Frictionless Loyalty - Two biggest loyalty launches this year

In the last couple of months, two new massive loyalty initiatives have been launched - and nobody really noticed.

Together they cover over 16 billion purchases and almost 1 billion people. They come from two of the largest brands in the world, one of which is rated number 8 in the top 100 Best Brands for 2011.

It's probably no real guess that these two brands are Facebook and Apple. However, what might be harder to pinpoint is the loyalty initiatives that they have launched.

Loyalty doesn't always have to mean points = prizes. Instead, loyalty can be defined as

Any activity or treatment that gets customers to make ongoing choices in your favour, all things being equal

Using this definition, I think you can define Facebook Timeline and Apple iTunes Match as loyalty initiaitves and here's why.

Facebook Timeline - For those that haven't noticed, Facebook is changing your profile page so that your whole life (or at least from when you started using Facebook) is laid out for you in one long timeline. You can go back to any year, month or day and see the comments you made, the pictures you've shared or the videos you uploaded.

It's presented in a really engaging way and once you get over the initial privacy concerns, it's really interesting to see and explore, especially if you've been on Facebook for a few years.

So why do I think this is a loyalty initiative?

This solution creates loyalty because they have essentially taken your existing information and created a context around it, something only they can do. Within Google+ I can re-create my relationships or re-upload my photos, but this doesn't re-create the context. Only Facebook knows when those online relationships were first created, what was said and where I was when I said it, where that photo was taken and where I was when it was taken.

This is being further extended with applications that will allow me to track activities such as how many miles I've run, the movies I've watched, the news I'm reading or the music i'm listening to; leaning towards the trend of self-tracking. These applications are also automatic, sharing on my timeline as I do them.

Facebook CEO and founder, Mark Zuckerberg described timeline as:-

"Real-time serendipity in a friction-less experience"

This use of the word "friction" is really interesting. In the book "The Loyalty Effect" by Frederick F. Reichheld, he says:-

Just as friction steals the energy from a mechanical system, defection steals the energy and knowledge from a business system. [..] The opportunity to reduce friction in most businesses is immense"

By making it easier to share my information and activities; by taking my own data and creating a context around it, Facebook have suddenly created something useful, desirable and importantly, frictionless.

Previously my profile was just a collection of the last few days of my thoughts and "likes"; something easily replicable on any other social network. Now my profile is everything I've done or am doing - all my interactions (or at least those shared) - ever.

Now, given the choice to do an activity like upload a photo, I'm more likely to choose Facebook, even though Google+ is equally capable. When adding a friend I'm more likely to add them on Facebook as that's where "I" am.

That preference is loyalty. Facebook Timeline is a frictionless loyalty initiative.

Apple iTunes Match - So I spent a lot of time over Christmas ripping all my CD collection onto my mac. Those that have previously done that will know it's not something you really want to do again.

The reason I did finally do it though was for one thing - iTunes Match.

Now, using iTunes Match, I'm able to let Apple see my whole music collection and to simply (and almost magically), make it available via the cloud, to every Apple device I own - forever.

Tim Cook, Apple CEO is quoted as saying about their overall cloud strategy:-

"I see it as a fundamental shift [..], it is not just a product. It is a strategy for the next decade"

By letting me upload my music collection I become less attached to the physical product - the CD or the download - and view iTunes more as a streaming service. The clever bit though is it's streaming my content to every Apple device I own. Using content that I already own and content that I'm attached to Apple have managed to create a strong and ongoing relationship by making it available on all of my devices in a truly frictionless way.

It's no surprise then that the overall Apple iCloud initiative has been described as:-

As close to seamless and frictionless synchronicity as we have been able to come to thus far.

They have turned their music store inside out and let me put my own product on the shelves. Now it's not a store but a repository - it's an extension of my own property and something I can share easily across all the (Apple) devices I own. (It's no surprise I've gone from zero Apple products to over 7 in less than 2 years!)

Now that they have the thousands of tracks I already own, I'm more likely to buy my next track from them, even though Amazon is equally capable. Even though I love the new Kindle Fire (and it is a fantastic little device), I'm more likely to buy the next iPad to keep easy and seamless access to my music.

