Tuesday 17 December 2013

Will Shell's re-introduction of service revitalise loyalty


There seems to be a never ending trend to automate and self-serve.

  • Retailers are introducing self-scanning solutions.
  • Train stations are introducing 24hr ticket machines.
  • Health care has introduced self-service diagnosis such as NHS Direct
  • Amazon has introduced automated delivery drones (well, not quite yet…)

There is less and less human interaction and an ever increasing expectation of getting what we want, whenever we want it.  From the companies point of view it reduces costs, increases availability, increases capacity - and for the customer, it may reduce prices (or suppress price rises) and increase availability.

So it was very strange to drive up to the petrol forecourt last weekend and be greeted by a smiling employee eager to fill up my car.  

This is something in the UK that died out in the last millennium.  In fact, we haven’t had forecourt attendants since the 1970s.  As small, owner operator forecourts closed and big, national brands dominated, the forecourt attendant was replaced with self-service pumps.

So why now - why has Shell re-introduced the forecourt attendant at a time when fuel prices are at their highest and fuel retailers claim margins are wafer thin?  Surely they’d want to continue cutting costs, automating processes and widening the roll-out of “pay at pump” technologies.

Well I think it’s for 3 main reasons

1. Customer Experience

2. Differentiation

2. Forecourt Margin

The first reason, customer experience, is an interesting one.  

On the one hand, customers want quick service and high availability/capacity at a forecourt - I basically don’t want to queue for my fuel or queue up to pay for it -  so this would seem then an obvious place to invest in automation so as to move customers through quickly.  On the other hand, with all fuels being pretty much the same and all forecourts offering the same services, the customer experience is pretty much the same across all brands - there is really no ability to create a stand-out customer experience.

However, with the new forecourt attendants, Shell would appear to be trying to change this, describing their role as:-

“[..] Designed to help drivers with advice on fuels and fuel efficiency, basic car care and safety tips… including checks on oil levels, screen wash levels, tyre pressure and tread. All Shell Forecourt Attendants have been trained by the Automobile Association (AA) to be able to carry out a range of car care tasks for Shell customers"

So this is moving Shell from simply being a outlet to re-charge the fuel tank into a destination to get re-acquainted with your car.

This ties nicely into the next reason which is differentiation.  

In a crowded market, with increased competition from supermarkets, what can a brand like Shell do to stand-out.  If your product/service is basically homogenised, as is the case with forecourt sales, you need to do something to stand out from the crowd.  Price is not an option as the brand leaders don’t have wider supermarket sales to fall back on.  Sales promotions have worked well, but they are hardly ground breaking or innovative and probably won’t reach the heights of the 1980s when people were encouraged to collect glasses or soup bowls.

Serviced fuel however creates a point of difference - and one which people will be more likely to value, helping to obfuscate other properties such as price or location.  Recognising this point of difference, Melanie Lane, General Manager of Shell UK Retail is quoted as saying:-

Across the industry, UK forecourts are generally not considered the most inviting and customer service-focused environments, and we aim to do something about that. The reintroduction of forecourt attendants will be a welcome addition for many of our busy customers.

I suspect however that there is also a revenue opportunity at the heart of this.  

One interesting aspect of the attended service is that I can’t actually pay for the fuel with the attendant.  Given I can pay for a burger with a virtual currency like BitCoin, it wouldn’t be a stretch to give the forecourt attendants the relevant technology to allow them to take payments.  However, this would remove a golden opportunity for me to wander about in the well stocked forecourt shop whilst waiting for my car to be filled or washer fluid topped up.  

Given that forecourts can be earning around 30% margin within the shop versus around 3-5% margin on fuel, it makes sense that Shell would want to get me spending less time filling the tank and more time filling the shopping bag.  I’d only need to spend £10 in the forecourt shop to double the margins earned on a £60 fill up - so this would seem a no brainer really.

This is not unique to Shell however - ironically, service is also being re-introduced due to automation in other sectors.  

Online supermarket sales for example now account for increasing percentage of all sales, with these set to double in the next few years and brands such as Tesco - the global leader in online sales - seeing around 8% of all sales being done online.  This means an increasing number of customers are very rarely setting foot within a supermarket store - and these are valuable customers, spending almost 3 times as much per shop.  For these customers the brand lives or dies based on the front line delivery drivers.  Like the forecourt attendants, these people are bringing a little last-century magic to the modern shopping experience.

As Which? pointed out in a survey of online shopping, the delivery experience can be key saying:-

"As it’s my first time, he presents me with a free pack of Waitrose and John Lewis magazines and recipe cards — a nice touch. He also offers to unpack.  Items arrive in 11 colour-coded bags — green and white for store cupboard and bright blue for fridge and freezer. It makes unpacking a doddle"

Contrasted with another supermarket where the experience is less than perfect:-

"The driver rings just after 8pm to ask if he can arrive earlier. That’s fine — but when he asks me to come out and wave at him so he gets the right house, I’m a little less chuffed. It’s a cold, wet night.  Nine bags sloppily packed. The vegetables are lumped in with the eggs and dried spaghetti, and the washing-up liquid is in with the crisps"

Whilst there is no doubt that Shell will be looking to maximise margins on every customer visit, it can’t be denied that the nostalgic value alone in these austere times adds significant differentiation and a richer customer experience.  Both of these are critical to increased customer loyalty and provide a warm fuzzy feeling that a plastic card and points alone cannot achieve at POS.  

As retailers look to increase these one-to-one customer experiences - delivered by their front line staff -  it will be key that they are well managed to get the best loyalty value.  Based on my personal experience, I can certainly report that Shell seems to be doing a good job so far judging by their courteous forecourt attendant when I visited.  It will be interesting to see how this new service unfolds.

Tuesday 1 October 2013

Remarketing - Loyalty's "Groundhog Day"


On February 2nd 2013, famous groundhog Punxsutawney Phil didn't see his shadow in Pennsylvania.

This apparently meant that spring would come early this year - although i'm not sure anyone actually told spring about that as we had a long, drawn out winter - but then I guess it's asking too much of Phil to predict the weather in the UK as well.

Regardless of how accurate this phenomenon is, it was immortalised in the popular film Groundhog day whereby the main character is forced to relive the same day over and over again until he learns to become a better person.  Recently though, you'd be forgiven for thinking the same phenomenon was happening to you.  

Here's the scenario - you're busy surfing the web looking at different products/brands and then all of a sudden wherever you go you keep seeing the same brand that you visited just a little while ago.  Maybe you'd never noticed them before, but now they seem to be popping up everywhere - and days later you're still seeing them all over the web.

Wow, you think to yourself - these guys are everywhere, they must be _____ (fill in the blank accordingly with... amazing, spending a fortune, just right for me, desperate).

You could be forgiven for confusing this with with another effect you see in real-life called the Observation Selection Bias.  When you buy a new car you suddenly see your car everywhere and assume - wrongly - that the frequency has increased; that everyone is now buying that car.  This is not however the case here.

It's actually no coincidence that you now can't fail to miss the brand - they're using remarketing.

Remarketing is a process by which you see personalised advertisements across almost any website that shows ads based on your previous surfing habits.  Google describe it as:-

Remarketing is a powerful way to stay engaged with your target audience. Presenting them with highly relevant ads and offers across the Web -- and making sure your brand is top of mind when they’re ready to buy

Remarketing (or retargetting as it's also known) helps by:-

  • Targetting users who visit but don't purchase (up to 97%)
  • Helping with brand recall - especially as they're possibly visiting competitors
  • Combining branding and direct response techniques to target users across different stages of the buying funnel

Using remarketing, companies have seen a 600% lift in response rates versus standard banner display campaigns.  This is not really surprising given these ads are now targeted at "soft" targets - customers who have already expressed an interest in the brand by visiting the website initially.  It doesn't do away with the initial acquisition marketing to drive traffic, it simply ensures you make the best use of this by having a second bite of the cherry.

