Saturday 30 January 2010

Is Barclaycard Freedom for merchants?

barclaycard freedom It’s been discussed and talked about in the industry for months – whispers and rumours about how it will work and a recruitment programme no one could have failed to have missed – and finally it has launched.

Welcome to Barclaycard Freedom.  A game changing credit card loyalty programme that is sure to shake up the industry.


On the surface this programme is different for a couple of reasons. 

Firstly, it is one of the only programmes in the UK to unite all stakeholders in the card value chain – the holy trinity of cards including the merchant, the acquirer and the issuer.  Utilising the Welcome Real-Time solution, this loyalty programme will execute at POS via Barclays Merchant Services, providing Barclaycard via the merchant the ability to communicate directly and in real-time with consumers.

barclaycardmoneyThe consumer will be able to see value earned, represented in cash during each purchase and will be given the option to utilise this cash to offset any future purchase .  Essentially providing earn and burn all at POS – in real time.

This inclusion of acquiring within the loyalty scheme is a real coup – allowing Barclaycard to not only promote the scheme to consumers but also to prospective merchants – providing an acquisition and retention solution in the highly competitive acquiring market.


The second differentiator for this programme is the fact that it is engaging smaller merchants.  Many card programmes include merchant partners or offers in one way or another, but these are normally large high street names and are increasingly for many programmes the same brands.

In contrast Barclaycard have apparently invited over 30,000 smaller merchants to take part and have stated that any card holder will have over 200 merchants participating within a 5 mile radius.  Although not explicitly stated in the press releases, it is understood that merchants will be able to run and fund their own promotions and campaigns, providing additional earning opportunities for card holders.

In this way it is for all intents and purposes a coalition programme.  For these smaller merchants this brings one of the main benefits of a shared earning model which is that the scheme can still be attractive to consumers and merchants even if no single merchant can provide enough value to be motivating on its own. 

This wide reach of merchants may however also be its Achilles heel.

With so many potential merchants on board, it may not be behaviour changing enough and simply reward customers for existing purchases.  There is no doubt that Barclaycard will still benefit from an increased share of wallet as customers centre transactions onto that single card, but the retailer may not actually get any additional spend.

Worse still the retailer may also see an increased cost to taking part as consumers move payments from cash/debit to more costly credit cards – and for smaller merchants these fees will be higher in comparison to the larger national brands.

There are also question marks over how well it will work from a loyalty marketing point of view.

In theory it would be possible to make one purchase and then immediately use the reward value from this on the next, allowing for very quick, but small redemptions.  There is research available however which indicates that where customers can earn and burn at relatively low levels that this can severely limit propensity to purchase ongoing – or essentially remain engaged in the programme.

Barclaycard will need to be very careful about how this scheme is “geared” to ensure there are relevant controls in place which encourage members to save and hence chase reward value. Only in this way will it also change behaviour.

The other issue is around the intangibility of the reward. Tesco Clubcard – recognised as a leading loyalty programme – issues paper vouchers via DM for a reason. They could easily integrate earn and burn at POS but choose to send the reward value out quarterly as this provides the highest engagement. Customers get to see an aggregated cash value almost as money in their hand – Tesco branded money – and there is no doubt in the customer’s mind that their activity with Tesco resulted in a tangible reward.

There is a risk with the Barclaycard programme however that a cash value which is earned and redeemed solely via POS will have lower engagement and be viewed more as a product right than a product benefit. Again, this perception may lower scheme engagement and impact the ability to change behaviour for both Barclaycard and the merchants taking part.

And this is where it all gets interesting…

This whole programme essentially hangs on merchant participation.  If it doesn’t ultimately work for them then it doesn’t work at all.

These concerns can be easily mitigated however through loyalty communications. This scheme will need huge awareness and I've no doubt there is an equally huge ATL budget to support this. However it is more than this, the scheme will need ongoing communications, both in store with participating merchants as well as personalised and relevant communications for card holders.

With so many merchants on board, getting cut through to the merchants which are relevant for each card holder will be one of the big challenges.

I certainly think it's an interesting proposition and it will be one to watch in 2010, both to see how many merchants get engaged in the scheme but also how well it actually works for them.

