tag:blogger.com,1999:blog-73169547819339369832024-03-27T03:01:09.294-07:00Loyalty Marketing Blog - Sage WordsLoyalty Marketing thoughts and musingsMark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.comBlogger186125tag:blogger.com,1999:blog-7316954781933936983.post-22597123028367310372015-12-14T02:16:00.001-08:002015-12-14T02:16:52.371-08:005 Lessons to learn from Woolworths loyalty meltdown<p><img style="float: right;" title="woolworthsrewards.jpg" src="https://lh3.googleusercontent.com/-2XyRDWklqLQ/Vm6XDwAEU_I/AAAAAAAAA0c/y2CLn5o6eJ8/woolworthsrewards.jpg?imgmax=800" alt="Woolworthsrewards" width="325" height="183" border="0" /></p>
<p>What a difference a month makes in the world of loyalty.</p>
<p>Back in October, Australian grocery retailer Woolworths announced the relaunch of their loyalty program and its transformation from the points based “Everyday Rewards” scheme to a new cash back scheme called “Woolworths Rewards”.</p>
<p>The press latched on the the headline grabbing earn rates with the Daily Telegraph <a href="http://www.dailytelegraph.com.au/business/companies/woolworths-ditches-qantas-rewards-tie-up-as-shoppers-complain-of-points-fatigue/story-fnkjkokq-1227581485265">reporting</a> that "typical members spending $108 per week will earn $10 off their shopping in just over seven weeks” and citing Woolworths research that stated that "68 per cent of customers wanted money off their shopping compared with just nine per cent who preferred a traditional points-based scheme"</p>
<p>The Sydney Morning Herald was <a href="http://www.smh.com.au/business/retail/woolworths-new-loyalty-scheme-a-better-deal-but-unlikely-to-win-new-customers-20151026-gkiwit.html">reporting</a> that “a typical shopper will save about $1.25 for every they $100 spend under the new scheme"</p>
<p>Then came the program launch.</p>
<p>Within days, customers were providing their real thoughts about the scheme and they weren't quite as rosey. Social media was buzzing with customers <a href="http://www.smartcompany.com.au/marketing/49324-woolworths-new-loyalty-program-slammed-as-a-waste-of-time-by-social-media-users.html">reportedly</a> saying :-</p>
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<p>“As a family we would spend roughly $500 a week with you, the frequent flyer points would cover a couple of trips to Brisbane a year to see family and specialists. Please don’t tell me this new system is going to benefit me because it is not true” [Kate Rogers - Twitter]</p>
<p>“Well done Woolies, you are about to lose yet another loyal customer…… your new “rewards” program is rubbish!!!” [Anthea Kinsman - Twitter]</p>
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<p>Facebook user Scott Mate <a href="https://www.facebook.com/photo.php?fbid=952523254810191&set=o.147632815308858&type=3&theater">posted</a> his thoughts on the scheme and clearly struck a cord as the post went viral on Facebook, attracting over 58,000 likes and over 5,000 shares. Scott described his experience saying:-</p>
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<p>"I've had the new upgraded "REWARDS" for now a few weeks and have earned a whopping accumulation saving of $4.80 on an amount of shopping in excess of $1000.00.... ( previous returns of 80+ dollars.). Sadly your little orange tag sales items ( That the new card now totally depends on .) just don't cut it, cause they're now less common than hens teeth, unicorn horns and rocking horse poop" </p>
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<p>Not only was this post shared by other Facebook users, but it was then picked up by the media with news.com.au reporting "<a href="http://www.news.com.au/finance/business/retail/woolworths-rewards-card-rant-goes-viral/news-story/084f4f2ae47feff7614a88fa07f655c5">Woolworths Rewards card rant goes viral</a>” and the Sydney Morning Herald saying "<a href="http://www.smh.com.au/business/retail/dont-like-woolworths-rewards-card-fails-the-social-media-test-20151208-gliy95.html">Don't like: Woolworths Rewards card fails the social media test</a>”. Scott even got interviewed on the <a href="http://www.9jumpin.com.au/show/today/">Today</a> program about his feelings on the new Woolies loyalty scheme.</p>
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<p>Keen to control the fallout from this, Woolworths are now <a href="http://www.smh.com.au/business/retail/woolworths-still-in-talks-with-qantas-as-rewards-are-rejigged-20151213-glmnct.html">reportedly</a> looking to re-introduce Qantas frequent flyer points as a reward option and provide more stickered product to give customers a fighting chance of actually earning some value on their shop. </p>
<p>This could be a very expensive mistake for Woolworths, not only because of the lost customer engagement but also because<a href="http://www.smh.com.au/business/retail/woolworths-loyalty-program-to-cost-508-million-a-year-says-deutsche-bank-20151026-gkid73.html"> analysts are estimating</a> that this new scheme could cost up to $500m per year to run compared to an estimated $60m-$80m for the previous scheme.</p>
<p>Despite the obvious challenges this is causing for Woolworths presently, there are actually some interesting lessons to learn from this for loyalty marketers. </p>
<p><strong>1. You need to deliver on the promise</strong> - The Woolworths program <a href="http://www.woolworthsrewards.com.au/home/">launch materials</a> were very slick and they had a great customer proposition. You can argue as to whether cash back and discounts are as motivating as points, but compared to other schemes in market, the Woolworths proposition was clean and simple with the strap line “Money off your shopping? How refreshingly simple.”.</p>
<p>The issue here though was in the delivery of the scheme and how what the marketers had designed on paper wasn’t being executed in practice operationally. Customers could only earn cash back on products with an orange sticker but these stickers were hard to find with one <a href="http://www.smh.com.au/business/retail/woolworths-still-in-talks-with-qantas-as-rewards-are-rejigged-20151213-glmnct.html">article</a> saying:-</p>
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<p>A trip to a full-format Woolworths supermarket in Sydney on Sunday found fewer than 20 products marked with orange Woolworths Rewards tickets – well below the 500 products Woolworths claims are participating in the program</p>
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<p>Quite literally like “hens teeth, unicorn horns and rocking horse poop” - the scheme failed to deliver on the promise.</p>
<p><strong>2. You need to link customer actions</strong> - I’ve previously <a href="http://www.marksage.net/2015/01/loyalty-building-better-mousetrap.html">written</a> about how to build a better mousetrap when it comes to loyalty - about how a loyalty program needs to tap into reinforcement schedules to create sticky, repeat behaviours. In this respect, the Woolworths loyalty program falls at the first hurdle. The most basic reinforcement schedule is that of continuous reinforcement which is defined as the constant delivery of reinforcement for an action; every time a specific action is performed, the subject instantly and always receives a reinforcement.</p>
<p>Due to the nature of the Woolies program design, not every purchase counts and in many cases, not every visit counts. Customers don’t get that constant reinforcement and so quickly become “extinct” in the scheme. This is basic loyalty 101 in program design, that customers need to have one action linked to another and in this respect the Woolworths scheme really doesn’t deliver.</p>
<p><strong>3. Good loyalty design is about reducing friction</strong> - The point of a loyalty program is to get to know your customers and the point of getting to know your customers is to help reduce friction in the relationship - to make it easier for the customer to do business with you than with your competitors. For the Woolworths scheme, they’ve actually managed to dial up the friction and make it harder for customers to do business with them. </p>
<p>By creating a scheme relying on stickered product, Woolworths are making customers search out the deals in-store; they are making the customer work hard to get a reward. Worse still, the orange loyalty stickers are not the only game in town - Woolworths have a number of product shelf stickers which makes the whole experience even more visually challenging.</p>
<p><strong>4. Rewards need to be emotional, not transactional</strong> - Many of the comments from disgruntled Woolies customers talk about the “value” of the reward they had previously such as how the program enabled a "couple of trips to Brisbane a year to see family…”. This link between their mundane shopping - something that has to be done - and the more emotional and aspirational aspects of visiting family in far flung corners cannot so easily be quantified.</p>
<p>As a recent article from pre-paid card specialist Blackhawk entitled “<a href="http://www.bhengagement.com/want-more-customer-loyalty-let-them-savor-your-rewards/">Want More Customer Loyalty? Let Them Savor Your Rewards</a>” points out, “as a general rule, cash costs more and does less to motivate consumer behavior than non-cash rewards”.</p>
<p>Wharton marketing professor Xavier Druze, having researched different types of loyalty rewards <a href="http://www.forbes.com/2007/01/02/frequent-flyer-miles-ent-sales-cx_kw_0102whartonloyalty.html">concludes</a> “You would think that if people were offered money and miles, they would always take the money, but a lot of people want the miles instead. [..] Their feeling is, ‘Money is only money, and if I take money instead of miles, I’ll just use the money to pay a bill.’ There’s nothing special about paying a bill. But when they take frequent-filer miles as a reward instead of cash, they will use them to take trips, and that gives them memories. That makes the miles special."</p>
<p>Within a loyalty program, we’re not looking for the logical choice, we’re looking for the emotional one - the one that connects with the customer. A reward program needs to feel like a reward and not a discount and needs to tap into the <a href="http://www.marksage.net/2012/09/do-loyalty-points-kill-relationship.html">emotional and not the transactional</a>.</p>
<p><strong>5. Need to put the customer at the heart</strong> - The Woolworths scheme is clearly personalised around Woolworths needs and not the customers. </p>
<p>As there is no "always on” earn mechanic - no continuous reinforcement - the customer must find the products that Woolworths wants them to buy. These products are personalised to Woolworths needs such as products they want to shift or where the manufacturer is funding the offer and so this means the offer has little to no resonance with the customer. Sure Woolworths can send individualised offers to a member for specific bonus earn on products they may actually want to buy, but these offers will only work if the customer is bought into the currency in the beginning.</p>
<p>By not putting the customer at the heart of the core scheme, Woolworths have simply lost the customer engagement and worse still, have triggered their ire.</p>
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<p>I’m quite sure Woolworths will ride out this storm and the program will evolve into something a little more engaging and a little more rewarding. However the price Woolworths have paid for poor loyalty design could have a lasting impact on both their brand and customer engagement.</p>
<p> </p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com23tag:blogger.com,1999:blog-7316954781933936983.post-90977254026983525242015-08-13T03:22:00.002-07:002015-08-13T03:23:59.512-07:00Enhancing digital coupon recall and usage<div class="separator" style="clear: both; text-align: center;">
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If asked, could you draw the Apple logo unaided? </div>
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Can you remember all it’s simple features? Is there a leaf or not? Is there a bite out of it? Which side?</div>
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Given the ubiquity of the logo on our devices and in the media, many of us would be fairly confident we could create a reasonable facsimile of the logo.</div>
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Researchers however put this to the test - or more accurately, put their participants memory to the test - and as expected, most participants were confident of their ability before starting out. However the <a data-mce-href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCEQFjAAahUKEwiNgce84aPHAhVpCNsKHZ2bDO8&url=http%3A%2F%2Fcastel.psych.ucla.edu%2Fpapers%2FApple_BlakeNazarianCastel_QJEP_in%2520press.pdf&ei=DVnLVc3GDOmQ7Aadt7L4Dg&usg=AFQjCNHGy2JHYTriemE2i1x-X6njov5JWg&bvm=bv.99804247,d.ZGU" href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCEQFjAAahUKEwiNgce84aPHAhVpCNsKHZ2bDO8&url=http%3A%2F%2Fcastel.psych.ucla.edu%2Fpapers%2FApple_BlakeNazarianCastel_QJEP_in%2520press.pdf&ei=DVnLVc3GDOmQ7Aadt7L4Dg&usg=AFQjCNHGy2JHYTriemE2i1x-X6njov5JWg&bvm=bv.99804247,d.ZGU">research</a> showed that despite this confidence, only 1 in 85 actually got all aspects of the logo correct and less than 50% managed to correctly identify the logo when presented with a number of alternatives.</div>
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So, despite seeing it every day, we don’t really “see it” - we haven’t really committed it to memory sufficiently that we can recall its detail. Remembering a logo is one thing, but what if we need to remember something more important.</div>
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<strong>From a marketing perspective, one of the most important things we need is for consumers to “remember to remember”</strong>. </div>
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We’ve created the perfect conditions for the consumer to form an intent, we just now need them to carry that intent out at some future date. We’re essentially relying on the consumers memory to prompt them at the right time; whether that’s to further research the purchase or to actually go on to buy it.</div>
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This ability to remember to remember is termed <a data-mce-href="https://en.wikipedia.org/wiki/Prospective_memory" href="https://en.wikipedia.org/wiki/Prospective_memory">prospective memory</a> and is basically defined as <em>where an individual intends to perform an action at a later time</em>. This could be an event based prospective memory such as "give a message to a friend at the next meeting” or could be time based such as "remember to go to the dentist at 10am on Friday”.</div>
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As marketers, we rely on a consumers prospective memory for the call to action to be executed and unfortunately we're relying on something that is extremely fallible. </div>
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Despite our reliance on this prospective memory, there has been little understanding of how it works or how it could be improved. This is changing though and in recent years there has been a real surge in research studies around prospective memory - and this couldn’t come at a better time.</div>
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<strong>With the ever increasing transition of marketing from paper based coupons to digital, we are potentially removing an important aide to memory recall.</strong></div>
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One of the key parts of prospective memory recall has been found to be a <a data-mce-href="https://books.google.co.uk/books?id=f7p_nbo40IAC&pg=PA239&lpg=PA239&dq=target+cue+memory&source=bl&ots=kAWWXc23er&sig=ZAWaxcn8lqeq1DZFuc4ymICXzYk&hl=en&sa=X&ved=0CEoQ6AEwBWoVChMI-4nN8-ujxwIVg27bCh0wZwDJ#v=onepage&q=target%20cue%20memory&f=false" href="https://books.google.co.uk/books?id=f7p_nbo40IAC&pg=PA239&lpg=PA239&dq=target+cue+memory&source=bl&ots=kAWWXc23er&sig=ZAWaxcn8lqeq1DZFuc4ymICXzYk&hl=en&sa=X&ved=0CEoQ6AEwBWoVChMI-4nN8-ujxwIVg27bCh0wZwDJ#v=onepage&q=target%20cue%20memory&f=false">target cue</a>. Using the example of a grocery coupon, where the consumer has seen the offer and made a decision to take up the offer they would traditionally have taken the paper coupon and put it somewhere to act as a cue when at some point later they went shopping. This may have been within their wallet or purse or next to their shopping list. The point is, the physical coupon would have acted as a target cue to trigger the intention at the point it was required.</div>
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As coupons move digital however, it’s very easy to browse offers in an email or via an app and select which ones you intend to take up, but then the offer is gone; the email disappears or the app remains unopened. For these digital offers, we’re relying on the prospective memory of the consumer to help them remember they signed up to the offer and to then go on to purchase the product at some point in the near future.</div>
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There could still be a target cue - the event of shopping - but even then, if they have signed up to a number of offers, how likely is it that each offer will be remembered. At this point we’re then relying on the target cue of the product itself - when (if) they see it and that they remember it’s on offer.</div>
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<strong>We’re putting a lot of pressure on someones prospective memory - to recall they have signed up to offers and to then recall what offers they have signed up to</strong>.</div>
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So how can we counter this to ensure we more fully link the intent to take up the offer with the activity of shopping.</div>
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Well this is potentially a two step process:-</div>
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<li>First - We need to get the consumer to remember to check for offers so that they can be reminded of which products to look for. </li>
<li>Second - We need to get consumers to do this every time the shop - we need it to become habitual.</li>
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It makes sense to start with the second step first as this is the end state we want. Essentially, we want the process of checking for offers to become habitual for the customer. When an activity is habitual we don’t think about it directly, it’s just linked into a wider script we have for the parent task.</div>
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As an example, when we drive a car, we don’t have to remember to put the key into the ignition or make sure the gear is in neutral, we just do this automatically. This task is not being held in prospective memory; we don’t have to remember it. Getting the use of offers routine then and linked into the wider task can help it to become habitual and move it from something that needs to be specifically remembered to something that simply gets done. Checking the offers available/opted into then allows individual product offers to provide a reminder - a target cue - which can help to prompt the consumer to find and select the product.</div>
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Before this can become an habitual activity however, we need the consumer to start doing it and remember to continue to do it. This essentially relies on prospective memory, with the consumer forming an intent to check the offers when they go shopping and to then actually carry this out.</div>
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<strong>Anything we can do to help strengthen activation of a prospective memory will be key to helping to turn the task into something that becomes habitual.</strong></div>
