Loyalty Magic - A lesson from Santa

When we're young we tend to believe what we're told.  

If your mum or dad tell you about Santa and how he delivers presents to all the kids on his "nice" list, young children will be in awe of the whole magical world you've created.  However, kids grow up, become more curious, more literate and start to dig under the illusion.

Spoiler alert here...  they then work out that Santa doesn't really exist.

There is a parallel here for marketing as well.

As consumers, new to a brand, we tend to believe what we're told - the less cynical amongst us tend to buy into the brand promise.  However, if that's all it is - a promise - then the consumers will quickly lift the veil on the illusion.

An article entitled "Marketing Magic and Illusions of Simplicity" in a recent MISC magazine discussed how "To truly mesmerize [..] consumers, a savvy brand magician plays first into their faculties for astonishment and disbelief, and then engages their curiosity".  Going on to say "For brands, that sense of spellbound infatuation translates as a unique opportunity to close sales and secure extended loyalty".

As an example, daily deal sites like Groupon promised much - access to local, great deals that I'd want.  People signed up in their millions, word of mouth spread - they were spellbound.  However, the reality didn't really live up to the hype - offers felt badly targetted to many people and so the illusion of a good deal was simply that - an illusion.

To really captivate customers you have to be able to astonish them.

Customers know that when they sign-up to a loyalty programme, provide personal details or swipe their loyalty card that this information is being tracked and analysed.  The veil has been lifted - points alone won't astonish them anymore.

Instead, they expect that this information will be used to provide them with a better experience.  When an offer is made or a new product highlighted, if it's relevant - truly relevant - then it has the power to mesmerize.  We've seen this within our own programmes; as we increasingly tighten up our offers to better target these based on customer behaviours - people suddenly see the selection presented and simply say "Wow - that's me".

It's not just about offers, though, it's also about how you go to market.  

In the US for example the credit union Patelco has a fantastic service for buying cars called "Members Advantage Plus".  Essentially you tell them what kind of car you want and they then shop around for you across 500 dealers in California - they haggle for the best cost, sort out the finance and deliver the vehicle to your home - and if you don't like it, just send it back, they sort that too.

Keep in mind this is a loan company... not an auto-dealer.  For me, that's not something I expected and when I read about it I was truly amazed.  Their customers are amazed to...

"Try shopping for a Prius at dealerships.  No one is dealing, everyone wants a Prius so the dealerships don't have to.  [Petelco] found exactly the car we wanted, color, accessories -everything.  And at $900 below MSRP. Fantastic."

Patelco have worked out how to add more to their basic product - finance - and in the process have created a service that helps to extend loyalty as well as satisfy the curiosity of their customers.

Whether it's help getting the best offers, selecting gifts, picking a film or buying a new car, consumers still want to be amazed.  As marketers we still have the power to amaze, to mesmerize and to keep customers curious - we just need to stop selling the dream and start delivering it - and we don't need a sleigh, elves or a red suit for that (unless you're Coca-Cola) ;)

Merry Christmas / Happy Holidays

Curiosity = Loyalty3

cu·ri·os·i·ty - noun
1. A strong desire to know or learn something.
2. A strange or unusual object or fact
3. An app that has hooked over 500k people

That last point is strongly linked to points 1 & 2 and also provides some interesting lessons for loyalty programme design.

In case you missed it, Curiosity is a new iOS and Android app in which people slowly destroy layers of a huge cube with the mission to reveal what's inside.  It's like a multi-player pass the parcel in which there can only be one winner.


The cube is apparently made up of 64 billion tiny blocks which users have to destroy one block at a time until a single layer is completely removed and then they begin on the next layer.

Thats it - In terms of gameplay, it could be argued that it's a little lacking.

However, if thats all you got from it - a Zen like feeling from destroying blocks and making patterns in them - then I can't imagine it would be anywhere near as popular as it is.  Instead, the game locks onto some powerful gaming mechanics employed by more complex ecosystems like Farmville to provide a rewarding and addictive experience.

These can be summarised as:-

• Social - Everyone taking part - like a shared experience.  Connect it with your Facebook account and you can see how your friends are doing.
• Reward - There is something to aim for even though no one knows what that something is.
• Gamified - There is skill involved and you can "level up" to get a perceived advantage.  Destroying more blocks earns coins and these in turn can be traded for tools to destroy even more blocks.

It's these 3 points combined that make Curiosity both an interesting take of gameplay as well as a great model for Social Loyalty.

People will download and play with the app for different reasons, either because they've heard about it and are curious (social element) or are intrigued by the possibility of the final prize (reward).

Whichever path brings them into the app, both then play a part in retaining them.

The "gamified" element though is also very important in keeping people playing - essentially keeping them loyal.  Users will very quickly tire of simply destroying blocks one at a time.  Instead, by recognising their activity and rewarding this with coins that in turn can be used to purchase tools to increase their activity, Curiosity is looking to maintain "flow" in the gameplay.  Keeping users somewhere between boredom and anxiety.

This is enhanced further, as these additional tools give users an advantage over others, something expressed within the social element by being able to compare your stats to friends.  Solo gameplay is rarely as rewarding as that played against others.

Just using these 3 simple mechanics, Curiosity shows us in a stripped back, minimalist way how to engage and harness peoples attention.  There's no fields to plough, crops to plant or farms to build - it's as basic as it gets, and yet it still works.

The lesson for us in loyalty is that it's not about how complex your programme is or how many rewards it has - it's all about the design and how this too can engage and harness the customers attention.

Many loyalty programmes today are one dimensional - simply using rewards as the mechanic to drive people forward.  Increasingly though Social Loyalty programmes look to harness the power of social currency as expressed and magnified through a gamified experience to add depth to the programme and turn into into a more rounded, 3-dimensional experience.

It's Loyalty³.

Intent casting shifts balance of power (and Facebook dips a toe)

Back in 1980, Prof. Allan Schnaiberg wrote about a theory he'd developed called "The Treadmill of Production" which was in part used to explain the drastic changes in US production quantities and/or qualities after the second World War.  It suggested how advances in technology, driven mainly by producers seeking increased profits allowed them to invest in new technologies which further increased production which was necessarily then matched by an increase in consumption.  This created an ever growing cycle as more efficient production required further economic growth to offset unemployment created by the previous mechanisation.

At a simple level it suggested that it is not demand from the consumer that drives supply but rather supply that creates the desire for demand.  In the paper "Interrogating the treadmill of Production" it went on to discuss  the focus of the theory on the production side rather than consumption side and the fact that consumers can only consume what is produced saying:-

"Consumers may opt not to consume specific produced items.  But they are not empowered by market processes to determine how such items will and will not be produced."

Ignoring the environmental aspects of this (as the ToP theory was focused on how this impacted the environment), it's interesting how this power play between producers and consumers may be changing in the sense that consumers are increasingly being given control of production.

Traditionally there was no way to access consumer needs in any formal way and so producers would create mass-market products based on limited market research studies.  However, technology is changing that allows consumers to provide feedback on products that don't yet exist, create demand for new product ideas and even to create their own products.

The concept of "Intent Casting" is one way this is manifesting itselt, with consumers able to create and issue their own personal RFP for a product or service they want and for producers/suppliers to be able to respond to this.  The website AskForIt for example allows consumers to ask for anything and through social sharing, to gain support for this from others.  Another website called OffersByMe allows you to indicate what activity/service you want and how much you're prepared to pay for it - offers are then shown/sourced based on this request.

