Challenge for CPG: Focus on the basket, not the trolley

I have to admit I love Shreddies.

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 Facebook page and Twitter account.  Part of British life since 1953, over 3m people in the UK seem to agree that its a tasty start to the day.

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.

The problem is, they didn’t grab a box of Shreddies.

Instead, they grabbed a box of Harvest Morn Malted Wheaties because I’m shopping in Aldi, now just about the 6th largest grocery chain in the UK.  In fact, Alid and Lidl between them have attracted 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 double UK stores by 2021, it’s a trend that doesn’t look like it’s set to stop any time soon.

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.

The reason is obvious - consumers are saving a tonne of cash!

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.

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.

This isn’t something that might happen in the future - it’s happening now.  

A recent report 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.

A report by McKinsey back in 2010 entitled "Trends that will shape consumer goods industry" 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.

The problem with fighting on price alone though is that this simply erodes category value over the long-term.  

Speaking about this issue last year, P&G UK Managing Director Irwin Lee indicated 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:-

“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.”

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.  

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 Amazon or dedicated online grocers like Peapod or Ocado.  Some brands are even experimenting with their own dedicated online solutions such as P&G with its P&G e-store.

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.

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.

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. 

Remarketing - Loyalty's "Groundhog Day"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Knowing the customers journey, not your journey is more important

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

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

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

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

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

Avios says adios to BA Exec, IB Plus and Airmiles

Loyalty is making headlines again.  With Airmiles announcing that it's to rebrand to Avios, there has been a media feeding frenzy discussing everything from the u-turn on taxes and potential devaluation through to the re-branding and how long it might last.
Overall the publicity seems to have been negative but then this is to be expected; Airmiles is a well loved brand but has become a little like Woolworths before it's demise - everybody of a certain age knows about it and many remember it fondly, however actual usage has declined over time from it's height in the late 80's and early 90's with only 2m active members now out of the 8m total.
Renaming it will feel like the end of an era for many.  However people mellow over time and get used to change, even for every day brands like Norwich Union (Aviva) or Marathon (Snickers).
While most of the mainstream commentary though is focusing on the fact that Avios is replacing Airmiles, what's interesting is that it's also replacing the BA Exec club and Iberia Plus, now all part of International Airlines Group (IAG).  Both of these frequent flyer programmes will retain their current branding, but the underlying currency (whether that's BA Miles or IB Puntos) will change to Avios.
This is also not just an alignment of currency name, it's also an alignment of the currency itself.  BA have been quoted on Flyertalk as saying:-

We realise that we may have members in the Executive Club, the Avios reward programme or in Iberia Plus so we are developing a new tool called Combine my Avios which will allow you to combine some or all of your balances into one or the other programmes

This is actually quite an interesting step.  By combining Airmiles UK, BA Exec and IB Plus into a single currency they have instantly created an international loyalty programme - albeit heavily biased to the UK and Spain.  If this was just BA and Iberia combining then you could argue it was more of a consolidation of schemes in the same way Northwest and Delta programmes combined.
The inclusion of Airmiles UK though which is not a frequent flyer programme and is instead a more traditional coalition programme suggests an ambition for the currency to be used wider.
This is backed up by Andrew Swaffield, Managing Director of the Mileage Company who runs Avios when he was quoted in Business Traveller Magazine as saying:-

[The intention of the new programme was to] "create a new shared global reward currency to provide benefits for all three members"

While the main focus of discussion is still around how members perceive the change in benefits with the introduction of Avios I suspect the real discussion is yet to be had about the potential impact of a new, global reward currency with around 17m members (Iberia Plus 4.2m, BA Exec 4.5m and Airmiles UK 8m).

Digital Channels - The Hidden Dimension

We've all met someone who is over-familiar. Someone who just gets a little too close.

That feeling of uncomfortableness that arises is normally because they've invaded our personal space. However this raises the question, what is personal space?

Back in 1966, Edward T Hall wrote a book entitled The Hidden Dimension where he discussed the concept of personal space. Defined as:-

The region surrounding a person which they regard as psychologically theirs. Invasion of personal space often leads to discomfort, anger, or anxiety on the part of the victim.

The measurement of this space and the distances between people as they interact is known as proxemics. In a physical sense we all understand the concept of personal space, and whilst peoples tolerance levels in terms of distance vary, they can be broken down into 4 main zones which are:-

• Intimate Space - For embracing, touching or whispering (= < 15cm)
• Personal Space - For interactions among good friends or family members (46 to 76 cm)
• Social Space - For interactions among acquaintances (1.2m to 2.1m)
• Public Space - For interactions such as public speaking (3.7m to 7.6m)

In essence, the closeness of these interactions are based on the closeness of the relationship we have with the individual.

This is something we all understand in everyday life, but what happens when offline interactions move online and when interactions are not person-to-person but are instead person-to-brand.

It was recently reported that just under half (46%) of shoppers now feel they are "bombarded with irrelevant information and offers via a dizzying array of touchpoints." - so something obviously isn't working well.

Just because a brand has a customers contact details doesn't necessarily mean it has permission to talk to them across every channel. Not all channels are equal and some are considered more personal than others.

If a salesperson repeatedly invaded a customer's personal space, making them feel uncomfortable and causing them to walk away, you can bet they wouldn't be employed for very long.

Ok, not a great example as that's exactly what many salespeople do to try and cross that boundary from acquaintance to friend; from untrusted to trusted. However, brands risk customers switching off by doing similar things within digital channels.

In proxemics terms, my letter box is considered public - I expect mass marketing messages to be posted to it and re-act accordingly; which is probably why response rates are so low. My mobile phone however is far more personal and not a channel I'd welcome un-solicited messages on.