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One approach that researches have showed works well is when people form <a data-mce-href="https://en.wikipedia.org/wiki/Implementation_intention" href="https://en.wikipedia.org/wiki/Implementation_intention">implementation intentions</a>. This involves identifying when and where they will execute the intention and what cues will be present - basically visualising themselves carrying out the task.</div>
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The <a data-mce-href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCYQFjAAahUKEwib7v-j7aPHAhXjFNsKHZC1CPg&url=http%3A%2F%2Fhumanfactors.arc.nasa.gov%2Fflightcognition%2FPublications%2FDismukes_Remembrance_28Jan10.pdf&ei=bmXLVZv_OOOp7AaQ66LADw&usg=AFQjCNHdntz7johWNNbexlZh5kFqWhwT2Q&bvm=bv.99804247,d.ZGU" href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCYQFjAAahUKEwib7v-j7aPHAhXjFNsKHZC1CPg&url=http%3A%2F%2Fhumanfactors.arc.nasa.gov%2Fflightcognition%2FPublications%2FDismukes_Remembrance_28Jan10.pdf&ei=bmXLVZv_OOOp7AaQ66LADw&usg=AFQjCNHdntz7johWNNbexlZh5kFqWhwT2Q&bvm=bv.99804247,d.ZGU">research</a> also shows that people better remember to perform a delayed task when the target cue (the trigger) is encountered in the context of an ongoing task associated with the delayed intention than when the cue is encountered in a different context. To put it another way, someone trying to remember to use a grocery product coupon will be more likely to recall the offer when in the supermarket - if this was the implementation intention - than when they see the product in their cupboard at home. </div>
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The real trick here is what is termed the <a data-mce-href="https://en.wikipedia.org/wiki/Encoding_(memory)" href="https://en.wikipedia.org/wiki/Encoding_(memory)">encoding</a> - ensuring that the thing to remember (the offer) was specifically linked to the right target cue (being in the supermarket) and to the time (when you plan to shop). </div>
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<strong>Encoding implementation intentions has been shown to improve prospective memory performance substantially - between 2-4x - so this works.</strong></div>
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This linking of prospective memory intentions into a wider task can also help them to become habitual as it ties them to the bigger task such as grocery shopping which is much easier to remember due to more obvious target cues (i.e. empty cupboards!!)</div>
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Thinking about the issue with digital offers, it may well be good practice to not only allow someone to indicate their intention to take up the offers, but also to indicate when they will do it. This could involve them flagging a likely location for the shop and a date when they may carry this out - forming an implementation intention for checking offers and linking it to a wider task of grocery shopping.</div>
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Doing this would also have the added advantage of allowing us to switch the prospective memory task from being an event based one (going shopping), for which we can’t influence the trigger cues, to a time based one which we can. For example, knowing the intended date and time of the shop we could use an additional target cue such as adding a diary reminder to flag up at the agreed time as well as a location based notification when the customer is in the vicinity of the selected store at the appointed time.</div>
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<strong>Strong target cues which we can control also help to overcome another weakness within prospective remembering - which is that prospective memory is typically impaired when the current task is demanding.</strong> </div>
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So if someone is busy doing something requiring a lot of memory based thinking, then it is less likely they will remember an intended action unless the target cue is highly salient. Using the context of remembering a grocery offer, you could argue that the mere act of grocery shopping in a busy store with kids in tow is a taxing enough task on its own - trying to remember something that was on offer to you 5 days before will be less likely. However, using time and location based notifications which are closely linked to the broader task of shopping makes it more likely that the intended task - using offers - will be remembered.</div>
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Retrieval of the intended task is also interesting as its not just triggered based on target cues - although these are shown to be very powerful. </div>
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Interestingly, in one study by <a data-mce-href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCEQFjAAahUKEwjWqLS_-KPHAhXEp9sKHXA6D4I&url=https%3A%2F%2Fuhra.herts.ac.uk%2Fbitstream%2Fhandle%2F2299%2F1969%2F103120.pdf%3Fsequence%3D1&ei=MXHLVZbMDMTP7gbw9LyQCA&v6u=https%3A%2F%2Fs-v6exp1-ds.metric.gstatic.com%2Fgen_204%3Fip%3D195.110.73.100%26ts%3D1439395709352899%26auth%3D2gouq553dtfn4lsfazgwcfypghas2dtr%26rndm%3D0.1300762603059411&v6s=1&v6t=472680&usg=AFQjCNHc5cUBsKrJM-HvCo11q6omlD0oKg&bvm=bv.99804247,d.ZGU" href="https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCEQFjAAahUKEwjWqLS_-KPHAhXEp9sKHXA6D4I&url=https%3A%2F%2Fuhra.herts.ac.uk%2Fbitstream%2Fhandle%2F2299%2F1969%2F103120.pdf%3Fsequence%3D1&ei=MXHLVZbMDMTP7gbw9LyQCA&v6u=https%3A%2F%2Fs-v6exp1-ds.metric.gstatic.com%2Fgen_204%3Fip%3D195.110.73.100%26ts%3D1439395709352899%26auth%3D2gouq553dtfn4lsfazgwcfypghas2dtr%26rndm%3D0.1300762603059411&v6s=1&v6t=472680&usg=AFQjCNHc5cUBsKrJM-HvCo11q6omlD0oKg&bvm=bv.99804247,d.ZGU">Kvavilashvili and Fisher</a> (2007), they found that when participants were given a task of phoning the researchers back the following week, the participants typically recalled that task over the week around 8-11 times. Many times this recall was found to be associated with trigger cues related to the task such as seeing a telephone. However, more interestingly, around 40-50% of recollections were completely untriggered - they just popped into the participants head.</div>
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<strong>Knowing we recall an intention 8-10 times before its intended implementation could be a useful characteristic if directly catered for within a digital offers solution.</strong></div>
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If consumers will randomly remember the need to check for offers a number times during the week, it may be possible to include functionality to reward this recall. </div>
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For example, building in a “need” to review offers in the app - maybe to check for changes such as a better offer - could create a reason to check the offers regularly, helping to reinforce them and also ensuring that any date/time based implementation intention is still correct.</div>
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This whole area of prospective memory is still an emerging research area with differences of opinion as to exactly how we remember things and how this could be improved. That said, given our increased reliance on the consumers memory as we remove physical target cues, combined with our ability to intelligently create new, highly relevant ones suggests this is an area we should pay more attention to as marketers.</div>
Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com25tag:blogger.com,1999:blog-7316954781933936983.post-70446979076732259302015-04-11T10:36:00.001-07:002015-04-11T10:36:41.987-07:00Periscope and Meerkat lead the way on creating a new kind of shared experience<p><img style="float: right;" title="kindletechsupport.jpg" src="http://lh4.ggpht.com/-3ZVxxfZPlAc/VSlbpY6BdRI/AAAAAAAAAyU/FbZC5DG6Vww/kindletechsupport.jpg?imgmax=800" alt="Kindletechsupport" width="150" height="145" border="0" /></p>
<p>"What if you could see through the eyes of a protester in Ukraine? Or watch the sunrise from a hot-air balloon in Cappadocia? It may sound crazy, but we wanted to build the closest thing to teleportation."</p>
<p>Rather poetically (and much quoted), this is how new live video streaming app provider <a href="https://www.periscope.tv">Periscope</a> describe their service - one of two new high profile launches of live video streaming apps with the other being <a href="http://meerkatapp.co">Meerkat</a>.</p>
<p>This is not a new market, apps such as <a href="https://livestream.com">LiveStream</a> and <a href="http://www.ustream.tv">UStream</a> have been around for a while. However, with increasing 4G coverage and investment from the likes of Twitter (they recently <a href="http://www.wsj.com/articles/twitter-acquires-live-video-streaming-startup-periscope-1425938498">purchased</a> Periscope for just under $100m 2 weeks after it launched), this sector is hotting up as the next big thing.</p>
<p>Meerkat founder <a href="https://twitter.com/benrbn">Ben Rubin</a> describes the trend as "spontaneous togetherness” and this to me is the most interesting aspect of it.</p>
<p>In a media world where everything is available at the touch of a button; TV can be paused and rewound; films are available on demand (and sometimes before they're even in the cinema); the “magic” of TV has been lost. That shared experience we used to have when a new TV show aired is increasingly becoming extinct. With so much choice, technology and platforms, people are watching it at different times or even not watching it at all.</p>
<p><strong>Indeed, if you’re in the Millennial Generation, there’s a good chance you never even tuned in. </strong> </p>
<p>Something that hasn’t really made the headlines, is that in 2015 there has been a double digit decline in traditional TV viewing for millennials (18-34). This has been happening since 2012 with a fall of around 4 percent year on year. However at the end of 2014 this fell an amazing 10.6 percent. Overall this has translated as almost 20% fewer young adults watching traditional TV than 4 years ago.</p>
<p>Alan Wurtzel, NBCUniversal’s audience research chief is <a href="http://nypost.com/2015/02/16/millenials-ditching-their-tv-sets-at-a-record-rate/">quoted</a> as saying:-</p>
<blockquote>
<p>“The change in behavior is stunning. The use of streaming and smartphones just year-on-year is double-digit increases […] I’ve never seen that kind of change in behavior.”</p>
</blockquote>
<p>This doesn’t mean of course that they’re not watching video content, it’s just not the content that the media industry wants them to watch. Instead, they are <a href="http://www.defymedia.com/2015/03/03/millennials-ages-13-24-declare-just-cord-tv-content-doesnt-cut/">reportedly</a> watching 11.3 hours of “free” online video per week and interestingly the major ways young people are selecting online content to watch is based firstly on content that has been viewed/liked by a lot of people (59%) and secondly content that was sent by “someone I respect” (58%). </p>
<p><strong>So no surprise - peoples viewing habits are now more likely to be influenced by their personal social network.</strong></p>
<p>This is where both Periscope of Meerkat have a distinct advantage. They both tie into twitter as a means of making people aware of live broadcasts and given that tweets are heavily influenced by the people you’ve chosen to follow, these broadcasts are more likely to be relevant to the viewers.</p>
<p>But it goes further than this. These are not static video feeds like you see on Youtube, instead the audience is positively encouraged to participate, to help direct the production. </p>
<p>In an article on the Verge they <a href="http://www.theverge.com/2015/3/9/8164893/meerkat-live-video-streaming-twitter-yevvo-periscope">reported</a> that "In their early tests [of Meerkat], they found something delightful in the interactions between the broadcaster and their audience: the audience always wound up helping direct the broadcast with their comments, to the general enjoyment of everyone involved”… and this is where the “spontaneous togetherness” comes in.</p>
<p>There is something powerful about being in the moment; this ephemeral experience which can only happen at that time, which places you at the centre of the action, allows you to take part and which happens within your social network - this could be a truly compelling mix.</p>
<p>Having played with Periscope, it’s funny how much it differs from a traditional pre-recorded video stream. Even when the <a href="http://www.huffingtonpost.co.uk/2014/12/17/25-vloggers-under-25-who-are-owning-the-world-of-youtube_n_6340280.html">vloggers</a> have created tailored content for their audience and speak to them like a personal friend, its still not as compelling as actually being in the moment.</p>
<p><strong>It’s like we’ve gone back to that shared experience, but at a hyper relevant level.</strong></p>
<p>So whats the implications for loyalty marketing? Well I’ve no doubt that marketers generally will find ways to create “brand engagement” and “brand experiences” through live videos - whether product launches, celebrity moments or just regular brand ambassadors creating content to watch and interact with.</p>
<p>What I think will be interesting though is if that personal connection - that in the moment experience - becomes as common place as the Facebook wall-post or the Tweet. If that happens, people are going to have greater expectations of their interactions, whether personal or business. Imagine what online banking looks like through live video streaming or being able to access customer service at your online retailer through video.</p>
<p>In fact, stop imagining it as that’s what Amazon has already done with it’s <a href="http://www.amazon.co.uk/gp/help/customer/display.html?nodeId=201540070">Mayday button</a> on the Kindle Fire, launched in late 2013.</p>
<p><a href="http://www.theverge.com/2013/9/25/4766878/jeff-bezos-interview-amazon-kindle-hdx">Described</a> by CEO Jeff Bezos as “the greatest feature we’ve ever made”, they may truly have hit on something at the beginning of a new trend. As consumers are conditioned by apps like Periscope and Meerkat to want “real” connections, you can imagine them increasingly seeking out brands that provide a similar experience.</p>
<p>Amazon is <a href="http://www.businessinsider.com/amazons-mayday-button-hilarious-uses-2014-6?IR=T">reportedly</a> fielding 75% of questions from Kindle Fire customers through Mayday with questions ranging from how to beat a level on Angry Birds to singing Happy Birthday to a new Kindle Fire owner.</p>
<p>Loyalty is all about customer experience and it would seem that what Periscope, Meerkat (and Amazon) are showing is that a new kind of customer experience can be created. One centred around real moments of truth in real time.</p>
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<p> </p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com35tag:blogger.com,1999:blog-7316954781933936983.post-43339834819448971992015-01-13T14:51:00.001-08:002015-01-13T14:51:47.359-08:00Loyalty - Building a better mousetrap<p><img style="float: right;" title="gray-mouse-cheese-13952547.jpg" src="http://lh4.ggpht.com/-dOSHcm2O1X4/VLWhgEnCUNI/AAAAAAAAAx0/YCVNo7gJsh8/gray-mouse-cheese-13952547.jpg?imgmax=800" alt="Gray mouse cheese 13952547" width="150" height="225" border="0" /></p>
<p>Ask someone how many loyalty programs they are a member of and they can probably name 3 or 4 big programs they use regularly. However, in the US, loyalty program membership is now over 23 per household and between 2008 and 2012 it grew by 10 percent per year. These are great numbers until you realise that only around 1/3 of these memberships are being actively used.</p>
<p>More worryingly, a <a href="http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0CCgQFjAB&url=http%3A%2F%2Fwww.mckinsey.com%2F~%2Fmedia%2Fmckinsey%2Fdotcom%2Fclient_service%2Ffinancial%2520services%2Flatest%2520thinking%2Fpayments%2Fmop17_making_loyalty_pay_lessons_from_the_innovators.ashx&ei=5oayVKikMeqy7QaxsYGACQ&usg=AFQjCNHHOoSECsLQ-mU8G1TnnYZvL5Ve-w&bvm=bv.83339334,d.ZGU">study</a> by McKinsey back in 2013 suggested that for many companies, those with loyalty programs actually underperformed vs the market with “loyalty-focused companies surveyed [growing] revenues at a weighted-average rate of 4.4 percent per year – compared to 5.5 percent for companies with lower loyalty focus.”</p>
<p>This doesn’t mean loyalty doesn’t work – it does and McKinsey acknowledge that. What it does mean though is that like anything, there is no quick fix; no silver bullet. A “me too” loyalty program is likely to add little long term value if it isn’t designed well and there are all too many of these in the market.</p>
<p>However, what is interesting is that when talking about what a good loyalty program looks like, the discussion frequently looks at program features like partnerships or reward value without really considering what actually makes a loyalty program work – and why they also fail.</p>
<p><strong>If we can understand what makes someone use and continue to use a loyalty program - what’s going on in their brain - then we can truly design a program that works harder and is more rewarding. As the famous quote says “Build a better mousetrap and the world will beat a path to your door"</strong></p>
<p>A good place to start with this mousetrap is back in the month of May, 1938, in a cold Minnesota that had just experienced one of its heaviest snowfalls ever for that month with over 12 inches of snow falling in just one day. That same month, psychologist B F Skinner published his now famous book called <a href="http://www.amazon.co.uk/gp/product/1583900071/ref=as_li_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=1583900071&linkCode=as2&tag=sagwor-21&linkId=BP54YW7XMZRL5VOK">The Behaviour of Organisms</a> – and it’s that book, published almost 80 years ago which provides some answers as to both why loyalty programs work, and why they don’t.</p>
<p>Before discussing that though, it’s worth also considering something happening in the here and now.</p>
<p>Consider for a moment how often you check your phone for new email or to check your Facebook account. Whatever number you come up with, you’ll probably be way off the mark because half the time, we do it almost on auto-pilot. One <a href="http://www.dailymail.co.uk/sciencetech/article-2783677/How-YOU-look-phone-The-average-user-picks-device-1-500-times-day.html">article</a> suggests we check our phones over 1500 times per week - thats more than once every 5 minutes during waking hours.</p>
<p>It’s not just the checking however, we are also at the beck and call of these devices. </p>
<p>A research <a href="https://dspace.lboro.ac.uk/dspace-jspui/bitstream/2134/489/3/Ease%2525202002%252520Jackson.pdf">study</a> by Loughborough University in the UK found that people, on average, take just 1 minute and 44 seconds to respond to a new email notification - with 70% of these alerts getting a reaction within 6 seconds and 85% within 2 minutes.</p>
<p><strong>We talk about the mobile phone being the remote control of life… it could equally be said that the mobile phone is actually the remote control of us.</strong></p>
<p>What this all means however is that we are essentially re-wiring our brains. Our brains are wired to protect us from danger or to help us survive; when we see something in the corner of our eye we respond. This is known as our orientating responses and these are now constantly being triggered by the ping of a mobile or the flash of a notification meaning we’re becoming ever quicker at responding and anticipating a response.</p>
<p>There is more to this phenomenon however and this is where that cold May in Minnesota comes in. </p>
<p>The book published by B F Skinner introduced the world to the concept of operant conditioning. Simply put, operant conditioning describes any voluntary behaviour that is shaped by its consequences and it implies a creature (including you and I) will repeat an activity that produces positive rewards. Underpinning this operant conditioning are a number of reinforcements which, when repeated, serve to further in-grain the behaviour.</p>