It is probably home services which is the biggest growth area for intent casting however with services like Thumbtack allowing the consumer to indicate the service they want (plumber / electrician / etc.) and to then receive quotes from local tradesmen for the request.

Facebook has recently extended into the area of intent casting by extending it's "Like It" button to include a "Want It" button.  This allows consumers to indicate products they want which are then added to collections.  They, or more importantly friends can then reviews these and click through to actually buy then.  While at the moment this is more of a wish list function, I suspect it won't be long before Facebook are mining these "wants" (or essentially consumer intents) to provide relevant offers from other service providers.

Intent casting for existing products and services is just the start of it though.

Crowdfunding website Kickstarter is opening up to UK projects at the end of this month, allowing anyone with an idea to sell it to consumers before they've even produced it.  In this model, intent casting actually starts to drive production as users on Kickstarter essentially help to bring the product to the market through demand (and donations).

Consumers can also now take a step back even further and become producers in their own right.

CreateSpace by Amazon is one of a number of companies that allows consumers to create their own books and to have these professionally printed on demand.  Website Ponoko takes this even further, allowing consumers to become producers with physical materials.  The user submits 2D and 3D designs and can then have these custom manufactured in over 80 different materials.  These products can then be listed and sold via the Ponoko website and custom manufactured on demand based on each individual order.

Brands such as Nike have also experimented in this area, allowing consumers to design their own trainers and have these uniquely produced.

Finally, new technologies are letting the consumers actually manufacture their own uniques goods on demand, in their home.

3D printers are now becoming commercialised to the extent that early adopter consumers can now purchase them, with brands like MakerBot and Cubify leading the charge.  The BBC recently reported how Disney Research is looking into how toys can be designed that can only be produced with a 3D printer due to their unique characteristics and controversial file-sharing website Pirate Bay is starting to host what it terms "Physibiles", or 3D printable designs.

It doesn't take much to see how all of these trends may ultimately come together, allowing the consumer to find products that don't yet exist and express a preference for them to direct what ultimately gets produced or is simply produced on-demand, whether by a 3rd party or at home.

This won't slow down the treadmill of production (and it's environmental impact), but it may change the economics and dynamics of it.  Given that "a key dimension of power is the ability to influence, if not dictate, the choices of those less powerful.", giving consumers more direct choice and the ability to state their intent is certainly a step forward.

Do loyalty points kill the relationship?

A recent blog article on Harvard Business Review discussing the concept of the "gift economy" provided a great example that stopped me dead in my tracks.  It said:-

"To understand a gift economy, consider the example of moving into a new apartment.  When friends help you move, you express your appreciation by providing pizza and beer — really good pizza and beer. When you hire professional movers, you pay with money. Offer your friends money instead of pizza and beer, and they are likely to be offended. Offer to pay the movers in pizza and beer, and they won't unload the truck. Your friends are operating in a gift economy; the movers in a market economy."

Take a moment to think about that example and then think about some of your favourite loyalty programmes.

Would your loyalty programme be operating in the gift economy or the market economy?

In the HBR article, author Mark Bonchek goes on to point out how in the market economy the focus is on transactions.  You receive a service or product and hand over money in exchange.  Market economies are normally between strangers and the trust lies within the currency. This is reinforced by the the latin term for money which is "specie", literally meaning "payment in kind".  

Gift economies in contrast are much more focused on relationships and are typically between friends or close communities.  It's not about the value of the gift or the expectation of return, as Mark points out the purpose is "not to execute a transaction, but to express a relationship".

Loyalty programmes  normally look to operate in this space, creating an emotional connection with members and typically stating that the desire is to develop a relationship which transcends the basic transaction.  Tesco for example state on their website that the Clubcard loyalty programme is "our way of saying thank you for shopping with us"

Yet despite this, many loyalty programmes simply reward a purchase with a set number of corresponding points; it's a transaction - a payment in kind.

While this works well and the customer understands the principle, it is essentially an exchange between strangers.

Using the example listed at the start, imagine if every time you called a friend it was to ask for something and you then responded to their help with a payment in money.  It's not difficult to see that this relationship would very quickly end or turn into a supplier/customer one; and this is exactly what we do within a basic loyalty programme.

This doesn't mean however that we throw away traditional points recognition - it serves a purpose in both helping to establish the initial relationship and keeping a focus between the member and the brand on the "value" of the relationship.  We do however need to recognise its limitations in that it is a transactional relationship and like all transactions, customers will be free to make the next one with your competitor.  Loyalty points help to simplify decision making (all things being equal, I'll use the store with invested points value), create goal directed behaviour and form part of the price comparison - but they don't build relationships.

To develop a relationship in part requires the programme to operate within the gift economy.  The programme needs to be able to express the relationship and demonstrate a different kind of value, a different kind of currency.  The gift economy operates on a Social Currency and can be expressed simply as:-

• Things that help me belong
• Things that help me feel significant

If when designing a loyalty programme, we build in components which align to these requirements, the programme will start to operate in both the market and the gift economies and move from being purely transactional to being emotional.  Whether it's providing benefits, surprise and delight, badges and achievements, access to information or membership of clubs, there are many ways to augment the basic loyalty design to create a social currency that is not directly linked to monetary value.

There is nothing wrong with points and indeed these form a crucial part of recognition.  We simply need to make sure that if the aim is to create a loyalty programme and not simply an incentive programme then moving the interaction from being transactional to being emotional is important.

5 Reasons why Evian "Smart Object" creates a new CPG loyalty solution

Apple basically invented the phrase "There's an app for that" and promptly trademarked it.

Whilst a catchy advertising line however, what it neatly demonstrates is how Apple popularised the concept of small, situationally specific applications that do a single job very well.  Whether it's a mapping app, a camera app or a Scrabble app, people now have on average 41 different apps installed on their smartphones.

This trend though may not just be limited to smartphones and tablets.  There seems to be an emerging trend of "smart objects" or essentially real world apps.  Situationally specific devices which perform just one task and are starting to be used by brands to connect customers directly from the point of need to the point of supply.

Start-ups like Green Goose have been creating ways of connecting the physical world to the online world through their smart sensors and this is part of trend known as the internet of things, something i wrote about 12 months ago.

The world moves on however and so it was interesting to see that Evian in France has just launched their own real world app in the form of a fridge magnet that will place an order for a water delivery when pressed, simply using a wifi connection to do it.  Developed by French company Joshfire, the device was developed from scratch to provide this unique proposition - and potentially a new loyalty solution.

 
A previous example was launched by a pizza company in Dubai who had a fridge magnet that would automatically order your faviourite pizza when pressed and I suspect at the time was seen more as a novelty.  However, a major global brand like Evian changes the playing field a little.

There are 5 main reasons why this more than just a sales promotion novelty and has the potential instead to be a powerful loyalty mechanic.

1. Direct Channel - It allows Evian to build a direct connection between the customer and the brand, disintermediating the retailer from the solution who would normally "own" this relationship.

2. Reduces Price Sensitivity - For some CPG categories, as much as 88% of all sales can be while the product is on promotion so anything that takes price out of the equation will be welcomed.  This solution provides a simple way for a consumer to just make a purchase without comparison of competitor/promotional pricing.

3. Reduces Paradox of Choice - It's no surprise that consumers find it hard to stay loyal.  In the water category alone, a top UK supermarket has 55 still water options and 25 sparkling.  Having just one decision and one button to press makes that choice simple (and you don't need to carry it home!).  This "one-click" decision works for Amazon online and has served them well; it's almost as frictionless as you can get for a purchase process.