As an example, this is how I'd categorise interactions across the various digital channels in terms of proxemics.

• Intimate Space = Telephone/Mobile Phone/SMS/IM
• Personal Space = Facebook, Foursquare
• Social Space = Email, Twitter
• Public Space = Direct Mail

However these categorisations can also be affected by the relevance of the interaction.

Mobile can be a great channel when the message is very relevant and personal - almost when it could be a whisper in your ear. When Premiere Inn sent me a text message reminding me of my hotel booking and asking if I wanted SatNav directions (which I did), then this worked very well. It was like a friend quietly asking if I knew where I was going.

When my bank rings me up though on the pretense of a customer care call, loosely covering a sales call, then this isn't welcome as I consider this channel far too personal for that type of interaction. This is akin to the salesperson trying to establish trust and cross that boundary.

When I post my thoughts to Twitter - just because they are essentially public does not mean the channel is. I want friends on Twitter that have something relevant, entertaining, informative or witty to say - not a brand advertisement.

With the increasing growth of location based services including the new Facebook Places, this will add another level of complexity. Commentators are already discussing the potential of this channel for advertising revenue with the Telegraph recently saying:-

The business idea behind such applications is that all these individual check-ins can be used to drive advertising. [Adverts] can be targeted more specifically because a user's spending habits are known.

However, knowing this information is one thing, knowing how and when to use it is something else altogether.

Can a brand talk to me when it knows I'm in the area, but not in their store?

Do I expect it to talk to me when I check in at the store specifically?

Will it increasingly be a faux pas if a brand doesn't recognise me when I tell them I'm in-store - almost like refusing a handshake?

With the explosion of digital channels available to talk to customers on I think the principles of proxemics are more relevant than ever. Marketing messages should be looked at not just in terms of what channel do we have available but also in terms of what is the tone of the message and what is the relationship with the recipient.

The classic CRM mantra of Right Message, Right Channel, Right Time could be added to through the application of proxemics with Right Relationship.

B&Q – You broke my heart

I loved you B&Q.

Your wide aisles, filled with tools, materials and furnishings that inspired me to do more.

Your warm colour of orange welcoming me when all others failed – stocking those items in such breadth that I never failed to find what I wanted.

Your tips and hints that helped when I doubted my skills and filled me with confidence to finish what I’d started.

True you didn’t always reward me – Wickes was always trying to get my attention.

But I stuck by you because you felt comfortable, I knew you, I knew you’d always be there when I needed something. I didn’t care about price – I was happy with a wide selection and good friendly service.

I opened my wallet to you and you responded in kind with a pleasurable shopping experience.

But then you ripped out my heart… when you ripped out your tills.

Instead you replaced them with self service units which meant I had to scan my own products.

No longer the warm, friendly voice of a satisfied employee – instead an automated voice ordering me what to do – telling me when I get it wrong (even when I don’t) - questioning my age when I buy solvent based products (even though I’m paying by credit card) – refusing to scan my barcode (even though it was completely undamaged).

I know you tried – one employee to man 4 automated tills – all of them going wrong. I tried to talk to you – but you said “there is only me”.

You had tills – but no one staffing them. You knew I was coming, it was Saturday at 2pm – it’s when we all come – yet you had no one to help.

I know I’m not alone – others have felt the same way.

Surely you understand that the purchase process is critical to repeat custom – a time when reassurance that you’ve made the right decision is key.

Surely you realise that as my money flows from me to you I want to feel I’m getting good value for money – not feeling like I’m paying the same price for less service.

Surely you know that employees are the physical manifestation of your brand.

Surely you can see how a brand which has tied it’s proposition to its staff – showing them within your advertising, speaking of them by name – has managed to completely destroy this in one failed moment of truth.

Surely you understand there are plenty more fish in the sea.

Your automated voice asked me at the end “How did we do? Please tell us”.

Consider this the reply.

O2 creates loyalty through entanglement

Providing additional ways for a customer to interact with your brand is a great way of creating “entanglement”.

The phrase “entanglement” is well used in loyalty marketing and typically refers to the process of meeting an increasing number of your customers needs with additional products and services in the hope of both becoming a trusted first point of call and making it harder for a customer to unpick themselves from the relationship. 

In the book Customer Winback: How to Recapture Lost Customers and Keep Them Loyalthe authors describe that the goal of entanglement “is to earn the customers dependence on your firm in as many ways as possible”

Interestingly, the phrase entanglement is also used in quantum mechanics.  There is a property known as quantum entanglement and it is described as where the quantum states of [two or more] constituting objects are linked together so that one object can no longer be adequately described without full mention of its counterpart.

I quite like the idea of that definition of entanglement for brands – essentially two or more products or services that can no longer be adequately described without their counterpart.  This would indicate that a brand was not only fulfilling a wider breadth of a customers needs, but that the product/service extensions actually supported and enhanced the originally offering – dare I use that much overused phrase – a synergy.

It’s rare to see a brand extension that works this well – sometimes they can appear disconnected, standalone and clumsy – but one company that stands out to me is O2.

They have recently released the O2 Money prepaid card which allows customers to top-up the card and use it in the same manner as a standard credit card, but with the condition that you can only charge as much as you have balance to support. 

There is nothing new with this product – prepaid cards have been around for a number of years now and are increasing in popularity within certain segments such as teenagers (allowing parents a vehicle to provide pocket money), the unbanked (allowing people to access online deals even if they are not credit worthy) and travellers (providing a safer way of carrying money). 

But it’s no secret that in these uncertain times people are looking for better ways to control money and this evidenced in a shift from credit to debit card payments as customers try to live within their means. 