That preference is loyalty. iTunes Match is a frictionless loyalty initiative.

Finding ways of making it easier for your customers to do business with you, of reducing friction, can be a really powerful loyalty driver.

With brands like Facebook and Apple finding increasing challenges to their dominant positions (think Kindle Fire / Android / Google+), these kinds of initiatives do really provide a competitive advantage and help their customers make ongoing choices in their favour.

That's what i'd call loyalty.

Facebook credits - a lesson for retail

Facebook credits are starting to gather pace, with the deadline set for July 1st for Facebook games to use them exclusively. To support these a number of features have been created to allow developers to integrate this new currency into their games.

What's interesting is how Facebook and the gaming community are designing and using these features and what lessons real-world retailers (and payment providers) can learn.

Buy with friends

This is a really simple idea which essentially allows the customer to promote their purchase to friends and in the process, giving their friends an opportunity to make the same purchase at a discounted rate.

On paper this wouldn't seem particularly compelling for real world purchases. Imagine an offer from a retailer saying "Purchase x and receive a 20% discount coupon for your friends" - the typical response would be whats in it for me.

However social media changes this concept completely. Firstly, people are more likely to want to promote their purchase (or anything else for that matter) as it provides "social currency" that they can share. Secondly, the immediacy of the offer which is linked directly to the purchase in real time and the ease in which it can be carried out (just clicking "Share") makes it less of a decision and more of a reaction.

The removal of barriers to making decisions is critical to get opt-in and this is what "Buy with friends" is doing. Facebook says:-

"more than half of people who were offered a deal in-game decided to share it with their friends, and the engagement and conversion rates on the resulting posts were also strong.”

For a retailer, linking their customer loyalty programme (which provides the identity) with a social network like Facebook makes this type of offer a real possibility - and the promise of over 50% of purchases being promoted to friends is very compelling.

Common knowledge (and common sense) says that it costs more to acquire than retain a customer, however that doesn't stop acquisition being really important; its just also really expensive. Providing an offer such as 50% off for friends in order to acquire them makes this both targetted and cost effective - something which services like Groupon have been exploiting.

I suspect it won't be long before real-world retailers have a "Share" purchase option at the end of their e-commerce process with a discount offer attached to it for friends. For offline retailers, technology services such as SNAP combined with a retail loyalty programme are beginning to make this a reality.

Frictionless Payments

The implementation of frictionless payments allows customers to spend up to 30 credits without interrupting game play with confirmation messages such as "Are you sure?". Again, the idea here is that the less decisions a customer has to make the more likely they are to make the decision.

Amazon see this all the time with their "one click" feature. As a customer I've hovered over the one-click button hesitating to make a decision and then just clicked it - one decision. Done. Instead, had I added it to my basket, then confirmed my basket, confirmed my payment settings and confirmed my overall order i'd have had plenty of chances to say no - and many customers do just that.

Contactless payments are looking to achieve the same thing within offline retail, however this will be a little harder. They will certainly help with impulse purchases when a customer doesn't have cash to hand, but I don't think they make the process frictionless. You still need to queue, deal with a cashier and hand over payment cards - it's just a little quicker.

Imagine instead if you could walk around a store and simply decide then and there to purchase the item. Picking it up, tapping your card/phone and walking out. That would be truly frictionless and is something we are starting to see through self-checkout.

Get Balance API

For loyalty programmes, a feature that lets partners retrieve a customer balance via a real-time API is pretty standard. Loyalty programmes keep a balance of points and partners can interrogate this balance to see if a member has enough points to redeem for an item.

What's interesting though is that while this is how the feature is normally used - to just power redemption - developers using Facebook Credits see a totally different opportunity here.

Inside Facebook had a blog recently discussing this feature which said:-

Determin[ing[ the Credits balance [...] allows them to identify high rollers with a large balance of Credits and dynamically price virtual goods to increase purchase probability or profit margin, improving monetization. Rarely in the physical world do retailers get the chance to look inside a potential customer’s wallet and price their wares accordingly.

That's a very different way of looking at things and something that equally applies to real-world cash as to virtual currencies like loyalty points or Facebook credits.