At it's heart though, remarketing relies on the the familiarity principle or mere-exporsure effect.  This is the psychological phenomenon by which people tend to develop a preference for something merely because they are familiar with it - it's what advertising is based on!  By using remarketing you continue to remind people of your brand and provide compelling reasons to come back and consider you.  If you're trying to acquire new customers, this alone becomes very powerful.  Research has shown for example that remarketing using personalised ads is 6x more effective than standard banner ads.

While remarketing is now firmly established in online acquisition marketing, I think there is also huge opportunity here for retention marketing.

At it's heart, remarketing is a one-to-one messaging solution based on customer behaviours and it's this that really makes it powerful for loyalty marketing.  Consumers now actively interact with brands via their online websites, making purchases, researching products, writing reviews.  From a loyalty context, they are also checking points balances, reviewing reward options and making redemptions.

Every one of these activities can provide a trigger point for remarketing.  While the messages (displayed as ads) maybe be relatively fixed, the timing of them is highly personalised.

Recognising when someone has checked their balance, has enough to redeem but has not looked at a reward gives you an opportunity to highlight relevant rewards and pull them back.  Members looking at rewards, but not redeeming provides the opportunity to pull them back in to redeem.  However, the opportunity is wider than this.  

It's not just about the single next best action, it's about the journey.  

Using a well designed remarketing campaign, it's possible to track the behaviours of both prospects and members and to tailor the right messaging based on this to deliver the next best action as part of an overall journey.

It's a misnomer to think that 1-2-1 marketing means a single, personalised message for every customer.  Instead, it's about the right message to the right customer at the right time.  You may only have 7 key steps within the overall customer journey, but knowing which step a customer is at and which is the next right step is the key.  We do need to be careful however when myopically driving customers along a predetermined journey.

Knowing the customers journey, not your journey is more important

In a recent (2013) research study by Lambrecht and Tucker entitled "When Does Retargeting Work? Information Specificity in Online Advertising", it was shown that dynamically remarketing to customers based on their browsing habits only worked well if you understand where the customer is in their own journey.  

Based on an example with a travel provider, the study suggests that making the remarketing message highly personalised  - down to the product or product category level - can be less effective than more generic remarketing.   In the study they found that ads which feature hotels that a customer had previously browsed or were similar only prove more effective when the customer is known to be looking for something specific (narrowly construed preferences) and that this was best demonstrated by understanding their wider browsing behaviour with both review websites and/or competitor sites.

This isn't to say remarketing as a whole wasn't working, but that the message used within the remarketing, whether generic or highly personalised needed to be aligned to where the customer was within the buying process - something which may not be apparent from just the behaviours the customer has shown with that brand/site.

Given the wealth of data contained with a loyalty programme and the increasing requirement for loyalty programmes to bring together wider customer interactions, this provides a real and tangible opportunity to increase programme effectiveness.  Whether this is to directly target brand customers for repeat purchase or to more subtly drive up loyalty programme adoption and engagement, both approaches are like to provide compelling returns.

If Punxsutawney Phil comes out next year and sees your loyalty programme using remarketing as part of it's overall marketing strategy, I think he'll be predicting both a very early spring and a bountiful summer.

Sunday 15 September 2013

Is opt-in simply a cop-out?


When marketers talk about wider customer interactions they tend to focus on language about consumers "opting in” – letting consumers choose to tell you about their interactions, transactions and viewing habits in exchange for rewards – typically framed as “exclusive” discounts or some other carrot.

Indeed, in many markets the process of opting in is regulated, requiring the consumer to provide their consent to receive ongoing marketing communications from a company.

There are a number of new companies trying to make the process of opting in and sharing data completely transparent. Handshake for example lets you setup your personal data and then negotiate with companies that want to buy it. They say:-

“Through Handshake you’ll be able to see exactly what brands want to talk to you, what they want to talk about and how much they will pay you for that conversation”

In reality though, the majority of consumers don’t see their data in that way – they don’t even see data. In the consumers language it’s about different services being able to understand each other.

For example:-

  • When a consumer is tracking calories they just wish that the products they bought at a store today were available for selection within their trusted calorie tracking application.
  • When a consumer checks-in on Foursquare or browses for nearby restaurants, they are not necessarily looking for a deal, they are looking for somewhere nice to eat, somewhere that others rate, somewhere close by.
  • When a consumer searches for a product on Google, they are not looking for an advert – they don’t want to “opt-in”. They are looking for a product. If an advert shows up based on their search criteria, previous search history, previous purchase history and this is an exact match, then the consumer is happy.

The consumer isn’t looking to opt-in, they want utility.

They want things to work together seamlessly, they want intelligent decisions to be made using their data; they want to reduce friction in future interactions; they want it to be relevant both in terms of content and transactions.

So this presents a challenge in that to be where the consumer is – to be aware of their search activity online or the check-in activity offline – we need the consumer to create relationships.

Note I didn’t say “opt-in”.

Consumers think in terms of things relating. If this service knew about that service then that would be useful.

We do this in real-life all the time when we make new acquaintances and friends. We may not actively think about the useful connections this new friend may provide, but we see synergies and we understand that things just work better when we establish more relationships.

Framing the language around interactions as creating new relationships or new connections is a much more positive language than opting in. It suggests that we see this connection as two-way – we both get value. It suggests that we may not yet know all the value we may be able to get from this relationship, but we can see there is value there.

Sure, we do actually have to get permission from the consumer, but this should be based on transparency, both in terms of what we want and why we want it.  Facebook for example, when speaking about Facebook Connect which essentially provides 3rd parties with access to a members Facebook details and interactions says:-

Facebook Login makes it easy to connect with people [and] functions as a trusted link between you, people using your app and their data.  The only way for an app to gain access to any of this is to transparently request each relevant permission from the person [with] each permission clearly explained to people [so they can] make the decision about whether to grant the app access

Notice they speak about connecting with people, providing access, giving permission and most of all, about trust - it's not opting in.

The aim then for marketers is not to try and simply get opt-in but instead to create more and more opportunities to make these relationships based on trust and permission and to provide useful services and utility value from them.

Friday 16 August 2013

Loyalty vs Lock-in (Current Account Switch)


In September there will be a big shakeup in the UK personal banking market.  The launch of the Current Account Switch Service will enable consumers to more easily move their current accounts from one bank to another - for free.

The switch has a low porting time - just 7 days, no porting charge and all existing automated payments such as standing orders and direct debits are moved as well as incoming payments such as salary credits.

There are obviously likely to be winners and losers when this launches and some fierce marketing from both existing banks as well as new entrants to attract customers to move.  A survey last year indicated that up to 75% of respondents would trust UK department retailer John Lewis if they moved into banking and 80% said they would consider moving to a non-traditional banking provider.

Presently, UK banks enjoy strong levels of loyalty, with very few customers moving banks.  However this is partly due apathy with the industry - "they are all the same" - and partly due to the high switching costs - "I can't afford for my bills not to get paid".

With the introduction of this new scheme, the high switching costs barrier has been reduced - it will be interesting then to see if banks and new entrants start to address the first barrier - apathy.

There is precedence as to what happens when high switching costs are reduced.  

Within the mobile telco industry, the introduction of Mobile Number Portability (MNP) made it easier for consumers to change provider without having to change their mobile number.

A research report by Cho, Ferreira and Telang entitled "The Impact of Mobile Number Portability on Price, Competition and Consumer Welfare" showed that, on average:-

  • Market price fell after the introduction of MNP
  • The market power of the incumbent was reduced and the price gap became smaller
  • Consumer surplus increased - that is the gap between the maximum price the consumer would pay and what they actually paid

For those large companies (historically having a monopoly position), the impact of reducing switching costs can be large.  