<p>Skinner based his research on observing animals such as rats and pigeons, which when placed into a specific environment (known as the <a href="http://www.simplypsychology.org/operant-conditioning.html">Skinner Box</a>), would carry out a repeated behaviour based on the rewards offered (i.e. press a lever to get food). Using this environment, Skinner was able to vary how and when the reward was delivered in order to measure the ability to influence and maintain ongoing behaviour - called a positive reinforcer.</p>
<p>From this research, Skinner came up with three schedules of reinforcement, defined as continuous, interval and ratio based.</p>
<ul>
<li>Continuous - Defined as a constant delivery of reinforcement for an action; every time a specific action is performed, the subject instantly and always recieves a reinforcement. With this type, the reinforced behaviour is prone to extinction and the behavior can become inconsequential (i.e., producing neither favorable nor unfavorable consequences) and so starts to occur less frequently</li>
<li>Interval - Based on the time intervals between reinforcements. These can be fixed time periods (FI) or variable (VI), with the variable being based on an average time that has passed since the last reinforcement. Both of these are not directly linked to the persons actual behaviour and so typically produce slow, methodical responses.</li>
<li>Ratio - Can be based on the behaviour of the person and be fixed or variable too. The fixed ratio (FR) is based on a specific number of responses (e.g. Coffee Stamp Card), whereas the variable ratio (VR) is based on a particular average number of responses (e.g Slot machines - pays out 10% of the time on average, but there is no guarantee when). </li>
</ul>
<p><img style="display: block; margin-left: auto; margin-right: auto;" title="Schedule_of_reinforcement.png" src="http://lh3.ggpht.com/-x_0s7ID9teg/VLWhfTRgk4I/AAAAAAAAAxs/TyEe24nzUdY/Schedule_of_reinforcement.png?imgmax=800" alt="Schedule of reinforcement" width="300" height="253" border="0" /></p>
<p><strong>It’s these reinforcement schedules that are key to understanding why we’re so quick to react and respond to that email notification - and why some loyalty programs work and others </strong><strong>do not.</strong></p>
<p>Simplistically, where the reinforcement schedule is predictable, whether by being continuous or at set intervals, then the behaviour becomes in Skinners words “extinct” - so its passive and inconsequential and decreases or stops altogether over time. On the other hand, where the reinforcement is on a variable ratio - where both the timing and the value can’t be predicted - then we get the highest rates of response and the the higher the ratio, the higher the response rate tends to be.</p>
<p>In the book <a href="http://www.amazon.co.uk/gp/product/B00INIYHFU/ref=as_li_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=B00INIYHFU&linkCode=as2&tag=sagwor-21&linkId=4Y7VW7VOMJ6WLZQ2">The End of Absence: Reclaiming What We've Lost in a World of Constant Connection</a>, author Michael Harris highlights this saying "Animals, including humans become obsessed with reward systems that only occasionally and randomly give up the goods. We continue the conditioned behaviour for longer when the reward is taken away because surely the sugar lump is coming up next time." This “variable interval reinforcement schedule” is really the critical factor in repeatable, ongoing behaviour.</p>
<p>This outcome can be seen in how we interact with email as discussed previously. One behavioural psychology <a href="http://education-portal.com/academy/lesson/variable-interval-and-the-schedule-of-reinforcement-examples-quiz.html#lesson">training course</a> describes this effect with email saying:-</p>
<blockquote>
<p>"Receiving a message serves as a reinforcer, or reward for, checking. You might check your email at 9:00 a.m. and have 5 new messages, at 11:00 a.m. and have none, and then at 3:00 p.m. and have 7. As long as you periodically continue to receive messages, your checking behavior will continue; however, this behavior can be influenced by the number of messages received. If you don't receive any messages for 5 days, you may check less often. On the contrary, if you receive several messages each time you check your email, you will probably check more often. In this case, your behavior is an effect of variable-interval schedules of reinforcement. You receive a reward (new messages) for a behavior (checking your email), and the reward is presented on a variable schedule (you can't predict when it is coming)."</p>
</blockquote>
<p>This is also something that the gambling industry relies on to keep punters coming. Co-Author of the book <a href="http://www.amazon.co.uk/gp/product/B0043D2EC2/ref=as_li_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=B0043D2EC2&linkCode=as2&tag=sagwor-21&linkId=M4QM64KTYNMUXDXH">Mind Hacks</a> and lecturer at the University of Sheffield, Dr Tom Stafford discusses this saying:-</p>
<blockquote>
<p>"Both slot machines and email follow something called a 'variable interval reinforcement schedule which has been established as the way to train in the strongest habits. This means that rather than reward an action every time it is performed, you reward it sometimes, but not in a predictable way. So with email, usually when I check it there is nothing interesting, but every so often there's something wonderful - an invite out, or maybe some juicy gossip - and I get a reward."</p>
</blockquote>
<p>Another industry that uses Variable Ratio (VR) reinforcement schedules is video gaming. In the research paper “<a href="http://link.springer.com/article/10.1007/s11469-009-9206-4">Video game structural characterisitics - A new psychological taxonomy</a>” it describes how powerful operant conditioning techniques can be for players saying:-</p>
<blockquote>
<p>“Players respond rapidly and persistently to the reward features in video games, such as XP and points, rare items, and meta-game rewards. These features are core components of the variable reinforcement schedule, which is known to create a persistent pattern of responding to a stimulus over time that is resistant to behavioural extinction."</p>
</blockquote>
<p>Video games build on this however using a number of different schedules - continuous, interval and ratio - in a combined way to create what is called a compound schedule which may superimpose two or more different and overlapping schedules to gain maximum effect. Just as a gamer is accomplishing one mission they have already started on another; in this way, using overlapping and compound schedules, game designers keep the players involved which leads to sticky and sometimes "addiction" like behaviours.</p>
<p>In the research study "<a href="https://groups.psychology.org.au/Assets/Files/21(1)-King-Delfabbro.pdf">Understanding and Assisting Excessive Players of Video Games</a>”, authors King and Delfabbro (2009a) found that overlapping quests and objectives (i.e., concurrent schedules of reinforcement) in video games kept players playing for longer periods than games without these features. The report also detailed how the use of VR schedules could also cause game players to carry out behaviours that are repetitive or boring, simply to chase the reward saying:- </p>
<blockquote>
<p> “The variable-ratio reinforcement schedules in video games and participants’ need to complete goals often produced what was termed ‘grinding’ behaviour. Grinding refers to the repetition of an action or series of actions in a video game in order to obtain a reward."</p>
</blockquote>
<p>Speaking about this behaviour, one player stated how he "played the same level 10 times to get the full set of armour. [It] gets frustrating but you have to do it if you want the items"</p>
<p><strong>This is really interesting because it suggests that the power of the right mix of reinforcement schedules can actually mask the more mundane actions required to achieve it.</strong></p>
<p>Whilst people obviously consider themselves unique and with their own individual decision making processes, the reality is that people tend to respond consistently to the same kinds of environment. Keeping with the video game theme, it’s interesting that research has shown that it's more about the design of the game mechanics than the individual gamers characteristics that drives usage. The research paper entitled “<a href="http://www.cyberpsychology.eu/view.php?cisloclanku=2010041401&article=6">The role of Structural Characteristics in Problem Video Game Playing</a>” pointed this out saying:-</p>
<blockquote>
<p>"In particular, ‘structural characteristics’, defined as those features that facilitate the acquisition, development, and maintenance of playing behaviour irrespective of the individual’s psychological, physiological or socioeconomic status, have been shown to play an important role in explaining the appeal of gambling activities."</p>
</blockquote>
<p>Further examining what makes video games “sticky”, the psychology book <a href="http://www.amazon.co.uk/gp/product/0465046096/ref=as_li_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=0465046096&linkCode=as2&tag=sagwor-21&linkId=FHLK5WW65U7VHOJL">Mind at Play</a> by Loftus and Loftus (1983) showed that the appeal of video games was a blend of variable-ratio and fixed-interval schedules which were intended by designers to be “addictive”. They noted that key aspects of this are that players are:-</p>
<ol>
<li>Often reinforced almost immediately for correct play</li>
<li>These rewards for good game play are of large [perceived] magnitude (i.e., the provision of 150 points appearing more significant than 15 points)</li>
<li>Rewarded on numerous concurrent reinforcement schedules</li>
</ol>
<p>So, back to the question at hand - If we can understand what makes someone use and continue to use a loyalty program - like they do a video game - then we can truly design a program that works harder and is more rewarding.</p>
<p>Loyalty programs, in part, already rely on the principle of positive reinforcement whereby when an event or stimulus is presented (e.g. points) as a consequence of a behaviour then the behaviour goes on to increase. It’s this behavioural psychology that underpins much of the change we see within customer loyalty.</p>
<p>However for the majority of loyalty programs, whether explicitly designed in or not, there is only one reinforcement schedule which is the continuous issuance of points in response to a purchase. From the customer perspective, every time I buy I get points which is much the same as the animal in the Skinner box which gets food every time the lever is pressed. </p>
<p><strong>The problem for these loyalty programs is that we already know that this continuous reinforcement schedule is the least likely to result in long term ongoing behaviour - we’re essentially designing in program extinction from the get go.</strong></p>
<p>The second issue is that as previously discussed, our brains are increasingly becoming used to managing constant distraction - honing our orientating responses. In a world where there is always another notification to respond to, another Facebook post to view, another email to read, any loyalty program has got to be able to cut through to compete with this. With so many things fighting for our attention, the larger the gap between the behaviour and the stimulus, the more likely our brain will not link these two activities and the more likely we won’t get the full benefit of this positive reinforcement. </p>
<p>This starts to manifest itself within loyalty program behaviour - customers will typically continue to swipe their card at point of sale because this is a learned (or prompted) behaviour - but it’s done passively. There is no stimulus driving this current behaviour and so its less likely we’re able to influence it at this point in time. Trying to get customers to then change or uplift their actual behaviour doesn’t work because there is no linkage between the behaviour and the reward/stimulus - the behavior has become inconsequential.</p>
<p><strong>To create a loyalty program that works for consumers and works for brands, we have to ensure that the ’structural characteristics’ of the program provide a number of different engagement mechanics - reinforcement schedules - so that we </strong><strong>create a persistent pattern of responding to a stimulus over time that is resistant to behavioural extinction</strong></p>
<p>As the research shows, this behavioural design works in gambling and it works in video games - some would argue it works too well. However there is already evidence that it works within loyalty programs. Some programs that do work well have many of these characteristics with a good blend of compound schedules.</p>
<p>For example, in a classic frequent flyer program there can be a continuous reinforcement schedule around miles earned for flights, but these are overlapped with fixed ratio schedules such as collecting towards tiering and benefits like companion tickets. Whilst these are not necessarily using the most powerful variable ratio (VR) reinforcement schedule, they still manage to engage members through compound reinforcement schedules.</p>
<p>This also brings into focus gamification - that new entrant into loyalty program design - and starts to explain why, when implemented well it can truly accelerate program engagement. Whether expressed as access to time limited deals, unlocking of recognition or achievement of challenges, gamification allows the loyalty marketer to superimpose additional, overlapping reinforcement schedules including variable ratio to gain maximum impact and benefit. This isn’t just theory either - we’ve seen examples of this whereby simply switching a recognition mechanic from a fixed ratio to a variable ratio has resulted in a 33% increase in ongoing usage.</p>
<p>Yet loyalty programs continue to be launched and continue to under perform.</p>
<p>As loyalty marketers its imperative that we understand why loyalty programs work, why consumers respond to them and how to make them work better for all. In the words of B F Skinner “A failure is not always a mistake, it may simply be the best one can do under the circumstance. The real mistake is to stop trying"</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com120tag:blogger.com,1999:blog-7316954781933936983.post-37769614369556270162014-11-16T05:04:00.001-08:002014-11-16T05:04:16.582-08:00Digital - A Coming of Age<p><img style="float: right;" title="141316083_toddler_tablet.jpg" src="http://lh6.ggpht.com/-H_0UvB5xDYc/VGigzNB5zZI/AAAAAAAAAxc/areYaGb-ju0/141316083_toddler_tablet.jpg?imgmax=800" alt="141316083 toddler tablet" width="200" height="240" border="0" /></p>
<p>Within any generation there is always someone who is a link between the old order of things and the new.</p>
<p>We’ve just commemorated 100 years since the First World War started, and for me it feels remote, but real. I didn’t know anyone who served, but my grandparents did who I knew, so I feel a connection. With the Second World War, things are different. When I was 10, I remember celebrating at school 40 years since the end of the war. At 10 that seemed a long way past, but my grandparents served in it and could bring it to life with stories and artefacts. For my kids though, all of this is a fading memory - stories we tell, but it may as well be like the Battle of Waterloo.</p>
<p>This connection between the old order and the new is explored in a book I’m currently reading called <a href="http://www.amazon.co.uk/gp/product/B00INIYHFU/ref=as_li_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=B00INIYHFU&linkCode=as2&tag=sagwor-21&linkId=O5ZM5TUY2KKB5MVA">The End of Absence</a> by Michael Harris. In it, he discusses the time we’re in now and how anyone born after 1985 is essentially a digital native - someone who has never experienced a world without the internet; a world without always on connectivity. For us others - those born before this time - we’re essentially digital immigrants. Describing this group, Harris says:-</p>
<blockquote>
<p>“For those of us who have lived both with and without the vast, crowded connectivity the Internet provides, these are the few days when we can still notice the difference between Before and After […] there’s a single difference that we feel most keenly; and it’s also the difference that future generations find hardest to grasp. That is the end of absence - the loss of lack. The day dreaming silences in our lives are filled; the burning solitudes are extinguished."</p>
</blockquote>
<p>This is thought provoking stuff. Realising that my kids (and a lot of those I now work with), just simply think differently. They’ve never experienced a time when there was genuinely nothing there. No kids telly on, nothing on demand, no chat, no connectedness. When I tell my son to get off his computer, I turn around to see him on his phone. Kick him off his phone and he’s flicked the telly on. It takes real effort to switch everything off so he’ll actually consider walking out the door to call for friends… and then they sit around their house playing Xbox. I tried.</p>
<p>So this got me thinking about the implication of this within the working environment.</p>
<p>For many of us, we work in companies established pre-1985 or staffed with management from before this time. We have computers, tablets and smartphones; intranets, instant messaging and email. We even have social networks for staff, with “friends” and wall posts and “status updates”. We’re thoroughly modern and fill every piece of time, every empty space within some activity. Responding to a ping on the phone, an email arrived - we sit in meetings only half listening as we type on our laptops and then check our phones. This is a state Harris references and one that writer <a href="http://lindastone.net/qa/continuous-partial-attention/">Linda Stone</a> referred to back in 1998 as “continuous partial attention”.</p>
<p>Yet despite this, we’re not as modern as we like to think. </p>
<p>Many companies still have a Digital department of some kind or a Head of Digital role - as if all things digital is somehow separate to what we do. It’s as if we’re in both the Before and the After - one part of the company in the pre-1985, pre-digital age and the other ring-fenced in the digital age. This does some ludicrous and you can’t imagine a company such as Facebook or Google having a Head of Digital role - they are simply digital companies (although strangely they <a href="https://www.linkedin.com/jobs2/view/21762875">do</a>). The point is, the world has changed, people have changed, but the way we do business seems to still be a mismatch of old and new.</p>
<p>This point was brought to life in an article I was reading about airlines entitled <a href="http://mobile.bloomberg.com/news/2014-11-13/passengers-become-data-mines-as-ryanair-to-emirates-hone-offers.html?cmpid=yhoo#">Passengers Become Data Mines as Ryanair to Emirates Hone Offers</a>. In it, Ryanair CEO Michael O’Leary is quoted as saying:-</p>
<blockquote>
<p>"I used to say that my ideal customer had a pulse and a credit card, but I’ve revised that view radically. […] In the next five years, with each of my 90 million customers, I’ll know when you’re traveling, where you’re traveling, and I can send you a direct offer.”</p>
</blockquote>
<p>This shocked me. </p>
<p>We’re in 2014, this is a relatively new airline (setup in the 1980’s) and yet it seemed a surprise to them that there may be value in the data they hold and process for 90m customers. This is though also understandable because companies still aren’t digital natives - they still have their digital marketing and data analysis functions somehow separate to their older, more established traditional sales and marketing functions. They’re an add on or an extension rather just being one single company.</p>
