a gaming layer to loyalty programmes is one of the most important changes to loyalty in the last 25 years. It's great then to see an industry that once pioneered loyalty now embracing the next phase.

Amex may have been a little late to the party with it's original loyalty offering, "Membership Miles" back in 1991, but it's certainly at the forefront now. I wonder how many other banks will be brave enough to follow suit.

Sunday 12 September 2010

What we (and Guns N' Roses) can learn from Google Instant


Google Instant has launched amongst mixed reviews. However, love it or hate it - it's part of an increasing trend amongst consumers to have have everything now. In the launch PR, the main selling point for Google instant was that it saved the worlds internet users the equivalent of 11 hours per second or 111 years per day.

On an individual basis this is just 2-5 seconds per user, and yet this is the main selling point.

It's easy to see why Google would want to minimise any possible wait time; in a recent survey, two-thirds of us have stated that we've walked away from buying something because we were fed up of queuing and 51% of us wouldn't even enter a store if we spied a queue.

This apparent impatience at having to wait for things also seems to be increasing. In the same research it was reported that British consumers are now only prepared to queue for up to two minutes - down from five minutes just six years ago. (At that rate we'd expect instant service by 2014)

This isn't necessarily just an impatience with queuing though - it's an impatience with anything that stands in the way of getting something now.

In a recent Experian survey it was noted that young people tend to use offline channels for purchases, despite researching them online simply because they "want it now" and don't want to wait for it to be delivered.

Even our leisure time doesn't escape this level of impatience as the legendary band Guns N' Roses recently experienced. At a concert in Dublin they were booed and bottled off stage after only performing four songs due to a late start to the concert. Keeping fans waiting for over an hour, they were shown peoples impatience when they did finally arrive on stage.

So with an increasingly impatient consumer, how do loyalty programmes fit which require a longer term commitment.

Many loyalty programmes work around annual timelines, with quarterly statements, annual tiering and rewards which take at least 12 months to make viable. This can make it hard to engage consumers early on when they are impatient for recognition from the programme they've joined, leading to disengagement.

For loyalty programmes to engage an impatient consumer they need, like Google Instant, to provide faster and more relevant recognition.

The standard response to this is to give more value more quickly. Giving double points, welcome point bonuses, hero rewards, instant discounts, merchant offers - anything which can bring the loyalty value exchange forward.

However, while I'd agree we need to make recognition faster and more relevant, I'd argue that the rewards tied to this recognition don't need to have a tangible value.

You don't need to give discounts, priority queuing or a £10 voucher to MAKE a customer feel special - you just need to make them LOOK special.

Giving someone a Black credit card might make them feel special - letting them show it to others makes them look special - and this in turn really makes them feel special. This is known as "Social Currency" and is defined as:-

  • Things that help me belong
  • Things that make me significant

Making loyalty programmes social so that peoples achievements can be shared allows this social currency to be leveraged. Using different achievement mechanics which have their roots in gaming dynamics, such as unlocking badges/levels or the use of leader-boards allows for many options to recognise and engage customers quickly and early on, without the need for monetary rewards.

Seth Priebatsch, CEO of SCVNGR recently wrote about some of the gaming dynamics which help form this social currency saying:-

Game dynamics are fast becoming a critical currency of motivation. Their power lies not in connecting us to our friends, but in directly influencing our individual behavior. Smart companies will take this time to look at their product portfolios and community behaviors through the lens of game dynamics.

Google is a smart company and is constantly looking at ways to improve its products and services to further engage consumers and stay one step ahead. If we don't want to be booed and bottled off the loyalty stage, then we also need to learn the same lessons; recognising and engaging consumers more quickly and more relevantly.

The use of social currency is one way to do this and is set to become the "Google Instant" for loyalty.

Saturday 28 August 2010

Loyalty Marketing - it's all a game. So play it.

Ted Turner famously said "Life is a game. Money is how we keep score."

How well you play it depends on understanding the rules and Albert Einstein said "You have to learn the rules of the game. And then you have to play better than anyone else."