Saturday 23 January 2010

Democratisation of Journey fills me with Glee

journey Sometimes it feels like we’ve rewound time back to the 80’s.  Whether it’s the Virgin Airlines advert with Frankie Goes to Hollywood theme tune and Our Price record store (remember those) in the background, girls wearing leg warmers or the fact that Journey are now in the Top 10 chart with “Don’t Stop Believing”.

Whilst I have to admit to already owning this particular Journey track (and handful of other 80’s soft rock tracks), it does show how different the music industry has become.  With services like iTunes, providing access to millions of tracks, the charts are much more democratic – reflecting what people actually want to listen to rather than what they are told they should listen to.

Of course what people listen to is still influenced by media – whether this is Mass Media like the Cadburys advert which caused the Phil Collins track “In the Air Tonight” to reach number 9 in the download chart or Social Media which managed to get Rage Against the Machine to the Christmas number 1 and displace the “sure thing” X-Factor winner.  In the case of Journey their leap to the top of the chart has been influenced by the new hit E4 show Glee – which interestingly has also released a version that is running neck and neck with the original.

However, it’s not only the music industry which is benefiting from this democratisation of choice.  Waitrose opened up their CSR programme to customer choice about 18 months ago – and in the process have really engaged customers. 

Most corporate CSR programmes feel like little more than an attempt to stem criticism of any perceived obscene profits or sky high executive packages and customers have typically little choice, knowledge or even buy in for the nominated charities or “good causes”.

What Waitrose did instead is throw open their programme to the customers through their Community Matters scheme.  Each customer is given a token at the tills which they then place into one of three bins at the exit, with each bin representing a local charity which the customers have nominated that month.


I was in Waitrose the other day and stood watching customers as they placed tokens into the bins.  Two things struck me.  First, almost every customer placed a token into one of the bins so this scheme has very high participation(or a very successful nudge) even after 18 months.  The second was that many customers actually considered their choice before placing the token into the relevant bin – demonstrating engagement.

In one newly opened store they reported that “In the two months since opening we've had more than 200 customer nominations for charities to support [and] had so much feedback I had to order another box of suggestion slips.”

Although never explicitly stated, CSR programmes are also meant to provide a positive customer feeling which leads to ongoing loyalty – and this is exactly what Waitrose see through this scheme saying “[We’ve] been able to help local causes through [Community Matters], and in return, customers are remaining loyal to Waitrose.”

It’s also driving advocacy with one store reporting that “One school sent a text message to all parents telling them to shop with us and put their token in the school's box, as did a vicar when he mentioned us in his parish sermon.”

All of this for a token which on it’s own is next to worthless.  Each store gives £1,000 to the charities each month, based on the percentage of tokens received so an individual token would be worth less than a penny in real terms – and yet customers take part, interact, engage and advocate.

I’d struggle to be able to tell you what charity my regular supermarket supports or indeed if they support any – but after shopping at Waitrose I know that for that month at least, they’ll be donating some money to a local school playground.

Unlike me, you may not favour 80’s soft rock in the charts, but at least you can try and change it if you like by downloading what you want.  What Waitrose have shown is that you can provide that same level of democracy for customers – distribute over £2m in charitable donations – and reap the rewards of increased engagement at the same time.

Sunday 17 January 2010

Duke Nukem & Loyalty – Where less is more

duke-nukem There was an interesting article in Wired a few weeks back about why the anticipated sequel to the immensely popular Duke Nukem computer game never quite made it to the stores.

In the article it pointed out that normally videogames take two to four years to build, however the team worked on the sequel to Duke Nukem, entitled Duke Nukem Forever for 12 years straight – before winding down the operation and closing the doors.

One of the main reasons for the game never getting delivered is that as with most industries, the longer you wait the more things move on. 

The original Duke Nukem game had helped to define a new genre in computer gaming – creating a 3D first person shoot-em-up game where the character could interact with other objects – going on to sell 3.5m copies. 

Aiming for the sequel to be as unique and cutting edge as the first game, they were constantly pushing forward, only to find another new title being released that they wanted to exceed or another new gaming engine which provided more features. 

In the end this constant desire to release the most innovative game meant it never actually got released.

What’s really interesting in this whole story is that they seemed to forget that whilst game-play was important, it was the character and the storyline which people loved.  What gamers wanted was not a cutting edge game (although that’s always good), but actually another chance to play their favourite character.

This issue isn’t limited to game development however - I’ve seen the same issue within loyalty programme development – with some never getting off the ground or being severely delayed simply because people can’t agree on the features.