A prepaid product can be seen as a modern version of household budgeting.  Rather than drawing out a fixed amount of cash and using this during the month for household expenditure, consumers can utilise a prepaid card in the same way, transferring a fixed amount onto the card and then using this to pay for goods and services during the month.

The only downside – and it’s a big one – is that you need to be on top of your expenditure to know what’s left on the card to ensure you don’t overspend or have the embarrassment of not having enough funds for the purchases.  This is where the O2 offering fits so well.

O2 have linked the prepaid product tightly into their mobile offering so that the two are entangled – in essence they can no longer be adequately described without their counterpart.

The mobile is used to check balances on the card, to top-up the card and a really nice feature is that real time balance updates are sent to the card after every transaction -  so it’s easy to keep on top of  the available balance and to manage funds.  Of course, as it’s cash, the card can also be used to top-up the mobile phone.

As you’d expect, the card is only available to O2 mobile customers and if you stop being a customer you can no longer load credit onto the card.  O2 see the card and the mobile as inextricably linked, with O2’s UK Chief Exec Ronan Dunne, saying:-

“We believe we are at the start of a journey of the coming together of phone and wallet and we intend, through O2 Money, to be at the forefront of this trend”

The entanglement of the two products – the mobile and the payment card – will inevitably lead to the entanglement of customers with the O2 brand.  For customers who build the card into their daily routine, this could be a powerful retention mechanic for O2 – and as it’s one of the few “fee free” cards on the market, it makes it an even more attractive proposition. 

It’s clear when you look at recent O2 innovations such as the branding of the Dome to “the O2” - and the entanglement this creates between the mobile and music - or the O2 Juggler – and the link this creates between the home, the family and the mobile – that O2 really get how to augment the basic provision of a mobile phone service.

It might not be quantum physics, but creating brand extensions that fit with, enhance and synergise with the core proposition is no easy task.  However it’s one that O2 seems to understand and is a strategy that is sure to create customer entanglement – ultimately resulting in greater loyalty.

Beanz Meanz Markz (& Spencer)?

The famous slogan "Beanz Meanz Heinz", coined originally in 1967 tells it like it is – if you want beans then you want Heinz beans – there is no other choice. It's a simple slogan and was apparently written over two pints of beer in the pub - which does make you wonder what the purpose of the office is when problems like this, world peace and the current financial crisis are so easily solved over a beer or two.

Lasting for almost 30 years until it was dropped in the 90's when Heinz wanted the brand to be associated with more than just beans – it was revived again this year. With over 63% of the baked beans market and the nearest branded rival having less than 10%, the memorable campaign seems to have helped Heinz maintain its brand leadership. What's more interesting is that even though competitor Branston claimed that in blind taste tests 76% of consumers preferred their beans to the Heinz variety –Heinz have still managed to increase their market share 9.6% year on year.

The reason for this I suspect is that brands provide reassurance to consumers and actually make life easier with instantly recognisable products. This means consumers can almost shop on autopilot from category to category - the brands essentially providing sign-posting around the store. It may not be so much that they are "better" beans – just that they are what the majority of people "recognise" as beans. It's obviously no coincidence that many own label products have a look and feel very similar to the brand leader – hoping to cash in on that moment of confusion.

It reminds me of the last time I strolled into a supermarket while abroad and looked around slightly bewildered at the strange array of goods – shelves stacked with local brands and not a pack of "real" bacon in sight or a decent loaf of bread - either too small (French), too sweet (US) or too hard (German). Strangely, this is not unlike the feeling I get whenever I enter a Marks and Spencer and finally it looks like M&S have realised this too.

Sure, they have a loyal customer base who loves M&S food and their own brand products, but for many customers, especially new or occasional ones, not having branded goods reduces their opportunity to maximise share of wallet. Indeed, it can provide opportunities for competitors to talk to M&S customers as they shop elsewhere to pick-up the brands they want but cannot purchase at M&S. Even M&S Chairman Stuart Rose admits that he has to shop in rival store Sainsbury's to purchase products he can't get in store.

The irony of all of this is that it's happening at a time when M&S competitors are extending their own label lines as consumers look to trade down from brands to more cost effective alternatives. Supermarkets like Sainsbury's and Tesco have both aired major advertising campaigns showing the savings customers can get by switching to own label products – and trying to reassure them its just "different", not lower quality.

So whilst brands will continue to form a large part of consumers shopping baskets, the supermarkets are changing their offering to stop customers from feeling the need to go to cheaper alternatives – or in the case of M&S - to stop them going elsewhere and seeing alternatives.

This really does show the power that brands have, if M&S feels a need to break a long tradition to start stocking them and other retailers feel the need to spend vast amounts challenging them.

It also shows however that to successfully acquire and retain customers you need to provide the products and services they want and more importantly, you need to keep adjusting these in reaction to changing customer needs.

Even where you have the brand strength there is no resting on your laurels – Heinz reported changed it's recipe following competition from Branston – increasing its tomato content from 27% to 33% in response to Branston's well publicised (and apparently more tasty) tomato content of 30%.

Personally I think the M&S decision is a good move - it allows people to feel the comfort and reassurance that the recognition of branded goods provides, whilst opening up their undisputable quality food to a wider audience.

However, it will take more than a jar of Marmite or a bottle of Coke to get me into M&S – having the right product is just part of the equation. Whilst they are located in the town centre and have higher (perceived?) prices I'm afraid I'll be buying my Heinz Beanz from Tesco.

M&S Simply Food at my local BP however – that's an altogether different equation – as are the M&S profiteroles!