In marketing it would be true to say "Loyalty is a game. Points are how we keep score."

Points are accumulated - the more points the better the prize. Points don't just mean prizes though, points can earn tiers and these open up additional benefits.

If a loyalty programme was a video game, then tiers would be like a new level - letting you unlock secret rooms like the "airport lounge" or giving you a new weapon such as "priority queuing". The monthly statement would be your end of level score sheet - letting you know how well you did by showing you your current and cumulative score, and on the better programmes, highlighting which puzzles you unlocked in the form of promotions achieved.

However, if loyalty was a game then in the words of Seth Priebatsch from SCVNGER - it would suck.

Seth makes a really interesting and inspirational speech at TEDtalks when he describes building the game layer on the real world - and how loyalty programmes are the forerunners to this.

What really interests me about this as a loyalty marketer is that we've been doing this for a long time - we just haven't recognised it as an industry - and haven't maximised it's benefits.

If you played a video game though which had no real direction, only recognised you when you happened to stumble upon something, had little or no challenges, took 12 months to get to the next level and 18 months before you got a reward - few but the most die-hards would play it.

Yet this is what many loyalty programmes are like.

For example, we know who's playing well. We have people tiered based on their frequency, value and recency. We have them segmented based on the products they buy, the promotions they use, the web pages they visit.

We know everything - and yet we hide it.

Foursquare on the other hand knows when I've visited a venue with a photo-booth 3 times and shouts about it, giving me a reward for it in the form of a badge. It knows if I'm out late, shopping locally or shopping with friends - and rewards me for it. It's a game for me and better still a competition with friends - creating social currency and influence - even if it's just a bit of fun.

When it comes to tiering, we make it very hard for a very small number of people to make it to each tier. This is for good reason as the benefits opened up at each tier cost a lot to fulfil.

However, if you take the monetary value out of a reward/benefit and replace this with social value, then you can emulate games like FarmVille and Mafia Wars which are engaging and influencing over 80m people with 40+ tiers/levels - something I wrote about previously saying:-

[They] create a really well designed journey which drives early engagement, rewards interaction, encourages peer comparison and recognises increased experience.

Adding a gaming layer to loyalty - or at least making the existing game play better - is probably the most important change to loyalty marketing since it moved from paper stamps to computerised points.

This is great for consumers, great for brands and great for loyalty.

Lets play.

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Sunday 22 August 2010

Digital Channels - The Hidden Dimension

We've all met someone who is over-familiar. Someone who just gets a little too close.

That feeling of uncomfortableness that arises is normally because they've invaded our personal space. However this raises the question, what is personal space?

Back in 1966, Edward T Hall wrote a book entitled The Hidden Dimension where he discussed the concept of personal space. Defined as:-

The region surrounding a person which they regard as psychologically theirs. Invasion of personal space often leads to discomfort, anger, or anxiety on the part of the victim.

The measurement of this space and the distances between people as they interact is known as proxemics. In a physical sense we all understand the concept of personal space, and whilst peoples tolerance levels in terms of distance vary, they can be broken down into 4 main zones which are:-

  • Intimate Space - For embracing, touching or whispering (= < 15cm)
  • Personal Space - For interactions among good friends or family members (46 to 76 cm)
  • Social Space - For interactions among acquaintances (1.2m to 2.1m)
  • Public Space - For interactions such as public speaking (3.7m to 7.6m)

In essence, the closeness of these interactions are based on the closeness of the relationship we have with the individual.

This is something we all understand in everyday life, but what happens when offline interactions move online and when interactions are not person-to-person but are instead person-to-brand.

It was recently reported that just under half (46%) of shoppers now feel they are "bombarded with irrelevant information and offers via a dizzying array of touchpoints." - so something obviously isn't working well.

Just because a brand has a customers contact details doesn't necessarily mean it has permission to talk to them across every channel. Not all channels are equal and some are considered more personal than others.