4. Point of Need - As marketers we're always trying to get to the consumer at the point of purchase.  This is why mobile and location are such hot topics - if I know when you're out shopping and near my store I can remind you I exist and send you an offer.  How about being there though when the customer first gets a need - when they run out of something, before they even head to the shops?
This is what the Evian solution provides.

When I've poured my last glass (or better still opened my last bottle), I just press a button to get another supply.  This potentially provides a direct dialogue with customers at a key point of need and a customer who has just consumed something is going to be much more open to a re-purchase (assuming they were satisfied).

5. Reward and Recognition - Although not part of the Evian solution at the moment, this is potentially the most powerful opportunity that this kind of solution opens up.  Being able to simply say to customers "this ones on us" is a really strong loyalty mechanic and would be very simple to implement.  Better still, there is no need for customers to enter on pack codes, collect labels or send in receipts - you have all the data you need, immediately.

Loyalty is all about reducing friction in a customer relationship and I think this Evian smart object is a fantastic example of how to do this well.  It won't work for every brand, but whether its a button for nappies in the nursery, toiler paper in the bathroom or beer in the games room, the opportunity for this solution is potentially massive.

To infinity and beyond - Engaging consumers through immersive discovery

Have you noticed a subtle change in how you browse some content online?

For many sites, you no longer have pages of content that you need to navigate with "next" and "previous" buttons.  Instead as you browse the content and start to reach the end, new content is simply loaded in underneath.  Social networks like Twitter and Facebook are big users of this technique, as is Google if you're searching for images.

Infinite scrolling as it's technically known is also being used by some commercial sites.  Amazon for example is trialling a version of it with it's Windowshop offering which is still in beta.  Although it works on standard PC browsers, it comes into its own on a touch based tablet such as the iPad where the Windowshop app allows you to simply explore the store by navigating what appears to be a borderless page jammed full of visual eye candy.

And it's this eye candy that really works well, enabling us to scan through hundreds of images until something catches the eye.  There is no purpose to it - sure you can search, but that kinda misses the point.  This is all about the browse experience.  You're supposed to just sit back and window shop, literally.

Amazon describe this as "[a] new experience [..] designed to make exploring everything from books and toys, to video games and gym equipment easy, fun, fast and convenient for iPad owners"

It would be wrong though to see this as simply another way to view content; instead, this immersive discovery moves the user experience from a functional activity to a leisure activity.

Whereas you would normally go to Amazon to make a purchase and would use it's search functions to find the item you were looking for, the Windowshop is instead  something you do with almost no purpose - like watching TV, browsing a magazine or watching the sun set - it's about filling time with something enjoyable.

This is a really interesting difference and something I think could be leveraged by anyone with a large amount of content, whether retailers, publishers or even loyalty programmes with rewards.  Moving the users mindset from "doing" to "enjoying" has the opportunity to create greater engagement and give you a slice of if that finite resource - attention.

One of the leaders in this area has to be Pinterest.  It has turned immersive discovery through its infinite scrolling from a convenience feature into a real engagement mechanic.

At over 97 minutes on average per month spent on the site by each visitor, Pinterest is a highly sticky user experience - and all it does is let you browse images.  This compares to just 21 minutes for users on twitter and 3 minutes for those on google. Only the behemouth that is Facebook exceeds this  time - by a mile -at 405 minutes per month per visitor.  When viewed per visit though, Pinterest does even better, clocking up 15.8 minutes per visitor on average compared with just 12.3 minutes for Facebook.

So what's different?

Well Pinterest have taken infinite scrolling to the next level by using different image heights and laying these out with what is known as the masonry layout.  This essentially allows them to show images in a more natural, engaging layout that doesn't feel like a fixed grid.  The real benefit though of the masonry layout is the fact that there is no clean cut line - no easy place for the user to abandon from.  By showing the following images just peaking out from below the fold, the user is more likely to be intrigued by something they can't quite see and will scroll down a little more - and so the process repeats.

Another thing that works for Pinterest is the fact that there is essentially no ordering from good to bad.  In a traditional search result, the returned set is ordered by something such as ratings, value, recency, etc.  This means that after a few pages, if you see results that you're not sure about you'll feel like you've hit the bottom, even if there is more content to go.  With Pinterest however, the pictures are all mixed, some good, some bad, some intriguing, some boring.

You don't know what you'll find on the next page, but you get a peak of it thanks to the masonary layout.

This is the difference between searching and browsing; between doing and enjoying.

With search, you want to bring back the minimum amount of results matching the search criteria - it's about pinpointing exactly what the user is looking for.  With browsing however, the user experience is very different.  The user is simply looking for something that catches their attention and so if you put all the good stuff at the top, they are unlikely to keep browsing.  However, if you seed the good stuff, the most popular items throughout the browsing set then the user will continue to be surprised.  They won't know what's coming next but they'll want to find out more, to browse more - to engage more.

Sure, let the customer find exactly what they want when they want it - but also just let them explore and have fun.  Its the immersive discovery experience you're looking for and it fills a different need for consumers.

I think Pinterest has set the bar high on immersive discovery using its clean design, masonry layout and infinite scrolling - but it has also shown a new way engaging people and engaging with content.  Changing the user experience from one of "doing" to one of "enjoying" and gaining a greater share of attention makes this something really worth exploring more.

Talk to the hand, the customer's not listening

Working in loyalty and IT for almost 20 years you see a lot of change in customer communication requirements.  The telex faded away, replaced by the more flexible and accessible fax - which then itself faded away even quicker.  Phone numbers changed so that it was no longer unusual for customers to have two or more.  Email addresses appeared and everyone clambered to update their systems to begin capturing these.

As more channels appeared and these became cheaper to use, Robinson Lists or preference services started to spring up to control over zealous marketers.  FPS (Fax Preference Service), MPS (Mailing Preference Service) and TPS (Telephone Preference Service)/Do Not Call Registry all purported to give consumers control over unsolicited contact.  Opt-outs became a standard part of campaign communications as marketing departments were forced to play nicely and now customers are being given Do Not Track support within the web channel.

But recently there has been another evolution which is a lot more interesting.

As social channels emerge, the balance of power in communications has shifted.

Consumers can now turn off communications from a brand at will - essentially disconnecting their ability to even make contact.  Within Facebook for example, a customer has to explicitly enable a brand to communicate with it either through application preferences or by "liking" the brand.  Either way, if communications become too much, the customer can simply opt out of these by choosing to hide the individual story or to hide all stories from that brand.  If the customer wants to revoke their relationship completely, they can simply "Unlike" the brand directly.

This means, in order for a brand to post messages on a customer's Facebook wall, the brand has to have established trust between them and the customer's Facebook account and to have maintained this trust with useful, relevant content.  

Irrelevancy is simply a click away.

Imagine how this would work with established channels today.

• A company or friend could only phone you if you had "Liked" them via the phone company
• A company or friend could only mail you if you had "Liked" them via the Post Office

Sounds a little far fetched?  Well some people are talking about this not just for social channels but for more above the line channels such as digitial advertising.  In an AdAge Digital article, Judy Shapiro says:-

"We can begin to design new types of media inventory -- call them 'trust ads' -- based on consumer choices: an opt-in/ pull marketing paradigm.  This would include platforms where people have powerful tools to pick which brands they want in their digital lives"  going on to say "It's time to pivot the [..] debate into a practical discussion of how marketing-technology platforms (free or paid) can support the urgent, emerging need for trust-marketing innovation."

This is wise as consumers favour channels they can control.  

In a recent Epsilon study it was reported that 42% of consumers state they like email because it gives them control over whether they receive it or not.  However the same study then went on to say that 65% of consumers feel they get too much email and 75% admit to simply "getting a lot of emails that they don't open".  