In India for example, local provider BNSL lost a large number of mobile subscribers (lost 47.7k) at the expense of new entrants like Vodafone (gained 50.7k).  In the UK, with the privatisation of utility companies, British Gas initially fared well.  However the market entry costs were high for utilities and so it was only when the deregulation of utilities in other markets was introduced that true competition followed - from this point on, British Gas was losing 40k customers every month.

This is where it gets interesting from a loyalty vs lock-in perspective.

Once switching costs are reduced and customers are able to move more easily, they will start to compare the products and services may closely.  Customer apathy will reduce and increasingly it won't just be price that customers are focused on, it will be service and benefits.  Disjointed customer communications, unhelpful staff and punitive fees will all become trigger points for defection and churn.

Once the lock-in is removed, the only thing left is loyalty

British Gas managed to turn this around.  Back in 2008 they attracted 2.2m new accounts (almost 4% of the market), but lost 2.6m back out the same door.  Just to stand still they needed to reduce churn and they did this by focusing on their customers.  With joined up communications and increasingly joined up systems, British Gas began winning back their customer's loyalty.

Between 2008 to 2010, British Gas managed to shift the needle from a net annual loss to an annual gain - winning 2m new accounts in 2010 versus a loss of 1.8m.

Based initially on a communications idea around the concept of "Your home is your world", brought to life through campaigns such as "Planet Home", this has extended over time to include British Gas joining another popular UK brand as a partner within the Nectar loyalty programme.

This had a further positive impact on results with a Net Promoter Score (NPS) increase of 6%, churn down by 5% and within just 8 weeks, British Gas was 2nd only to Sainsburys as the most associated Nectar partner.

This shows both the potential issues that a reduction in switching costs can bring as well as the benefits that a focus on reducing customer apathy can attract.

The challenge then that UK banks will face from September is one of loyalty vs lock-in.  Customers will be free to choose and as competition increases, which it no doubt will, the banks will only retain their customers if they're actually focused on their customers.

Friday 2 August 2013

Customer engagement reinvented through the crowd?


There is a real trend at the moment about empowering the crowd.

Back in 2012, UK Deputy Prime Minister set out his vision for a "John Lewis" economy - making reference to the popular UK department store which is owned by it's employees.  

It was reported that:-

Mr Clegg will demand that the era of “crony capitalism”, in which wealth and economic interests have been “monopolised by the few” comes to an end.  "I want this to be the decade of employee share ownership. We need more individuals to have a real stake in their firms, more of a John Lewis economy."

This aim has been further backed up by the recent announcement that employees at the Royal Mail in the UK will be issued with shares when it is privatised and the governments plan to allow firms to offer reduced employee rights in exchange for giving employees a share in the company.  Whilst all of these plans have their detractors, they do point to an increasing trend to get the individuals, the employees, more closely linked to the fortunes of the business.

Over the pond, there has also been a movement to empowering the individual.  

Google for example announced back in May 2013 that it had taken a $125m stake in crowdfunding firm Lending Club, while at the same time investing in funding startup CircleUp, a crowd funding platform for small businesses to sell equity to investors.  These platforms are linking individuals directly through peer-to-peer lending/investment tools to allow ideas, products and businesses to be more easily funded.

Interestingly, recent changes slated for the US market via the Jumpstart Our Business Startups Act (JOBS) look to introduce this crowd funding ideology wider into the small business investment market.  By enabling small businesses to have a greater number of shareholders before they must be registered with the SEC, allowing these shareholders to be normal people (i.e. non-accredited investors)  and the direct encouragement of equity based crowd-funding platforms, the US government is really trying to break the strangle hold of financial institutions and encourage peer-to-peer lending.

In discussing crowdfunding and its potential impact on financial institutions, the Spanish bank BBVA stated:-

Crowdfunding is a disruptive innovation that commercial banks cannot ignore.[..] They currently serve the “bottom of the market”, but that doesn’t mean they cannot reach upper segments. In fact, by the time crowdfunding platforms appeal to mainstream consumers it will be too late for banks to catch up with the new trend.

So whether its employees gaining a greater stake in the business they work for or consumers having a direct stake in the products they buy or the businesses they frequent, there is definitely an increasing appetite to directly link the beneficiary to the benefactor; taking out the middle-man.

One really great example of empowering the crowd and how this is changing the way people transact and consume is that of Collaborative Consumption which is described as:-

A new economic model [and] named by TIME as one of the "10 Ideas That Will Change the World", collaborative consumption describes the shift in consumer values from ownership to access.

This is about connecting people directly with other people to exchange goods and services, whether it's borrowing a car for the day or a room for the night (think Airbnb).  By cutting out the middle-man in terms of a retailer, these start-ups are providing a way to solve the problem (getting a hole drilled by borrowing a drill) rather than forcing you to actually buy the product in the first place.

So what could this mean for loyalty?

Well I've previously discussed the thought about businesses more directly linking a customers loyalty with a share of the business.  Whether this is a UK Co-Op style share of profits programme or a more direct programme that gives actual shares in exchange for loyalty as done by US hotel chain Jameson Inns.

I do think however that there may be more innovative approaches to loyalty based on these crowd funding models.  Whether it's involving consumers more in product innovation/selection (Kickstarter style product ranging), linking the consumer more directly to the manufacturer (taking out the middle-man), linking consumer spend more tightly to business results or completely changing the way consumers buy (Collaborative Consumption).

Disruptive technologies, solutions and ideas are happening all the time and as BBVA stated, when these become mainstream it's too late to catch up.  Connecting individual consumers more directly to the opportunity, need or product and utilising online, real-time platforms with social tools is going to provide interesting opportunities to create and deepen customer engagement.

What do you think?

Saturday 20 July 2013

Loyalty has to keep up with ever increasing customer expectations

Inamo smlBack in 2010, pioneering restaurant inamo launched a whole new user experience for diners.

Using a combination of computers, projectors and software, inamo provides an immersive ordering solution that literally cuts out the middleman (the waiter) from the process and enables each individual diner to browse the menu, build up their order and then send it directly to the kitchen.  While ordering, the possible food choices are projected onto your currently empty plate, allowing you to see virtually what may be in store.  The next time you see a staff member is when the food is placed in front of you.

Having experienced it recently, it was certainly entertaining and different.  What did become apparent very quickly though is how fast things move.

In 2010, not only was inamo launching their interactive e-tables, but Apple was launching their first iPad.  Prior to the launch of the iPad, the human/computer interface had changed very little; we'd all become accustomed to keyboards and some kind of mouse pointer solution and were adept at using them.  The iPad however changed that and began to educate the public on a new way of interacting - touch.

This is no where more apparent than when your fellow diners keep pressing on the inamo menu options projected onto the table, even when they already know that it is driven solely by a mouse touch pad.  The urge to just naturally touch the item being displayed kept coming up and suddenly the innovative dining experience felt.. well a little less innovative.

Pizza Express in the UK  also looked to change the dining user experience as I've written about before.
Their solution utilises technology already available to the customer -  their mobile phone - and provides a means to pay the bill whenever they want and simply walk out of the restaurant.

This is helping to address one of the most annoying parts of the whole dining experience; that time where you've had a lovely meal and now, wanting to go, there is suddenly a desert landscape when it comes to table service.

Unfortunately this also falls a little flat in the user experience stakes though as you need to request a code upfront from your server to make the whole "innovative" experience work - and to be honest, I'm not thinking about the lack of service later when I'm currently getting service now.

I think the real innovation in the area at the moment is coming from technology payment start-up Square.... and the first innovation is that they don't see themselves as a payments company at all.
Founder Jack Dorsey is looking to create "frictionless commerce" with his long term aim to "to make accepting payments a breeze for businesses, and [..] to make paying for stuff invisible—for everyone, across the entire economy, for all types of goods and services".
Their first move into this area was to enable the smaller merchants to accept card payments cheaply and simply through just their iPad app and the Square device.  This single app took the place of the cash register, ePOS and payments terminal.  This changed the user experience for the merchant, but did little for the customer.