Keeping up with the Joneses (or better still leaving them for dust)

I had my first computer when I was 11 – it was a Sinclair Spectrum 48k+ which still brings back fond memories today.

Now I knew this was good for a number of reasons. Firstly it had 48k, trumping the 32k BBC Micro and the 16k ZX Spectrum - secondly it was a "plus" version so it had to be better. For a while this was the cutting edge of home computing – until that was my friend got a Commodore 64.

A few years on and my computing needs got upgraded. Eventually I had amongst others an 8088 IBM PC with MDA green screen and a full 10mb hard disk. As I started my career in software development it was easy to understand the evolution of PC hardware – we all knew that the Intel 386 was better than the Intel 286. There was great excitement at the Intel 486 – I was working for IBM at the time and I remember getting an opportunity to use one when its price tag was over £9k! (I also remember being overjoyed at the colour printing offered by the IBM desktop plotter – essentially remote control felt tips)

The operating systems followed the same pattern. Your level of MS-DOS or more latterly Windows told you that one was better (or at least newer) than the previous one – life was simple.

Then for some reason it all changed. Intel brought out the Pentium which even I could work out translated to the "586", but giving it a name rather than a number was the beginning of the change. We now have Intel Core, Celeron, Centrino and Atom processors - now I have no idea which is better and which is worse and the name also lends little direction as to their intended uses.

Microsoft did the same – first changing from a version number to a year with Windows 95 and then to a name with Windows XP and Windows Vista (there was Windows ME in there somewhere as well – but we won't resurrect that memory).

It seems a little strange to me that both Intel and Microsoft had relied on the fact that users upgraded and this meant users had to understand that something had changed and was better. I clearly know that a BMW 8 series is better than a BMW 3 series or at least it will cost me a heck of a lot more. I can also work out that a Mercedes A Class is probably going to be smaller and cheaper than an S Class. However what I can't tell you is the difference between a Ford Focus, Fusion or C-MAX in the same way as I can't tell the difference between recent Intel processors.

I don't know either way whether the movement from a clear numbering system for Intel and Microsoft has affected their recent sales but no one can deny that Vista certainly hasn't flown off the shelves at the rates expected and many machines "sold" with Vista on have subsequently been downgraded by companies to XP.

Now this may appear as an excuse for a trip down geek memory lane (and to a point it is), but there is a link here (I'll leave it for you to judge how tenuous) and that is essentially how a product or service description can bestow status and hence motivate behaviour.

In a research report on loyalty programme tiering by Nunes and Dreze entitled "Feeling Superior: The impact of loyalty programme structure on customers' perceptions of status" they discuss the effects and benefits of loyalty programme tiers (i.e. Silver, Gold, Platinum) and begin by looking at how people perceive status. Not unexpectedly, people apparently like to compare themselves to others and where possible would rather feel superior than inferior – even though most people aren't aware that they are doing this (or wouldn't admit to it).

The research has lots of interesting information with regard to how to design tiers and what is the optimum number and size of these tiers – and I hope to touch on this in another blog. However what interested me most was how customers perceived the naming of tiers. Within their research, when they named tiers with non-status laden names (blue, red, yellow), versus names which a customer can recognise as bestowing an increasing value (Bronze, Silver, Gold), the non-status names did not provide the same benefits to the programme.

This is interesting because it suggests that it's not necessarily just the rewards that a tier brings which attract customers (i.e. lounge access or priority queuing), it's actually the fact that the tier itself bestows an element of status on the holder – a knowledge that they are in a more elite position. This is backed up by the fact that the benefits are lost when this tier is increased in size so that it becomes more "mass".

There is obviously a correlation here within product marketing – whether its early adopters paying a premium to be part of a small group of people with the latest gadget and the bragging rights it brings, or the highly priced handbag which is no different to its high-street version except for the logo and the associated "exclusivity" this endows.

It's interesting that within computing, as customers have lost the reference as to what is deemed "better" ( I can't tell if my laptop is quicker than my peers) the focus seems to have moved from the internal processor to the external product. Screens have got bigger, laptops glossier and it seems to be all about the show. I can't brag about having a "686", but I can have a 17" widescreen laptop with DVD Blu-ray – or more recently and much more in demand a slower but sleeker Asus Eee PC - and quite frankly I don't really care what the processor is.

Whether we like it or not, we all want to feel a little special some of the time and creating a means to let people set themselves apart can be a great way of gaining additional loyalty and increased motivation - whether this is to encourage an upgrade of a product or upgrade of a loyalty programme tier.

The golden rules from the Nunes and Dreze research would seem to be however that firstly, the product, service or tier needs to have a limited membership - at least initially - in order to command a higher price and/or increased activity. Secondly, the customer needs to be able to recognise that this is something better and more importantly know that their peers can recognise this too.

I would probably add that there is also a need to innovate – what is new very quickly becomes passé and those consumers looking to remain on top will look elsewhere. This is why many loyalty programmes have "hidden" top tiers to which they invite some of the very best customers.

By the way, if you're reading this blog you're currently part of a small and exclusive group. I hope this helps in some way to keep your loyalty – but feel free to invite selected friends – there's room for a few more ;o)

twitter - The Swiss army knife of relationship marketing?

I'm increasingly amazed how quickly new technologies are becoming household names - in years past when I used to use Compuserve (remember that?) and ICQ, you'd never have seen them on the mainstream news, yet in recent years you can't move for updates on new online services.

Last year it was all about Facebook with news channels seeming to talk about it every other week – for 2009 however it has to be twitter - mainly driven by the antics of Stephen Fry (locked in a lift) and Jonathan Ross who are both avid tweeters and have made the service a household name. It is now starting to break out of the smaller eco-systems it has occupied and is becoming mainstream in a big way. DMNews points out that this time last year twitter was ranked at number 22 in terms of monthly web visits – it's now number 3 behind Facebook and Myspace and has just secured $35m in VC funding in the middle of one of the worst recessions.