It would appear the balance of control is lacking even here.

As consumer communications move to new channels where it is easier to simply switch the message off, it's going to be increasingly difficult to simply rely on the "spray and pray" model to marketing.  Instead, marketing is going to need to become more relevant, more targeted and quite simply more interesting for it to gain time within a consumers limited attention.

Loyalty programmes provide the ability to be relevant, giving you insight into consumer purchase habits and social connections.  However you'll need to actually use this information wisely to become relevant otherwise you'll quite literally be talking to the (down-turned) hand because the customer will no longer be listening.

3 reasons why CBA Pi pivots retail

Commonwealth Bank of Australia have just launched a video showing their new merchant payments solution called Pi.



This is truly interesting for a number of reasons:-

1.  As with previous innovators in this space such as Square, they are bringing together a number of different parts of the value chain within a single platform.  Watch out if you currently make money out of ePOS, stock control or loyalty!

2. They are creating a platform which is both open and closed - just like Apple.  It's open in that developers can build custom applications that add value (it's based on Android), but closed in the sense that CBA own it and will ultimately control it.  This is not something I've seen before from Square or PayPal.

3. The platform blurs the boundary between the user (the retailer) and the customer.  Any payment terminal allows interaction with the customer, but normally only in the sense of identifying themselves or possible picking their chosen payment type (check / credit account).  With Pi though the customer can truly interact, chosing for example how to pay amongst friends and I would assume select how they want to receive receipts.

The increasing use of tablets within the retail space is opening up more and more opportunities to create engaging customer interactions.  Unlike dedicated terminals or tills, with a tablet the scope is limited only by the imagination of the developers.  By CBA providing a platform like Pi that allows developers to create new functionality they benefit by having a constantly evolving merchant solution which they control.

CBA say on their website, "Pi is the future of business".  I'd argue it's also possibly the future of ePOS, e-receipts, acquiring, stock management, loyalty and anything else the merchant may think of or need.

Loyalty design - Treat it "lean" keep them keen

I was on a training course the other week learning about Agile Scrum which is a "lean" software development methodology that looks to develop software people actually want and need.

The traditional approach to software development (known as waterfall) requires users to provide their input up front. This is then used develop requirements that are passed to developers who write the software. The written software is then passed to testers to make sure it works.  The completed, tested software is then installed and unveiled to users - possibly 12-18 months later... who then say "that's not what I wanted".

Using Scrum changes this in a number of ways.

Firstly, it mandates that the business (as represented by the Product Owner) and developers work closely together (daily) on the development of the product.  Next, it stipulates that software is developed in chunks or sprints (no more than 4 weeks long).  This short time frame allows for a small number of important features to be developed, but ensures that if anything is going in the wrong direction it is caught early.

After the sprint is finished, there is a review which allows the team to show off what they have built so far as a releasable product to the wider business/users.  This then allows for comments and feedback so that subsequent sprints/releases can incorporate this.

Using this methodology allows us to ensure that what we build is always based on something useful and allows us to fail fast - and learn from this.  Most importantly though, it allows us to build something the users actually want and need in shorter timescales.

This approach though shouldn't just be limited to software development.

Within loyalty programme development the approach can be the same.  We speak with users initially; carrying out research studies and focus groups to understand what they want (or think they want).  Programmes are then designed, developed, implemented and launched - at which point we involve the users again, hoping they might actually participate.

The problem with this approach is the same as with waterfall software development - the potential for an incorrect perception of what consumers actually want and an inability to separate out what they say from what they do.

For example, a recent WorldPay Report entitled Perfect Passenger Payments highlighted the misalignment between what factors airlines think are important to consumers and what consumers feel are important.

Within the report, airlines stated that the #1 factor for customers was the "Overall speed of the online booking process" (96%), closely followed by the "Website functionality" (80%).

Customer however sited "Ease of finding flights" (89%), "Clear, upfront pricing" (88%) and "Confirmation/After-Sales support" (85%).  Overall, "Speed" ranked 7th and "Website Design" was down at 12th position.  Worryingly, while 85% of customers said after-sales support was important, only 18% of airlines felt this was important to customers.

This disparity between what customers want and what airlines think they want is reflected in how customers are consulted.  Within the research, less than 40% of the airlines spoken to said they consulted customers on the booking experience - and even then, only "periodically".

Sometimes we think we know what's best for our customers when really, we're simply thinking about what's best for our business.  Using "lean" methods is one way to join these two requirements together.  Building and launching a small number of features and functions, quickly and cheaply provides a way to test and learn with customers.

In a recent article on Tech Crunch called "How to create a minimum viable product", Emre Sokullu, founder and Chief Architect of GROUP.PS said:-

"Perhaps the biggest mistake I’ve made at GROU.PS at its initial phase was to add way too many features onto it. [..] The result? An unstable product which was trying to do too much and poor user experiences due to an overwhelming set of functionalities."

Whether you have an mature loyalty programme or are just starting out, using "lean" methods to develop, deploy and decide on features and functions will help your programme become innovative and forward thinking; letting you learn quickly, fail fast and keep customers keen.

Do customers love your brand or your brands customers?

There is little difference between supermarkets in terms of the products they stock.  The larger ones may carry more variety, but typically you can buy everything you need from any supermarket.

 

Yet despite this people are still loyal to their chosen brand.

 

While place, product, price and promotion all play their part, I'm wondering if ultimately there is another "p" here - people. Not the staff or employees that you'd normally associate with "people" but actually the other customers. 

 

From a demographics point of view, each supermarket attracts a certain type of customer. Whether you think about Aldi, Adsa, Tesco or Waitrose, you can probably quickly draw up a basic persona to represent their "average" customer.  While in reality customers will be a mix of age, affluence and attitude, you can feel the difference in customer type if you move between stores. 

 

Obviously brands know this and foster it by catering to these customer types in how they present, price and promote their products.  Other brands like Tesco and Sainsburys try to be more inclusive in the customer groups they attract, providing a mixture of products from "Basics" to "Finest" in an attempt to serve the different demographics as well as providing a way for customers to transition up (or down) as circumstances dictate. 

 

Peter Jackson, professor of human geography at Sheffield University highlighted this fact a few years ago in an article in the Guardian when he said:-

 

"The problem for the supermarkets, is to provide a store environment that is attractive to a wide range of people to maximise their market share, while shoppers seem to want a more differentiated environment where they will be surrounded by people 'like themselves', with whom they feel comfortable."

Some brands however take this customer desire to be "surround by people like themselves" as a positive and go further to actually leverage their customer base as part of the service benefit. 

 

KLM for example has been experimenting in this area for a while. Their most recent offering, "Meet & Seat" allows customers to share their social profiles like Facebook and Twitter to enable them to pick seats next to other customers with complimentary interests.   They also provided a similar service a few years ago allowing customers who flew into regions like China to meet up before, during and after flights either online or in person.

 

Starwood Hotels takes a slightly more hands off approach by promoting the use of Foursquare for customers to check in which allows for people to connect, should they wish to.  It also organises events for its loyal customers, providing opportunities for them to socialise. 

 

It's not just service based business like airlines or hotels though that can connect customers.  Every business essentially exists because of it's customers and so it makes sense to facilitate connections between them.

 

Car brand Jeep has been doing this for years with it's Jeep Jamboress, started in 1953 and described as "probably the first owner loyalty programs" by Lou Bitonti, Senior Manager of Jeep Brand Global Marketing.  Now using Camp Jeep since 1995, it provides a way for Jeep owners to meet and share their passion for both off-roading and the Jeep brand.