Loyalty programmes do this to some degree today, using customised offers, targetted points promotions and tiering to recognise different types of customer and their ability to change behaviour. However, the ability to dynamically price goods and services (whether directly or using offers/points promotions) in real-time is something few, if any are doing today.

Open this wider across coalition loyalty or payment services and you have the ability for a retailer to make real-time decisions on pricing or cross-sell offers based on customer headroom, value or purchase categories.

As Facebook Credits become the defacto in-game currency, expect game designers to continue innovating in ways that make their products stickier and setting the agenda for how payments and retail will be evolving moving forward.

Loyalty - the achilles heel of Groupon (and Facebook knows it)

If Google are willing to try and pay a reported $6bn for a company which is little more than two years old then it must be doing something interesting - and Groupon is certainly generating some interest.

Depending on how you look at it, Groupon is either the hottest trend since...er... the last one, or is simply a purveyor of local discount deals via email.

However, if "imitation is the sincerest form of flattery" then with both Google and Amazon looking to have a bit of the discount deals pie by each creating (or buying into) their own version, there must be something to it.

Group buying is nothing new, back in the (first) dot-com boom years there were a number of group buying start-ups, but these failed to gain traction despite significant above the line spend. One of the reasons for this is that these early pioneers focused on selling branded goods like a standard e-commerce site, but would lower the price based on the number of committed sales. In reality however, they would have bought the goods beforehand and so the "group discount" wasn't negotiated based on the group itself. Even if it was, mainstream retailers would already be buying significantly more volume of the same item and so beating their prices was hard.

So whats changed? Quite simply, relevance - based on location, timing and friends.

These offers are typically from local businesses, with subscribers selecting their chosen city to receive offers from. The offers are distributed via email and with most subscribers now having always on internet access via smart phones or tablets, the offers become timely, with users able to react quickly to get the deal. Finally, social media means both the offers and the offer provider and getting more visibility as subscribers quickly push them out to friends.

Current group buying leader Groupon describes their service as providing "valuable new customers, guaranteed". Going on to say:-

These subscribers are not looking for “the perfect deal.” They’re looking for the perfect excuse to try something new. We get them to your business, and you bring them back again and again.

Quite clearly, Groupon see themselves as an acquisition channel. A way for smaller brands or independent retailers to cut through the clutter of both digital and traditional marketing channels, many of which are inaccessible to smaller merchants, accessing customers directly with an attention grabbing offer.

The issue with this though is something which Groupon seem to know, but possibly don't recognise when they say "We get them in [..] you bring them back again and again". They may drive customer acquisition in the first instance, but it's clearly up to the merchant to get the customer to come back - and this requires a retention strategy, something Groupon is simply ignoring.

Facebook on the other hand is not known to miss a trick.

As reported in Forbes, they are testing a new feature called "Buy With Friends" which allows users to publish a purchase within their newsfeed and for friends to be able to click on this and purchase it themselves with a discount. The feature will let a user "unlock" a deal and then share that same deal or discount with other friends who can take advantage of the fact that it's already been unlocked. In tests, Facebook reported that more than 50% of people chose to share their purchase.

Currently it only works with in-app purchases using Facebook Credits, but it's easy to see how this could be expanded to real worlds goods and services.

As I discussed in a previous post, there is a trend now for retailers linking their e-commerce activities directly into Facebook, something we've discussed in more detail in a white paper called "The Future of Relationship Marketing". Joining the dots, if retailers linked their e-commerce into Facebook this would allow them (large and small) to both publicise purchases by existing customers and to push deals to prospects.

The combination of Facebook Places, Deals, "Like" and "Buy With Friends" provides a unique array of services to merchants with an pre-existing audience of 600m people. It won't take much for Facebook to combine these in a way which competes head-on with Groupon, but adds longer term value through the ability to track these interactions and build further contact - linking the initial acquisition to ongoing retention and loyalty.

You could argue that Groupon shouldn't be the only one worried here - every loyalty agency will (should) also be looking over their shoulder at the fast approaching Facebook juggernaut. The winners will be those embracing it to drive even greater value for their clients and customers.