Their next move though, firstly known as Card Case and more recently "Square Wallet" changed this by improving the user experience for both parties.  Using the app installed on the users phone, the merchant or restaurant is able to simply see the customers at the till and, clicking on their photo, authorise payment.

For the customer you simply say who you are such as "Hi, I'm Mark" and the cashier will probably already know this as they can see you on their iPad.  Compared to the current payments dance we do with chip&pin or the increasingly sterile process that contactless enables, this is a breath of fresh air.
No cards, no pins, just a simple, friendly hello.

Square report that for the 75k+ merchants currently using it, they see greater footfall and loyalty from Square equipped customers.  This is not surprising and really doesn't have anything to do with points or prizes or emails or offers - this is simply to do with making the experience more frictionless.

inamo with their self-ordering tables are trying to streamline the process to make it more frictionless.  Pizza Express with their self-checkout are trying to make the process more frictionless.

I think we sometimes forget that loyalty marketing is also about reducing friction.

Like inamo, we may feel our programme is innovative, and when it launched it may have been.  However, customer expectations change and competitors keep moving ever forward.

Like Square, we shouldn't be just thinking about how to make each individual part of the process easier, instead we should be thinking about making the whole process "a breeze" - using data and technology to reduce friction and increase loyalty.

Friday 24 May 2013

New Frontier:Unhosted Loyalty - Less big data, more my data

Island color
There's an intriguing new application available called Forever.

From a functional perspective it's not ground breaking - it simply provides address book functionality.  What is interesting however is that it does this without actually holding any data.

Of course it manages personal data - it has to so it can bring up a friends address details - but it doesn't persist it.  It keeps your address book in sync and up to date -  but it doesn't change anything.

Forever is a new breed of application known as an unhosted app and this has been defined by unhosted.org as:-
"Also known as "serverless", "client-side", or "static" web apps, unhosted web apps do not send your user data to their server. Either you connect your own server at runtime, or your data stays within the browser"
The application provides a service and works upon your own data, but it never actually "owns" the data.  Instead, you connect your own data store, such as that provided by a personal cloud, which the application can then work with.

In a world where everyone is talking about big data, this really is a breath of fresh air.

Rather than gathering data in bigger and bigger corporate repositories, the data is essentially always owned by the the customer.  Sure, it's probably still going to be hosted by a 3rd party for most people - the average consumer is not going to want to spin up their own homebrew hosting solution.
However, these 3rd party personal cloud suppliers are more akin to the 4th party concept spoken about within VRM - they work for the consumer.

Now, I'm a marketing technologist at heart, so I like customer data because I want to be able to market relevant products and services to that customer - and to be relevant, I need to know something about them - I need their data. However, I don't think that the 4th party personal cloud as utilised by the unhosted app concept precludes this from happening.

We just need to think differently.

If the data belongs to the customer, then we essentially need permission from the customer to access it.  This permission will be granted if the customer sees a worthwhile value exchange for their data and also feels in control of it.  They can grant access and they can revoke it - which side of the fence we're on will depend on what we provide back.

In reality though, as corporates, we don't need huge repositories of personal data despite our quest to build them.

Increasingly the battle field for relevant communications is real-time.  As I spoke about in my last post, technologies like Complex Event Processing and other solutions like collaborative filtering (people who bought x also bought y) are executing at the time a customer is carrying out a behaviour - on that behaviour.  At this point of interaction, we're working with the customer and will have access to their personal data and can use this within the application to make decisions.  Of course, we'll also need large amounts of historical data to support recommendations, but this doesn't need to be "a single customers data", it just needs to be aggregates of behaviours.

Imagine this within a loyalty programme context - one of the biggest aggregators and users of consumer behavioural data.

In an "unhosted loyalty app" context, when I swipe my identity card (4th party identity provider), the retailer would send my purchase information about the transaction to my 4th party personal cloud.  At this point, that data is mine to do with as I wish - it's basically an electronic till receipt.
  • I could then choose to connect this data to a 3rd party application that analyses my nutritional intake
  • I could connect it to the retailers loyalty programme which would then recognise my purchases and update my connected bank provider (cash or points)
  • I could connect it to one or more FMCG/CPG manufacturers who could choose to recognise my purchase of their products (or my purchase of their competitors), and respond to me with relevant offers or rewards
  • I could simply connect it to my shopping list app to tick off what I'd already purchased
It's my data, I get to choose who I let see it and for how long - but they don't need to hold it, process it, sell it or bombard me using it.

While this may seem like a step back for companies currently designing big data solutions which will increasingly sweep wider and wider customer interactions into larger and larger repositories, it's actually a giant leap forward.  I'm betting that Walmart would love to see detail on the transactions I've made with Costco.  Or Visa would love to see my spend with MasterCard.  Presently this data will never be shared between these competitors.

However, when it's my data, I can choose to share it with whom I like - my supermarket can have access to my credit card spend (and see who else I spend with) if I feel this provides value back to me.

Why though would a retailer simply give this data away in a format I can use electronically?

Well, ignoring the fact that this will likely be mandated soon by governments, it's also a customer retention mechanic.  When my data has value to me, then I'm more likely to frequent a retailer that can actually provide it.

In the last century, I gave my loyalty to a retailer so they could have my data; in this centuary I'll be giving my loyalty to the retailer so I can have my data back.

In my professional role I design and build loyalty solutions for clients including the backend systems to support these - I'm part of the machine that is gathering big data across wider interactions to help engage and retain customers.  I'm positive about this and it's an exciting place to be, both as a marketer and as a consumer.

I also understand however that consumer attitudes are shifting, government approaches are changing and technology is democratising data - looking out 5 to 10 years, I'm betting it's "My Data", not "Big Data" thats going to be the new frontier.

Tuesday 14 May 2013

Data the new oil? Then exploration is just the start

Oil drilling

What do Google, Amadeus, AmEx and Tibco all have in common?

Well, they are all market leaders in their verticals.  

Amadeus for example are the largest travel transaction processor in the world, processing 440m bookings per year for 693 airlines across 195 countries.  Tibco are a software company with a suite of products that focus on real-time data transfers powering many of the Fortune 500.  AmEx account for almost a quarter of all dollar volume for credit cards in the US and Google... well they are Google.

What they also all have in common is data.  

Each company manages and processes vast amounts of data.  You could say that they are in the data business and they just specialise in a particular vertical, whether this is travel bookings or web search.  If, as has been said before, data is the new oil, then these companies have very deep reserves.

It's this data though that is also the catalyst for the third thing they have in common.  

They all do loyalty.

They may not be widely known or recognised as loyalty companies and this may not be their core business - however they recognise the importance of loyalty and have made strategic acquisitions to add this capability to their services.

Back in 2010, Google acquired loyalty startup Punchd and Tibco acquired SAAS vendor Loyalty Lab.  In 2011 AmEx acquired Loyalty Partner which operates Payback in Germany and Poland and i-Mint in India.  Then in 2013 Amadeus recently acquired airline loyalty specialist Hitit who provides loyalty solutions for over 40 airlines - more than any other provider.

So what's the rationale here?  Why are these companies branching out into loyalty marketing?

AmEx stated that this was to "diversify it's fee service", "deepen merchant relationships" and "add more than 34 million consumers".  Ed Gilligan, Amex's Vice Chairmain said at the time that:-

"The loyalty coalition model is growing rapidly in many parts of the world. Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings"

It's that final statement that real nails it.  "Consumer decisions...are based on loyalty offerings".  

If you can package up the offering from the initial consumer decision then you potentially get to control the whole value chain.

This seems in part to also be the rationale for Tibco purchasing Loyalty Lab.