 

Even though brands like Jeep and Harley Davidson have been building active communities around their brands for years, there is a real opportunity here for brands within many different verticals to facilitate connections between like minded customers.  Social media makes this much easier to do, but I think the real trick is to connect social media into the heart of the customer interaction.

 

For too many brands, social media is just another form of marketing.  Treated separately.  Operated separated.  Measured separately.

 

The KLM "Meet & Seat" programme is unique and innovative simply because it brings social media right into the purchase transaction and connects the service and product directly with the social network.  

 

That's clever.

Keeping your loyalty star rising

"If the stars should appear but one night every thousand years how man would marvel and stare" - Emerson

This is an interesting observation from the eminent US poet, lecturer and essayist Ralph Waldo Emerson and was written back in 1836 in his essay Nature.

It is though still as relevant an observation nearly 200 years later.

When we first see something it gets more pleasing and likeable the more we see it.  Known as the familiarity principle, it is something advertisers leverage when they constantly expose us to their advertisements across ever increasing channels.

These adverts leverage the mere-expore effect that essentially states that repeated exposure to something increases perceptual fluency which is the ease with which each subsequent stimulus can be processed.  This then follows with the branded goods we go on to purchase and is the reason we simply pickup the same brand repeatedly - perceptual fluency makes it easy -  we don't have to think about it.

However, this only works to a point. In the research paper "What's in a name? Reputation Building and Corporate Strategy", they showed that "the higher a firms visibility per unit of sales [...], the worse it's reputation. ", even when the exposure is mostly positive.

As the saying goes, familiarity really does tend to breed contempt.


This is obviously interesting (and has implications) for above the line marketing, but how does it impact below the line marketing?

• If every one is doing daily deals, does anyone really care anymore?
• If every store has a sale, are we excited anymore?
• If every day we receive another offer, do we read them anymore?
• If every activity has points attached, do we collect them anymore?

Groupon was is a great example.  It was new, engaging and different and it took customers, merchants and the market by storm.

Google offered to buy them for $6bn and recent "valuations" suggested $30bn.  But then competitors jumped in - lots - including retail behemoth Amazon.  With reports suggesting though that Amazon is only selling a handful of deals, 80% of subscribers to deal sites never buy a deal and merchants running away in droves, this would appear to be a sector who's star has already peaked.

Over exposure of both the offers and the approach has meant customers are starting to tune out.


In a similar way with loyalty, if every activity is "sprinkled" with points, there is a danger of points fatigue and ultimately ambivalence towards the points.  Using points on all activities, especially those not related to any monetary exchange can devalue the points and make them appear worthless.

Brent Houlden, leader of Deloitte's Retail Practice in Canada highlights this when he says:-

"...Point collecting is losing its lustre... Loyalty programs tend to go stale over time. If you want to continue engaging customers, you need to continuously reinvent your program"

In a recent McKinsey iConsumer survey where consumers were asked why they had posted online comments / reviews - something loyalty programmes are keen to encourage - only 6% said it was to gain points.  On the other hand, almost 40% did it because they liked it or liked helping others.

This is something a well designed loyalty programme can also foster and encourage.  In a blog entitled "Loyalty: More than Just Points" it discussed how Starwood Hotels’ emphasis on guest service interactions are the key to producing loyalty saying:-

"It is telling that Starwood, so tightly branded by its loyalty points program, places such emphasis on service interactions as the first component of guest loyalty.  And it is that passionate loyalty, Starwood’s “Loyalty Beyond Reason” that inspires guests to share their experiences, recommend properties to their friends, and rebook."

This is not to say points programmes in themselves have a problem, it's just that in a competitive market where almost every retailer, branded product or hotel chain has a loyalty programme  customers will simply become ambivalent to them.  The programmes and their mechanics have become familiar and the danger is that this ultimately leads to contempt and thus consumers tuning out.

In order to attract, engage and retain customers you need to do more to make programmes standout and continue to stand out so as to make people "marvel and stare".

Balancing big data with a big voice

Back in the day, loyalty communications were pretty simple.

You got a Welcome Pack when you joined and then periodic points statements after that.  The statements may have contained some offers, and if you were really lucky, these may have been personalised in some way.  Some people really pushed the boat out and sent individual mailings with specific offers, normally in response to a lack of behaviour, trying to get you back in-store.

Then email arrived and it became much cheaper to be relevant - or so we thought.  In practice it just became much cheaper.  Emails were sent, even if there wasn't anything particularly relevant to say and if you didn't like it... well you could always opt-out.  So what happened to that dream of 1-2-1 marketing?


Quite simply, it's actually pretty hard to be relevant all the time.

Sure you can use analytical techniques to target customers who you think have a propensity to do something.  Or you can respond to customers with trigger marketing based on their behaviours (i.e. not purchased in a little while) and send an email to encourage them back.  However, for regular communications it's much harder to create customised content for each member based on their exhibited behaviours - for many programmes it's just too hard (or costly) to be relevant.


But there is a simpler way - just ask the customer what they'd like through the use of a preference centre.

With an increasing number of channels and ways of interacting with customers, a simple opt-in/out marketing permission doesn't really cut it any more.  Customers are being trained by social networks like Facebook that allow them to manage who can access their data and for what purpose.

For example, with a simple Facebook wall post I can choose whether to hide that post or not, increase or decrease further posts from that friend, unsubscribe from further communications from that friend or unfriend them completely.  With apps, I get further choices - deciding whether that app/partner can for example access my personal information, access my friends or post on my wall.

LinkedIn go one better and intelligently look to help you control preference.  If you subscribe to a group on LinkedIn and opt in to receive updates via email, LinkedIn will proactively dial-down the frequency of communications if you haven't visited the group for a while.


Preference centres essentially help to manage this by giving customers control over what communications they want to receive, about what topics, over what channels and at what frequency.  Email marketing specialist Adestra reports that preference centres can have a real impact on unsubscribe rates, suggesting that giving customers choice keeps them engaged.  Digital marketing specialists Smart Insights provide some advice on the use of preference centres suggesting that you don't offer what you can't deliver.  If you provide choice in terms of topic or frequency, make sure you have the content and capability to manage this.

If you google preference centres however, they seem to be a feature of email marketing but, little else.  This is I think needs to change.


Preference centres need to become a key feature of loyalty programmes to control preferences for all aspects of the programme and to help manage some of the innovations that are just around the corner.

• For gamification features, members are going to want control about what achievements are posted to which social channels and when.  This  "social currency" is where the key value is within gamification, but that value will only work if the member feels in control.  
• Vendor Relationship Management (VRM) functions will allow members to manage their loyalty data and which partners and/or applications can access this on their behalf.  Like Facebook, members will expect to be able to control both who has access to the data and what data is shared.  They'll also want to able to terminate these relationships at will.
• The "Internet of Things" will bring a host of interactions that can be recognised and rewarded, but members will want to be able to control what can be seen (and recorded) and what can't.  Just because my toothbrush can tweet it's usage, doesn't mean I want it to.

With an increased focus on "Big Data" and the headlong trend to get more and more data from more and more sources it can sometimes be easy to forget that there is a customer at the heart of that data and they'd actually like to be heard.

Sure, we can use the data to work out when someone might be pregnant based on their purchase patterns, and this can be really useful to both the retailer and the customer.

We could also just provide the customer with an easy way to tell us and to give them a big voice...