<p>If we go back to <a href="http://en.wikipedia.org/wiki/Marketing_mix">Marketing 101</a> and the 4Ps of the marketing mix we have Product, Place, Price and Promotion - this was something created in the 1960s by marketer Edmund Jerome McCarthy - a set of marketing tools based on the age but which is still taught today. </p>
<p>A company like Ryanair has really focused on these 4P’s - it’s “Price” has been refined by pairing back its “Product". By choosing carefully the airports it uses to get the best rate for a given destination even if it’s not quite the best airport in terms of distance, it has truly honed “Place”. Promotion you could argue has been a mixed affair, but there probably isn’t a person alive in the UK who doesn’t know the airline, it’s CEO and the kind of message he had long stood for (such as <a href="http://www.independent.co.uk/travel/news-and-advice/ryanair-unveils-its-latest-plan-to-save-money-remove-toilets-from-the-plane-2369232.html">removing toilets</a> from planes).</p>
<p>But within this 4Ps mix, there is nothing about the customer. It’s the old world order of making a product people want, at a price they are willing to pay - and then shouting about it loudly in the right places. It’s all push.</p>
<p>Take a look at the new world however through a different lens.</p>
<p>Freemium models support many of the latests products/services, with apps (and some <a href="https://econsultancy.com/blog/63619-how-do-we-bring-the-next-billion-people-online#i.dvou9t115dfs8v">products</a>) giving away their product in the knowledge that they can monetise customers either through targeted advertising or in-app purchases - and this is where data comes into play as a key part of the marketing mix. Even airlines have a form of this with their ancillary services - the basic service is paired right back and then customers are encouraged to top this up with ancillary services as they need - a kind of pick and mix of products. This is all pull. </p>
<p>Speaking of this, CEO O’Leary is quoted as saying:-</p>
<blockquote>
<p>"Ryanair’s data will let the carrier know how often travelers head to particular destinations, whether they travel alone or as a couple or group, if they routinely book insurance or car rental, and be able to customize its offers accordingly and target the passengers with special offers […] We know who you are [and] the clever airlines are going to make a fortune in the next 10 years”</p>
</blockquote>
<p>This thing which will make a fortune is the missing piece - it’s the digital native addition to the marketing mix. It’s the bit about the customer, about what they do and about what they want. </p>
<p>It’s personalisation and it is truly the 5th “P” of the marketing mix. I’m not the <a href="http://books.google.co.uk/books?id=ItTbExD_lgoC&pg=PT143&lpg=PT143&dq=Ps+of+marketing+Personalisation&source=bl&ots=074Qv4HUTR&sig=5Y2AZ_vhbRVmxvrZue52Q1CCeSY&hl=en&sa=X&ei=75ZoVPzZEo7jauCigpgE&ved=0CFQQ6AEwBzgK#v=onepage&q=Ps%20of%20marketing%20Personalisation&f=false">first</a> to point this out, but it really is the difference between the Before and the After. The increased connectivity and the computing power, scale and flexibility this has afforded, as well as the increased expectation of a customer base in “continuous partial attention” mode means that personalisation is critical to success.</p>
<p>As we transition from companies and people born of this pre-digital age to the next generation of digital natives, there will be change, there will be new ways of doing things. We cannot stop it but for many of us, and for many of the companies we work for, we’ve yet to embrace it. In the book <a href="http://www.amazon.co.uk/gp/product/B00INIYHFU/ref=as_li_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=B00INIYHFU&linkCode=as2&tag=sagwor-21&linkId=O5ZM5TUY2KKB5MVA">End of Absence</a>, Harris says of this:-</p>
<p>“Technology is neither good nor evil. The most we can say about it is this: It has come. […] We can only judge, only really profit from judging, the decisions we each make in our interactions with those technologies. How shall we live now? How will you?"</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com5tag:blogger.com,1999:blog-7316954781933936983.post-91532504989415793062014-10-03T03:21:00.001-07:002014-10-03T03:21:29.184-07:00The rise of the alternative (loyalty) currency<p><img style="float: right;" title="barter.jpg" src="http://lh4.ggpht.com/-OZkb3SL1s4s/VC54pFCV42I/AAAAAAAAAxM/BdPFe1eQVAw/barter.jpg?imgmax=800" alt="Barter" width="279" height="288" border="0" /></p>
<p>You can’t have failed in recent months to see the rise of alternative currencies like Bitcoin.</p>
<p>With SIBOS, one of the worlds premier financial services events dedicating a whole day to Bitcoin discussions and Paypal <a href="http://www.finextra.com/news/fullstory.aspx?newsitemid=26488">enabling</a> Bitcoin support amongst it’s digital merchants, there is no doubt that this crypto-currency is heading mainstream.</p>
<p>Whilst there is a lot of focus on the fluctuating price of Bitcoin and the how the currency itself comes into existence, there really isn’t that much difference between it and a more traditional currency like Sterling. In both cases, there is essentially a digital ledger that manages payments and deposits. Within a traditional system, these ledgers are managed by a trusted 3rd party such as the users bank and these in turn are typically managed through some form of central bank such as the Bank of England. The money itself is held as a digital record and we simply place trust in the centralised 3rd parties that this will be managed accurately. With Bitcoin, this ledger is decentralised and essentially owned by all users (know as the <a href="http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q3digitalcurrenciesbitcoin1.pdf">block chain</a>). Trust is managed through sophisticated cryptography to ensure that changes are accurately represented and can be trusted.</p>
<p>As with any currency then, whether centralised or de-centralised, it really just comes down to whether the users of the currency place a value on it as a medium of exchange, a trust in it as a store of value over time and a unit of account that can be used to measure any particular transaction.</p>
<p>In this sense, you could argue that loyalty points are a currency. They are a closed loop currency and you work to attain it by doing specific behaviours with the value issued directly in relation to your “effort”, be this purchase behaviour, frequency or other interactions such as social activity. This makes it a medium of exchange which is normally measured based on the corresponding value to the issuer such as the retailer. </p>
<p>The problem with this currency however is that in many cases, it's simply not that good.</p>
<p>It has relatively low liquidity - I can have lots of loyalty currency, points or miles from lots of programmes, but essentially they are all siloed. I can’t move them, share them or aggregate them easily. I can of course convert them to other assets such as rewards, gift vouchers or other loyalty program currencies, however the transaction costs for this can vary, making the exchange in many cases less attractive.</p>
<p>I’m also constrained by how much I can earn/attain based on other behaviours. As these other behaviours are related to share of wallet activities like grocery shopping, it’s harder to increase my earning velocity past what I naturally need - so a change in pricing for example would not necessarily result in a significant change in demand and hence loyal behaviours recognised. Sure I can centre my purchases with one retailer and possibly up-sell to higher value products - but there is essentially a ceiling to how much I can spend and hence earn. Coalition programmes like Nectar help this to some degree by widening the opportunities to earn, but it’s still limited based on the amount I can actually spend.</p>
<p>It’s interesting however to look at a loyalty currency as an actually currency - a retailer issued, closed loop monetary supply.</p>
<p>As a retailer currency, why can’t I purchase currency upfront? Why can’t I exchange the currency with friends?</p>
<p>Sure there are good reasons when you look at it as a reward mechanism. </p>
<p>If it’s too portable, then does it lose it’s stickiness? If I can simply give my points to someone else, am I less likely to try to build a balance? If my points can be shared with others will this increase breakage and mean that high numbers of points will ultimately be redeemed?</p>
<p>The answer is likely yes to many of these questions.</p>
<p>However, if people can “pay” each other in loyalty points, will this increase the attractiveness of the currency (and hence the retailer)? If customers could convert real money into a retailers closed currency upfront, how much is this “potential purchase value" worth? 1% discount? 5% discount? If other, complementary retailers can issue the loyalty currency, does this increase the liquidity of the currency and create more customers and more purchases?</p>
<p>It has been <a href="http://edition.cnn.com/2014/08/05/opinion/starbucks-nike-currency/index.html">reported</a> that Starbucks now see 30% of their purchases being made with their loyalty currency, Starbucks Stars. Of course, Starbucks could have just reduced their prices, but in doing this, the customer saving would have been in the most liquid asset - cash - and the chances of Starbucks seeing that cash being spent back with them would have been low. However, with their loyalty currency, they’ve managed to both discount their product whilst keeping the value within their own closed loop currency.</p>
<p>Now at this point, that currency is no different to any other loyalty program we’ve been doing for the last 80 years, whether physical stamps or a digital record.</p>
<p>However, what if Starbucks allows the currency to be exchanged between people - what if they increased it’s liquidity?</p>
<p>Could I pay for a taxi ride with Stars? Could I pay for a haircut with Stars? Could the barber issue my change in Stars?</p>
<p>How much is a Star worth to me if I have all the coffee I need - would I trade it for less than it’s value at Starbucks to someone who values it more?</p>
<p>This may sound a little farfetched, but it’s happening today. The Economist <a href="http://www.economist.com/news/finance-and-economics/21569744-use-pre-paid-mobile-phone-minutes-currency-airtime-money">reported</a> last year that in many markets in Africa, mobile airtime is becoming a defacto currency, with retailers issuing small amounts of change in mobile airtime rather than cash. People are settling personal debts through the transfer of airtime and with the ability to move airtime credit globally, it’s not just a local phenomenon, it crosses borders and continents.</p>
<p>It’s even more interesting when you look at this through the lense of the new crypto-currencies like Bitcoin.</p>
<p>Rather than being “earned” based on behaviours, these crypto-currencies are typically mined - in a virtual sense. Based on a complex algorithm which takes (ever increasing) computer power to work through, the algorithm rewards the computer user with coins every so often. For a currency like Bitcoin, there is a finite number of coins to be found and as more are found, the remaining ones get even harder to find, taking longer and taking more processing power. In this way, the Bitcoin market is essentially constrained, making a Bitcoin value flexible depending on what the market will pay.</p>
<p>Back in 2011, Stan Stalnaker, founding member of the Ven currency wrote an article entitled <a href="http://techcrunch.com/2011/05/20/bitcoin-ven-and-the-end-of-currency/">Bitcoin, Ven and the End of Currency</a> built on this theme saying:-</p>
<blockquote>
<p>“To be traded, [a digital currency] must be assigned a value. And if it can be assigned a value, it can be interchanged with anything else of assigned value. The Internet is enabling exchange of all types of value, and helps us to measure and publish these values. [..] How many Likes is a Facebook Credit worth? How many Credits make a Ven? How many Ven make a lasagna at the Olive Garden? How much do you have to Like the Olive Garden to get a lasagna? We’ll know soon."</p>
</blockquote>
<p>As alternative currencies rise in popularity, we’re going to see more examples of people exchanging products, services, time, attention and share of voice for something other than the national currency. I think loyalty currencies have a positive role to play in this new and emerging economy and it will be interesting to see how they change and are transformed to become more flexible and possibly decentralised.</p>
<p> </p>
<p style="font-size: 9px;">Image credit http://williamstake.files.wordpress.com/2012/09/barter.jpg</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com2tag:blogger.com,1999:blog-7316954781933936983.post-57598286058027690852014-09-13T08:18:00.001-07:002014-09-13T08:18:14.338-07:00Challenge for CPG: Focus on the basket, not the trolley<p><img style="float: right;" title="shreddies2.jpg" src="http://lh6.ggpht.com/-IsHwCWS-O78/VBRgMkQLQxI/AAAAAAAAAw8/JVC7zQswAmo/shreddies2.jpg?imgmax=800" alt="Shreddies2" width="184" height="176" border="0" /></p>
<p>I have to admit I love Shreddies.</p>
<p>Little woven parcels of wholegrain goodness which, if you listen to the marketing blurb from Nestle, are lovingly hand knitted by a nana called Pearl and her friends. They have their own <a href="https://www.facebook.com/knittingnanas">Facebook</a> page and <a href="https://twitter.com/ShreddiesUK">Twitter</a> account. Part of British life since 1953, over <a href="http://www.statista.com/statistics/301916/leading-nestle-breakfast-cereals-in-the-uk/">3m</a> people in the UK seem to agree that its a tasty start to the day.</p>
<p>When we go shopping, I ask the kids to go grab a box of Shreddies and they quickly grab it and drop it into the trolley.</p>
<p>The problem is, they didn’t grab a box of Shreddies.</p>
<p>Instead, they grabbed a box of Harvest Morn Malted Wheaties because I’m shopping in Aldi, now <a href="http://www.telegraph.co.uk/finance/newsbysector/epic/tsco/10997573/Aldi-set-to-overtake-Waitrose-as-Britains-sixth-largest-supermarket.html">just about</a> the 6th largest grocery chain in the UK. In fact, Alid and Lidl between them have <a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10522663/Half-the-nation-is-shopping-at-Aldi-or-Lidl-for-bargains-new-survey-claims.html">attracted</a> over 50% of households to shop with them - thats 13m people. With sales for Aldi up 30 percent on the previous period and an aim to <a href="http://www.esmmagazine.com/201409113720/Retail/Aldi-to-Double-UK-Store-Numbers.html">double</a> UK stores by 2021, it’s a trend that doesn’t look like it’s set to stop any time soon.</p>
<p>You only need to look at Germany, the heartland of the so called hard discounters to see the effect this could have where they dominate with 44% of the market.</p>
<p>The reason is obvious - consumers are saving a tonne of cash!</p>
<p>For example, I get around 625g of Malted Wheaties for 1/3 the price of 500g of Shreddies. The price today for 500g of Shreddies is £2.49 (49.8p/100g), for Aldi Malted Wheaties its 99p (15.8p/100g). Overall, these types of savings have translated to pretty much a 50% cut in my household food bill. Great for me, not so great for Tesco who used to have my loyalty and my purchases.</p>
<p>However, whilst we hear a lot about the woes of Tesco et al., we don’t hear too much in the press about the packaged goods brands and the impact it’s having on them. I buy Malted Wheaties not just because they are cheap, but also because thats the only choice I have - almost everything in Aldi is own-label which means the more market share they get, the less market share the consumer brands will have.</p>
<p>This isn’t something that might happen in the future - it’s happening now. </p>
<p>A recent <a href="http://www.iriworldwide.co.uk/Resources/Macroview/tabid/387/Default.aspx">report</a> from IRi showed that the UK saw the biggest decline in grocery sales since the second world war. Compared to the first half of 2013, there was a decline in sales of CPG products across all UK supermarkets by 1.2% in value and 3.2% in volume. This at a time when brand promotions themselves are at an all time high.</p>
<p>A report by McKinsey back in 2010 entitled "<a href="http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/Consumer%20Packaged%20Goods/PDFs/Trends%20that%20will%20Shape%20the%20Consumer%20Goods%20Industry.ashx">Trends that will shape consumer goods industry</a>" forewarned of this when it highlighted one of the top 5 trends to be that of “The shift to value”, with consumers looking for ways to save money and to trade down. The report suggested that CPG brands were looking to address the issue head on with more competitive pricing through the use of scale, product sizing and finding ways to work with or displace private label products.</p>
<p>The problem with fighting on price alone though is that this simply erodes category value over the long-term. </p>
<p>Speaking about this issue last year, P&G UK Managing Director Irwin Lee <a href="http://www.marketingweek.co.uk/news/pg-places-value-on-innovation-as-focus-shifts-away-from-promos/4008142.article">indicated</a> that 5 years ago, brands excluding P&G sold about two-thirds of their volume at an average of 33% off - this had now risen to 80% of volume with an average deal size of over 40%. To address this, Lee set out the P&G strategy, saying:-</p>
<blockquote>
<p>“Our focus is on value creation to complement, if not offset, the over-reliance on unsustainable value give away. There is nothing proprietary in price promotions. We believe promotions win quarters, but true innovation wins decades.”</p>
</blockquote>
<p>As Lee points out, consumers need more reasons to buy the product than price alone. Innovation is part of the equation, however all products can be copied as private label shows and with the emergence of the hard discounter “private label only” stores such as Aldi, this battle just got harder. Brands are no longer fighting for premium shelf space but instead are fighting for customer head space. </p>
<p>Consumers are now shopping in both hard discounters and traditional stores - buying the bulk of their weekly shop at a low price and the little extras at the one of the big 4. Those little extras are also increasingly being done via an online trip from established e-commerce brands like <a href="https://fresh.amazon.com/welcome;jsessionid=60D8E1CE3209AA877CF079C58A09322F">Amazon</a> or dedicated online grocers like <a href="http://www.peapod.com">Peapod</a> or <a href="http://www.ocado.com/webshop/startWebshop.do">Ocado</a>. Some brands are even experimenting with their own dedicated online solutions such as P&G with its <a href="http://www.pgestore.com">P&G e-store</a>.</p>
<p>This is leading to the relationship between the brand and the consumer to become more fragmented. No longer able to simply pay for in-store promotions and positioning to reach consumers, brands now need to look to build direct relationships with consumers.</p>
<p>The challenge for brands then is not how to get into the trolley - thats where the discounters win - but how to get into the basket; how to convince customers to make that extra trip just for them. This is heart vs mind; emotion vs rational.</p>
<p>There are many tactics to achieve this such as advertising, digital couponing, receipt scanning or on-pack codes, but what is really needed is a co-ordinated and long-term customer relationship strategy. Some might call this loyalty marketing - I’d call it the future of CPG marketing. </p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com3tag:blogger.com,1999:blog-7316954781933936983.post-2043446627861465052014-07-29T09:05:00.001-07:002014-07-29T09:05:58.424-07:00Changing the choice context can change the game<p>I saw a number of presentations from various UK startups in the last few weeks and one really caught my attention.</p>