If a salesperson repeatedly invaded a customer's personal space, making them feel uncomfortable and causing them to walk away, you can bet they wouldn't be employed for very long.

Ok, not a great example as that's exactly what many salespeople do to try and cross that boundary from acquaintance to friend; from untrusted to trusted. However, brands risk customers switching off by doing similar things within digital channels.

In proxemics terms, my letter box is considered public - I expect mass marketing messages to be posted to it and re-act accordingly; which is probably why response rates are so low. My mobile phone however is far more personal and not a channel I'd welcome un-solicited messages on.

As an example, this is how I'd categorise interactions across the various digital channels in terms of proxemics.

  • Intimate Space = Telephone/Mobile Phone/SMS/IM
  • Personal Space = Facebook, Foursquare
  • Social Space = Email, Twitter
  • Public Space = Direct Mail

However these categorisations can also be affected by the relevance of the interaction.

Mobile can be a great channel when the message is very relevant and personal - almost when it could be a whisper in your ear. When Premiere Inn sent me a text message reminding me of my hotel booking and asking if I wanted SatNav directions (which I did), then this worked very well. It was like a friend quietly asking if I knew where I was going.

When my bank rings me up though on the pretense of a customer care call, loosely covering a sales call, then this isn't welcome as I consider this channel far too personal for that type of interaction. This is akin to the salesperson trying to establish trust and cross that boundary.

When I post my thoughts to Twitter - just because they are essentially public does not mean the channel is. I want friends on Twitter that have something relevant, entertaining, informative or witty to say - not a brand advertisement.

With the increasing growth of location based services including the new Facebook Places, this will add another level of complexity. Commentators are already discussing the potential of this channel for advertising revenue with the Telegraph recently saying:-

The business idea behind such applications is that all these individual check-ins can be used to drive advertising. [Adverts] can be targeted more specifically because a user's spending habits are known.

However, knowing this information is one thing, knowing how and when to use it is something else altogether.

Can a brand talk to me when it knows I'm in the area, but not in their store?

Do I expect it to talk to me when I check in at the store specifically?

Will it increasingly be a faux pas if a brand doesn't recognise me when I tell them I'm in-store - almost like refusing a handshake?

With the explosion of digital channels available to talk to customers on I think the principles of proxemics are more relevant than ever. Marketing messages should be looked at not just in terms of what channel do we have available but also in terms of what is the tone of the message and what is the relationship with the recipient.

The classic CRM mantra of Right Message, Right Channel, Right Time could be added to through the application of proxemics with Right Relationship.

Sunday 8 August 2010

Flipboard - Reinventing the advertorial

Imagine a magazine or newspaper which has articles you're really interested in. Whether it's the latest industry news - in your industry - or the latest news from your friends and family. Combine this with the best media content you like - don't want sport, remove it. Now make this near real-time, in a glossy, tactile, user friendly format.

This is Flipboard. The much hyped - and in my opinion deserving - new application for the iPad.

Building articles based on your social network content including Twitter and facebook, Flipboard presents a highly personalised and relevant experience. With the content you read being based on your network, it means that those who's opinions you trust, value or enjoy are literally building and collating the content for you.

More importantly though it provides a whole new way of interacting with social media. Using Flipboard makes traditional Twitter streams look more akin to reading news on Ceefax.

It obviously doesn't replace Twitter for two way interaction or posting of thoughts, but does provide a fantastic way to consume the information that flows by.

In a recent article Flipboard co-founder Evan Doll said:-
"With the information overload, people are doing more sharing and it is more difficult for the signal to get through the noise"
Although it is currently free and revenue streams are yet to be realised, it is clear that this will be revenue generating. CEO and co-founder Mike McCue says:-
"We think we can bring a totally new form of advertising to the table that will allow publishers to monetize their content by a factor of ten from what they’re currently doing with banner ads".
However, for brands there would appear to be two opportunities. The first is to use standard advertising, much as they would do within traditional media - although given McCue's comments I'd expect this to be a lot more intelligent and relevant.