People will have different opinions about what makes twitter great (or even be thinking "I don't get it") but I reckon the best thing about twitter is that with a maximum of 140 characters you're limited to short messages that are typically about the present – what you're doing right at this moment. You can't sit there and think about your tweet, planning the message you want to get across – its all about being open and telling it like it is – whether it's a status update, a comment on events or a rant, twitter allows you to get it off your chest - immediately.

People seem to tweet about anything and everything, with brands inevitably popping up in people's posts as well. In a recent article on Marketing Pilgrim the question was asked as to why Coca-Cola wasn't on twitter given that their brand pops up in tweets over 1000 times per day.

This got me thinking that FMCG brands like Coca-Cola do have one thing in common with tweets – and that is that the thought process for both is in the here and now – it's all about the present. People don't sit there and think about which brands they are going to buy – at best a customer will be considering categories – I need bread, milk, beer, pizza (you can see why my wife does the shopping) – but very rarely will a brand be strong enough that customers will consider it upfront. For brands the purchase decision is typically instant and emotional – when a customer is browsing a category they will pickup the brand they automatically recognise / is positioned in line of sight / is on special offer (tick all that apply).

The customer won't then give the brand a second thought until the time of consumption which may be days or even weeks later.

If you're a brand manager, you'll know this and so will be doing your best to make sure consumers are aware of and reminded of your product in the hope that when a customer does think about a purchase, your brand will benefit. Building loyalty to a brand though is all about building brand equity and isn't simply brand awareness – Woolworths was a well known brand, yet it still failed. Brand equity is about what consumers feel about a brand – consumers have to understand what it stands for, what it delivers and what makes it better than a competitor brand. If these messages aren't clear then there is no reason for continued loyalty (or initial purchase).

To make matters worse, what is important to consumers today can change over time as their tastes change, their budgets change and competitor products/communications change.

Many brands have no direct relationship with consumers and can sometimes be the last to know of these changes – seeing it first in their bottom line. In an ideal scenario brands would have a relationship with their customers, allowing easy, free flowing dialogue which enables them to understand issues a customer is having and to communicate what makes the brand special. Customer care-lines and websites have helped to open up brands to consumers, but these aren't really available when customers are thinking about a brand – either at point of purchase or consumption. What is a required is a means for consumers to feedback when they want to and when it's relevant – instantly - being able to update a brand on their thoughts – good or bad – or even to rant and to be updated when they want on their terms.

Using that most pervasive of technologies – the mobile phone – seems to be key to this, but services like SMS just don't appear to deliver.

This it seems to me is where twitter really comes into its own. Unlike SMS, twitter isn't charged per message so I'm not thinking "how much is this going to cost me", nor is it such as personal relationship – I'm fine with being a "friend" of Skittles on MySpace or Bebo but there is no way they are getting into my mobile address book.

Opt-in rates for SMS are also typically very low for brands and though this is in part due to perceived costs it is also due to the "interruptive" nature of SMS – when a message arrives I'll look it at almost immediately, but if it's not relevant you'll be sent "STOP" two seconds later. Twitter manages to solve these many issues, combining the immediacy (and increasingly availability via mobile), the "free" cost (normally hidden within overall data allowances) whilst supporting loosely coupled relationships and on-demand consumption.

Could this be the perfect communications channel? - Some brands seem to think so.

In the Telegraph it was reported that Tesco owned US brand Fresh & Easy was using twitter to inform customers and potential customers of special offers and new store openings. However, much more impressive I felt was its use of twitter to build direct dialogue. In one such exchange, a customer is reported as complaining about "sparse stock levels" in his local store, only to receive a reply highlighting "that levels tend to be a bit low at the end of the year due to shipping schedules". Now I know this won't help me with the question "where the heck are the pickled onions" when I'm in store, but answers (or simply acknowledgement) to questions like "why have you stopped stocking Silverspoon Sugar" - a personal gripe of mine last year – would be great.

So it seems to me that twitter offers brands that most elusive of things – a direct two-way relationship with consumers (see previous article of the value of customer feedback).

However I feel it could also offer so much more – the tracking of customer value.

Having followers is one thing and brands like Innocent are renowned for their blogs, newsletters and surprise and delight gifts at Christmas. The issue is a follower doesn't necessarily translate into a customer – sure it helps - but it doesn't tell you how often someone is purchasing your product, or even if they are purchasing it at all. To get this kind of insight many brands choose to run some kind of loyalty scheme or frequency marketing programme so they can get to know their customers – or at least some of them.

More recently many of the programmes I have worked on have been run using unique on-pack codes making the process more immediate though online entry – codes (and more importantly interest) are captured from the first product rather than waiting for someone to stick 20 coupons onto a form and mail it back 10 weeks later! Given that typically 1 customer redeeming can represent 50 customers who started collecting – getting to know the customer upfront can be very valuable for those brands wanting an ongoing dialogue – why talk to 10,000 redeemers when you can talk to 500,000 registrants.

Whilst on-pack collection schemes can work well for products consumed in-home as the label or packaging can be retained to be captured online later, for out of home consumption this can still prove challenging - I really don't want to have to keep an empty bottle and crisp packet (or two) in my pocket for the whole day.

Brands have tried to solve this issue by allowing customers to SMS codes in - think Coke Zone or Budbucks - however it can still be problematic for both sides. For the customer they're not sure of the cost and whether they will then be bombarded with ongoing marketing – for the brand the cost is typically absorbed so each SMS eats into margin which could have been used to reward the customer.

