Ask and you shall receive

One of the things I've noticed in the last couple of months is how worried people are about saying the wrong things. Robert Peston, the BBC Business News editor had covered the story of the credit crisis since the beginning and was credited with breaking the news of discussions between the banks and the government about a bailout which then resulted in the share prices of the banks in question free falling.

Over the following weeks it became difficult to tell if the media was reporting things they saw happening or causing things to happen. A number of commentators began to point the finger at Peston with some suggesting that he inflamed the situation rather than just reporting it.

When George Osborne, shadow chancellor discussed how the governments high borrowing could lead to a collapse of the pound he was accused of "talking down the pound" – so worried were people that simply saying it may be so might make it so.

In an article in the Telegraph the reporter denied that the media can cause a recession just by talking about it and then went on to say that what causes recessions is the relative optimism or pessimism within the economy – without seemingly connecting that peoples view of the economy is dictated by what they read in the press or see on the TV.

Whether the current slowdown is being influenced in any way simply by what the media say will always be hard to measure, but as any marketer knows, if you want someone to do something you simply have to ask them - unlike the media it seems, marketers do understand the power of suggestion.

Some quite scary research from Stanford University found that in tests with pre-school children, anything wrapped in a McDonalds label was rated as tasting better – even carrots and milk. Almost 77% of kids preferred the fries when wrapped in McDonalds packaging versus 13% when not. It would seem that telling kids McDonalds has great food repeatedly via TV advertising actually affects their ability to taste!

Looking at more direct suggestions, an incentive programme we ran a few years back for a credit card company was based around a simple statement – "can I put that on your <card name>". Just by asking the customer for a specific brand of card, we saw a huge lift in usage of that brand – for which the retail staff were rewarded. Card issuers spend a lot of money on direct marketing and loyalty programmes to encourage their card to be front of wallet and yet that can so easily be undone simply by getting the retailer to ask for a different card at the point of sale.

On the flip side I've seen marketing programmes which don't seem to be getting cut-through with customers. On one programme regular, glossy marketing materials were being sent to customers but there was no change in behaviour either within control groups or pre/post mailing. When reviewing the marketing materials it was clear to see why – there was no call to action – the customer didn't know what they were expected to do. The marketing materials were focusing on what the customer could get within the loyalty programme, without telling the customer what they needed to do in order to achieve it.

The call to action is the basis of direct marketing - if the communication asks the recipient to take a specific action, for instance calling a free phone number or visiting a website, then this is considered to be direct response advertising.

Whilst this is understood by direct marketers, it is sometimes overlooked by loyalty marketers. At all touch points within a loyalty programme the customer needs to understand what is expected and actually be asked to do it. Whether this is training the employee to say "do you have a loyalty card" to every customer so that the customer gets the card out of their wallet (or signs up), or sending communications with a clear call to action which maximises participation.

Having a clear call to action is probably even more essential in the current climate. With so many pessimistic messages being put forward by the media, anyone wanting a customer to actually make a purchase is going to have to be clear and concise about what the customer needs to do.

Being a little optimistic will probably help as well!

Short term gain or long term relationship?

Abbey have recently launched a credit card providing 3% cash back for 6 months on card spend for groceries and petrol. The press release around this stated "The increasing cost of living, combined with the credit crunch, means families need all the help they can get to cover the cost of their weekly shopping essentials - which is why we developed this cash back card".

This card is interesting on a couple of fronts.

Firstly it is blatantly targeting everyday transactions – the holy grail of card spend. If a card issuer can get a card to be used in habit forming sectors such as supermarket and petrol, then it's more likely to be front of wallet for other purchases. All card issuers encourage this activity, but it's normally more subtle as part of a statement communication or targeted marketing. This is one of the first such cards to be rewarding just this form of spend and is being done at a time when consumers are much more aware of their spend within these categories due to rising food and fuel costs.

By excluding other categories such as travel and expenses, the proposition rules out many customers in the traditional cash back segment of travel and entertainment who use their card to pay for business expenses. This card is squarely aimed at families who would normally pay for groceries and fuel by other means such as cash and debit – a previously overlooked segment within cash back loyalty.

What is a little worrying however is the promotion.

Anyone working within the card industry will know that 3% cash back is not a proposition that can be supported within the normal economics of a credit card. All merchants pay a card issuer for spend taken on a credit card, but this is no where near 3%. For Abbey to fund this offer of 3% its either in for the long haul and is hoping to make back its investment through a long term relationship with the customer, or it is hoping to make back its investment in the shorter term through a large number of customers revolving a balance on the card, paying interest and hence offsetting the costs of 3% being paid to a smaller number of transactors – customers paying off in full every month.

I wouldn't like to suggest which business case is driving this proposition. However, in a mature market with customers an increasingly scarce resource, the best route to healthy, long term profits is through healthy long term customer relationships. A loyalty proposition which encourages the right behaviours for the card issuer, the merchant and the customer provides a long term win-win for all stakeholders.

I sincerely hope the new Abbey cash back card is such a product – with customers at the heart of the proposition and a continued focus on meeting their needs so as to reap the rewards of a long term relationship.