The second though is really about leveraging the power of social media.

If you create content and opportunities which get people talking about your brand, linking to your brand and sharing your brand within their social networks this will translate into articles in Flipboard.

Essentially a modern day advertorial - except without the cost and with more credibility.

With server capacity reportedly reached within 20 minutes of launch, over 130 media companies contacting them within 4 days and riding on the back of the iPad which is breaking all sales records, it's clear that Flipboard is both the one to watch and the one to get watched by.

Sunday 18 July 2010

Foursquare - from check-in to check-out


Geo-location is a hot topic..and it's getting hotter.

Foursquare, one of the biggest location based social networks took 12 months to get it's first million users, just 3 months to get it's second and is reported to have recently secured an additional $20m in funding.  Brands everywhere are experimenting with it to see what it might offer from Barbie to Jimmy Choo, Starbucks to Dominos.

In theory location is the ultimate marketing mechanism - being able to target consumers when they are actually out and about, wanting to buy, and right by your store. The idea is nothing new though. Ever since the mobile became ubiquitous, agencies and brands have been talking about how they could connect a consumer to a brands physical location.

The (somewhat unimaginative) idea was that as I walked past a store I'd suddenly get relevant, targeted offers sent to my mobile - beckoning me in with their irresistible offer. The reality would be quite different though and would consist of being spammed with irrelevant offers from stores I have no intention of frequenting and a mobile that is buzzing every few seconds.

In one recent article, this idea was still being promoted, saying:-

Cell broadcast works by blanket-sending a message to a mobile phone cell or series of cells within a specified location. The applications for this are endless.  Food chains could text everyone in a shopping centre with their latest offers and details on how to get to their concession stands.

The problem with this original premise is that geo-location is being treated like traditional push based mass media.  A marketing message needs to be delivered and it gets delivered where the potential audience is greatest - or is pretty close by.

The difference with tools like Foursquare is that they are much more collaborative.  More pull than push, consumers choose who to interact with and when.  Brands providing something relevant are rewarded with interactions or check-ins.  Consumers choosing to interact are rewarded with offers, tips and occasionally meeting old friends or making new ones.

However I know from the flack I get from others for checking-in all the time that Foursquare in it's standard form will probably not appeal to the masses.  Chasing badges just isn't going to cut it for many people.  Foursquare are not resting on their laurels though - following the tradition of Facebook and Twitter, they have opened up their platform to developers to allow applications to be built on top and it is probably this more than anything which will really open it up to the masses.

In an interesting blog by Chris Dixon, he describes how this progression works with technological advances building on each other - forming a stack - so Intel chips -> PCs - > Windows.  With regard to location marketing, GPS enabled devices have allowed for services like Google Maps, leading to utilities like Foursquare which connect people to places.  The use of applications on top of Foursquare is just the next natural step.

So whats in it for brands?

Well for the moment, it's more of a one to one conversation between the consumer and the brand with many brands not even listening yet.  Those that are listening are ahead of the curve and are starting to build a dialog with customers - rewarding them with offers, discounts or simply the knowledge that they are listening.

However, as the networks grow and the tools which sit over these become more useful, brands will benefit from implicit advocacy as consumers see their friends frequenting different places and choose to follow - turning advocacy into footfall or check-ins.  In fact, Foursquare see this ability to allow peoples check-in's to drive footfall as a key area of growth with co-founder Dennis Crowley saying:-

We can anonymise data and use it to show venues trending at that moment. Twitter helped the world and the search engines know what people are talking about. Foursquare would allow people to search for the types of place people are going to – and where is trending – not what.

If results from early adopters like Dominos or Jimmy Choo are anything to go by, brands are then free to start a dialog to turn a check-in to a check-out.

Monday 12 July 2010

Creating a pointless loyalty programme


Many brands would love to have a loyalty programme, but don't see the point as they feel they can't make it work for various reasons such as low purchase frequency, low margins or brand fit.  Worse still, other brands simply run head-long into creating a programme without giving due consideration as to what they want to achieve or even whether the programme will be valued by or add value to their customers.