I really think twitter seems to provide an answer here to.

Allowing me to "tweet" my on-pack code means I'm not worried about the cost (and neither is the brand) and it removes concerns about ongoing marketing - I can read it when I want and if you send me stuff I don't want I can simply block it. Not only that but it also has the potential to provide a wider dialogue as messages not sent directly will be seen by all my followers - (@brandname 56G4K62KFIG4V) - letting all my friends and acquaintances know about my purchase (and potentially my Budweiser habit)

I've no doubt revenue models will change with twitter in the future as investors look to get some kind of return, but right now twitter is looking like the Swiss army knife of relationship marketing - providing a means for promoting offers, receiving direct response feedback, building relationships and tracking purchases.

Given the current cash-strapped climate and the phenomenal growth twitter is seeing, I think any marketer would be mad not to be looking at the benefits twitter can offer today.

PS. If you're still trying to get your head around Facebook – go check out the twitter help for a crash course

Snow? When all about you is white – where is the purple cow?

For those that don't know, we've had snow in the UK - and not just a dusting, we've had inches of snow – and inevitably it has made the country grind to a halt with schools closing and roads un-passable. Now we're told that local authorities are running out of grit and salt for keeping the roads clear. We're simply not used to having severe weather in Britain – everything is normally middle of the road – not too hot, not too wet, not too cold, not too windy.

Now generally we're quite happy with middle of the road – it's normal, it's unsurprising, it's comfortable. When the weather does change though we get excited about it – we like things that are out of the ordinary. When we get snow, the TV news seems to dedicate 90% of their time to it and if it's hot for just a few days the newspapers are full of headlines like "Britain Sizzles in Heat Wave". However, give it a week and everyone is fed up – the snow becomes an inconvenience and we just want things back to normal. When it's too hot we dream of a little cloud just to cool things down a bit and maybe some rain to save the lawn.

Things that are out of the ordinary catch our attention but can then very quickly become everyday and passé – we become comfortable with them and don't even notice they are there.

Marketing guru and blogger Seth Godin discusses this subject in his new book Purple Cow: Transform Your Business by Being Remarkable. He describes a situation where when driving through France they saw field upon field of picturesque cows grazing by the roadside – saying it was like something out of story book. Now ignoring the obvious question this raises about the UK dairy industry and where the heck did all our cows go, he then writes that within 20 minutes this once fascinating scene became common – boring even. You've seen one cow you've seen one hundred – however what would have been interesting he states would have been a Purple Cow.

Now you can almost picture this – driving along seeing field upon field of brown cows and then suddenly a Purple Cow appears – that would capture your attention – it may even make you stop what you're doing. Seth describes this as the new marketing "P". Previously marketers were dealing with Product, Price, Place, Promotion (and a host of other P related words for 5 Ps, 7 Ps, etc.) but he argues that the Purple Cow "P" represents something "Remarkable" – going on to argue that Remarkable Marketing is the art of building things worth noticing into your product or service. He says "Something remarkable is worth talking about. Worth noticing. Exceptional. Interesting. New. It's a Purple Cow. Boring stuff is invisible. It's a brown cow."

In a small way I thought I spotted a Purple Cow today. I received an email from UK clothing brand Next with the title "Snowed In? Shop Men's New Arrivals" and this really peaked my interest – it seemed relevant – it was snowing outside and they knew this and had seemed to have quickly made their communication relevant to me. Unfortunately on opening the email it fell down completely – the content was obviously not themed around the title and I very quickly lost interest. Now I know that typically email campaigns are planned weeks ahead and the content needs to be developed and approved before it can finally arrive in my in-box, however what it showed me was that to really peak someone's interest a communication needs to be relevant and quite often relevance will be time related – what is relevant today (a snow related email) will not be relevant next week when it has all melted (I hope).

Slapping a last minute "Snowed in?" at the front of a standard email isn't relevance – it made me open it I grant you – but it actually disappointed me more as it smacked of "lipstick on a pig" – not that their overall email was that bad, it just wasn't what I was expecting and wasn't relevant.

Standing out from the crowd can be a scary prospect though - it may require risky and new approaches - dare I say... innovation - and in these uncertain times this is something many brands are shying away from. Instead they are going with the tried and tested methods they have used before.

Tom Fishburne picked up on this theme in his blog entry "Blend into the herd" where he said that the first projects to get cut are the speculative ones - the innovative ones - as brands attempt to batten down the hatches. Instead though he points out that forward thinking brands should see this as an opportunity - as all around are trying to blend into the herd the ones which can react the quickest and offer something truly unique have the potential to not only survive but to thrive.

If marketers want to gain attention at a time when people are increasingly overwhelmed with information and are filtering out messages more and more then the message needs to be remarkable – it needs to stand out from the crowd – it needs to make me stop what I'm doing - it needs to be a Purple Cow.

T'ain't What You Do (It's the Way That You Do It)

I know I've spoken about this before but I'm intrigued by how many FMCG brands count success based simply on the number of baskets their product is in within a 52 week period. It's even more surprising when you consider that for many brands, increasing this penetration is accomplished through free product such as buy one get one free – essentially paying customers to purchase the product. I wasn't expecting however a brand to actually pay customers to buy their product but this is exactly what General Mills are doing in the US with its latest campaign, providing gift cards in denominations of $5, $10 and $25 for 1 in 20 purchases.

Now this is pure play sales promotion and although the prize is instant win cash it could easily be any kind of prize draw item. Sales promotion by its very nature is there to promote sales and the brand will know exactly what will happen – there will be a spike in purchases as new consumers are attracted to the offer, existing consumers bring forward purchases and competitor consumers switch – all for the chance of winning something. The hope – and it's normally a slim one – is that a small percentage of the customers who purchase the product because of the offer will enjoy the product and stay with the brand.