Lean Forward Loyalty

Just a few years ago the world was a very passive place.

You could sit and watch television – no fast forwarding of the ads! You could go about your day seeing billboards or press ads – noticing them all but not being required to do anything.

Even in the early days of the internet the web was essentially a passive experience - you could browse websites, maybe even dabble in a little e-commerce, but it really was an undemanding experience. Broadband speeds have reflected this expectation with the download speed typically 4 times as quick as the upload speed – they really weren't expecting you to give information, simply to consume it.

Not any more. The world has changed.

Passive doesn't cut it anymore – everything must be active. It comes in all forms, whether its social networking, instant messenger, twitter, mobile internet, mini-web or any other technology, they all want you to do something – to interact. It's now not good enough to simply watch television – you need to interact with the telly – pressing the red button for more information, back stage interviews or re-runs of the weather.

Steve Jobs told MacWorld in 2004 "We don't think that televisions and personal computers are going to merge. We think basically you watch television to turn your brain off, and you work on your computer when you want to turn your brain on". He may still be right to some degree about the TV and computer actually merging – but what has certainly merged is the activity of people using the TV and computer at the same time. People are in essence making the passive active.

This change has been called "Lean Forward" media, contrasting the passive nature of "lean back" media which didn't really require much from you other than sitting in a chair.

However, it's no coincidence that the top 3 website are lean forward experiences – sites like Facebook, MySpace and Twitter – people like to interact, to integrate and interrogate. As technology allows this more and more then people will take advantage of it in ever greater numbers.

This has implications though for brands.

As consumers increasingly expect a lean forward experience they will expect brands to lead the way. It's not unusual within customer services to have service levels of answering a call in 3 rings, but answering an email in 24 hours – if you even get a response!

To the lean forward generation 24 hours is an eternity.

If a consumer can interact via their many channels (and it's not unusual to find me on email, Skype, twitter, Facebook and LinkedIn within a single hour), you can bet that the longer you take to answer a query the more time they'll have to spread their dissatisfaction.

Lean Forward media works both ways – it provides an active and open channel to both create positive engagement and to fuel negative reaction. Only last week we found a negative tweet about a loyalty programme which linked to a negative blog which had been written 6 weeks ago. Who was checking the blogs for feedback? Who was checking twitter for comments?

It begs the question…. Are you listening?

If you don't make it easy for consumers to talk to you on the channels they want to use, they will simply use those channels to talk to your customers.

The great thing about this shift to Lean Forward media though is that it also provides brands with ways of creating increased engagement and building stronger relationships.

Building relationships and engagement is typically the role of a loyalty programme, but this has previously been a passive experience – apart from the initial enrolment, the interaction tended to centre around a semi-regular statement and an occasionally card swipe. If you were lucky, the really "clever" programmes might notice when you stopped transacting and ping you a DM piece to re-activate you.

Things have moved on.

Programmes now need to engage customers today and continue to engage them tomorrow. Operators are beginning to integrate Lean Forward concepts like social media, allowing feedback between customers to exchange views or rate partners and rewards. The butter company Lurpak has a site entitled "In search of good food" which allows consumers to interact around all things food in the context of the brand. This isn't another "me to" corporate site – pumping out product listings and CSR policies. It's an attempt to create an interaction between their customers and potential customers – facilitated by the brand.

Brands also realise they need to create a buzz, a reason to discuss and interact. Walkers Crisps have been doing this very successfully over the last year or so. Beginning with their Brit Trips promotion which created an opportunity for customers to register, log on-pack codes and redeem for days out. They then seamlessly moved on to their "Do us a flavour" promotion which asked customers to interact online to recommend new flavours - with the winner getting a percentage of any subsequent sales. Moving the interaction from online to offline they have gone on to manufacture the 6 finalist flavours which you can now buy in-store. Back from offline to online you can vote for your favourite flavour – via mobile web, SMS, web, Facebook or email – almost all the channels covered!

This Lean Forward approach to loyalty sets apart the active brands from the passive.

