Sunday 28 March 2010

Is the going good for Barclaycard Freedom?


The TV advertising has launched. The programme collateral has been dispatched. The biggest new loyalty programme launch in the UK for the last few years is out of the gates.

However, what are the chances of it making it over the first few hurdles and more importantly actually crossing the finishing line. This is most definitely not a one horse race and the verdict is still out on whether Freedom may be a good bet - and that's with the punters - the card holders.

Hurdle 1 - Earning Options

Within a loyalty scheme, the ability for engaging customers in the programme is a balance between the perceived value of the reward and the effort required to achieve this.

For Freedom it ticks one of these boxes well - it gives 1% back to card holders, positioning it at the high-end of standard card loyalty programmes (with most giving more like 0.5% back). However in order to get that 1%, you have to spend at Freedom merchants, and this can be hard given the current selection of partners.

For me personally, the majority of my high, regular spend is business expenses. This means I need hotel companies, train companies and airlines signed up to Freedom to make it worthwhile. Until then my current reward credit card gets the spend - and that all important front slot in the wallet.

Hurdle 2 - Coalition vs Card Loyalty

Freedom is a little schizophrenic. It's not quite a traditional card loyalty scheme - offering rewards on all spend on the card, regardless of merchant - and not quite a coalition scheme - offering rewards on all spend with the merchant, regardless of payment card.

In reality Freedom is trying to be both a coalition and card loyalty programme - building loyalty to the retailer as a coalition scheme would and loyalty to the card at the same time.

This is a tough call for consumers as it means not only do I have to think about retailer choice, but also payment choice. Most loyalty junkies have a favourite payment card (for me it's my Tesco Clubcard Credit Card) which they use everywhere to maximise points earning, and will then have other, secondary loyalty cards such as Nectar or Boots Advantage to collect points across retailers where applicable.

By limiting earning to only Barclays merchants who have signed up, they are limiting potential ongoing usage of the card across all merchants - this may naturally make it a secondary card for many people - a position Barclaycard can't afford it to take.

Hurdle 3 - Programme Sign-posting

With Freedom being basically a coalition programme, it requires the consumer to make a choice - ideally changing their regular merchant to one who takes part in Freedom.

Getting the consumer to change retailer is all well and good if you're the Freedom merchant - but how does the customer know about you?

The issue here is that on a programme like Nectar, it's easy to remember the relatively small number of big brands taking part. Sainsburys, BP, Homebase - these are all big brands who are nationwide. Freedom on the other hand has some big brands - but none who really fit into those habit forming categories. Also, whilst it's both ingenious and laudable to provide a loyalty scheme that works across smaller, grassroots merchants, this makes it harder to get cut through to the consumer.

For Freedom to work, small merchants are going to have to shout about it from the roof-tops - almost literally.

As an example, look at how PayPoint - a provider which enables bill payment at merchants - publicise themselves. They have signs physically displayed on the outside of the merchant and clearly displayed window decals.


This may be overkill for Barclaycard Freedom, but with 30,000 merchants invited to take part, the card holder is going to need some form of sign-posting to be able to identify them on the high-street. It's too late if I have to wait until I get to the payment terminal to see the Barclaycard logo.

This I think is the crux of the problem though - and possibly the genius - the removal of reliance on big brands.

For decades now we've been sold on brands - from branded retailers to branded goods, we use easily recognisable logos to help simplify an increasingly competitive and complex commercial environment.

The Freedom programme though would seem to be trying to get us to think differently - to ignore the brands and instead focus on the service.

For example, whilst they may not have a large supermarket brand in the programme - looking at "Grocery and General Goods" retailers in the programme local to me brings up a number of small, privately owned grocery retailers such as "Meadow Farm Shop & Tea Room" in the village of Flore - not Tesco I grant you, but then they aren't trying to be, they offer something completely different.

For me this is the point - Freedom itself is actually offering something completely different.

It's not trying to be Nectar - it actually turns the traditional coalition programme on its head with no category exclusivity.

It's not trying to be Tesco Clubcard - with one retailer trying to take an ever larger share of our purchases in ever larger stores.

Instead, it is offering choice - freedom you might say - as long as that choice is paid for on a Barclaycard.

Saturday 20 March 2010

Starwood build non-customer relationships

twitter.jpgPeople love a mystery. Authors like Ian Rankin or Lisa Gardner are masters at it - keeping the reader guessing till the end about who did it or how.