Increasingly loyalty is about real-time decisioning and next best action and the software to manage this, known as CEP (Complex Event Processing), is an emerging frontier.  Tibco provide the software, but Loyalty Lab allows them push further up the value chain for their consumers in the B2B space, helping them steal a march on their competitors (incl. Oracle, SAP and IBM) by providing a solution to the problem (packaged up in a loyalty application) rather than just a cog in the overall solution.

Google is interesting in that having acquired loyalty start-up Punchd, they then went on to shut it down.  It's not totally dead however and the "closed for business" web page alludes to something bigger and better coming when it says:-

"The team has been working to integrate Punchd features and ideas into other Google products. Retiring Punchd is the next step towards our integration with Google"

For Google, Punchd provided a means to access small, local, offline retailers - and this is a key, strategic market for them.  As I've discussed previously, Google actions seem to be about protecting it's "economic castle" - it's ad revenue.  Having increased control from personalised online offer, through to purchase (via Google Wallet), loyalty and repeat purchase helps them to secure the whole value chain.

Continuing with the data being the new oil analogy - these companies have essentially mastered the "upstream" segment in terms acquiring the resource through exploration and production.  They've got the data reserves and the means to extract them.

However the "downstream" segment which involves refining, processing and distribution is increasingly attractive.  Loyalty is very similar to a network of forecourts - it provides a guaranteed consumer base for the core product and ensures the companies have line of sight from raw material through to consumer demand.

Vertical integration doesn't work for every industry or company, but what these examples show is that loyalty still has the power to drive and direct consumer demand.

Sunday 17 March 2013

The 5 steps to creative ideas (still relevant today)

I'm not a big fan of workshops or brainstorming.

They are typically done to generate ideas or solve problems, and yet the research suggests that in fact large groups of people has the opposite effect on creating on ideas.  It creates "group think", stifles ideas and can lead to the lowest common denominator being accepted.  It could also be that I just don't like large meetings.

It's not just me though... organisational psychologist Adrian Furnham is quoted as saying "Evidence from science suggests that business people must be insane to use brainstorming groups. If you have talented and motivated people, they should be encouraged to work alone when creativity or efficiency is the highest priority."

Innovation and creativity is though of paramount importance to businesses and even more so now because the costs of cutting edge technology become less and less with every month that passes.  Now, a couple of people in a garage (or more likely their spare bedroom) can spin up a new idea in a matter of weeks - mashing together cheap cloud infrastructure with free open source solutions.  This can make established companies, with layers of bureaucracy, established roles and "group think" workshops seem slow and antiquated.

It was interesting then to see on the BBC Horizon programme this week some new research into how we have new ideas - what creates that spark of creativity - and importantly when we have it.

Psychologists and scientists are mapping the brain as they work with people to see how they solve problems, whether this is done analytically or through flashes of insight... and there were some interesting findings.

The spark of creativity is generated within the sub-concious - Using a divergent thinking test whereby they ask a subject to come up with as many uses for a house brick as they can, people were allowed a break after coming up with initial ideas.  Those people who either did nothing or who worked on another complex problem were the worst at coming up with additional ideas after the break.  However, those people who did something mundane during the break so that they were occupied on something different, but not mentally taxed were then able to come up with even more uses for the house brick.

Breaking existing routines can make you more creative - In the Netherlands, researchers showed how just changing simple everyday routines such as the order in which you prepare breakfast can make you more creative, allowing new ideas to flow.  The suggestion is that we need to break established neural paths to allow more things to connect and reconnect and so providing more opportunity for divergent thoughts to collide and provide creative ideas.

What really amazed me though is that all of this cutting edge research into creativity seemed to just be confirming what had been published back in the 1940s by an advertising executive called James Young Webb.  He had no formal scientific training and yet in his book A Technique for Producing Ideas (McGraw-Hill Advertising Classic) he basically lays out the steps required for creative thinking, all of which is backed up by modern science.

Step 1 - Gathering of raw materials - For the first step, Webb recommends reviewing materials both for the immediate problem and wider, from general knowledge, adjacent knowledge, etc.  The purpose is really to ensure that you have enough material lodged in the grey matter to actually allow it to collide in different forms.  Ideas don't really come from the ether, they come from building on existing knowledge.  As Italian sociologist Pareto (of 80/20 fame) is quoted as saying, "an idea if nothing more nor less than a new combination of old elements".

Step 2- Work over the materials in your mind - This is an analytical process where you try different ideas, fitting them together in different ways and trying to form relationships.  What Webb is suggesting here is that you start off analytically - this may sometimes produce some immeadiate results, but either way, it's all about creating new connections and relationships.  The research that was presented on the Horizon program showed this too, with subjects being asked to solve various puzzles and to indicate if these were solved through analytical comparison (trying each piece in different ways) or via insight (it just came to me).    This is about breaking existing routines / assumptions and making new connections and relationships.

Step 3 - Incubate the idea - Just like the work with the divergent thinking tests, Webb recommends you simply go and do something else unconnected with the problem.  He says "drop the problem completely and turn to whatever stimulates your imagination and emotions.  Listen to music, go to the theatre, read poetry or a detective story."

Step 4- The "eureka moment" - This is when the idea comes to you; when you're not actually thinking about it.

Step 5 - Shaping and development - This is where you take the wonderful new idea and begin to circulate it to colleagues, friends, etc.  The chances are the idea will not be perfect and working with others to shape it will turn it from a good idea to a great idea.  The idea itself is a combination of old elements joined in a new relationship; this new relationship will break existing routines and assumptions for those around you, letting their creative juices flow too.

It's interesting that author Susan Cain who has written the book Quiet: The power of introverts in a world that can't stop talking highlights in an article she wrote on this topic for the New York times that "During the last decades, the average amount of space allotted to each employee shrank 300 square feet, from 500 square feet in the 1970s to 200 square feet in 2010"

In our rush to bring people together for the free exchange of ideas in our open plan offices, it's ironic that we may in fact have suppressed innovation and free thinking.

Whatever job we do, new ideas and new approaches are needed to keep us moving forward and being leaders in our industry.  Understanding better how these ideas form, how there is a process to it and that this process can be helped will lead to a greater number of truly innovative ideas.

Friday 15 March 2013

Rallying cry for innovation - and faith

I've spoken about VRM - Vendor Relationship Management before on this blog and it's one of the topics that I feel is currently mis-understood and undervalued in terms of its future impact on customer relationships and loyalty.  Like many new things, people think it irrelevant, unworkable or simply solving a problem that doesn't exist.  It was great then to see today on the ProjectVRM mailing list, Doc Searls, author, journalist, blogger and VRM evangalist, discuss these challenges and to put them into context.

I've repeated the majority of Doc's post here for those without access to the ProjectVRM list:-

[..] Nobody is ever interested in a new category before it is given shape by applications people want once they see them. Personal computing, starting in '76, was positioned as "a way to do your checkbook and keep recipes." Really. None of the early hardware makers were especially successful, with the conditional exception of Apple, thanks to Visicalc. IBM took a look at Visicalc and introduced the PC in '82. But even then the PC succeeded in business in part because Attachmate and other companies sold micro-to-mainframe cards that turned $2500 PCs into $1000 IBM 3270  and DEC VT-100 and -200 "dumb terminals." But by then Visicalc had a foothold, as did Wordstar and DOS. Lotus 123 picked up where Visicalc left off, and a wave of applications followed. The Mac succeeded in part because of Quicken, which really did, finally, eight years after PCs were born, make balancing a checkbook easy. Quicken was an invention that mothered necessity, as were the rest of the early programs. Still, business dismissed PCs from '76 to '82, and ordinary people dismissed them until at least '84.