Mutualistic Marketing - The Loyalty Cuckoo

As everyone knows, many Cuckoos will lay their eggs within the nests of other species.  This activity, known as brood parasitism, relieves the parent cuckoo from the investment of rearing young or building nests and so they have more time to spend foraging for food or producing offspring.  It also lets them mitigate risk by distributing their eggs amongst a number of different nests - taking the phrase "not having all your eggs in one basket" to it's literal conclusion.

The word parasite can seem quite negative but it literally means "one who eats at the table of another" and it is just one type of symbiotic relationship.  Another type of symbiotic relationship is known as Mutualism and this is where two organisms of different species interact in a relationship in which both parties derive benefit.

As with biology, where different species have evolved to benefit from and to other species, we are seeing a similar evolution within marketing.

Credit card loyalty marketing for example could be classed as a parasitic relationship as it essentially benefits from the merchant (the host) spend without providing it with any real benefit back.  However, this is changing with the advent of transaction driven marketing.  With companies like Cardlytics allowing merchants to interact directly with consumers through targeted offers that are based on card spend, they now stand to gain from this relationship, moving it from parasitic to more mutualistic.

This is not just about adding value back to merchants though.  It also begins to change the loyalty paradigm for many sectors, including loyalty providers.

As an example, consider a retailer looking to get closer to their customers.  Setting up and running a loyalty programme would be a costly endeavour and while there are many benefits to running their own scheme, at a basic level they may simply want to be able to identify customers (and prospects), based on their value so that they can communicate with them and encourage repeat purchase.

Traditionally, without a loyalty programme the only method to do this was advertising - getting a message out there far and wide in the hope it hits the right customers.

However, what if you can find someone who already knows your customers and your competitors customers - already knows how much they spend and how frequently.  You might want to strike up a relationship...

This is where mutualist marketing comes into play.  Working with payment providers like card issuers, retailers can create well designed acquisition and retention campaigns without running their own loyalty programme.  To use the cuckoo example, they can put their eggs in someones else's nest, albeit with their permission and for mutual benefit.

This isn't just limited to card issuers though.

Google provides a great example of an acquisition host, letting merchants and brands target their services based on google search resources in a mutually beneficial relationship.

What's really changing though is the number of hosts (vendors with data) and their ability to collect, retain and utilise behavioural information in the form of transactions and interactions.

Whether is location based checkins, TV viewing or sports/fitness tracking services, these are becoming increasingly sophisticated and more importantly utilised.  At the same time, they're providing additional ways for a brand to target the right behaviours without the expense/investment of a dedicated loyalty solution.

Pepsi for example has recently run a promotion that tied up with reward company Kiip to offer fitness "achievement rewards" when a user logs activities such as runs through fitness apps such as Nexercise and MapMyRun.  Rather than trying to get consumers to enter on-pack codes to interact with Pepsi, they have instead chosen to interact with the consumer at the point when they may actually want a Pepsi.

There has been talk about the divide that may be created between the data "haves and have nots" - in evolutionary terms, a data survival of the fittest.  However, like all things in evolution, it was never going to be that simple.  Just as symbiotic relationships form in nature to ensure species survive, the same is true for us.

The data "haves" are essentially leveraging their data for the "have nots", creating a mutualistic relationship which benefits both sides.

This means on the one hand your loyalty strategy should take account of all routes to your customer, not just the ones you can create - using other peoples "nests" may just let you focus on growing your business and distributing risk.  On the other, a strong loyalty programme may also prove a real data asset that you can leverage for greater synergies.

The question as to what your loyalty strategy should be has just gotten a little more complicated.

What we can learn from PayPal's shunning of skeuomorphic design

Skeuomorph is an interesting word.

It's from the Greek for vessel/tool (skeuos) and shape (morphe) and is basically used to describe something which retains the design cues from an original product, even when these aren't necessary anymore. Examples would include digital music players which have the look and feel of a real-world device like a car radio or online calendars that present information in the style of a paper, month by month calendar.

In many ways, a Skeuomorph is positive as it allows us to transition from the old to the new; letting people understand how something works as it replicates the look and feel of the original. The example below shows how the iphone calculator look and feel is based heavily on the extremely popular 1977 Braun ET44 calculator, even down to the button colouring.

However, skeuomorphs can also hold our thinking back. Rather than trying to re-think a problem with newly available technology, it is sometimes easier to try and transfer the existing solution into a new medium.

Digital advertising for example simply tried to transfer the understanding and heritage of the physical world into the digital. The direct mail campaign morphed into the email campaign and the outdoor poster into the banner ad. It took a different kind of thinking from a young upstart called Google to approach it in another way back in 2000. Google did away with the visual aspects and instead focused on the relevancy, linking text based adverts to search terms. Combined with their innovation around ranking/click-thrus, this helped propel Google to the number 1 position.

Google hasn't done too well in another domain however - namely digital wallets. When people talk about digital wallets, they discuss taking your existing payment cards, loyalty cards and paper coupons and essentially digitising these into a smart phone application. Indeed, the Google Wallet even shows a representation of a credit card so you can choose how to pay.

The problem with this though is it's trying to solve a problem people don't have and doing it by simply moving what people have and do today into another medium. In reality, you are simply exchanging a leather folder for a smart phone - it's skeuomorphic design. What it's not really doing is challenging how people pay.

Of course, I'm not a payments expert, so I'll leave it to someone who is, namely Jack Stephenson, Director of Mobile, E-Commerce and Payments at JP Morgan Chase who said:-

"Consumers don't really have a mobile payment problem. Ninety-five percent of the time, paying with cash and credit cards actually works pretty well. Consumers have a mobile shopping problem. There's a difference."

While I agree with the first part of Jack's observation, I don't really agree with the latter. Consumers don't have a mobile shopping problem either, they have a money management problem - and many of them don't even realise it.

As I've discussed in a previous blog, if we're going to change how consumers pay, we should take the opportunity to change how consumer think about payments. Instead of being bounded by a skeuomorphic requirement to replicate the old, we should look to invent the new.

And that's just what PayPal have done.

Paypal are looking to reinvent our relationship with money. Not just our physical money or payment cards, but all of our liquid assests, from loyalty points to gift cards. If it can be converted into cash, PayPal will let you use it.

To support this they have separated the decision to purchase from the method of purchase. After buying through PayPal you then have 7 days to indicate how you'd like to pay for the item and this could be from a combination of:-

• Money you've saved for it such as a travel savings
• Money you have on a retailers gift card
• Money you have in loyalty points from a frequent flyer
• Money you have in your checking/current account
• Money you have access to from your credit card
• Money you don't have access to yet - so it lets you spread the cost over 3 equal payments

Any and all of these types of funds can be used to pay for the transaction. Now you can save for something and then literally pay for it from your savings.

It's worth watching the following videos from Finextra to see how really revolutionary this is.

Skeuomorphs can help us to transition people from the old to the new, but holding onto the old can also limit our ability to truly transform how we do business.

For loyalty, the collecting of points hasn't really changed fundamentally since the original paper stamps back in the 1930'. Even Google startup Punchd is simply transferring the paper punchcard to a smart phone medium.

Maybe it's time to rethink loyalty recognition for a new era. #gamification

If Apple did loyalty...

I was updating one of my Blackberry phone apps this week - something I'd been putting off for a while as I know from experience what a chore this can be.

Having managed to login, navigate the cumbersome menus and download the application, I was then prompted to re-boot my phone.  After what felt like 5 minutes, but was probably closer to 2, my phone was rebooted and I was finally back in with my updated application.

I could say I've been spoilt with my Apple devices.  Their app store just works.  It's not the most beautiful application in the world, but it certainly sets the standard currently for how it should work.  It also doesn't need a reboot after it's installed an update, which is why I'm updating numerous apps daily.