In the business world, Apple are undoubtably leaders at the guessing game - managing to build up a huge amount of buzz and pent up interest in it's products simply by not telling anyone about them (or at least controlling exactly what is told and when). Witness the recent hype around the iPad - with speculation months ahead of time and possible names being banded around like the iSlate or iTablet.

It was interesting then to see Starwood Hotels creating a bit of a stir with it's new secret loyalty programme. In a recent article in USA Today, there was a "scoop" discussing a new loyalty initiative they are trialling which appears to be identifying and interacting with customers in a different way.

Mark Vondrasek, Starwood's senior vice president of interactive and loyalty marketing is quoted as saying:-

"We looked at factors beyond just frequency, which is the key measure in traditional hotel loyalty programs. For instance, we evaluated factors including guest's profitability, their lifetime growth potential and their ability to influence travel by others. We even targeted some travelers who were loyal not to Starwood, but to our competitors."

Details are slowly emerging - see Hotel Chatter for latest - but what interests me most here are the last two points - their ability to influence travel by others and the targeting of those not loyal to Starwood.

This is different as it's essentially looking to create a loyalty programme which attracts and retain non-customers.

The obvious issue here is that identifying these customers is notoriously difficult - by their very nature Starwood won't have any internal data for these (potential) customers.

So how are Starwood finding, contacting and attracting these highly valuable - non-customers?

Well we don't know the details of how the Starwood programme is being managed (that's the problem with secrets), but my guess is that a large part of it involves social media.

People give away a wealth of information across their online social networks - whether it's their opinion or general musings on twitter, their job (and likely business travel potential) in LinkedIn or their location in Flickr tags or FourSquare postings.

Increasingly these are being aggregated by services allowing people - and more importantly brands - to track these and pull them together into possible prospect lists. As an example, just search twitter for "Marriott" to see a list of people tweeting that they are staying there right now.

Now imagine tracking and scoring these people over time - building a picture of their activity - de-duping against the ones you know and you have some sense of the power in these random tweets.

There was an interesting article in the blog "Edge of Brooklyn" recently discussing how this opportunity is often missed by many brands.

The article was discussing how the Chicago Cubs were rewarding loyal customers - but how this reward basically just focused on season ticket holders - essentially the audience they knew about and could address. However it failed to address the wider and more difficult to track national fan base, with blog author Dana saying:-

"The Cubs are a national team. For all the season ticket holders every season, there are hundreds of thousands throughout the country who are rabid, loyal Chicago Cubs fans who will never be able to get season tickets - [and] there’s something other than cold, hard cash that many of us fans spend each and every day on the Cubs – social capital."

Going on to say:-

"We generate our love for the #Cubs one tweet at a time – and we even get non-Cubs fans to root for the Cubs sometimes! - Social capital builds more passion, excitement, community and loyalty, which turns into ticket and merchandise sales, even if the team is performing below expectations"

Like I said earlier, we don't know how Starwood are actually building this programme - but I'm betting Social Media is playing a large part.

In a traditional loyalty programme, it is not unusual for 20% of customers to represent 80% of revenue. However you can't know who these 20% are without in some way tracking the larger base. This is what a loyalty programme allows you to do - you track the behaviour of all and then focus benefits and offers increasingly on the more valuable, smaller segment of loyalists.

Social media may however change this model.

What if through a blend of data from social networks, overlaid with other third party data such as card payment data or online ad-tracking data you could begin to build a profile of your "ideal" customer - your "20 percenter".

How much marketing spend would you focus on acquiring and retaining each of these?

We're probably not there yet as the accuracy and available data still makes the view a little blurry - but expect this to become more focussed in the next few years - and if Starwood are playing in this space, expect them to be leading the pack.

Knowing your best customer before they even have a chance to know you has to be the ultimate loyalty programme.

[Image generated using twitter mosaic based on Starwood followers]

Sunday 14 March 2010

Is it the end for traditional retail (or the beginning)

starbucks-sml.jpgEver since the first e-commerce site was launched there has been a perceived battle of online and offline retail.

Online retail with it's apparent advantages of economies of scale, the ability to focus on the niche and the low start-up costs. Offline retail with it's higher costs to serve, reduced range (compare a high street book store with Amazon) and limited catchment areas.

But offline retail has one real advantage - it's physical.