The American poet and physician Oliver Wendell Holmes once said "The main part of intellectual education is not the acquisition of facts but learning how to make facts live" – essentially not acquiring something simply for the sake of it without due consideration as to how it can be "brought to life". This is however what many marketers do today with their acquisition campaigns – looking to acquire as many sales as possible without thinking about how the customers behind these can then be retained.

As a loyalty marketer it's easy to point the finger and say you'd be better off spending the money on your existing customers and retaining them – going on to then spout some facts and figures about how much cheaper it is to retain a customer than to acquire one. However, a dogged focus on just retention is almost as dangerous as a single focus on acquisition. All customers will churn at some point – whether this is because of the tactics of another brand, a maturing/changing of tastes or just because the reaper has "come a knockin" – you can't keep a customer forever.

An alternative approach though is what we term "Acquisition for Retention" – this is a focus on acquiring customers which you are looking to retain. This doesn't change the techniques used to acquire customers - sales promotion is still an important tool in supporting this – but what it does is ensure that the type of customers you acquire are the ones which are likely to want to continue buying your brand.

For example, if you have a large promotion with a prize such as "win a holiday to the Caribbean", the type of customer you will attract is someone who wants to go to the Caribbean. If the offer is rich enough and compelling enough they may not actually want your product at all – just the chance to win the prize. The General Mills promotion will fit into this type of offer – customers attracted to it will simply like the idea of winning cash.

In order to create promotions that attract the right kind of customers you need to keep in mind three golden rules:-

• Desirability – Understand your customers and what motivates them – select rewards which resonate well with your core customer segments and are a little less ordinary
  
• Achievability – Ensure rewards are achievable for different customer segments – whether this is an on-pack collection programme or a sales promotion prize draw, customers will tune out quickly if they feel the effort doesn't justify the reward
  
• Brandability – Ensure any rewards reflect and deliver upon the brand promise – the rewards are an extension of your brand so choose carefully who and what you want to be associated with
  

Walkers Crisps in the UK ran a campaign recently called "Brit Trips" that fits these rules perfectly. The campaign allowed consumers to collect on-packs codes from promotional packs and to enter these within a website to build up a points balance. These points could then be exchanged for a range of UK based activities including ½ price entry to attractions like Sea Life or theme parks as well as hotels and holiday parks. The campaign aligned well to the three golden rules with:-

• Desirability - The promotion worked well with its core customer base of families – providing family orientated rewards

• Achievability- The promotion fitted the economic climate well – allowing families to save money during school holidays with just 2-3 purchases providing a reward

• Brandability - Walkers has picked up on the recent trends for locally sourced food and has played to the fact that it uses 100% British sourced potatoes. The "Brit Trips" campaign helped to re-enforce this brand positioning by focusing on rewards which are local and British - helping to drive this point home with its consumers.

The success of this campaign can be easily seen from its online usage - visitors to the Walker Crisps brand sites peaked at 575,000 in April 2008 (source: Nielsen NetRatings April 2008) and year on year grew from 17,000 in June 2007 to 444,000 in June 2008 – an increase of 2,575%! Although Walkers spent a lot on media to promote the campaign, reportedly over £5m, what really worked well was a promotion that was targeted to their core audience with a selection of rewards that resonated well.

So that's the acquisition part of "Acquisition for Retention" sorted, what about the retention part?

Stay tuned for a subsequent post when I'll discuss what to do with the customers once you have them…

(Post title: "T'ain't What You Do (It's the Way That You Do It)" is a song written by jazz musicians Melvin "Sy" Oliver and James "Trummy" Young. It was first recorded in 1939 by both Jimmie Lunceford and Ella Fitzgerald)

Woolworths is dead – long live Woolworths

I think the news of the demise of Woolworths is probably a little premature – there is no doubt it's in trouble and the Woolworths of the future may bear little resemblance to the current chain – however I don't think that this is the end. The Woolworths brand has strong affection with many people who may not have shopped there recently but certainly remember it from their formative years. It's always been a strange store, selling a variety of goods from the famous pick and mix, through children's clothing, stationary and music/films, however in some senses this is probably what's caused its demise. With the pound stores taking one audience and the supermarkets taking another, Woolworths has struggled to know what it stands for.

WH Smith was in a similar position 2003, having no real focus and being undercut on all sides by the supermarkets. This changed however when they started to focus on their core offering - their books, magazines, news and stationary - and reduced focus (and retail space) on entertainment products such as CDs and DVDs. Understanding what customers valued in the store allowed them to ensure that the stores stocked what they wanted and to concentrate on when customers wanted it - leading to an increase in their store locations at places like airports and train stations. These decisions have changed WH Smith's fortunes – it may still have some way to go and the current climate isn't going to help, however WH Smith chief executive Kate Swann was clear in her vision when she said in 2004 "I want people in the UK to get to the point where they say, 'Of course I go to Smith's for stationery; of course I go to Smith's for books; of course I go to Smith's for my magazines.' That's what I want Smith's to be for."

Starbucks is one company for which it's clear what they stand for and that's great coffee. Before Starbucks came along it was possible to buy a coffee in the high street, but Starbucks redefined what coffee stood for. They set a standard for it, built a business around it and were very clear that it was all about the coffee. Every decision they made whilst growing into a global brand was centred on their belief in their product and how it should be enjoyed. Whilst others for example were creating flavoured coffee beans, Starbucks refused to adulterate their product and stood firm by their beliefs in keeping the product pure. They didn't always get it right though and in their early days their stance on not using low-fat milk initially bemused customers who had to go elsewhere to enjoy their "skinny" latte.