This difference all comes down to the user experience.

I'm reading the Steve Jobs biographyat the moment and this is one of the things that becomes immediately apparent - he cared about the user experience.  He may not have expressed it particularly well in dealing with staff, but he certainly knew what was right and wrong (most of the time).

In one part of the book it discusses how he was disappointed with the boot time of the Macintosh.  The engineer was initially reluctant to commit to being able to reduce it.  Jobs asked him if he would be able to shave 10 seconds of it if someones life depended on it - the engineer suggested he might be able to do it with that kind of thing at stake.   Jobs then went on to say:-

Well, let's say you can shave 10 seconds off of the boot time. Multiply that by five million users and thats 50 million seconds, every single day. Over a year, that's probably dozens of lifetimes. So if you make it boot ten seconds faster, you've saved a dozen lives. That's really worth it, don't you think?"

It may not really have been life or death, but every user was thankful for the 28 seconds they ultimately saved as users today are also thankful for the "instant on gratification" offered by it's eventual successor, the MacBook Air.

User experience is a crucial aspect of all design - loyalty programmes included.  However it is also one of the things that can tend to get lost in the rush to actually deliver.

The integration is fastidiously planned, making sure all the systems connect.  The best hosting environments are sourced, making sure that data is protected and systems resilient.  The right rewards and communications plans are devised to encourage mutually beneficial behaviours.

However if the user experience sucks then despite all that hard work, customers may fall by the wayside.

As an example, I've recently tried to collect retrospective earnings on a frequent guest and a frequent flyer programme.  Either because I hadn't taken my card or hadn't logged it at the time of booking I needed re-claim my points/miles.  This is where the user experience started to break down.

Both un-releated programmes required me to send correspondence to a designated address with my proof of purchase.  Correspondence is a quaint word and it's also a quaint concept.  Really?  You want me to write a letter, put it in an envelope and send it to an international address - just to claim loyalty miles.

Ok, so one of them also provided an electronic version - I could fax it.  Now, I'm old enough to remember faxes becoming mainstream communication devices - but I'm also old enough to know they are dead.  Sure we still have some dotted around for some reason, but it's not for everyday communication.  However, I did try faxing it - twice.  Nothing.

Eventually I phoned up the frequent guest programme who i'd been collecting with for a while and established that they did indeed have an email address (unpublished) which I could send a scan to.  One web browse, two faxes, one phone call and one email later I have my points.

This gap between my intention (to claim my points) and the allowable actions (the tools provided to claim) is defined as the "Gulf of Execution" by user experience pioneer, Donald Norman and is the same problem that prevents people from using their microwave or programming their PVR.   In describing the gulf of execution, Wikipedia states:-

Usability has as one of its primary goals to reduce this gap by removing roadblocks and steps that cause extra thinking and actions that distract the user's attention from the task intended, thereby preventing the flow of his or her work, and decreasing the chance of successful completion of the task

The chance of successful completion of the task and on who/how many complete it will ultimately depend on the balance between the strength of intention and the size of the gulf.

In the case of the frequent guest programme, my invested interest in the programme meant i'd try harder to finish my intention of claiming miles.  However, the frequent flyer programme didn't fare so well.  I'd only just joined and so had no invested interest in it and so no reason to waste my time.  In fact, it was worse than that - it wasn't that I didn't earn the points, it actually felt like i'd had them taken away.  This resulted in not just "better luck next time" but "there won't be a next time", I'll just fly with someone else.

Whether it's how members login, how they redeem for rewards or how they claim for missing points, the user experience is a key aspect for any loyalty programme.

A faster starting computer, downloading app or easier retro claim may not actually save lives, but as Apple continues to demonstrate it could certainly help to save customers and that is the whole point after all.

Pinterest taps into the active lurker

Another week, another social network explodes onto the scene. Barely 2 years old and picture collecting social network Pinterest is growing rapidly and making headlines.

Despite being a simple concept - you essentially pin or bookmark pictures onto one or more boards - it is strangely satisfying. I'm by no means an avid user but there is something slightly voyeuristic about browsing image after image to see what takes your fancy. Whether its architecture, fashion, food, travel or technology, there is something for everyone.

I also think it taps into some basic needs in this current financial climate. While there is less money to go round and less desire to be seen flaunting it, people still like beautiful things. Pinterest taps into this, letting you like it, collect it and show it. Friends can still marvel at your good taste and ability to find something unique - just without the need to actually buy it. You're also able to "own" a collection of things that form part of your wish-list, even if most of those wishes have no chance of coming true.

What's makes Pinterest really appealing though is how it engages the active lurker.

Within social marketing we're aware of the 90-9-1 principle which states that typically 1% of people actually create new content, 9% of people curate this content (adding value/re-posting) and 90% simply read/consume it. A recent blog post however from enterprise social network provider Yammer commented on how this 90% might not be quite so passive. Discussing a research study from MIT Sloan, the blog pointed out how upto 50% of these lurkers may actually be active. This may not be directly within the community in terms of posting, but instead are active in terms of how they use and pass on the information.

Within Pinterest though, they seem to use a number of techniques to lower the hurdle for engaging these lurkers directly within the community.

Firstly they have an invite only acquisition process which is something I wrote about in a previous blog. This is becoming increasingly common for these start-ups and social networks as not only does it help them control acquisition (and the associated traffic), but it also helps build up demand and create social currency. As existing members can invite friends, this invite only mechanism helps bestow value on the membership and members are then more likely to recommend it to friends and/or brag about being part of it.

The second interesting feature within Pinterest that looks to create more engagement is how they use "endowed progress". Giving people value up front in the form of a welcome bonus is nothing new within loyalty programmes, however Pinterest takes a different angle on this endowed progress. Rather than a points currency, their currency is measured in friends and so on joining, they automatically link you to people you might want to follow. You're obviously free to unlink from them at any time, but this "instant network" based on your stated interests ensures you see content immediately and don't start with an empty profile. It's a simple idea that really helps you to feel engaged and a part of something straight away - it also helps to power with the final feature, re-sharing.

Pinterest makes the process of collecting very easy, lowering the hurdle to taking part.

You don't have to be the 10% of curators/creators who go out seeking new content to pin from across the web. Instead you can simply browse what others are posting and just pin whatever takes your fancy. This is something that is really interesting and not dissimilar to the Facebook "Like" activity. The difference however with Pinterest re-sharing is the curation part of it - your likes are essentially built up into a collection which you maintain and continue to share with friends. Amazon does something similar with it's Listmania service - but you'd be hard-pressed to find it given it's buried at the bottom of the page.

Pinterest have shown however how to bring this functionality front and centre and really engage members around it. They are obviously doing something right given they are the fastest growing social media site in history and have already got a presence on almost 10% of the top 300 online retailers.

With an increased desire to both share and consume information, the opportunity here for brands is how to engage this 90% of lurkers in an active way - and Pinterest certainly provides some interesting ideas.

Frictionless Loyalty - Two biggest loyalty launches this year

In the last couple of months, two new massive loyalty initiatives have been launched - and nobody really noticed.

Together they cover over 16 billion purchases and almost 1 billion people. They come from two of the largest brands in the world, one of which is rated number 8 in the top 100 Best Brands for 2011.

It's probably no real guess that these two brands are Facebook and Apple. However, what might be harder to pinpoint is the loyalty initiatives that they have launched.

