Monday, 28 May 2012

Keeping your loyalty star rising

Starsinthesky"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".

Tuesday, 8 May 2012

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.
Linkedin email

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...