<p><a href="https://playmob.com">Playmob</a> is a startup focused on linking charitable giving to the purchase of game items/actions. When CEO/Founder <a href="https://twitter.com/playinthecloud">Jude Ower</a> presented she described the positive effect that linking a charity donation to the purchase of a virtual item had. In one example she detailed how 80% of people who purchased the virtual item had never purchased one before and of those, over 30% went on to purchase more virtual items.</p>
<p>I found these stats pretty amazing.</p>
<p>The 80% alone would be a good result - getting people who hadn’t previously purchased virtual goods to buy them. You could argue that they weren’t really buying the goods and instead just used the opportunity to be charitable - however, with 30% going on to purchase again, this suggests a change of decision. </p>
<p>The introduction of the charity element had somehow changed the decision context and caused them to purchase an item they had apparently previously ruled out.</p>
<p>Obviously, as marketers, influencing customer choice is something we do all the time - this is the basis of sales promotions and loyalty programmes. What intrigued me though was the sheer number of people influenced who had never purchased virtual goods before. It seems they simply need a little push to flip their decision.</p>
<p>In another charitable example, there was a study by Karlan and List called "<a href="http://www-news.uchicago.edu/releases/07/pdf/071214.list.pdf">Does Price Matter in Charitable Giving?</a>” and they identified that match funding for charitable donations - whereby every $1 the donor gives is matched by another $1 - increases the amount given per donation (by 19%) as well as increasing the number of donations (up by 22%). What’s really interesting here though is that the amount matched doesn’t actually impact these numbers - whether it’s 1:1 match of a 3:1 match (e.g. $3 matched to every $1 donated), the resulting uplift is the same.</p>
<p>This suggests that when it comes to decisions to do something, it is not just a black and white binary decision - there are lots more variables at play. </p>
<p>Sure, there will be a segment who will always say yes and a segment that will always say no. But in the middle, there is a floating segment who just need a little extra nudge to flip a no to a yes. It also suggests that people don’t commit as much as they could - with the match funding lifting the actual amount donated it suggests that people had a little more headroom but that this only went so far. The promise of even more match funding would not influence them to go past their personal headroom target.</p>
<p>The decisions people make - such as whether to buy a virtual item or not - depends on them making a number of decisions that lead up to the final choice. In doing this, people tend to make compromises and tradeoffs to compare the likely outcome. Evaluating the cost vs the benefit and looking at the different options in terms of the value they add. What’s interesting here though is that it’s possible to change the choices people make by introducing additional options, even if they don’t actually go for that option.</p>
<p>This seems to be what Playmob had tapped into. The game producers already had a model for getting some players to purchase items (typical <a href="http://www.superdataresearch.com/blog/social-game-spending-cools-april">less than 3%</a>), but they needed something to change the context to influence others.</p>
<p>The decisions people make however really depends on the context of the choices available.</p>
<p>Using the example of a circle, that same circle appears large when surrounded by small circles and small when surrounded by large ones. In the same way, a purchase choice such as a virtual reward may appear to be unattractive in context of the value it adds to the game, but becomes more attractive when combined with another, real-world benefit such as a charitable gift. Likewise, in charitable giving - whether to give and how much to give can be manipulated by the introduction of an additional variable or choice such as match funding or gift aid.</p>
<p>Placing more variables into the mix can ultimately change a persons choices in more complex ways. A good example of this was published in the research report entitled “<a href="http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCgQFjAA&url=http%3A%2F%2Fwww.jstor.org%2Fstable%2F3172740&ei=iFPVU_vHC_Tb7AbspYDIBg&usg=AFQjCNHCisZ3MO1X3MtFY9L83fCRNOl1YQ&bvm=bv.71778758,d.ZWU">Choice in Context - Tradeoff Contrast and Extremeness Aversion</a>” by Simonson and Tversky. </p>
<p>It had a study which provided two groups with two different sets of choices for the purchase of a new microwave oven. In the first group they had 2 product choices which varied by price and quality, but with the same discount. The second group had the same choice but with one additional product added with better quality, better price but less discount. See table below:-</p>
<p> </p>
<table>
<tbody>
<tr>
<td><strong>Microwave Choice</strong></td>
<td><strong>Group 1</strong></td>
<td><strong>Group 2</strong></td>
</tr>
<tr>
<td>Emerson (0.5cu. ft. / $109.99 / 35% off</td>
<td>57%</td>
<td>27%</td>
</tr>
<tr>
<td>Panasonic I (0.8cu. ft. / $179.99 / 35% off</td>
<td>43%</td>
<td>60%</td>
</tr>
<tr>
<td>Emerson (1.1cu. ft. / $199.99 / 10% off</td>
<td>n/a</td>
<td>13%</td>
</tr>
</tbody>
</table>
<p> </p>
<p>What’s intriguing here is that in the first group, the lowest quality product won out with 57% of purchases. In the second group however, this same product only attracted 27% of purchases because a potentially better product was introduced into the mix. Participants were forced to make choices using a different context and with different tradeoffs and so in this case, the 2nd product won out overall with 60% of purchases.</p>
<p>Simply by adding in another product - albeit one more expensive - the researchers were able to increase the overall sales revenues by encouraging a greater number to select the higher priced item.</p>
<p>This also worked in reverse. In a similar study, they introduced a lower quality choice into the mix and demonstrated how this encouraged the participants to then increasingly select the higher value/cost option.</p>
<p>So choice is not a static context - just because your products and offers have influenced some customers doesn’t mean thats the best it can be. Changing the choice context can shake things up a little and create an additional nudge for customers - whether that’s making their first purchase or increasing/uplifting their planned purchase.</p>
<p>This isn’t just a one-off benefit though as can be seen by the Playmob example. Having given users a reason to purchase by changing the choice context, they then went on to continue purchasing as this initial choice had broken down the barriers to future purchases, possibly through the forming of a <a href="http://en.wikipedia.org/wiki/Cognitive_bias">cognitive bias</a> such as the <a href="http://en.wikipedia.org/wiki/Escalation_of_commitment">commitment bias</a>.</p>
<p>In the context of loyalty marketing, using the reward currency to provide additional options and to change the choice context can be an excellent way of encouraging consumer trial or repeat purchase - simply by sprinkling a small number of points on different product options. Also, like the match-funding example, the value of the points given isn’t directly related to the change of behaviour.</p>
<p>Changing the choices changes the context and ultimately can allow you to change the rules of the game.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com2tag:blogger.com,1999:blog-7316954781933936983.post-57121131895333459472014-05-30T08:13:00.001-07:002014-05-30T08:13:27.111-07:00Tesco Bag-For-Life outlasts customer life time<p><img style="float: right;" title="tescobag.jpg" src="http://lh6.ggpht.com/-EBS-4zs3amU/U4igEyOikbI/AAAAAAAAAwY/DTT1SxISRSE/tescobag.jpg?imgmax=800" alt="Tescobag" width="225" height="225" border="0" /></p>
<p>What’s interesting about modern grocery shopping in the UK today is that the disposable plastic bag, so vilified by many, has been replaced with “lifetime” bags - thick plastic bags that last a long, long time. </p>
<p>If you purchased one these bags you’d tend to be a regular customer because:-</p>
<ul>
<li>a) You bought enough to warrant a big bag</li>
<li>b) You liked the brand enough to buy a “permanent” bag</li>
<li>c) The bag is re-usable so it probably means you intended to come back</li>
</ul>
<p>What’s interesting though is that these bags also tell another story and they tell me that Tesco has a problem.</p>
<p>I don’t need to read a newspaper or their annual report to see this problem. I don’t need to run customer research to see this problem. I simply need to shop at Aldi and look at the bags that customers are carrying.</p>
<p>These bags may not literally last for a customers lifetime, but they do seem to have lasted longer than the customers lifetime with the grocer that sold them.</p>
<p>Coming out of my local Aldi, every other customer was carrying a rival supermarket bag. What was more interesting was that 9 out of 10 of these was for Tesco.</p>
<p>Now this over-indexing of Tesco is probably due more to rival supermarket proximity than anything else, but it is indicative of a wider problem - previously loyal customers are shifting their loyalty.</p>
<p>It’s also closer to home for me personally - I was up until recently a highly loyal Tesco customer. I saw the value in their loyalty programme and I received significant value back every year from the programme. I used their supermarket, their home shopping, their insurance products, their fuel and their credit card.</p>
<p>Yet I left them to shop at Aldi.</p>
<p>I’m also not the only one judging by the bags people use, and more scientifically, based on the results of the latest <a href="http://www.theguardian.com/business/2014/mar/11/tesco-market-share-shrinks-lowest-level-decade-aldi-supermarket">Kantar survey</a>. This shows Tesco’s market share has dropped nearly 1 percentage point in the last year (down from 29.6% to 28.7%) and is down 3 percentage points from its peak of 31.8%. Given each percentage point is worth around £1.27bn, that’s a lot of sales value.</p>
<p>This isn’t due to lower sales overall - the market grew by 2.2%. It’s also not due to customers trading down - both Sainsburys and Waitrose held onto their market share. For me, this is more of a customer experience issue than a pricing one.</p>
<p>Obviously there is no denying that Aldi are significantly cheaper on many products than Tesco and it isn’t hard to see that these real savings today add up to more than loyalty rewards later.</p>
<p>However, that’s not the reason I continue to shop at Aldi - I actually like shopping there more than I like shopping at Tesco and the reason for this is fourfold:-</p>
<ol>
<li>Store Format - At Tesco the stores are now just too big. It’s great if I want something specific, but for a standard shop it just makes the trip take too long. Walking down endless aisles past thousands of products I don’t want or need. Aldi have smaller stores making the shop quick and simple.</li>
<li>Paradox of Choice - When selecting products, there is too much choice. While this can be a good thing, when presented with 10 different types of sliced bread there is a tendency to pick something you recognise to help expedite the process. The net result of this is that you pick brands you’ve used before or heard of and brands have a premium. At Aldi there is limited choice, very few branded goods and typically one option for each.</li>
<li>Service - I’m not talking about customer service specifically, both brands have well trained, personable staff. I’m talking about the way the tills work. Aldi is specifically engineered for speed. A whole shop is scanned at tremendous speed with packing done elsewhere at your leisure. This means no real queues and no long waits. Tesco checkout is just, well, slow.</li>
<li>Gamified - This is price related and is a personal aspect, but I like to compare purchases and keep the shop under a defined value. Given the shop is typically 50% cheaper than my previous comparative Tesco shop, there is a pleasure - almost like a game - in seeing the final till receipt value.</li>
</ol>
<p>I've given up a number of things to shift to Aldi. I’ve given up a loyalty programme; I’ve given up home delivery; I’ve given up choice. Ironically though, I feel like I’ve gained time (due to the quick shop), gained satisfaction (in making a smart choice) and gained money in my wallet.</p>
<p>The fact that I then blow that extra cash on eating out that weekend in simply a bonus - There’s no waiting for me to spend the value I’ve accrued. I don’t need to wait for a quarterly statement, or redeem for a voucher.</p>
<p>So what would make me go back to Tesco?</p>
<ul>
<li>Better pricing/value exchange - that’s always a basic requirement.</li>
<li>Better store layout - Make my basic shop quicker</li>
<li>Better checkout experience - Speed up how the scanning/packing process</li>
</ul>
<p>The number one thing though is to connect the satisfaction of shopping with the experience of shopping. Tesco Clubcard doesn’t do that today for me - it’s not immediate enough, it’s not rich enough, it’s not connected enough. Interestingly, <a href="http://www.marksage.net/2014/03/sales-promotion-comes-of-age.html">Target Cartwheel</a> which I’ve written about previously does seem to achieve many of these things.</p>
<p>Loyalty is still in the game and it still has a role to play - but at the moment for Tesco, it hasn’t kept pace with the market. When your bags are lasting longer than your customers, you know there are issues to address. </p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com4tag:blogger.com,1999:blog-7316954781933936983.post-72994641486425322402014-04-15T08:03:00.001-07:002014-04-15T08:03:02.555-07:00Airlines show how tablets create loyalty ESP<p><img style="float: right;" title="BA-ESP_sml.jpg" src="http://lh5.ggpht.com/-pOb9DqM1ZAQ/U01KH_882rI/AAAAAAAAAwE/y-VbnhP6Wt0/BA-ESP_sml.jpg?imgmax=800" alt="BA ESP sml" width="212" height="216" border="0" /></p>
<p>There’s a lot of talk within loyalty about the increasing volume of customer interactions and how these are being enabled through mobile devices, wearables and the Internet of things.</p>
<p>Indeed, Microsoft consider it so important that they’ve <a href="http://www.techradar.com/news/internet/microsoft-s-new-task-force-will-tackle-internet-of-things-and-wearable-tech-1223902">apparently</a> setup a special task force to develop it further. Whether it's Smart watches, fitness wristbands or intelligent eye-wear, there’s a whole host of new consumer channels, devices and ultimately data heading our way.</p>
<p><strong>However the real benefit may not be in getting consumers to don these products, but getting the employees to instead.</strong></p>
<p>Giving employees access to real-time information on a customer may be the thing that gives a brand the edge over it’s rivals.</p>
<p>As ever, the airlines are at the forefront of this revolution with many enabling access to customer information to front line staff through a variety of devices. Delta for example recently <a href="http://news.delta.com/index.php?s=20295&item=124409">announced</a> that it’s equipping it’s flight attendants with tablets, highlighting the benefits by saying:-</p>
<blockquote>
<p>"In addition to its functionality as an in-flight sales device and replacement for the on-board manual [it will] enable flight attendants to [..] provide information for personalized service, including customers' frequent flyer status and potential need for special services during flight."</p>
</blockquote>
<p>British Airways was one of the first carriers to issue a mobile device to staff with the intention of improving customer service and interactions. Called the Enhanced Service Platform or ESP for short, the naming of the device seems indicate their intention for staff to be empowered with what customers might perceive as an almost psychic capability. Their platform, <a href="http://tabtimes.com/feature/traveltourism/2011/11/01/tipping-point-ipads-take-flight-british-airways">developed in house</a>, is reported to allow staff to access details on key high spending customers including their previous travel arrangements, where they are seated, who they are travelling with and their loyalty status. It can also be used to lodge customer complaints immediately. </p>
<p>The service would seem to be valued by both the staff and customers with a flight attendant <a href="http://www.bloomberg.com/news/2012-02-16/british-airways-crews-tap-into-ipads-for-lowdown-on-vip-flyers.html">quoted</a> as saying:-</p>
<blockquote>
<p>“I’m ahead of myself in knowing where our corporate and high-value customers are sitting, and who needs help,” Kaur, a cabin-service director, BA’s highest rank of flight attendant, said in London following a flight from Istanbul. “They look at you and say ‘have you been on a special course?’”</p>
</blockquote>
<p>It would also appear to get some great results with customer satisfaction for Gold members <a href="http://www.slideshare.net/airlinetrends/welcoming-change-and-innovation-in-the-cabin">reportedly</a> up 14% since the original rollout initiative.</p>
<p>Never happy to be a follower, Virgin Atlantic has gone one better by <a href="http://www.ndtv.com/article/world/google-glass-for-faster-check-ins-virgin-atlantic-thinks-so-507913">looking to equip</a> it’s First Class concierge staff with wearables including the <a href="http://www.sonymobile.com/global-en/products/accessories/smartwatch-2-sw2/">Sony SmartWatch</a> and <a href="http://www.google.co.uk/glass/start/">Google Glass</a> to provide them with personalised information on the passenger they are interacting with. One of the key aspects was the personal touch that the technology enabled, removing the barrier between the staff member and the customer. Virgin <a href="http://www.techweekeurope.co.uk/news/virgin-atlantic-hails-success-of-google-glass-scheme-141858">reported</a> that:-</p>
<blockquote>
<p>“The trial helped reduce the number of times that a Virgin Atlantic agent had to go behind a desk to look something up for a passenger, which would break eye contact – apparently vital to ensuring a “VIP customer experience” [and] also negated the need for any radio communications between staff, as all the information needed for each passenger was available through the unit."</p>
</blockquote>
<p>This is not just limited to airlines however. </p>
<p>Retailers are also looking to equip staff with mobile technologies to enhance customer service. In the UK for <a href="http://www.retail-systems.com/rs/Monsoon_Accessorize_MICROS_Retail_Assistant.php">example</a>, fashion retailer Monsoon has started equipping staff with an iPad that allows them access to the complete product range and stock, so they can help a customer locate an item wherever it may be.</p>
<p>AT&T in the US plans to go further and completely remove their traditional POS cash registers. Instead, AT&T store employees will be equipped with tablets and mobile POS systems to facilitate the purchase at the point of experience - when the customer is looking at and playing with the product. AT&T Chief Marketing Officer David Christopher is <a href="http://adage.com/article/news/t-rids-retail-stores-counters-cash-registers/243425/">quoted</a> as saying:-</p>
<blockquote>
<p>"It's a pretty radical departure from what we've done in the past, [..] We want people to try, play with and ultimately buy our products...If [shopping] was just transaction based, customers could do it on the web."</p>
</blockquote>
<p>There does seem to be a difference however between how retailers and airlines are using tablets with staff. </p>
<p>Whilst for the airline it is predominantly to improve the customer experience and to personalise the service, for retailers it seems to be to make the purchase process more streamlined and ensure they can get what the customer wants. </p>