Likewise the Internet was nowhere until graphical browsers showed up. We forget that Bill Gates saw no way the Net could make money for itself, or anybody, until it was clear that Netscape's browsers and Web servers would threaten Microsoft to the core. That was in '95, when the Net's protocols, which we still use today, were up to decades old. Smartphones were Palm's idea, but not many people took advantage of the apps on them, because they were too hard to get and use. Once Apple showed how it could be done, the market exploded. That was more than a decade after Palm began. I remember an early VRM meeting at Berkman where Paul Trevithick said "Nothing that requires a user install will succeed." That was true, then. But not long after that, Apple made user-install easy, Google followed, and now all of us install apps with ease all the time. Yet it would be easy to say there was no appetite for the Internet in '93, or smartphones in '05. All we needed were inventions to mother necessity.

So, likewise, it's easy to say nobody cares about managing relationships with vendors, because, obviously, they don't. Or, do they?

What about the stacks of loyalty cards people keep on keychains, in their wallets and purses, or in the armrests of their cars? That's a crude form of management. What about clipping and carrying coupons, or spending hours or days adding up "points" from credit cards to trade in for miles on airlines? (I have a friend who is obsessed with doing that.) What about going over stacks of receipts and trying to match them up with credit card bills — arduously reviewing old calendars to see what we did and when, so we can minimize our tax hit? Is there no management in that?

Think of all the pain points any one of us deals with in relating to vendors — or anybody. All those pain points are potential business opportunities. Not all of them will be pursued, but none of them are worth dismissing because nobody seems interested in dealing with them now. As Henry Ford said, "If I'd asked people what they wanted, they'd have said 'faster horses.'" To my Irish grandmother growing up in The Bronx, the biggest problems were horse manure piling up in the streets and the danger of fire from gas light. Neither problems were relieved by the industries of the time. Yet both horse-drawn wagons and gas light were obsoleted by new inventions. 

[..]Everybody manages data today already.

We do it with folders on our hard drives, with bookmarks and tabs in our browsers, with boxes in our mail programs, and with every online service that organizes files for us. Are all these in such a complete and final state that they are un-improvable? Or is there opportunity here for many kinds of new approaches? Again, it's easy to say "nobody is interested." But it's not wise to bet against relieving whatever causes people pain. Or what opens up new opportunity where almost nobody is looking.


And most of us don't care about advertising. (Though some do, and we respect that.)

Fixing advertising's problems, or pursuing its opportunities, is almost entirely a vendor-side issue. My own attitude toward advertising is kind of like Ford's toward horses and trains: those things will keep doing what they're best for, and we'll go invent something else. My guess is that, if VRM succeeds, it will help brand advertising and hurt adtech or alter it for the better. But VRM's purpose has nothing to do with any of that.

Still, business senses that we are on to something here, so we can't help talking about it, and, in some cases, getting invited to conclaves where advertising is a big issue.

For example, yesterday I attended one of those things here in New York. The word "intention" was used a lot. The context was using "big data" to "intuit" what customers "intend," without ever having to listen to what those customers want to say, directly, to the "brands" doing the advertising. So the talk was about "listening in" on "conversations" among "consumers" in "social spaces" so those consumers could be "delivered" a "better experience." It was the sound of one hand slapping, not two hands clapping. A few voices  from within the business were raised, saying "Are we listening to ourselves? Do we not realize that we're abusing people's privacy, and that this will have consequences?" As usual those voices were mostly not heard. But the wilderness from which those voices were raised is called the marketplace. 

Are those voices pointing toward actual requirements, as you suggest? Well, let's look at what the market is already doing.

Today the most popular browser extensions are ones that block advertising and turn off tracking. Governments (especially in Europe) want to switch off tracking altogether, because their citizens are tired of it. These are significant trends. Look up "privacy" on Google or Bing and see how many results you get, and the order in which they are prioritized. Is there no market for solutions here?

Personally, I don't want legislative relief. Anti-adtech laws today will protect yesterday from last Thursday with legal code that won't change for decades, or perhaps ever. On the whole that's not good in a vital and fast-changing marketplace. I'd rather come up with technic fixes that will take care of business without new laws. (Though perhaps with legal decisions based on standing laws. Those are likely to happen in any case.)

Finally, just because a glass is 1/Nth full doesn't mean that it's X/Nths empty, or can't be filled. Faith, St. Paul tells us, is "the evidence of things unseen." Without it we wouldn't have civilizations, or markets. There would be demand only for the hides of animals and sharpened rocks.

VRM isn't complicated. It's only about giving customers means toward two things: independence and engagement. To see how that can be done, one needs to stand on the side of the customer. So that's what we're doing. 

Sunday 17 February 2013

Tesco ClubcardTV part of a new trend?

When it comes to innovative ways of going to market, airlines have traditionally been the bellwether.  From basically creating the modern day, database driven loyalty programme through to their innovative yield management for maximising profits, the airline industry typically sets the standard that all other industries follow.

So when someone like Jeff Katz, (Currently CEO of Nextag, a global digital shopping network and former VP at AA/CEO of Swissair/CEO of Orbitz) highlights another trend in the airline industry that's likely to cross-over into retail, it's worth paying attention.  

In a recent article for Fast Company entitled "Fasten Your Seatbelts: The Future of Shopping Looks a Lot Like Airline Travel", Jeff describes how over the last few years, airlines have basically deconstructed their product offering to provide the cheapest price for the base commodity - an airline seat.  All the value add elements such as luggage allowance, in-flight meals and seat selection have been stripped back and then re-purposed as benefits which can either be montised to those customers who value them, or used as recognition rewards for valuable customers like frequent flyers.

Discussing this, Jeff says:-

Airlines have taken a commodity (a seat on a plane) and caused us to change our view about what we’re buying and how we’re buying it. It’s no longer about buying a product at the cheapest price, it’s about selecting and paying for a package of services that we value most--from an aisle seat, to a faster security lines, in-flight meals, rewards for frequent patronage, or in-flight Wi-Fi connectivity

He then goes on to discuss how retail may actually start to follow this trend.  Deconstructing the retail experience and then rebuilding it with additional, value add options that customers can either buy into if they value them or be provided with for free if they are frequent shoppers.  

It's hard to imagine right now how this may look as you can't really see a clothing retailer "unbundling" their changing room or a supermarket "unbundling" their late night opening hours.  However, as technology improves and customers are able to shop using their own smart phones such as in the new Sainsbury's "Mobile Scan & Go" initiative, you can see how this suddenly changes the landscape.

Being able to scan goods and simply walk out of the store, bypassing tills is a real benefit.  Scanning products as you shop allows for personalised pricing, so elements of yield management can start to be introduced - scanning an item with a longer shelf life remaining could actually cost me more for example.  Tying this into the loyalty programme like the airlines do could allow for certain products or product ranges to only be available to loyalty card holders or to be bundled differently so that a "Silver Tier" customer gets a free bottle of wine with their ready-meal which a normal customer doesn't.

However this manifests itself, I agree with Jeff that this unbundling trend that airlines have started (and which Ryanair continues to push the boundaries on) will cross over into retail and some retailers are already putting a toe in the water today.

Online retailer Amazon for example is already doing something like this today with their Amazon Prime offering, providing customers with additional benefits, including free shipping, a free book rental per month and unlimited instant streaming of movies and TV shows.

In the UK, Tesco is trialling Clubcard TV, a service for its loyalty card holders which, like Prime, looks to provide free entertainment content in recognition of their customers continued loyalty.  The website describes it as:-

"Offer[ing] thousands of movies and TV shows for free. There are no schedules, no subscriptions, no fees – as long as you are a Tesco Clubcard customer and you have access to the internet, you’re free to enjoy Clubcard TV"

Also like Amazon Prime, Tesco "Delivery Saver" provides free delivery for online grocery orders for a single, upfront payment.

Whilst these offerings are more about bundling products to enhance the retail experience rather than unbundling them, it does demonstrate how the retail experience is being taken wider than the basic shopping experience.

It's clear that competition is increasing and retailers are always looking for more ways to deliver the right value to the right customers.  If unbundling/bundling can create a differentiated retail experience, catering to the price conscious consumer at one end and the convenience conscious consumer at the other, then it's a trend that's sure to continue.

