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.