<p>For retailers however there doesn’t appear to be a desire to use previous customer purchase behaviour and preferences to actually personalise the shopping experience. This would seem to be a missing piece of the puzzle as this is where loyalty data really comes into it’s own and would truly deliver on that retail loyalty promise of the “cornershop experience”. A little of the BA ESP for retailers would probably go a long way.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com1tag:blogger.com,1999:blog-7316954781933936983.post-63831229754672338862014-04-08T08:31:00.001-07:002014-04-08T08:31:26.417-07:00Amazon - A dash for loyalty<p><img style="display: block; margin-left: auto; margin-right: auto;" title="Amazon-Dash.jpg" src="http://lh5.ggpht.com/-8FGba6H1xss/U0QWSp3mEdI/AAAAAAAAAv0/9RiHX9YBzaY/Amazon-Dash.jpg?imgmax=800" alt="Amazon Dash" width="332" height="119" border="0" /></p>
<p><a href="https://fresh.amazon.com/dash?utm_content=buffer7fff2&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer">Dash</a>, the latest technical innovation from Amazon threatens to totally change the whole shopping experience… and retail loyalty. </p>
<p>Using a combination of voice recognition and bar code scanning, the standalone “wand” allows anyone in the household to add to the shopping list when an item is running low, has run out or is simply needed. Either by scanning the item that is about to be consumed or just saying what item is required, the dash adds it to your shopping list for later fulfilment.</p>
<p>Interestingly the idea is nothing new. </p>
<p>Apps like <a href="https://itunes.apple.com/us/app/shopper-shopping-list-flyer/id284776127?mt=8&ign-mpt=uo%3D4">Shopper Pro</a> allow you to maintain a shopping list and scan items onto it. Back in 2000, LG launched one of the first connected devices with the <a href="http://en.wikipedia.org/wiki/Internet_refrigerator">Smart Fridge</a> that incorporated a modem (remember those) and a touch screen to allow items to be inventoried, managed and re-ordered.</p>
<p>What Amazon have done though is different.</p>
<p>Whilst consumers have been happy to collapse many different gadgets into their smartphone such as a camera, videophone, GPS, fitness tracking or video games, they don’t always fit into every scenario. When I’m in the middle of cooking, with dirty hands, liquids and a hot stove, getting my smartphone out and navigating the security and app selection is not going to be high on the agenda... Sometimes a specific, dedicated, connected device can be a much better user experience.</p>
<p>By creating a single-purpose device, Amazon have been able to hone the user experience to be exactly what’s needed. </p>
<ul>
<li>It had to recognise that a household is made up of many individuals, so a mobile app wouldn’t have shared well </li>
<li>It had to recognise that not everything has a bar code - fresh produce for example, or an item not yet purchased which is required for a recipe - so voice input closed this gap</li>
<li>It had to recognise that the device would have to function within a busy kitchen environment so it’s wipe clean and includes a hanging loop so it can sit right alongside other utensils.</li>
</ul>
<p>User experience would have been key to the product design.</p>
<p>Amazon also had another advantage though and that is the closed loop ordering. As a supplier of the goods through <a href="https://fresh.amazon.com/welcome">AmazonFresh</a>, the dash connects the consumer from the moment of need to the moment of purchase seamlessly.</p>
<p>This is the real benefit of the dash - frictionless shopping and the loyalty effect this creates.</p>
<p>One of the main aims of loyalty marketing is to use knowledge about a customer and their purchase habits to <a href="http://www.marksage.net/2012/01/frictionless-loyalty-two-biggest.html">reduce friction in the relationship</a> to make it easier for them to do business with you. In that respect, the dash is a fantastic loyalty play.</p>
<p>It provides the consumer with utility - a useful product/service. It reduces friction in the purchase process by streamlining the process of shopping. It provides stickiness as I’m unlikely to build my shopping list in AmazonFresh and then go and order it from competitor.</p>
<p>Like the <a href="http://www.marksage.net/2012/09/4-reasons-why-evian-object-creates-new.html">Evian “smart object”</a> launched back in 2012 to enable product re-ordering at the point of consumption, the dash cuts through decision making and in the process is likely to increase loyalty, reduce price sensitivity and reduce the paradox of choice.</p>
<p>Whilst AmazonFresh is fairly niche at present, it will be interesting to see if dash will create competitor offerings from other retailers, all fighting for that newly created “front of kitchen draw” position. </p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com3tag:blogger.com,1999:blog-7316954781933936983.post-39641021631360666722014-03-16T10:08:00.001-07:002014-03-16T10:08:03.160-07:00Sales Promotion Comes of Age<p><img style="float: right;" title="target.png" src="http://lh5.ggpht.com/-g1owaI3DuKI/UyXabVoGqpI/AAAAAAAAAvY/s_55-Btxins/target.png?imgmax=800" alt="Target" width="150" height="150" border="0" /></p>
<p>I was speaking at the <a href="http://www.slideshare.net/MarkSage/rbte-2014-throwing-off-sparks-reigniting-retail-loyalty">Retail Business Technology Expo</a> last week and what was interesting is how payments, coupons and loyalty have all merged into a single entity.</p>
<p>Whether you were a POS vendor or a payments solution, everyone had a solution that included coupons and loyalty.</p>
<p>It’s interesting because coupons and loyalty have traditionally existed in separate universes.</p>
<p>Sure, a retail loyalty program may have sent out coupons and increasingly these may have been targeted to the member based on previous purchases. However, coupons have tended to exist in the world of Sales Promotion rather than Loyalty Marketing. Whilst both below-the-line activities, they have always had different aims.</p>
<p>Sales promotion is normally used for a push of a particular product or service. Typically in support of a wider advertising campaign, a sale promotion is short term with specific aims - to get (more of) the product moving. Indeed, the latin for promotion (<em style="font-family: verdana; font-size: small;"><span id="hotword"><span id="hotword" class="hwc">prōmovēre</span></span></em>) means “to push onward”.</p>
<p>Due to the typically short term nature of many sales promotions, any customer data collected is normally transitory - being used to facilitate the promotion itself with additional calls to action, encouragement to continue with the promotion and identification of winning behaviours. Once the campaign is complete however the data is typically lost - either immediately or simply due to the data ageing over time as there is no real reason to continue a dialogue.</p>
<p>Indeed, I remember conversations in the past when asking clients if they had a customer database where they referred to the competition entries currently lying dormant in a mailing sack in the corner.</p>
<p>Loyalty on the other hand is in it for the long term. It’s not typically concerned with that single purchase and is instead aimed at getting a continued and regular purchase pattern. By definition, to be a loyalty programme it needs to be able to both identify the customer uniquely AND be able to see customer behaviours (e.g. purchases). This tends to necessitate having up to date data and frequent communications with customers. It also tends to lead to insight driven decisions, promotions and communications.</p>
<p>As a loyalty marketer, you tended to feel you occupied a higher ground when it came to customer led marketing. Looking down on sales promotion as it stuffed product into random customers baskets for free (really, how hard is buy 1 get 1 free!), with many of these being the very same customers who were going to buy it anyway!</p>
<p>However, what sales promotion did have which loyalty didn’t was that immediacy. That ability to change customer opinion there and then. To be able to shift product sales immediately, typically at point of purchase (or decision). Sales promotion was glossy, it dangled from the shelf edge and lit up the packaging.</p>
<p>Loyalty on the other hand tended to be after the fact. After the customer had made the decision and paid for the goods the loyalty programme would wake up and suddenly recognise that great decision you’d already made without us. Sure we could communicate with you later and hope you remember our messages as you walk around the store, but we just weren’t as “shiny” as the sales promotion guys.</p>
<p>That really is all changing though and so are the rules that go along with it.</p>
<p>Sales promotion is tending to run via social media tools and smartphones. Customer data flows from the moment they connect with the promotion. Even when the promotion ends, the conversation continues through branded social media campaigns. Whereas before it was a random affair, promotions can now be targeted based on previous purchases, previous campaign usage, friends campaign usage.</p>
<p>Just take a look at <a href="http://cartwheel.target.com">Target Cartwheel</a> to see this in action. </p>
<p>The customer signs-up using their Facebook account (now they know who the customer is and how to talk to them), then they select the coupons they want to use (purchase intent), then they let the customer scan their single “barcode” (sounds very much like a customer loyalty id) to make savings (and obviously link ALL their purchases to their customer account).</p>
<p>While they could have stopped there and had a very capable mobile coupon app, they’ve gone further and included gamification features as well. New customers start off with just 10 coupons slots; however over time the customers can earn badges which help to unlock additional coupon slots to get even greater savings. These badges are awarded for various behaviours including sharing the app and offers socially, using in-store features like self-scanning and through frequency of usage (based on amount saved).</p>
<p>Is this sales promotion or loyalty? Well, it’s both and it means the customer gets the best of both.</p>
<p>Target get to know the customer uniquely, see their behaviours, target further offers and encourage frequent usage - that pretty much sounds like a loyalty program to me. The offers though are still good old fashioned sales promotions providing money off, BOGOF, etc. and will be largely funded by the manufacturers.</p>
<p>Retail loyalty is changing as mobile, payments, coupons and loyalty all seamlessly blend together. This is great news for consumers but will create a real battle in the industry as these areas increasingly converge.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com6tag:blogger.com,1999:blog-7316954781933936983.post-35184765653306297352014-01-12T07:17:00.001-08:002014-01-12T07:25:11.178-08:005 Key Trends for 2014 - The Year of "Now"The pace of change bounds on and 2014 will be no different. Picking up on key trends that have been maturing during 2013, the following are my thoughts on how some of the trends are all coalescing around a single vision of “now”.<br />
<br />
<b>1. Enhanced Experiences</b><br />
One of the <a href="http://www.cokezone.com/uk/en/coca-cola/new-250-ml-can--complete-with-music">promotional mechanics Coke</a> are using for the launch of their new 250ml can is the product recognition app <a href="http://www.blippar.com/">Blippar</a> that allows consumers to use their smartphone to view the coke product and in response, the consumer sees the product become interactive, allowing access to a number of music tracks.<br />
<br />
This recent addition to Coke Zone in the UK is interesting in that it suggests two trends. Firstly, whilst the solution is not strictly speaking traditional loyalty, it does point to an interesting trend about being able to both recognise and reward the customer not just at the point of purchase, but during the consumption/use of the purchase. This type of enhanced experience could be utilised at any point in the sales cycle, from pre-purchase through to purchase.<br />
<br />
Whats interesting about this is that the consumer doesn’t need to enter product codes, send in coupons or even redeem a download code, they simply point their phone at the product. It’s something that can done “in the moment” as they are experiencing the drink itself, and allows the everyday experience of drinking coke to be enhanced with an interactive overlay. Coke aren’t the only ones doing this, Blippar (and apps like it) are enhancing everything from magazines to beer mats to ketchup. <br />
<br />
It does however speak to the trend of “now” and how being able to provide recognition and interaction as close to the originating event/action is ever more important.<br />
<br />
The other part of the Coke Zone promotion - and the second trend it suggests - is the use of Spotify to stream the music tracks rather than provide downloads, and this ties nicely into the next trend.<br />
<br />
<b>2. Access, not ownership</b><br />
Time magazine had a headline at the start of this year saying “<a href="http://business.time.com/2014/01/03/spotify-and-youtube-are-just-killing-digital-music-sales/">Spotify and YouTube are just killing digital music sales</a>”. Apparently users are choosing to stream music and video as and when they want it rather than purchasing the item; albeit digitally. Its interesting because 10 years ago, back in 2004, the BBC News website had a headline entitled “<a href="http://news.bbc.co.uk/1/hi/entertainment/3734993.stm">Will Napster kill high street record stores</a>” and in January 1990 the Seattle Times has an article entitled “<a href="http://community.seattletimes.nwsource.com/archive/?date=19900121&slug=1051873">Vinyls Final Days - CDs are gobbling up the market of that old dinosaur, the album</a>"<br />
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Things move on and technology and tastes change. People still want to listen to music, but they want it on their own terms and they want it now. Broadcasters and publishers alike are scrabbling to keep up with the change as consumers vote with their (virtual) feet and move on. NowTV from Sky is a direct response to the success of streaming services like NetFlix and Lovefilm.<br />
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Even the darling to tech innovation, Apple, is on the back foot. Streaming service Spotify is now the second biggest revenue service for music publishers after Apple with <a href="http://appleinsider.com/articles/12/06/26/spotify_reportedly_number_two_revenue_source_for_record_labels_still_far_behind_itunes">rumours</a> that it could overtake Apple iTunes in under 2 years. Whatever the reality, its clear that consumer tastes are changing again and the advent of 4G that enables streaming on the go is only likely to make this move at an ever quicker pace.<br />
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In this environment where the purchase transaction is replaced with an all access subscription to content now, the concept of a customer changes. As competitors provide access to the same content in a different coloured box and essentially commoditise access, creating wider and deeper relationships that don’t just focus on the next purchase but span the total relationship will become ever more important.<br />
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<b>3. Ephemerality</b><br />
In Mission Impossible, Jim Phelps is given a mission via some device such as a tape machine which always finishes with the line “this tape will self-destruct in 5 seconds”. The purpose of this is both security - so others can’t intercept the mission - but also relevance - Jim either wants the mission or he doesn’t, the information has no value after it has been communicated. This “ephemerality” of the message is also becoming more relevant to those of us who aren’t secret agents.<br />
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When people first start using twitter they don’t always understand how to use it; the more people you follow the more tweets come pouring through your feed and the more out of control it can feel if you try to consume it like a news feed. This feed is presented as a constant stream of information and the stream can soon become a torrent if you’re not careful. Instead, twitter is best used as a means of taking a “pulse” - when you choose to read your feed you see what is there at that point. You don’t go scrolling through days (or hours) of history, the point is to be in the moment - in the now.<br />
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Speaking about this in The Atlantic in an article entitled “<a href="http://www.theatlantic.com/technology/archive/2013/12/2013-the-year-the-stream-crested/282202/">2013: The Year ’the Stream’ Crested</a>”, reporter Alexis Madrigal says:-<br />
<blockquote>
The Stream represents the triumph of reverse-chronology, where importance—above-the-foldness—is based exclusively on nowness. No matter how hard you sprint for the horizon, it keeps receding. There is always something more. </blockquote>
In response to this, some solutions are taking ephemerality seriously and building it into the heart of the offering. Snapchat is a great example of one way this is working, with people sharing pictures at that moment for consumption at that moment. There is no preservation or history, no ability or need to roll back and look at something from last week. The whole point is that it’s relevant now and Snapchat defines it as:-<br />
<blockquote>
If we can't disappear completely, let's leave as little of a trace as possible. Let's be water vapor, a passing fog, not the stream.</blockquote>
With consumers drowning under these ever increasing volumes of “now", it raises the question as to how we plan and communicate to consumers. Madrigal highlights this further in his article saying:-<br />
<blockquote>
When the half-life of a post is half a day or less, how much time can media makers put into something? When the time a reader spends on a story is (on the high end) two minutes, how much time should media makers put into something? </blockquote>
This isn’t suggesting that we don’t communicate, just simply that we think about how this communication will be relevant and it’s longevity. It also introduces some thoughts about where else it’s possible to build ephemerality into our wider marketing programmes. Either way, we can expect to see more of these types of applications in the future as consumers increasingly try to both manage their time and their privacy. <br />
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This leads into the next trend for 2014, that of communications context.<br />
<br />
<b>4. Communications Context</b><br />
CRM matra talks about the Right Time, Right Place and Right Message when discussing about how to manage targeted and relevant communications. Increasingly however there will be a new one added to this about Right Context.<br />
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If indeed, people are over communicated to and are starting to treat communications as a stream, then getting your message into the right stream at the right time will be critical.<br />
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Whether it’s email filtering or mail box redirects, people are just trying to limit what gets through the gate before they even look at it. However, when the message is more directly related to the context of what they are doing then they are more likely to review it. Messages sent via social channels like Facebook and LinkedIn tend to be consumed in a different context to general email. Gmail for example has introduced tabbed email folders that automatically separate emails into difference contexts such as Social or Promotional so you can choose when and if to read them.<br />
