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.