At Carlson Marketing we are wrapping the interactivity of lean forward media into the longevity of loyalty marketing - allowing brands to start creating truly engaging and exciting programmes – essentially creating Lean Forward Loyalty.

Social Currency Marketing

What do erotic balloon animals and dancing commuters have in common?

They have both been used by brands to provide a social currency which can be exchanged for consumer attention.

As more and more information is created, we struggle to consume it and so give it less and less attention. Simon Herbert first talked of this issue in 1971 when he stated that "a wealth of information creates a poverty of attention". It's ironic though that with all the demands on what is essentially a scarce resource – our attention – we choose to become ever closer and more connected by streaming information on each other through tools like Twitter or Facebook.

But is this really so surprising? As we are increasingly bombarded by external media with its demands on our time and attention aren't we simply forming a virtual "circle of wagons" – huddling together with those we trust (or would like to trust) to present a united front against the wider world.

This does though create a challenging opportunity for information providers - they might have to fight harder for the attention of consumers in the first place, but once they get it from a small number then it can spread like wild fire through the most effective peer-to-peer word of mouth "recommendation" in a matter of minutes. Using this blog as an example, I saw a 700% increase in visits in just one day when one of my articles got linked to someone's status update within twitter - much of that coming within just a couple of hours. And I wasn't even trying.

For a brand that is trying to find ways of breaking into these ever tighter virtual communities a commodity exchange is required that takes them from external threat (or worse still, a nonentity!) to a trusted (or at least accepted) insider. Continuing the analogy of the early pioneers, brands are finding things to trade. And where in the late 1700's it was mirrors, nails and buttons – in the 21st century the shiny objects are access, entertainment and kudos – creating essentially a social currency.

Looking at the recent viral campaign from Durex it's clear to see how this provided a valuable exchange – the video is extremely funny, and for those finding it first and forwarding it on to their friends, there's an element of kudos.

Durex have created an item to trade with potential and existing consumers which gives them access to a viral community and to a share of that most scarce resource – attention. In getting that attention they will have generated unexpected awareness and doubtless approval, as well as reminding people of a brand which of late may have been seen as less relevant than its competitors.

Mobile telco brands have really embraced this. In the UK, T-Mobile recently created an advert set in Liverpool Street railway station, with dancers mixed amongst the commuters who suddenly start dancing. This really captured the imagination of those who were there - sharing the event via their mobile and the video itself being posted to YouTube and receiving over 1.3m hits. With the strap line "Life's for Sharing" its clear they are trying to capture a share of consumers attention with something that can be talked about and traded.

The issue with these types of campaign is that although it breaks into the consumers consciousness, it is very quickly replaced by the next 'cool thing'. By its very nature it's difficult to maintain this kind of awareness through viral activity as the nature of this kind of interaction is that it is always looking for the next new thing, the next cool thing. Repetition is impossible – it's unremarkable – it's 'has-been', or worse still 'me-too' if you're the competitor brand.

Another way of gaining access to these hard to reach consumers is to not try and break in at all but instead to become part of their everyday life. Looking at another mobile operator O2, they have done this through their £6m per year rebranding of the Millennium Dome in the UK to the O2. This has allowed them to provide "access" for its customers such as priority booking for shows – allowing bookings 48 hours before non O2 customers - as well as bringing exclusive entertainment to their phones. They back this activity up with the ability to gain 4 free SIMS, allowing customers to introduce and share O2 with their friends.

With the Orange Wednesday promotion in the UK which provides 2 for 1 cinema tickets every Wednesday for Orange customers, this mobile telco operator has found an innovative way to really become part of their customer's everyday life whilst ensuring that their friends are introduced to the brand as well – providing a social currency through free films. This connection between their customer and their social network really does tie into everything they do, from the inclusion of free Facebook within their Dolphin package to the recent rebranding of Orange around the "I am" theme which focuses on how peoples social connections make up all that they are.

It's clear that brands are increasingly understanding that in the fight for a consumers attention they need to think not just about the consumer themselves, but all of the people they interact with and need to provide some form of social currency which can be traded in exchange for attention – whether this is erotic balloon animals, dancing commuters or free films.

As the recent Orange campaign says "I am who I am because of everyone".