However the mistake here is to simply assume that a loyalty programme means a points programme.  That providing recognition to customers for repeat custom requires some form of currency and reward catalogue.  This is not the case.

Loyalty is all about customer retention and anything which encourages customers to make that next purchase - and to continue to make purchases - is in essence a loyalty programme.

Creating a pointless loyalty programme (one without points) does not mean creating a programme which is simply pointless.  Instead it's about looking at where your brand can facilitate and build upon customer interactions - creating deep engagement and participation, and ultimately increasing and maintaining loyalty.

So how do you provide added value without giving points?  Below are a few recent examples of brands doing just that.

Exclusive Access/Content

Starbucks in the US announced recently that it is looking to use exclusive content to recognise and reward customers.  Providing free WiFi, customers will be able to access a content network called Starbucks Digital Network which in partnership with companies like Yahoo will provide local content that you can't read anywhere else.  Commenting on this, CEO Howard Schulz said

"Free WiFi is in my mind just the price of admission - we want to create.. new sources of content that you can only get at Starbucks, this is a thing that doesn't exist in any other consumer marketplace in Amercia."

This also fits well with their brand as they consider Starbucks "a third place" - somewhere between work and home - and the local, exclusive content may add to this.

The hope is that this will create loyalty with customers through content that is "so compelling that it drives incremental traffic"

Exclusive access and content is well used by many brands, such as O2 in the UK which provides their customers with priority access to concert tickets.

Social Currency

In a previous blog I discussed how people all want to feel a little special some of the time and that creating a means to let people set themselves apart can be a great way of gaining additional loyalty and increased motivation.  A recent article in McKinsey Quarterly showed this working in a social networking context - discussing how providing people with a means to publicise their activities, whether this is through the award of badges as used on foursquare or the publication of achievements from sites like SportyPal.

The article pointed out:-

"Recognition from peers is a powerful motivator, and brands that allow users to gain it deliver real perceived value.  When users publicise that recognition, it translates into word of mouth"

The author Michael Zeisser, VP of Liberty Media discusses how they have taken this one step further and actually look at word of mouth as a distinct form of media - allowing it to be treated as a form of content to which can be applied tried and true content management practices and metrics.  Going on to say:-

We see this phenomenon daily—for example, on the forums of our site. When members boast of reaching their target weight or other goals with help from workouts, we receive authentic and credible word-of-mouth endorsements at almost no cost

This works to create loyalty in two ways.  Firstly, it taps into peoples desire to chase goals, such as achieving/beating a best performance time - and being able to brag about it to others.  Second it taps into the idea of Social Proof, letting people know that others are taking part and keeping them on track - helping them stay loyal.

Interaction Loyalty

Increasingly it is more important to recognise and reward customers for their interaction, not just their transaction.  This means creating tools that allow these interactions to be captured as unlike a purchase there isn't usually a POS transaction.

Obviously it's possible to capture online interactions such as reading/responding to an email, logging into a website or recommending a friend.  However some brands are beginning to experiment with linking offline interactions such as store visits with loyalty - and seeing great results!

In the UK for example, Dominos Pizza has linked up with foursquare to reward customers who check-in at Dominos outlets, essentially letting Dominos know that they have visited - even if they didn't actually make a purchase themselves.  Whilst this is a very new phenomenon, Dominos feel they are really seeing the success of it, reporting that they have seen:-

A 29% surge in pre-tax profits to £17.5m, buoyed by a strong performance from e-commerce sales and attributing its link-up with Foursquare as key to its recent performance.

Competitor location based social network Whrrl in the US has also looked to link a customers physical location with a brand through its Society Rewards programme.  Working with US petrol retailer Murphy USA, if a customer checks-in at any of their 1,100 locations they will immeadiately be in with a chance to win up to $50 of free fuel.