Whilst you need to make sure that a loyalty programme is right for you – it’s actually doing something which is more important than doing something perfect first time.

Don’t get me wrong, you need to make sure that the programme is well designed and right for your business as once it’s launched it can be very difficult to pull.  However a test and learn strategy can allow you to change a programme over time – doing more of what works well and cutting back on anything that doesn’t.

In the book All You Need is a Good Idea!: How to Create Marketing Messages that Actually Get Results, 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, you will not just miss a lot of important deadlines – it is possible you might never get there at all, in effect turning a good idea into no idea.”

Seth Godin made the same point in a blog post using his usual succinct style saying:-

Having good ideas meant also having bad ideas.  If you keep waiting for a good idea to be a great idea then you’ll never risk it being a bad idea and so do nothing.

It’s increasingly difficult to have an idea which no one has tried or can’t easily be copied.  However most people won’t be expecting you to have the most innovative and unique loyalty programme – they simply want more from your brand – more from the relationship.

Your brand itself is unique and as long as what you do fits with and builds upon your unique brand proposition then this itself will make it stand apart from competitors.  Doing nothing however is simply a missed opportunity.

As Duke Nukem would say:-

It's time to kick ass and chew bubble gum. And I'm all out of gum.

Saturday 9 January 2010

Mazda get some Zoom Zoom from data

mazda3-mps-small Mazda’s customer dialogue service is reaping real results with a reported increase of 10% for first services – this at a time when having your car serviced is viewed by some as an unnecessary luxury with 15% of people indicating they had deferred their last service.

So what has Mazda done to buck this trend and actually increase the number of people coming back to them.  Well in part it’s through the use of a retention programme with a combination of tried and tested timely communications coupled with some interesting “sticky” features.

However the first real innovation in the Mazda programme was not communications or features – instead it was the more mundane requirement of data collection.

If there is one thing many car manufactures don’t have it’s up to date, clean customer data.  An outcome that arises from historically very manual processes – like paper log books – and a channel based sales network meaning that the manufacturer has little or no customer details.  Compounding this is that due to second hand car sales and customer movements, even the best dealer database struggles to stay up to date between the long buying cycles.

The solution then for Mazda was DSR or its Digital Service Record, described as “an innovative electronic service booklet, which replaces the traditional booklet that you used to get stamped following a vehicle service”.  More importantly though is that the “vehicle's service history is stored digitally on a central Mazda database”

It’s this centralised storage of vehicle (and customer) details which has allowed Mazda to build it’s retention programme

When DSR was first launched to dealers back in 2005 it was well received with dealers recognising the potential benefits for customers over and above the operational aspects of servicing a car.  One dealer in the UK was quoted at the time as saying

"It is an ideal asset for nurturing customer retention with its tracking capability. The critical time comes after a car is three years old. It will highlight for dealers how much business they retain or lose from the network and should help keep more customers within Mazda’s orbit."

Mazda are making good use of this database, using it to target customers due for a service with both service notification mailings as well as “missed service” reminders – all of which generate extra business for dealers.  They are also targeting customers of older cars to come back in to Mazda – generating additional footfall and opportunities.

All of this is only possible with good, up to date data and there is always a price for getting customers to provide it – the trick is doing this at the least cost and then extracting the most long term return.

A retail loyalty programme giving points for spend is essentially paying customers to swipe their card – to identify themselves on their transaction.  This data has then been paid for through the issuance of points – how you use this data to extract additional value is your return. 

What Mazda did was indentify an opportunity to collect data whilst providing a win-win for all stakeholders.  For the customer they have a secure, maintained service record, ensuring maximum future sales value – this in turn creates value for the dealer as customers will want to ensure this is maintained and so will return.

Whether you’re an automotive company, a restaurant or retailer, knowing who your customers are and what they do is an important first step in building a relationship with them – essentially creating a retention programme. 

Only when you have sight of this information can you create timely and relevant communications which maintain or change behaviour as Mazda have done.

The trick is to find the opportunities to collect this information at the lowest possible cost whilst gaining the greatest overall return.  Collecting data and not getting a return from it is just as bad as not making the investment to collect it in the first place.

Want to add a little Zoom Zoom into your customer relationships?  It might be worth thinking about what data you could collect and/or make work harder which is currently ignored, lost or only held locally?