Saturday 24 December 2011

You and Yours (3 key loyalty trends for 2012)

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At this time of year, thoughts tend to be about you and yours. This however may be a continuing theme going into 2012 as I think loyalty marketing is going to become a lot more interested in "you".

This is more than just mass personalisation or segmented communications. I believe 2012 will be about individual engagement and empowerment as consumers provide more and more data, expecting increased control over it and better experiences being delivered because it.

You (and your data)

Back in 2006, Time Magazine named the Person of the Year as "You". Pointing out the cultural shift that social media had begun to bring, they recognised that it was democratising communications, with people sharing with each other and big institutions and governments beginning to lose control. They described it as:-

"[The] founding and framing [of] the new digital democracy. It's [..] about community and collaboration on a scale never seen before [..] about the many wresting power from the few."

It's unbelievable to think that this was 5 years ago now and Facebook was just starting out and MySpace was king. Whilst the tools we use may have changed, the pace itself hasn't. Social media has indeed wrestled power from the few leading to Time Magazine nominating the Person of the Year in 2011 as "The Protester". Highlighting the role of social media in showing injustice and gathering support they said:-

"One of the unequivocal generational virtues of these movements has been their use of the Internet and social media."

It's not just in politics that we're seeing this democratisation however. Consumers are also gaining more and more power with the UK government for example recently announcing that they plan to give consumers more control over their data by releasing it back to them. In describing this they say:-

"[It] will give consumers increasing access to their personal data in a portable, electronic format. [..] Individuals will then be able to use this data to gain insights into their own behaviour, make more informed choices about products and services, and manage their lives more efficiently."

Outside of government, some of the biggest collectors of personal data are loyalty programmes and so I'd fully expect them to begin taking part in these kinds of initiatives, allowing members to use their data to better understand their buying habits, but also to unlock more relevant offers and promotions on their terms. Indeed, many of the companies signing up to the UK midata initiative are companies with their own loyalty programmes. Generically termed VRM (Vendor Relationship Management) or PIDM (Personal Identity Management), I think 2012 will be the year when we start to see this trend gaining ground.

Your Behaviours

Increasingly, as you carry out an activity you leave a trail of bread-crumbs which others can use to follow you. Whether its location information that your smart-phone tracks, items you view but don't purchase or the TV programmes you watch (and then discuss on Twitter), all of this information is out there waiting to be collected and used.

This data is providing insight into previously hidden behaviours. Bricks and mortar retailers will start to get the same visibility as that enjoyed by online retailers, seeing those customers who have visited, but not bought or which items they viewed before purchasing. TV advertisers will have more visibility of which adverts were seen by which individual customers, allowing them to create a true ROI from awareness to purchase.

This is all being made possible by a combination of smart-phone/tablet penetration, innovative new apps and an established social graph. Using tools like twitter and Facebook as identity management, companies can collect together and refine this raw information from apparently disparate sources.

People are already using twitter for example to comment in real-time on TV programmes and this experience is being enhanced through new applications like Zeebox in the UK and IntoNow from Yahoo in the US. Zeebox co-founder Ernesto Schmitt says:-

The emergence of net-connected TVs; the mass proliferation of companion devices like smartphones, laptops and tablets; and people's expectations that entertainment will be socially connected felt like a perfect storm. The time was right to revolutionise TV

Increasingly using "fingerprinting" technology, these applications can automatically detect what TV programmes you're watching and any associated advertising. Linking this to your loyalty purchase transactions is simply the obvious next step and something i'd expect to see appearing in loyalty programmes in 2012.

Your Experiences

Apple changed the face of electronics retail. By combining great looking products with a great in-store experience they managed to make the electrical stores more of a destination than a retail outlet. Others have quickly followed, most notably Dixons in the UK with their pilot store Dixons Black in Birmingham. As offline retail increasingly struggles against online, especially where the products are more commodatised like in electrical, then the focus is shifting to the in-store experience. Using a combination of knowledgeable staff and well presented products, retailers are fighting back.

As retail expert Clare Rayner of Retail Acumen says:-

When you don’t offer anything special then the only thing you can do is compete on price… and that’s a downward spiral where the retailer with the deepest pockets to “buy their customers” is going to be the winner.

Retailers like Apple, Dixons, Game and Disney are starting to offer something special to turn the shopping experience from a physical one to an experiential one.

Apple do more however. They have turned the purchase process into a relationship. Making the stores also a centre for servicing and support through the "Genius Bar" as well as running seminars and training, they actually want customers to return. Whilst this isn't a loyalty programme in the traditional sense, i think it indicates how retail loyalty is changing. It can't simply be something stuck onto the side of the retail process and instead needs to be deeply embedded into the experience.

Expect to see more retailers upping the experience in-store and needing their loyalty programmes to help both support and drive this.


As these 3 key trends converge we're going to see a blurring of the lines between online and offline retail, with consumers having a more tailored and personalised in-store experience and with retailers gaining a better understanding of (and ability to influence) the end to end purchase process for each individual customer. Loyalty programmes play a key and central role in all of this as a means of proactively gathering consumer data in an opted-in manner and allowing appropriate reward and recognition to be given back.

This will result in "you and yours" - your data, your behaviours, your friends, your experiences - being a central theme for 2012.

I probably say this every year, but 2012 is going to be an exciting time in loyalty marketing!