Loyalty doesn't always have to mean points = prizes. Instead, loyalty can be defined as

Any activity or treatment that gets customers to make ongoing choices in your favour, all things being equal

Using this definition, I think you can define Facebook Timeline and Apple iTunes Match as loyalty initiaitves and here's why.

Facebook Timeline - For those that haven't noticed, Facebook is changing your profile page so that your whole life (or at least from when you started using Facebook) is laid out for you in one long timeline. You can go back to any year, month or day and see the comments you made, the pictures you've shared or the videos you uploaded.

It's presented in a really engaging way and once you get over the initial privacy concerns, it's really interesting to see and explore, especially if you've been on Facebook for a few years.

So why do I think this is a loyalty initiative?

This solution creates loyalty because they have essentially taken your existing information and created a context around it, something only they can do. Within Google+ I can re-create my relationships or re-upload my photos, but this doesn't re-create the context. Only Facebook knows when those online relationships were first created, what was said and where I was when I said it, where that photo was taken and where I was when it was taken.

This is being further extended with applications that will allow me to track activities such as how many miles I've run, the movies I've watched, the news I'm reading or the music i'm listening to; leaning towards the trend of self-tracking. These applications are also automatic, sharing on my timeline as I do them.

Facebook CEO and founder, Mark Zuckerberg described timeline as:-

"Real-time serendipity in a friction-less experience"

This use of the word "friction" is really interesting. In the book "The Loyalty Effect" by Frederick F. Reichheld, he says:-

Just as friction steals the energy from a mechanical system, defection steals the energy and knowledge from a business system. [..] The opportunity to reduce friction in most businesses is immense"

By making it easier to share my information and activities; by taking my own data and creating a context around it, Facebook have suddenly created something useful, desirable and importantly, frictionless.

Previously my profile was just a collection of the last few days of my thoughts and "likes"; something easily replicable on any other social network. Now my profile is everything I've done or am doing - all my interactions (or at least those shared) - ever.

Now, given the choice to do an activity like upload a photo, I'm more likely to choose Facebook, even though Google+ is equally capable. When adding a friend I'm more likely to add them on Facebook as that's where "I" am.

That preference is loyalty. Facebook Timeline is a frictionless loyalty initiative.

Apple iTunes Match - So I spent a lot of time over Christmas ripping all my CD collection onto my mac. Those that have previously done that will know it's not something you really want to do again.

The reason I did finally do it though was for one thing - iTunes Match.

Now, using iTunes Match, I'm able to let Apple see my whole music collection and to simply (and almost magically), make it available via the cloud, to every Apple device I own - forever.

Tim Cook, Apple CEO is quoted as saying about their overall cloud strategy:-

"I see it as a fundamental shift [..], it is not just a product. It is a strategy for the next decade"

By letting me upload my music collection I become less attached to the physical product - the CD or the download - and view iTunes more as a streaming service. The clever bit though is it's streaming my content to every Apple device I own. Using content that I already own and content that I'm attached to Apple have managed to create a strong and ongoing relationship by making it available on all of my devices in a truly frictionless way.

It's no surprise then that the overall Apple iCloud initiative has been described as:-

As close to seamless and frictionless synchronicity as we have been able to come to thus far.

They have turned their music store inside out and let me put my own product on the shelves. Now it's not a store but a repository - it's an extension of my own property and something I can share easily across all the (Apple) devices I own. (It's no surprise I've gone from zero Apple products to over 7 in less than 2 years!)

Now that they have the thousands of tracks I already own, I'm more likely to buy my next track from them, even though Amazon is equally capable. Even though I love the new Kindle Fire (and it is a fantastic little device), I'm more likely to buy the next iPad to keep easy and seamless access to my music.

That preference is loyalty. iTunes Match is a frictionless loyalty initiative.

Finding ways of making it easier for your customers to do business with you, of reducing friction, can be a really powerful loyalty driver.

With brands like Facebook and Apple finding increasing challenges to their dominant positions (think Kindle Fire / Android / Google+), these kinds of initiatives do really provide a competitive advantage and help their customers make ongoing choices in their favour.

That's what i'd call loyalty.

Tesco profit warning - how much was Clubcard responsible?

If they say a picture is worth a thousand words then the following graph is no exception.

Using Tesco market share data from TNS/Kantar Worldpanel, there seems to be an interesting correlation between changes in their market share and changes in the reward value of Tesco Clubcard.

With declining market share in 2007-2008, Tesco implemented the Double Points Promotion which gave customers a huge lift in loyalty value and in response, Tesco didn't just stem the decline in market share, they lifted it 5.5% from 2008 levels.

In 2010 the double points promotion was changed to make it less generous, reducing reward deals from 4x value to 3x. This still meant the reward value was higher than the original scheme, but it was much less than customers had been getting used to during 2009.

Despite this positive impact on market share however, Tesco decided to change strategy, moving from a loyalty focused approach to a price focused one. This took a huge amount of value out of the Clubcard programme and pushed it into £500m of price discounts.

At the time a Tesco spokesperson was reported to have said:-

"Our customers have said what really matters to them at the moment, is the price at the till"

This is no surprise - customers will always say that it's price that matters, whether it's boom or bust. What is a surprise is that Tesco listened to this feedback and then acted on it. With ASDA already having a price match promotion and Sainsburys quickly implementing their coupon at till Brand Match promotion, Tesco's big gesture around price was essentially neutralised. This also didn't go unnoticed by ASDA, who at the time said:-

"Yawn. We were 10 per cent better value yesterday. We're 10 per cent better value today. We'll be 10 per cent better value, whatever they do, come Monday."

In the process though Clubcard had taken a double whammy. Not only had they reduced the value of the scheme to it's lowest point ever, but by reducing prices in-store they had taken further value away of around 1.2%.

For an average loyal Tesco Clubcard customer who was shopping in-store, picking up Tesco fuel and using their credit card for purchases, this change amounted to a 40% drop in value from the high of 2009.

What did they get for this? Well just over 346,000 extra customers according to Kantar.

How many of these will stick around though is the more interesting question. As The Daily Telegraph said in it's article "The cuts that lost Tesco £5bn of its value"

"Though Tesco shoppers took advantage of the lower prices, they did not feel they were getting a bargain and failed to return for another shop"

It seems Tesco forgot how powerful loyalty could be and played straight into the hands of EDLP retailers like ASDA. Whilst publicly they are now focusing on their store offering as the new point of difference, it will be interesting to see if Clubcard once again takes centre stage.

Example Tesco Clubcard Reward Value

Category	Monthly Spend	2008 Original B/E(4x/1x)	2009 2x Points B/E(4x/2x)	2010 3x Deals B/E(3x/2x)	2011 Current B/E(3.2x/1x)	2011 Current (Adj) B/E(3.2x/1x)
Supermarket	£600	£24.00	£48.00	£36.00	£22.40	£22.12
Fuel	£240	£9.60	£9.60	£7.20	£8.96	£8.96
Car Insurance	£25	£1.00	£1.00	£0.75	£-	£-
Credit Card	£1,000	£10.00	£10.00	£7.50	£7.47	£7.47
Monthly Reward		£44.60	£68.60	£51.45	£41.60	41.29
Annual Reward		£535.20	£823.20	£617.40	£499.16	£495.50
Difference		-£39.70	-£327.70	-£121.90	-£3.66

Notes:

1. Supermarket / Fuel spend calculated as spend via Tesco credit card
2. Current Burn rate average as 3x across wide range of deals
3. Current (Adj) assumes 1.27% lower supermarket spend due to £500m discounts across £39.3bn food sales (2010)
4. Car insurance no longer has any active Clubcard deals