Sunday 10 February 2013

Feast or Famine: The next move for Netflix?

HouseofcardsSomething interesting happened recently in entertainment; there was a slight shift in the balance of power.

Netflix, traditionally a channel for reaching the content of other networks  became a producer in their own right.

Their new production, "House of Cards" was a shot across the bow for the likes of HBO and more traditional networks and at the moment it seems their $100m gamble is paying off with generally positive reviews.

A Netflix spokesman is quoted as saying:-
"We’re not releasing any data, but we are happy with the reception the show has gotten in the media, on social media and from our members in reviews"
This is a big deal for Netflix and they know it.  Ted Sarandos, Chief Content Officer is quoted as saying:-
"The goal is to become HBO faster than HBO can become us."
While this is interesting for the entertainment market, what's more interesting for me is the potential impact this series will have on both customer acquisition and retention for Netflix.

Clearly, unique, exclusive content is a major acquisition tool for Netflix, helping them draw in both new and lapsed customers.  This is a tried and tested model used by the likes of BSkyB who would in many cases pay over the odds for subsequent series of shows like 24, Heros or more recently Mad Men that had previously aired on free-to-air channels, hoping to bring those hooked customers across in the process.

Indeed, customers such as respected blogger Dave Winer who had previously (and publicly) turned off his Netflix account then made an about turn and switched it back on specifically because of this new content.

So there is no question that exclusive content can be a big draw for new customers.  However with "House of Cards" Netflix is also chalking up another first.

They have launched the whole of the House of Cards series in one go.  Original programming made available like a box set from the get-go.

This is really significant as traditionally broadcasters would utilise a high profile series to draw in audiences regularly at an appointed time; keeping viewers restricted and waiting with baited breath for the next episode.  For commercial broadcasters these episodes would be timed to maximise the audience and hence the revenues from advertisers.  It would also provide the opportunity to gain from the halo effect of viewers staying tuned into the channel for longer pre/post airing.

For Netflix however, this doesn't matter;  their revenue comes from subscriptions, not advertisers.  Without this restriction they have provided a veritable feast of television, allowing subscribers to binge on the whole series in one sitting if they like.  Whilst figures aren't available from Netflix directly, it has been reported that a "significant portion of fans binged on the entire series in the first weekend".

It's worth contrasting this with another form of entertainment, that of social games.

I'm currently hooked on the popular social game "Clash of Clans" which uses all of the best gaming mechanics to keep me playing, progressing and in the flow.  The more I play the more I unlock.  If I had access to everything all at once - if I could feast on all it offered - then I'd tune out pretty quickly.  It would be fun, but there would be no challenge.  Instead, they try to balance the game play, including the strength of foes I have to battle based on my current experience and level achieved.

In discussing the winning formula of the game design, the blog Deconstructor of Fun highlights how the game supports different types of play, saying:-
"Not all of the parts of the core loop are equally important as the importance of each part is influenced by [the] player's ongoing goal in the game, which creates different style[s] [of] game play [,] from resource gathering and building, [to] heavy [and] active battling"
Creating this "flow" within social gaming that ensures players are hooked with a fun and entertaining experience takes data.  They need to constantly monitor usage of the game and adjust the mechanics as users progress or they see usage drop at certain points.

Now Netflix are not short of data but i'd argue they're not really getting the maximum value from it as game designers do.

They are well known for their detailed data analysis of their customers viewing habits in order to serve up better and more targeted content.  Currently, around 75% of Netflix customers select content to watch based on their recommendations and Netflix aim for this to be higher.  Mohammad Sabah, Netflix Senior Data Scientist is quoted as saying:-
"The ultimate goal is to show Netflix customers content they’ll view to completion and then recommend the next thing they’ll view to completion"
The problem Netflix have though is the classic situation all retailers face; the consumer has choice.

There is an increasing plethora of streaming services and so whilst recommendations are important and so is exclusive content, the real key is that consumers "value" Netflix.   The stickyness from content only lasts for as long as the content is "exclusive".  Letting customers essentially burn through that exclusive currency too quickly may in fact reduce the time period its effective for but also the extent to which customers actually value the content.

PSYBLOG recently reported on an interesting study that looked at how consumers valued chocolate based on how they consumed it.

In the study, the consumers were split into 3 groups with one told to give it up completely for 1 week, the next given a big bag and told to gorge and the final group, acting as a control, given no chocolate related instructions at all.  At the end of the study, the groups were given more chocolate and asked to rate the experience.

Those who abstained reported getting more pleasure from the chocolate than either the gorging group or the control group.  Not only that, but they also savoured it more - in essence they valued it much more because they'd been restricted.

Getting the balance between feast and famine is key to keeping customers involved and ensuring they continue to value your product/service.  

It's early days for the Netflix experiment but it will be interesting to see if they start to introduce some of these restrictions on consumption to gain additional loyalty; managing the flow of their customers.  You could easily see top rated Netflix consumers - those who watch more shows, over more hours and engage more with other viewers via social media - being given the ability to watch new exclusive content more quickly than others.  This would then provide social currency into the mix, ensuring those customers stay loyal longer and encouraging others to strive to level up.

If you want to stop your brand falling down like a House of Cards, it's worth looking at how game mechanics can strengthen those bonds.

Game mechanics are not just for games.

Wednesday 30 January 2013

Blockbuster should have traded time before it ran out of it

In time postcard 3There was an interesting film I saw recently called In Time that was based on the premise that the currency of the future wasn't money but instead was time.

In the future, having solved the problem of people dying naturally, there was a new solution needed to help "balance" the population and so people had been genetically engineered with a built in timer that kicked in when you were 25 and from then on you had to work to get more time added and if your time ran out - well, your time had run out, literally.

As with money today, there were those that were born a little more privileged - and had literally thousands of years to live - and those that didn't and would perish quite quickly.  In this fictional world, time was traded as a currency for goods and services and so wasn't something to be wasted.

What's interesting about this is that essentially, it's already happening today.

We don't have the timer genetically linked into us and people still pursue money in preference to time.  However, in an attention economy where people are being bombarded with a multitude of activities which will take up time, getting them to waste time with your brand or product rather than someone else's or something else in increasingly hard.

I was reading a short book by Dr Wu from Lithium entitled "The Science of Social" that discussed the topic "Cultivating Superfans & Influence" and highlighted this issue facing brands saying:-
One of the biggest challenges of attracting attention from fans willing to spend time interacting in brand communities, time thinking and talking about their products, and time taking action that's helpful to the brand is the fact that time... is scarce.
The answer apparently is about fostering and strengthening relationships between individuals so that you're more likely to be of relevance and more likely to get a share of that attention and the trust that it brings.

This is probably right to some degree, but I actually think it's simpler than that - it's about being useful.

I don't ask my friends for product recommendations in conversation because i trust them - it's because I don't have the time to do the research myself.  It's not even because I have "strong ties" with them as frankly, I don't care if I've just met the person in the pub - if they own a product and are speaking positively about it then I'm going to be much more likely to put it to the top of the list.

Researching products takes time.  It takes time to find the products that are available.  It takes time to understand and decipher all of their features.  It takes time to compare and evaluate them.  My time then is probably better spent asking someone who has already solved the problem what they have and if they're happy with it.

This is where I think the difference is.  Yes, trust is important.  I need to trust a brand will have the product I want.  I need to trust a brand will deliver the product I want in a timely manner.  I need to trust that they will take it back, no questions asked if it doesn't work.  I need to trust that the brand will look after my details.

But I expect that of all brands I deal with.

Brands that get my attention; brands that I will spend time with are those that recognise my time is precious and help me get the best from it.