<br />
Discussing this treatment of email, in recent <a href="http://techcrunch.com/2013/11/22/email-is-now-just-another-stream/">article</a> on Tech Crunch, Peter Yared, CTO/CIO at CBS Interactive is quoted as saying:-<br />
<blockquote>
Mail systems are evolving to match the new volume of email, and users will increasingly see only algorithmically vetted emails. Some other emails may be shown below the vetted email, and the rest will flow away into temporal oblivion, just like uninteresting social posts from a few hours ago</blockquote>
Responding to this will mean being more flexible in where a message is delivered. A siloed approach to communication with specific campaigns for specific channels will be replaced with cross-channel capability that allows the relevant message to be communicated to the customer at that channel at that time, whether it’s a POS till receipt or a in-app notification. Just as important, and tying back into the previous trend, the message will also need to disappear as quickly as it appeared if it subsequently becomes irrelvant. Context is king.<br />
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<b>5. Quantified Self</b><br />
Finally, a trend I’ve written about previously looks to be continuing to gain ground in 2014 and continuing with this overall trend of the “now". <br />
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With an increasing use of wearable and connected technologies becoming available, more and more people are starting to monitor more day to day activities. At CES 2014, amongst the many “quantified self” technology launches, Sony showed off its life logging app and kit called the Sony Lifelog which not only tracks activities like walking or running, but also claims to know how you’re travelling such as by train or cycling and linking this information to your behaviours such as social interactions or photos. This is a real extension of the basic “fitness” apps current available and is starting to extend into recording more day to day activities.<br />
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It’s interesting that the core value of this technology is quickly recognised with Marketing Magazine headlining the article “<a href="http://www.marketingmagazine.co.uk/article/1226331/sony-makes-data-grab-launch-smart-wristband-lifelog-app">Sony makes a data grab</a>”. However Daniel Matte from tech consultancy Canalys goes one step further and <a href="http://www.bbc.co.uk/news/technology-25633647">indicates</a> that with all this data, the winners will those that both grab user attention and keep it by providing actionable insight saying:-<br />
<blockquote>
“The end goal of these companies is to provide actionable advice and not just data logging [..] I don't think the average user frankly cares if, for example, they slept eight or nine hours. What they want to know is whether that was adequate and what they can do to sleep better, eat better etc. [..] Creating change should be the primary goal these technologies are striving for"</blockquote>
With this area continuing to grow and dedicated industry conferences just on the use of <a href="http://personalinformationeconomy.ctrl-shift.co.uk/">Personal Information</a>, the challenge for loyalty programmes - typically the largest uses of consumer data - is not only how to integrate this level of behavioural data, but how to provide members with actionable insight - with utility value. <br />
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All 5 of these trends really do coalesce around the concept of “now” - from enhancing the experience the customer is presently having, utilising real-time data about where they are and what they are doing and communicating relevant and timely messages that cut through the stream - 2014 as ever is about grabbing a consumers attention whilst you have it.Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com3tag:blogger.com,1999:blog-7316954781933936983.post-63263302577279216132013-12-17T05:14:00.001-08:002013-12-17T05:14:55.012-08:00Will Shell's re-introduction of service revitalise loyalty<p><img style="float: right;" src="http://lh5.ggpht.com/-IR9w3ZMdzKI/UrBOSscGljI/AAAAAAAAAuk/ixfaV0-YA9c/shell1.jpg?imgmax=800" alt="Shell1" width="237" height="193" border="0" /></p><p>There seems to be a never ending trend to automate and self-serve.</p><ul><li>Retailers are introducing self-scanning solutions.</li><li>Train stations are introducing 24hr ticket machines.</li><li>Health care has introduced self-service diagnosis such as NHS Direct</li><li>Amazon has introduced automated <a href="http://www.bbc.co.uk/news/technology-25180906">delivery drones</a> (well, not quite yet…)</li></ul><p>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.</p><p>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. </p><p>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.</p><p>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.</p><p>Well I think it’s for 3 main reasons</p><p>1. Customer Experience</p><p>2. Differentiation</p><p>2. Forecourt Margin</p><p>The first reason, customer experience, is an interesting one. </p><p>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.</p><p>However, with the new forecourt attendants, Shell would appear to be trying to change this, describing their role as:-</p><blockquote><p>“[..] 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"</p></blockquote><p>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.</p><p>This ties nicely into the next reason which is differentiation. </p><p>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.</p><p>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 <a href="http://www.telegraph.co.uk/motoring/news/9314872/Return-of-the-forecourt-attendant.html">quoted</a> as saying:-</p><blockquote><p>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.</p></blockquote><p>I suspect however that there is also a revenue opportunity at the heart of this. </p><p>One interesting aspect of the attended service is that I can’t actually pay for the fuel with the attendant. Given I can <a href="http://www.standard.co.uk/news/london/london-food-stall-sells-burgers-for-00131-bitcoins-750-to-you-and-me-8997443.html">pay for a burger</a> 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. </p><p>Given that forecourts can be earning around <a href="http://www.financialmail.co.za/fm/2013/08/22/shoppers-leave-high-street-shops">30% margin</a> within the shop versus around <a href="http://www.propertyweek.com/Journals/2013/01/17/r/k/t/Forecourt-Property-Market-Update---Jan-2013.pdf">3-5% margin on fuel</a>, 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.</p><p>This is not unique to Shell however - ironically, service is also being re-introduced due to automation in other sectors. </p><p>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 <a href="http://www.tescomedia.com/assets2/downloads/Tesco%20Grocery%20Media%20Pack.pdf">almost 3 times</a> 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.</p><p>As Which? pointed out in a <a href="http://www.dailymail.co.uk/femail/article-1363118/Which-online-supermarket-truly-delivers-Our-secret-shopper-test.html">survey of online shopping</a>, the delivery experience can be key saying:-</p><blockquote><p>"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"</p></blockquote><p>Contrasted with another supermarket where the experience is less than perfect:-</p><blockquote><p>"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"</p></blockquote><p>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. </p><p>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.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com7tag:blogger.com,1999:blog-7316954781933936983.post-28915257458504782822013-10-01T05:31:00.001-07:002013-10-01T05:31:19.320-07:00Remarketing - Loyalty's "Groundhog Day"<p><img style="float: right;" src="http://lh5.ggpht.com/-63uX8PhuvQ8/UkrAkzvDmoI/AAAAAAAAAt8/fDP-x8YaCuI/groundhog.jpg?imgmax=800" alt="Groundhog" width="259" height="194" border="0" /></p><p>On February 2nd 2013, famous groundhog Punxsutawney Phil didn't see his shadow in Pennsylvania.</p><p>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.</p><p>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. </p><p>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.</p><p>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).</p><p>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.</p><p><strong>It's actually no coincidence that you now can't fail to miss the brand - they're using remarketing.</strong></p><p>Remarketing is a process by which you see personalised advertisements across almost any website that shows ads based on your previous surfing habits. Google <a href="http://www.google.com/ads/innovations/remarketing.html">describe</a> it as:-</p><blockquote><p>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</p></blockquote><p>Remarketing (or retargetting as it's also known) <a href="http://www.slideshare.net/onenetmarketing/one-guide-to-remarketing-by-one-net-marketing">helps</a> by:-</p><ul><li>Targetting users who visit but don't purchase (up to 97%)</li><li>Helping with brand recall - especially as they're possibly visiting competitors</li><li>Combining branding and direct response techniques to target users across different stages of the buying funnel</li></ul><p>Using remarketing, companies have seen a <a href="http://www.slideshare.net/onenetmarketing/one-guide-to-remarketing-by-one-net-marketing">600%</a> 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.</p><p>At it's heart though, remarketing relies on the the familiarity principle or <a href="http://en.wikipedia.org/wiki/Mere_exposure_effect">mere-exporsure effect.</a> 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. <a href="http://www.law.northwestern.edu/faculty/programs/searlecenter/events/internet/documents/Tucker_Targeting_2013_05_05_nonanon.pdf">Research</a> has shown for example that remarketing using personalised ads is 6x more effective than standard banner ads.</p><p><strong>While remarketing is now firmly established in online acquisition marketing, I think there is also huge opportunity here for retention marketing.</strong></p><p>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.</p><p>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.</p><p>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. </p><p><strong>It's not just about the single next best action, it's about the journey</strong>. </p><p>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.</p><p>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.</p><p><strong>Knowing the customers journey, not your journey is more important</strong></p><p>In a recent (2013) research study by Lambrecht and Tucker entitled "<a href="http://www.law.northwestern.edu/faculty/programs/searlecenter/events/internet/documents/Tucker_Targeting_2013_05_05_nonanon.pdf">When Does Retargeting Work? Information Specificity in Online Advertising</a>", 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. </p><p>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.</p><p>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.</p><p>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.</p><p>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.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com3tag:blogger.com,1999:blog-7316954781933936983.post-55423810119656583182013-09-15T04:28:00.001-07:002013-09-15T04:28:21.511-07:00Is opt-in simply a cop-out?<p><img style="float: right;" src="http://lh3.ggpht.com/-YbB5glTsbQY/UjWZ0SwwocI/AAAAAAAAAts/2JvzX_fwjqA/optin.jpg?imgmax=800" alt="Optin" width="150" height="150" border="0" /></p><p>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.</p><p>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.</p><p>There are a number of new companies trying to make the process of opting in and sharing data completely transparent. <a href="http://www.handshake.uk.com/hs/index.html">Handshake</a> for example lets you setup your personal data and then negotiate with companies that want to buy it. They say:-</p><blockquote><p>“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”</p></blockquote><p>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.</p><p>For example:-</p><ul><li>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.</li><li>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.</li><li>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.</li></ul><p><strong>The consumer isn’t looking to opt-in, they want utility.</strong></p><p>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.</p><p>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.</p><p><strong>Note I didn’t say “opt-in”.</strong></p><p>Consumers think in terms of things relating. If this service knew about that service then that would be useful.</p><p>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.</p><p>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.</p><p>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 <a href="https://developers.facebook.com/docs/facebook-login/overview/">says</a>:-</p><blockquote><p>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</p></blockquote><p>Notice they speak about connecting with people, providing access, giving permission and most of all, about trust - it's not opting in.</p><p>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.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com2tag:blogger.com,1999:blog-7316954781933936983.post-37436297139239132912013-08-16T06:55:00.001-07:002013-08-16T06:55:55.236-07:00Loyalty vs Lock-in (Current Account Switch)<p><img style="float: right;" src="http://lh5.ggpht.com/-Bpf-NHAe_34/Ug4vaM3SCCI/AAAAAAAAAtQ/F5f89FJxKpg/lockin.jpg?imgmax=800" alt="Lockin" width="271" height="186" border="0" /></p><p>In September there will be a big shakeup in the UK personal banking market. The launch of the <a href="http://www.paymentscouncil.org.uk/switch_service/">Current Account Switch Service</a> will enable consumers to more easily move their current accounts from one bank to another - for free.</p><p>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.</p><p>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 <a href="http://www.finextra.com/News/fullstory.aspx?newsitemid=24015">survey</a> 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.</p><p>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".</p><p>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.</p><p><strong>There is precedence as to what happens when high switching costs are reduced. </strong></p><p>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.</p><p>A research <a href="http://www.industrystudies.pitt.edu/kansascity13/documents/Papers/7.4%20-%20Cho%20-%20The%20Impact%20of%20Mobile%20Number%20Portability.pdf">report</a> by Cho, Ferreira and Telang entitled "<a href="http://www.industrystudies.pitt.edu/kansascity13/documents/Papers/7.4%20-%20Cho%20-%20The%20Impact%20of%20Mobile%20Number%20Portability%20(Slides).pdf">The Impact of Mobile Number Portability on Price, Competition and Consumer Welfare</a>" showed that, on average:-</p><ul><li>Market price fell after the introduction of MNP</li><li>The market power of the incumbent was reduced and the price gap became smaller</li><li>Consumer surplus increased - that is the gap between the maximum price the consumer would pay and what they actually paid</li></ul><p>For those large companies (historically having a monopoly position), the impact of reducing switching costs can be large. </p><p>In India for <a href="http://www.slideshare.net/prjpublications/mobile-number-portability-opportunities-and">example</a>, 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, <a href="http://www.britishgas.co.uk/">British Gas</a> 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.</p><p><strong>This is where it gets interesting from a loyalty vs lock-in perspective.</strong></p><p>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.</p><p><strong>Once the lock-in is removed, the only thing left is loyalty</strong></p><p>British Gas <a href="https://www.marketingsociety.co.uk/sites/default/files/thelibrary/British%20Gas.pdf">managed to turn this around</a>. 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.</p><p>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.</p><p>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 <a href="http://www.nectar.com/NectarHome.nectar">Nectar</a> loyalty programme.</p><p>This had a further <a href="https://www.marketingsociety.co.uk/sites/default/files/Marketing%20Teamwork%20HC%20British%20Gas.pdf">positive impact</a> 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.</p><p>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.</p><p>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 <em>on their</em> customers.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com5tag:blogger.com,1999:blog-7316954781933936983.post-50082940351498477402013-08-02T07:47:00.001-07:002013-08-02T07:47:34.727-07:00Customer engagement reinvented through the crowd?<p><img style="float: right;" src="http://lh5.ggpht.com/-se6_2Zaqawk/UfvGgiEjhZI/AAAAAAAAAtA/iO8sGgTRzUg/crowdshopping.jpg?imgmax=800" alt="Crowdshopping" width="217" height="146" border="0" /></p><p>There is a real trend at the moment about empowering the crowd.</p><p>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. </p><p>It was <a href="http://www.telegraph.co.uk/news/politics/nick-clegg/9016800/Nick-Clegg-plans-a-John-Lewis-economy.html">reported</a> that:-</p><blockquote><p>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."</p></blockquote><p>This aim has been further backed up by the recent <a href="http://www.independent.co.uk/news/business/news/thousands-of-royal-mail-staff-to-receive-shares-in-privatisation-plans-8698585.html">announcement</a> that employees at the Royal Mail in the UK will be issued with shares when it is privatised and the governments <a href="http://www.ft.com/cms/s/0/bc63b47e-ad07-11e2-9454-00144feabdc0.html#axzz2aoPddPV3">plan</a> 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.</p><p>Over the pond, there has also been a movement to empowering the individual. </p><p>Google for example <a href="http://www.forbes.com/sites/parmyolson/2013/05/02/google-buys-stake-in-lending-club-valuing-peer-to-peer-lender-at-1-6-billion/">announced</a> back in May 2013 that it had taken a $125m stake in crowdfunding firm <a href="https://www.lendingclub.com/">Lending Club</a>, while at the same time <a href="http://www.forbes.com/sites/jjcolao/2013/05/07/crowdfunding-for-food-circleup-raises-7-5m-from-union-square-ventures/">investing</a> in funding startup <a href="https://circleup.com/">CircleUp</a>, 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.</p><p>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.</p><p>In discussing crowdfunding and its potential impact on financial institutions, the Spanish bank BBVA <a href="http://www.finextra.com/finextra-downloads/newsdocs/1306_EEUUOutlook_2Q13.pdf">stated</a>:-</p><blockquote><p>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.</p></blockquote><p>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.</p><p>One really great example of empowering the crowd and how this is changing the way people transact and consume is that of <a href="http://www.collaborativeconsumption.com/">Collaborative Consumption</a> which is described as:-</p><blockquote style="border-left-width: 4px; border-left-style: solid; border-left-color: #777777; margin-left: 34px; padding-left: 10px;"><p>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.</p></blockquote><p>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 <a href="https://www.airbnb.co.uk/">Airbnb</a>). 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.</p><p>So what could this mean for loyalty?</p><p>Well I've previously <a href="http://www.marksage.net/2010/06/aligning-shareholders-and-customers-is.html">discussed</a> 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.</p><p>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).</p><p>Disruptive technologies, solutions and ideas are happening all the time and as BBVA stated, <em>when these become mainstream it's too late to catch up</em>. 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.</p><p>What do you think?</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com0tag:blogger.com,1999:blog-7316954781933936983.post-34964957817032723502013-07-20T04:17:00.001-07:002013-07-21T07:19:46.858-07:00Loyalty has to keep up with ever increasing customer expectations<img alt="Inamo sml" border="0" height="169" src="http://lh6.ggpht.com/-m1IZjRguCrk/UepxyJl3lXI/AAAAAAAAAso/yKhPJ0zsIP4/inamo_sml.jpg?imgmax=800" style="float: right;" width="169" />Back in 2010, pioneering restaurant <a href="http://www.inamo-restaurant.com/pc/">inamo</a> launched a whole new user experience for diners.<br />