Image credit:♫muxu's photostream

Sunday 4 December 2011

When excluding customers adds value

Winlose sml

I'm a loser.  I've been a loser lots of times.

When I play poker, I very rarely win big and tend to be happy if I break even.  When I was young and we'd play games like pass the parcel, I'd lose more times than I won.  Losing is part of life and it's what makes winning feel that much more special.

When my kids play games like pass the parcel now, every wrapper has a gift in it.  Everyone's a winner.  Yay!  Strangely enough they don't really play it that often.

If everyone is a winner then essentially no one is a winner.  All it does is dilute the whole process to the point where taking part ceases to have value.  Sure it's inclusive, but it doesn't take long to realise we don't want inclusive, we want exclusive.  We want to be winners.

Imagine a frequent flyer programme where everyone was a winner.  It didn't matter how many times you flew, you were top tier.  I'd feel great with my Platinum frequent flyer card, with its exclusive benefits.  Priority queuing - with everyone else.  Lounge access - with everyone else.  Priority Boarding - with everyone else.  Somehow that's not going to feel special very long if everyone is included.

This peaked my interest recently when I read about a new card that has been launched for what the Evening Standard termed as the "digerati".  Called the FoundersCard, they state

"[It] is a first-of-its-kind membership community for entrepreneurs and innovators" providing members with "access to frequent networking events held throughout the year [..] exclusive benefits, upgrades, and amenities from the hottest travel, lifestyle, and business brands, carefully selected to meet the needs of the entrepreneur"

Only 5,000 people worldwide have been accepted for one so far and it costs $495 to have it.

So I have to pay for it, I want it, I don't know what "it" is but I can't have it.

Still, it's cheaper than another card that I'm excluded from, the Centurion Card.  Another "invitation only" card with annual fees of $2,500, the FoundersCard looks cheap in comparison, especially given the Centurion card also has an joining fee of $5,000.

What do you get for that kind of money?  Well basically, in the words of Tolkien, it's "one ring to rule them all" or more accurately "one card to rule them all".  Providing elite membership in frequent flyer/guest programmes including Virgin Atlantic, US Airways, Delta and American Airways, elite status in Hertz and Avis and personal shopper access within many top retailers.  It's one card that can open doors to almost any other loyalty programme.

The only reason these cards work though is by controlling access and membership - including some and excluding others.  If Amex opened the floodgates to the Centurion Card, not only would it devalue the card to other members, but also to their partners.

This is something Groupon partners keep experiencing.  There was another report in the press this week of a partner being overwhelmed by the response to a Groupon deal.  A baker in the UK was inundated with orders for a 75% discount on 12 cupcakes.  Expecting only a "few hundred" orders, they received over 8,500 and had to make over 100,000 cup cakes - at a loss.

The original purpose of Groupon was to provide exclusive deals.  As they say on their website "Just imagine the joys of an exclusive spa day or a four course meal for half price".  The problem is, if it's not really exclusive then it won't be valued, either by the consumer or the partner.  This will mean it'll be harder for Groupon to source genuinely "exclusive" deals and consumers won't be getting a deal, they'll simply be getting what they paid for.

These exclusive offerings work on the scarcity principle, with people valuing (and overvaluing) something when it is in limited supply.  The real value of exclusive access within an airport is about £2.50 for fast-track security and £15 for lounge access - assuming of course you could buy it.  Limiting supply however allows airlines and operators to provide these low cost benefits as part of high cost business class seats and loyalty programmes.

Google used this principle when launching Google+ as an invitation only service.  For something many of us didn't know if we wanted (and probably still don't), there was a clamour for invitations on twitter with a clear divide between the haves and the have nots with reporting on this saying:-

When Google shut down inviting [for] a few hours [..] hype only intensified. Lesson: going slow with a launch is not only good for your servers and your sanity, but can extend a feeling of exclusivity to users.

By excluding potential customers initially, Google simply increased the desire of potential customers to gain access and at the same time increased the value of the service to those who already had.  Creating winners and losers created a win-win and in the process created the fastest growing social network in history.

This also applies where there is no real value.

Achievements or digital rewards may be cheap to manage and fulfil, but they'll also be cheap in the mind of the recipient if they don't have exclusivity tied to them.  Foursquare works because they make getting badges a challenge and also make it hard to find out exactly how you get them.  This means when you are awarded one there is genuine surprise (and delight if you're a little sad like me) or a genuine feeling of achievement.

This is something that the MacArthur Foundation is counting on along with the Mozilla Foundation.  They are looking to tap into it with a proposal to use achievement badges as a form of virtual CV.  Recognising that increasingly, formal qualifications don't express the richness of someones skills or those skills they learn ongoing, the badges would form a visual recognition of acheivement.  However these only work if they genuinely recognise achievement as a Mozilla spokesperson said

"The badge itself is more than a static image or button. Its value comes from the information or metadata attached to it [, including an] implicit validation system"

In reporting this the New York Times said "If valued, they might also inspire students to accomplish new tasks."

This in the end is the key to all of these solutions - the consumer has to value them and that value can be created and intensified by limiting their supply through achievement.

It doesn't really matter what the rules are, whether it's demonstrated by the size of your brain, your klout or your wallet.  There has to be winners, those who are included, and losers who are excluded for things to have enough value that it encourages motivation and engagement.