I can see, and touch what i'd like to buy. I can compare products next to each other. I can assess size and appearance. This physical connection is not required across all product categories - which is why traditional music shops have struggled - but for many types of product, seeing it in person can be a necessity.

However, the lines are blurring and its less about offline or online shopping and more about convergence (or multi-channel retailing in retail lingo) - and the mobile device in your pocket is enabling this.

In a recent article in the Wall Street Journal, Forrester's e-commerce analyst Sucharita Mulpuru asked the question
"If somebody buys from a mobile device in your store, is that a Web sale or a store sale?"

This is interesting as for many people, one of the issues of buying in a store is actually the costly sales assistant. Yes I need someone to help sort out the actual purchasing of an item, but I'm less inclined to believe they can help me to select the right product - do they have the knowledge - and that they have my best interests at heart - how are they compensated.

The great thing about the integration of online and offline through the mobile device is that I can stand in front of a product in store and access reviews and pricing information instantly. I don't need a sales assistant to tell me why it's a great product, I have access to hundreds of reviews from real people to tell me if its a great product.

One retailer who gets this is Best Buy.

In a recent video they did for the National Retail Federation's 2010 Retail Innovation & Marketing Conference, they demonstrated their view of mobile integration within offline retail.

One thing I particularly liked in this thought piece from Best Buy is the linking of the physical product to online information. This was something I discussed on this blog back in 2008 and it's great to see a retailer with this on their radar.

Another interesting retailer is Starbucks. They have recently partnered with "new kid on the block", social network FourSquare, which they describe as:-
People use foursquare to "check-in", which is a way of telling us your whereabouts. When you check-in someplace, we'll tell your friends where they can find you and recommend places to go & things to do nearby. People check-in at all kind of places - cafes, bars, restaurants, parks, homes, offices.

So basically I can let FourSquare know where I am at any time, and they will let me know if my friends are there as well, plus it will automatically update my other social networks like Twitter and Facebook with my location. However, FourSquare aren't doing this just for fun as their website goes on to say:-
We all have our local hangouts and foursquare keeps tabs on who's the most loyal of all the regulars. If you've been to a place more than anyone else, you'll become "the mayor"... until someone else comes along and steals your title. It may sound a little silly until you see the list of places that are offering freebies to our mayors - free coffees, free ice-cream, free hotel stays - it pays to be a foursquare loyalist and check-in whenever you go!

And there's the magic.

FourSquare get to know where you go and how often - and this is what Starbucks is buying into.

They have partnered with FourSquare to develop a reward programme which recognises people for frequent visits. The rewards at this time are simply a "Barista Badge" (badges are a big thing on FourSquare), but this is just the beginning. Speaking in the New York times Bits blog, Chris Bruzzo, Vice President for Brand, Content and Online at Starbucks says:-
“It’s where the intersection between digital and physical starts to get interesting. Starbucks loves that, because we’re always looking for that intersection, which we think is the evolution of social networks.”

I think this is a very interesting development - whilst it may be the evolution of social networks I think it's actually the evolution of retail.

This "intersection between digital and physical" is all about enabling and tracking customer interactions. Regular readers of this blog will know I've spoken about recognising and rewarding this interaction before - and this is what Starbucks are doing.

In some senses the interaction is more important than the transaction as the interaction is further back in the buying process - if you can get someone to interact with you more often you have a better chance of converting this into a transaction - a sale.

The forward thinking retailers are recognising this and also recognising that traditional retail loyalty solutions are in the most part reactive - rewarding a decision that has already been made.

Of course there is a hope that the loyalty programme influenced this decision, but retailers like Starbucks and Best Buy are also ensuring that their loyalty initiatives are working harder and smarter - engaging customers before the purchase - and this is the traditional space for more mass above the line marketing; another area which is seeing a convergence - this time between above the line and below the line.

To me this is the real future of retail and retail loyalty.

Not only the convergence of channels but also the convergence of marketing. Engaging, recognising and rewarding customers across channels - before they purchase - before they are even a customer.

This isn't the end of traditional retail - it looks to me like it's just moved up a gear.

[Image credit Physorg]

Saturday 6 March 2010

Pay peanuts, get monkeys. Pay too much and create them.

The old adage about "pay peanuts, get monkeys" suggests that the quality of work - and in fact products / services - is directly related to the amount we pay. If we pay more for something then logic would say we are getting better materials, more expertise (who can command a higher day rate) and more time - all of which combine to provide a superior result.

But where does this end - when is more money too much money.