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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.<br />
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Having experienced it recently, it was certainly entertaining and different. What did become apparent very quickly though is how fast things move.<br />
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In 2010, not only was inamo launching their interactive <a href="http://www.e-table-interactive.com/">e-tables</a>, 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.<br />
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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.<br />
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Pizza Express in the UK also looked to change the dining user experience as I've <a href="http://www.marksage.net/2011/06/pizza-express-app-glimpse-into-future.html">written</a> about before. <br />
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. <br />
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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. <br />
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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.<br />
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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.<br />
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Founder Jack Dorsey is looking to create "<a href="http://www.slate.com/articles/technology/technology/2012/09/square_jack_dorsey_s_payments_firm_is_silicon_valley_s_next_great_company_.single.html">frictionless commerce</a>" 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".</blockquote>
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.<br />
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Their next move though, firstly known as Card Case and more recently "<a href="https://squareup.com/wallet">Square Wallet</a>" 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.<br />
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For the customer you simply<a href="http://www.nytimes.com/2012/07/19/technology/personaltech/as-pay-by-phone-advances-square-takes-another-leap-state-of-the-art.html?pagewanted=all&_r=0"> say who you are</a> 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.<br />
No cards, no pins, just a simple, friendly hello.<br />
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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.<br />
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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.<br />
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I think we sometimes forget that loyalty marketing is also about reducing friction.<br />
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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.<br />
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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.Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com5tag:blogger.com,1999:blog-7316954781933936983.post-28130337663289632962013-06-03T01:17:00.000-07:002013-06-03T01:17:00.656-07:00INFOGRAPHIC : The Growth of Interactions (and the rise of the quantified self)<a href="http://4.bp.blogspot.com/-RIb679lM8YQ/UaxP6wpLerI/AAAAAAAAAsU/G7eElxeNX1g/s1600/Infographic+-+The+Growth+of+Interactions.png" imageanchor="1"><img border="0" src="http://4.bp.blogspot.com/-RIb679lM8YQ/UaxP6wpLerI/AAAAAAAAAsU/G7eElxeNX1g/s1600/Infographic+-+The+Growth+of+Interactions.png" /></a>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com105tag:blogger.com,1999:blog-7316954781933936983.post-3215891976054788702013-05-24T10:36:00.001-07:002013-05-24T10:40:14.545-07:00New Frontier:Unhosted Loyalty - Less big data, more my data<img alt="Island color" border="0" height="162" src="http://lh6.ggpht.com/-bw_SaRdo2Oc/UZ-lFQ1pbsI/AAAAAAAAAsE/CmFou-AtzAE/island-color.png?imgmax=800" style="float: right;" width="200" /><br />
There's an intriguing new application available called <a href="http://www.windley.com/liveweb/forever/">Forever</a>.<br />
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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.<br />
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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.<br />
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Forever is a new breed of application known as an unhosted app and this has been <a href="https://unhosted.org/">defined</a> by unhosted.org as:-<br />
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"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"</blockquote>
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 <a href="http://personal-clouds.org/wiki/Main_Page">personal cloud</a>, which the application can then work with.<br />
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In a world where everyone is talking about big data, this really is a breath of fresh air. <br />
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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. <br />
However, these 3rd party personal cloud suppliers are more akin to the <a href="http://blogs.law.harvard.edu/vrm/2009/04/12/vrm-and-the-four-party-system/">4th party concept</a> spoken about within VRM - they work for the consumer.<br />
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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. <br />
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We just need to think differently.<br />
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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.<br />
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In reality though, as corporates, we don't need huge repositories of personal data despite our quest to build them. <br />
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Increasingly the battle field for relevant communications is real-time. As I spoke about in my last post, technologies like <a href="http://en.wikipedia.org/wiki/Complex_event_processing">Complex Event Processing</a> and other solutions like <a href="http://en.wikipedia.org/wiki/Collaborative_filtering">collaborative filtering</a> (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.<br />
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Imagine this within a loyalty programme context - one of the biggest aggregators and users of consumer behavioural data.<br />
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In an "unhosted loyalty app" context, when I swipe <a href="http://blogs.law.harvard.edu/vrm/2013/05/01/identity-is-personal/">my identity</a> 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. <br />
<ul>
<li>I could then choose to connect this data to a 3rd party application that analyses my nutritional intake</li>
<li>I could connect it to the retailers loyalty programme which would then recognise my purchases and update my connected bank provider (cash or points)</li>
<li>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</li>
<li>I could simply connect it to my shopping list app to tick off what I'd already purchased</li>
</ul>
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.<br />
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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. <br />
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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.<br />
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Why though would a retailer simply give this data away in a format I can use electronically? <br />
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Well, ignoring the fact that this will likely be <a href="https://www.gov.uk/government/news/better-choices-better-deals">mandated soon by governments</a>, 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.<br />
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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.<br />
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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. <br />
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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.Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com4tag:blogger.com,1999:blog-7316954781933936983.post-61391796881250081842013-05-14T12:43:00.001-07:002013-05-14T12:43:54.269-07:00Data the new oil? Then exploration is just the start<p><img style="float: right;" src="http://lh6.ggpht.com/-AnkhOAkZZOI/UZKT9U0O9-I/AAAAAAAAAr0/-w08qBk8sz8/Oil_drilling.jpg?imgmax=800" alt="Oil drilling" width="151" height="197" border="0" /></p><p>What do Google, Amadeus, AmEx and Tibco all have in common?</p><p>Well, they are all market leaders in their verticals. </p><p>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.</p><p>What they also all have in common is data. </p><p>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.</p><p>It's this data though that is also the catalyst for the third thing they have in common. </p><p>They all do loyalty.</p><p>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.</p><p>Back in 2010, Google acquired loyalty startup Punchd and Tibco acquired SAAS vendor Loyalty Lab. In 2011 AmEx <a href="http://about.americanexpress.com/news/pr/2010/loyalty.aspx">acquired Loyalty Partner</a> which operates Payback in Germany and Poland and i-Mint in India. Then in 2013 Amadeus recently <a href="http://www.tnooz.com/2013/04/08/news/amadeus-acquires-hitit-loyalty/">acquired airline loyalty specialist Hitit</a> who provides loyalty solutions for over 40 airlines - more than any other provider.</p><p>So what's the rationale here? Why are these companies branching out into loyalty marketing?</p><p>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:-</p><blockquote><p>"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"</p></blockquote><p>It's that final statement that real nails it. "Consumer decisions...are based on loyalty offerings". </p><p>If you can package up the offering from the initial consumer decision then you potentially get to control the whole value chain.</p><p>This seems in part to also be the rationale for Tibco purchasing Loyalty Lab.</p><p>Increasingly loyalty is about real-time decisioning and next best action and the software to manage this, known as CEP (<a href="http://en.wikipedia.org/wiki/Complex_event_processing">Complex Event Processing</a>), is an <a href="http://www.pcworld.com/article/213000/article.html">emerging frontier</a>. 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.</p><p>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 "<a href="http://www.getpunchd.com/">closed for business</a>" web page alludes to something bigger and better coming when it says:-</p><blockquote><p>"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"</p></blockquote><p>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 <a href="http://www.marksage.net/2011/04/o2-free-wireless-is-it-for-keeps.html">previously</a>, 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.</p><p>Continuing with the data being the new oil analogy - these companies have essentially mastered the "<a href="http://en.wikipedia.org/wiki/Upstream_(oil_industry)">upstream</a>" segment in terms acquiring the resource through exploration and production. They've got the data reserves and the means to extract them.</p><p>However the "<a href="http://en.wikipedia.org/wiki/Downstream_(petroleum_industry)">downstream</a>" 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.</p><p>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.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com4tag:blogger.com,1999:blog-7316954781933936983.post-84770087642209338662013-03-17T10:16:00.001-07:002013-03-17T10:16:53.857-07:00The 5 steps to creative ideas (still relevant today)<p>I'm not a big fan of workshops or brainstorming.</p><p>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.</p><p>It's not just me though... organisational psychologist Adrian Furnham is <a href="http://www.nytimes.com/2012/01/15/opinion/sunday/the-rise-of-the-new-groupthink.html?pagewanted=all&_r=0">quoted</a> 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."</p><p>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.</p><p>It was interesting then to see on the <a href="http://www.bbc.co.uk/programmes/p0160y96">BBC Horizon programme</a> this week some new research into how we have new ideas - what creates that spark of creativity - and importantly when we have it.</p><p>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.</p><p><strong>The spark of creativity is generated within the sub-concious</strong> - Using a <a href="http://en.wikipedia.org/wiki/Divergent_thinking">divergent thinking test</a> whereby they ask a subject to come up with as many uses for a <a href="http://99u.com/articles/7160/Test-Your-Creativity-5-Classic-Creative-Challenges">house brick</a> 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.</p><p><strong>Breaking existing routines can make you more creative</strong> - 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.</p><p>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 <a href="http://en.wikipedia.org/wiki/James_Webb_Young">James Young Webb</a>. He had no formal scientific training and yet in his book <a href="http://www.amazon.co.uk/gp/product/0071410945/ref=as_li_ss_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=0071410945&linkCode=as2&tag=sagwor-21">A Technique for Producing Ideas (McGraw-Hill Advertising Classic)</a> he basically lays out the steps required for creative thinking, all of which is backed up by modern science.</p><p><strong>Step 1 - Gathering of raw materials</strong> - 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".</p><p><strong>Step 2- Work over the materials in your mind</strong> - 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.</p><p><strong>Step 3 - Incubate the idea</strong> - 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."</p><p><strong>Step 4- The "eureka moment"</strong> - This is when the idea comes to you; when you're not actually thinking about it.</p><p><strong>Step 5 - Shaping and development </strong>- 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.</p><p>It's interesting that author Susan Cain who has written the book <a href="http://www.amazon.co.uk/gp/product/0670916765/ref=as_li_ss_tl?ie=UTF8&camp=1634&creative=19450&creativeASIN=0670916765&linkCode=as2&tag=sagwor-21">Quiet: The power of introverts in a world that can't stop talking</a><img style="border: none !important; margin: 0px !important;" src="http://www.assoc-amazon.co.uk/e/ir?t=sagwor-21&l=as2&o=2&a=0670916765" alt="" width="1" height="1" border="0" /> highlights in an <a href="http://www.nytimes.com/2012/01/15/opinion/sunday/the-rise-of-the-new-groupthink.html?pagewanted=all&_r=0">article</a> 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"</p><p>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.</p><p>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.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com1tag:blogger.com,1999:blog-7316954781933936983.post-26361180804681223582013-03-15T10:29:00.001-07:002013-03-15T10:29:52.899-07:00Rallying cry for innovation - and faith<p>I've spoken about VRM - Vendor Relationship Management <a href="http://www.marksage.net/search/label/VRM">before</a> 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, <a href="https://twitter.com/dsearls">Doc Searls</a>, author, journalist, blogger and VRM evangalist, discuss these challenges and to put them into context.</p><p>I've repeated the majority of Doc's post here for those without access to the <a href="http://blogs.law.harvard.edu/vrm/">ProjectVRM list</a>:-</p><blockquote><p>[..] 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.</p><p>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.</p><p>So, likewise, it's easy to say nobody cares about managing relationships with vendors, because, obviously, they don't. Or, do they?</p><p>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?</p><p>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. </p><p>[..]Everybody manages data today already.</p><p>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.</p><p>[..]</p><p>And most of us don't care about advertising. (Though some do, and we respect that.)</p><p>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.</p><p>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.</p><p>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. </p><p>Are those voices pointing toward actual requirements, as you suggest? Well, let's look at what the market is already doing.</p><p>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?</p><p>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.)</p><p>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.</p><p>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. </p></blockquote>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com7tag:blogger.com,1999:blog-7316954781933936983.post-7886112471333423382013-02-17T08:39:00.001-08:002013-02-17T08:39:12.054-08:00Tesco ClubcardTV part of a new trend?<p>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.</p><p>So when someone like <a href="https://twitter.com/NextagCEO">Jeff Katz</a>, (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. </p><p>In a recent article for Fast Company entitled "<a href="http://www.fastcompany.com/3005266/fasten-your-seatbelts-future-shopping-looks-lot-airline-travel">Fasten Your Seatbelts: The Future of Shopping Looks a Lot Like Airline Travel</a>", 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.</p><p>Discussing this, Jeff says:-</p><blockquote><p>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</p></blockquote><p>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. </p><p>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 "<a href="http://thenextweb.com/apps/2012/10/15/sainsburys-trials-mobile-scan-go-app-for-shopping-in-store-via-iphone-or-android-devices/">Mobile Scan & Go</a>" initiative, you can see how this suddenly changes the landscape.</p><p>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.</p><p>However this manifests itself, I agree with Jeff that this unbundling trend that airlines have started (and which Ryanair continues to <a href="http://www.independent.co.uk/travel/news-and-advice/ryanair-unveils-its-latest-plan-to-save-money-remove-toilets-from-the-plane-2369232.html">push the boundaries</a> on) will cross over into retail and some retailers are already putting a toe in the water today.</p><p>Online retailer Amazon for example is already doing something like this today with their <a href="http://www.amazon.com/gp/prime/">Amazon Prime</a> offering, providing customers with additional benefits, including free shipping, a free book rental per month and unlimited instant streaming of movies and TV shows.</p><p>In the UK, Tesco is trialling<a href="http://www.clubcardtv.com/"> Clubcard TV</a>, 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:-</p><blockquote><p>"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"</p></blockquote><p>Also like Amazon Prime, Tesco "Delivery Saver" provides free delivery for online grocery orders for a single, upfront payment.</p><p>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.</p><p>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.</p>Mark Sagehttp://www.blogger.com/profile/08437767598291122765noreply@blogger.com5