Blockbuster failed not because it didn't stock products customers wanted - people still want to watch films.  They didn't fail because people didn't trust them - ironically their brand is still strong.  They failed because they didn't recognise my time is precious.  I don't want to go back to the store and I don't want to be on their timeline for returns.  More recently, I don't want to have to wait (and make a journey) to get my film.  Customers found alternative ways of getting the same thing in less time.

The high street is failing in some sectors because of time.  The brands on the high-street aren't trusted any less, they are simply not as convenient.  I can shop online at a time that suits me.  It's also quicker, saving me time.  Better still though, winning brands like Amazon also save time through relevant search and product recommendations, giving the whole purchase process less friction and with that, less time required.

Brands doing well on the high-street though like Costa Coffee in the UK are also about time.  They are creating opportunities to spend time in a more pleasurable, relaxed way.  Given time is a precious resource, we'd rather spend it with friends and family than doing chores like weekly shopping.

Time is a currency today and it is something that's traded.  Customers will give you their time if you treat it like the precious commodity it is and give them value for it.

If you waste a customers time with complex in-store procedures, difficult to find products, slow purchase processes, difficult returns processes, long-winded loyalty enrolment forms, overly engineered rewards processes - then customers will spend their time elsewhere; and in the process, your time may simply run out too.

Tuesday 15 January 2013

Loyalty+Coupons = Positive Price Discrimination

I was at a conference last week where the speaker was from the gaming industry and touched upon the topic of price discrimination - where essentially a customer is given a unique price based on both their price elasticity and potential value.

The thinking was that given a casino hotel gets near 100% occupancy, isn't it better to fill rooms based on the total potential value of a customer (i.e. including how much they might spend in the casino), rather than just look at the margin on the room itself.  In that scenario, if a lower value customer wants a room then you can simply price the room higher for them to ensure you get the same overall margin return from the customer (and the room).

Price discrimination is a really interesting concept and one most retailers would love - being able to price items individually based on what a customer is prepared to pay for the item - in essence maximising reach and margins.

This practice is quite common in some industries today such as airlines and hotels through yield management strategies and results in customers self selecting whether they are prepared to pay that price or not.  However this still isn't personalised pricing based on the profile of the customer.

A recent blog article discussed the topic of price discrimination and highlighted two recent studies into the practice that found no real evidence that it was happening in online retail - at least not on a per customer basis.

One of the reasons for this is that price discrimination can create negative publicity.   It doesn't seem fair if two different customers pay different prices for the same item, simply because one is "willing" to pay more for it.  There has been no additional value provided and from the customers perspective, no additional costs incurred for delivering it.

In fact, in the US, where retailer Staples was highlighted as using price discrimination based largely on a customers proximity to a competitors store, the customers affected said "I think it's very discriminatory", questioning, "How can they get away with that?".

Ways around this are to keep the headline price fixed and vary benefits and offers instead.  Coupons for example provide a means for retailers and manufactures to lower the price for those customers who are sensitive to it and yet maintain the premium for those who are not.

Loyalty points are obviously another key mechanic in positive price discrimination in that the same price is paid for the goods, but customers are given different levels of deferred discount as expressed through loyalty points depending on their membership of the programme and potentially their tier.

From a customer perspective, loyalty points are not seen as a cost or as part of the price they pay, they are seen as a reward.  I could pay the same price for the same item as another customer, but I wouldn't typically complain if the other customer earned double points on that purchase.

Increasingly though, where real value can be achieved for a retailer is through a combination of loyalty and coupons.  Using customer purchase behaviour derived from the loyalty programme allows for targeted couponing to reward and shift individual consumer behaviour.

The sticker price stays the same, but price discrimination on a customer by customer basis is alive and kicking.

As recent article in Forbes magazine discussed the emergence of individualised coupons and how they enable price discrimination saying:-

"Coupons are psychological, and that’s why they succeed so much. They are designed for the store’s benefit in profit, but they achieve this by making the customer feel good about the price they “scored.” [...]  With individualized coupons, we’re allowing stores to use personal transaction data to make us feel good, in an attempt to subtly modify our spending behavior for the store’s profit"

For ecnomists, price discrimination creates an almost perfect market where every customer gets the product they want for the price they feel it is worth.  There is nothing wrong with treating different customers differently and there is nothing wrong with recognising those customers who add more value to your business.

Whilst nothing is perfect and some would argue that rewarding one group is done at the expense of another, using loyalty in combination with targeted offers provides a powerful way for retailers to maximise margins, recognise customers and change consumer behaviour.  

Personalised pricing just got a lot easier to implement and loyalty is right at the heart of it!

Thursday 3 January 2013

Whats next for loyalty in 2013

What's my prediction for the big thing in loyalty in 2013? Two words...

User Experience

Increasingly the way we do things has changed.  Smartphones have enabled us to find "an app for that" and those apps are getting better and more easy to use with every release.

This is not just about design or how it looks - it's truly about the overall interaction.

Yahoo get this.  When recently hiring ex-Google team member Marissa Mayer, Yahoo! co-founder David Filo said

"Marissa is a well-known, visionary leader in user experience and product design and one of Silicon Valley's most exciting strategists in technology development" going on to say "[the appointment] signals a renewed focus on product innovation to drive user experience and advertising revenue for one of the world's largest consumer Internet brands"

Microsoft also get this with the recent release of their Metro interface across platforms for Windows 8 showing how user experience is now front and centre of their operating systems.


Although Apple is lauded for it's hardware design, any user of it's software knows that this design doesn't always flow through everything they do.  Indeed, Bill Flora, one of the designers on the early prototypes for the Microsoft Metro interface is quoted as saying:-

"I have found their hardware to be amazing and sophisticated, and I have found their software to be kind of old school"

Apple know this and with the recent shake-up, Jony Ive, the man behind the iMac, iPhone and IPad hardware will now also be looking after human interface design and you can bet that's going to give a real shake-up to the overall iOS user experience.

A designer working at apple is quoted as saying:-

"You can be sure that the next generation of iOS and OS X will have Jony’s industrial design aesthetic all over them"

User experience is important in all interactions, it's not just about online or digital experiences.  Take a look at the humble POS receipt below and how this has been reimagined both visually and for the enhancements it makes to the overall user experience:-



Created by design consultancy BERG, this is a great example of how an everyday customer interaction can be completely transformed.

Earlier in 2012, Kickstarter project Mail Pilot successfully secured their funding from over 1,600 backers for their redesign of email claiming "Email is in need of a fresh start.  A redesign from the ground up.. [Mail Pilot] intuitively works the way you've always wanted to use email"


This is the real essence of user experience design, creating interactions and user experiences based on what users and customers want to do and making that easier for them.

Within loyalty, when we talk about terms like gamification and how these are changing the face of loyalty, most commentary is about the mechanics.  However what gamification is really doing is improving the user experience.  It's making loyalty programmes more responsive, giving users feedback on what they've done, what other users like them have done and providing easy to interpret pointers about what to do next.

We increasingly rely on real-time feedback to understand when something has happened,  whether thats a button depressing when clicked or a screen moving when dragged.  If we didn't see things change in real-time with our actions and gestures we'd be unsure as to whether the application had interpreted our request and may try again.  Either way, if we didn't get feedback we'd eventually just give up.

The same is true within our marketing programmes.  Increasingly the user experience is what sets us apart from competitors.  Making things easy, engaging, responsive, fun and useful is critical.  

This is something i'd previously spoken about back in September when looking at how Pinterest was creating loyalty and longer engagement through immersive discovery and basically, a great user experience.  It's also something that we're increasingly seeing creep into B2B interactions as evidenced by CBA with their Pi payments solution.

One of the clear leaders in this area last year however has to be PayPal and their re-imagining of how customers interact with money and the development of a solution for the PayPal Digital Wallet that works the way customers think, not the way banks do. 

I think 2013 is when we'll see the real battle lines being drawn based on user experience and how this sets the leaders apart from the laggards.