Well it would seem there can be a limit. In research carried out by Dan Ariely - professor of behavioural economics at Duke and author of Predictably Irrational: The Hidden Forces That Shape Our Decisions - it was found that offering more money to individuals to complete a task can actually decrease performance.

In a number of tests which were designed to replicate everyday work - requiring attention, memory, concentration and creativity - those offered a large financial incentive for completion fared consistently worse than those with medium or low incentives.

This research has been reported upon in conjunction with discussions around the benefits (or not) that large bonuses provide for bankers - suggesting that the size of the bonus may have little effect on their delivery and in fact may ultimately be detrimental. Counter arguments have put forth that these astronomical bonuses are less about performance and more about recruitment and retention of top talent.

Whatever the reason for the bonuses and their impact on actual performance, what interested me is that we see this type of effect within loyalty programmes as well - but possibly for different reasons.

It is well known and documented in the book Scoring Points: How Tesco Continues to Win Customer Loyalty that Tesco originally trialled 1% and 2% back in value and found no real difference in the loyalty effect - so opted for 1%. This suggests that at these relatively low values, consumers aren't additionally motivated. However, when they were researching Club Card deals, which effectively gives 4 times the reward value at partners, a lot of time was spent getting the wording right as consumers initially felt this was too good to be true.

This "too good to be true" effect is also visible in other programmes. In recent tests we carried out offering varying bonus point values for the same behaviours we actually saw a drop off in responses with a larger bonus point value. It would appear that customers felt the reward value was too much - maybe thinking that there was a hidden agenda and so was too good to be true.

All programmes need to be tuned to ensure the best value is being achieved, both in terms of how much value is given back and what behaviour change is exhibited. Too little and the value is simply wasted on little or no change - however too much and you'll see the same effect. This is mirrored in rewards with rewards which are too low in value - too easy to reach - risking a decrease in ongoing participation.

Whilst it may be right to say pay peanuts and get monkeys - and there is actually research to prove this - it would appear that this can equally apply if you pay too much, with the recent banking crisis seeming to back this up.

Whether it is money or points however, the same rules would appear to apply - under rewarding may simply recruit monkeys, but over rewarding could actually be helping to create them.

Wednesday 3 March 2010

By focusing on the reward they're not has had some interesting advertising over the last few years - and this despite (or possibly because of) a past trend of making their own adverts internally.

Their campaign in 2009 featured apparently real users who reviewed the site commenting on it's usability. Whilst many considered the adverts annoying, there is no denying that they tapped into the trend on user generated content - looking like they'd been made for youtube and so came across as possibly more authentic than competitors.

In the comparison site space however the show has been stolen recently by the Meerkat.

Apparently dreamt up as a way to reduce the reliance on expensive google keywords such as "compare" and "market" (rated at £12 and £5 per click respectively), it was a real coup to get people looking for "meerkat" instead (at just 5p per click). In the process however it has also created a real character which itself attracts over 700k Facebook fans and was made into a sell out toy at Harrods.

Not to be outdone, Go Compare created it's own character, the really annoying tenor - however I suspect this won't attract anywhere near the same kind of following or fan base.

So if you're a brand like, what do you do to fight back?

Well what they have done is refocus the discussion back onto the task in hand - namely saving money by comparing products. However this is nothing knew, many comparison sites highlight the typical savings you can make.

What have done which is clever though is to make these savings tangible. Rather than simply saying you can save £150, they have highlighted a product/purchase which you could have achieved with the saving - such as a new guitar or a pair of jeans.

The strategy works because people have less emotional attachment to cash. We see this in reward programmes all the time - cash based incentives and rewards are less motivating and under perform in comparison to tangible products.

By utilising products such as a new pair of designer jeans or a new guitar, are hoping to get deeper emotional engagement from the audience - letting them focus on something they want (which they will change behaviour for) rather than something they save.

Carlton Hood,'s chief executive highlighted this when he said:-

"What we have decided to do is to focus on bringing customers back to the site." going on to say "[This campaign] plays on this moment of regret, a character missing out on something – we have put in an emotion that we felt was very real and put humour in."

There is a real battle going on with comparison sites. In an industry which has grown quickly, the focus will now increasingly be on attracting back previous customers or taking them from competitors.

This can be fought to some degree by shouting the loudest - spending more on above the line - however increasingly it will require more retention marketing techniques and I think have done well to start this process.

Still not getting the logo though...