They learned though that there is a balance to be struck between giving the customer what they want whilst ensuring the business is focused on what its core values are and what it stands for.

Woolworths on the other hand has lost its way – it doesn't seem to stand for anything in particular and is a jack of all trades – master of none.

It was once well known and well respected for its children's clothes. After securing rights to the Ladybird clothing brand in 1984, Woolworths went on to launch a hugely successful range of children's clothes in 1986 which was supported by PR, TV and press advertising. Despite going on to acquire this brand in 2000, Woolworths have never really leveraged it to the full. Rather than building on this they went on to launch Big W which further confused customers as to what they stood for and subsequently failed and was axed in 2004.

Customer loyalty cannot be bought – either through discounts or points – in all surveys on customer loyalty, top of the list after convenient location is that the retailer stocks what they want - if a brand gets this fundamental wrong, all other efforts will fail. Any new buyer of Woolworths will need to first take a step back to understand what Woolworths stands for, what its key values are and then build a business around this. Reducing or removing product lines which run counter to this and focusing on what the customers want within the context of these values.

Only in this way will Woolworths be able to set itself apart on the high street and reinstate itself as a brand that customers understand and say, "I go to Woolworths for…"

Boom and Bust Marketing

Despite assurances from Gordon Brown at the Labour conference in 2000 that we would not return to the days of boom and bust, here we are in 2008, tumbling out of a boom and right into a bust. There are probably many reasons for this that I'm not qualified to discuss, but it would appear one of the primary reasons is an overheated and overvalued housing market. A market which created a great amount of perceived wealth and was encouraged and hailed as an indicator of our successful economy.

There was no real recognition that it was essentially a bubble waiting to burst – like the internet bubble before it and the tulip market bubble way back in the 17^th century. Opinions differ as to why they form – whether it's simply greed or herd mentality – but it's generally only in retrospect when the bubble has burst that we see it for what it was and people begin to recognise that demand goes down as well as up.

What's interesting is that while we see this at a macro level, its happening all the time in different markets. Through my work with various FMCG brands I was amazed to see that the number one measure of success for many brand marketers was penetration – the number of people who have the brand's product in their basket in a given period of time.

The movement of this measure in a positive direction has become critical to many and being the number 1 or 2 brand in penetration terms is the place most brand marketers want to be. Changing this measure can be relatively simple though – in the short term – by creating a sales promotion which targets a large number of people with a very compelling offer.

The problem is, the gain from this sales promotion is not real – many of the brand's existing customers have simply bought forward to take advantage of the offer and many others have only purchased it because of the offer. Sure it has introduced new people to the brand – some of whom will stay – but no where near the amount of people who were contained in the spike in penetration.

Now there is nothing wrong with this approach – generating awareness and creating trial is a key activity for any brand - the problem is believing that the spike in penetration is reflective of the actual customer base.

Where brands believe this, thus starts a never ending cycle of sales promotion – creating new promotions to follow quickly on the heels of the previous promotion so as to prop-up the penetration figure over time. This can be costly on two accounts – firstly the brand is literally buying this extra penetration with free product and secondly they are conditioning their existing customers to only purchase through offers.

As times get tough and budgets are reviewed, this constant over spend on sales promotion is going to result in some brands coming back down to earth with a bang as the penetration bubble bursts.

Ideally brands should be looking at how to maintain market share and grow this in a controlled and responsible way – not focusing on price reductions and volume lifts but focusing on brand values and recognising and rewarding existing customers. Sales promotion will always have its place to drive awareness and trial, but acquisition without a focus on retention is a slippery slope to boom and bust.

As Gordon Brown said a little prematurely back then - no return to short-termism – no return to boom and bust.

Customers Pay the Price for Quality and Service

I had some push back on my article "The customer is always right (unless they’re wrong)" where I commented that I felt price ceased to be a major reason for churn for existing customers. It was pointed out to me that although this may be true to a point, brands still needed to reassure their customers that they were receiving a fair price, even if they wouldn’t really know either way. This is evidenced by brands such as Tesco continuing to provide messages on "value" and comparisons to other retailers.

I was then reading an article on Retail Week by Mark Price, MD of Waitrose with the title "Cash-strapped shoppers might be chasing after value, but they can still appreciate quality". He raised the question that in these challenging times and the sudden need to realign around price, how a brand such as Waitrose, with a tradition of quality for over 100 years can reassure about price (and real value) without losing their quality credentials.

He then went on to outline how Waitrose is meeting this challenge by actually investing in their products rather than cutting back and cutting costs. They have invested in the quality of their own brand lines meaning these now stand up well against other own-brand and branded products. This has then been backed up with advertising saying that if you don't enjoy your Waitrose product they will refund and replace it.

To fight the challenge that consumers will naturally think that a "quality" product is automatically going to be more expensive they have introduced subtle ticketing in-store to communicate that they are the same price.

Most interestingly they are also investing in their staff - an area many businesses actually cut back on in hard times, reducing training and staff numbers. By investing in customer service training they are now seeing a 10 percentage point gap on mystery shopping scores between themselves and their closest competitor.

Mark finished of his article stating that they have improved their quality, value and price perceptions over recent months and are holding on to their customers. Waitrose it would seem are doing a good job of retaining their customers by building on the things that customers value – good quality and service – whilst reminding customers that they are still competitive on price.

I still maintain that price is not the number 1 reason for churn despite what customer research may say - but it would seem all brands in these more trying times need to consistently reassure customers that the price paid is fair for the quality and service delivered.