While at a basic level this programme is simply a sales promotion mechanic, where it starts to get clever is that the more a customer checks-in - and others act on their recommendations - the higher levels they achieve, providing additional opportunities to earn.  In essence, the more a customer interacts with a brand, the more they get back.  Whrrl describes this by saying:-

Whrrl’s Society Rewards is based on a person’s ability to inspire friends to try new ideas at real-world places. Users receive additional points when others “Want To” try that idea, actually do try the idea or pass on the recommendation to their friends. Users also earn points by getting others to join the Society and by checking in at qualifying locations.

These are just a few examples of brands creating pointless loyalty programmes which recognise, reward and engage their customers.

When thinking loyalty, don't just think points - there are many more creative ways to interact and engage with customers.

However points can provide a strong motivator, allowing customers to easily see what is expected and helping to shape ongoing behaviours - utilising any of these ideas as well as points will simply create even deeper engagement and make your currency that much more rewarding.

Either way it's a win-win.

Saturday 26 June 2010

What is iPad?

Creating a new category can be hard. People know what a phone is so the fact that actually making calls from a smart phone is now a secondary function for many people doesn't stop it being marketed as a phone.

The iPad is different though.

It's not a phone, but is has 3G.
It's not a laptop, but it has a web browser.
It's not a TV but it plays and streams videos.
It's not a games machine, but it has thousands of games.

It's something new.

People will buy it because it looks beautiful, is intriguing and has an Apple badge. People will use it because it fills a need.

So as the owner of a new shiny iPad I was intrigued as to how I would use it.

What I've noticed is I use it differently to a laptop. Sure I web browse on it, check my email on it, access Facebook on it - even read my work email on it and review attached documents on it.

But I don't use it in the same way.

Whereas previously I'd have spent longer in my social networks on a laptop, I find the apps get a greater share of use on the iPad.

On the laptop, the browser was the centre of the entertainment, on the iPad though the machine itself is the entertainment. If my usage is in any way indicative of how others use it then I think this is important for brands and how information and access is provided for customers.

Brands are used to providing websites and micro sites for consumers and increasingly have been integrating into social networks like Facebook because, frankly, this is where consumers actually spend their time. However with the iPad, I think consumers will expect more interaction through the applications - providing quick, easy access to information.

When they want to track the status of an order, the number of points they've accumulated or even browse a product or reward catalogue, increasingly I think consumers will want these as applications. It's likely that as with all things, consumers will have limited space for individual brands in a given category, so those providing a great application experience will probably get increased loyalty and that front of page position.

One great example of this is Pizza Hut. They saw online orders increase exponentially when they introduced an iPhone app for ordering pizza. As with all pizza brands, they already had an online website, but the introduction of a specific application increased engagement within their key 18-34 demographic. Its popularity was confirmed with over 1m downloads and a number-two free app position.

Like the Pizza hut app though, applications available today tend to have been designed for the iPhone. It's about information on the move or in the moment. Accessing my loyalty card, reviewing my friends statuses, ordering pizza or searching for a new contact in LinkedIn.

The iPad though is different. It's a more sit back and browse experience - time is available and users will want experiences. They will want entertaining. Brands providing a compelling innovative experience will be rewarded with increased dwell time leading to greater engagement. The Financial Times application for example is a much more engaging experience on the iPad than the website version - it's tactile and draws you in.

In the end though what the iPad "is" may take a little more time to define and Apple is certainly hedging its bets with it's latest advert saying :-

What is iPad?
iPad is thin,
iPad is beautiful,
iPad goes anywhere,
and lasts all day,
there’s no right way,
or wrong way,
it’s crazy powerful,
it’s magical,
you already know how to use it,
it’s 200,000 apps and counting,
all the world’s websites in your hands,
it’s video, photos,
more books than you could read in a lifetime,
it’s already a revolution,
and it’s only just begun.

I think the last two lines sum it up perfectly - the iPad is a revolution that has only just begun and ultimately, what brands choose to do with it will be as interesting as the consumers.