Tesco Bag-For-Life outlasts customer life time

What’s interesting about modern grocery shopping in the UK today is that the disposable plastic bag, so vilified by many, has been replaced with “lifetime” bags - thick plastic bags that last a long, long time.  

If you purchased one these bags you’d tend to be a regular customer because:-

• a) You bought enough to warrant a big bag
• b) You liked the brand enough to buy a “permanent” bag
• c) The bag is re-usable so it probably means you intended to come back

What’s interesting though is that these bags also tell another story and they tell me that Tesco has a problem.

I don’t need to read a newspaper or their annual report to see this problem.  I don’t need to run customer research to see this problem.  I simply need to shop at Aldi and look at the bags that customers are carrying.

These bags may not literally last for a customers lifetime, but they do seem to have lasted longer than the customers lifetime with the grocer that sold them.

Coming out of my local Aldi, every other customer was carrying a rival supermarket bag.  What was more interesting was that 9 out of 10 of these was for Tesco.

Now this over-indexing of Tesco is probably due more to rival supermarket proximity than anything else, but it is indicative of a wider problem - previously loyal customers are shifting their loyalty.

It’s also closer to home for me personally - I was up until recently a highly loyal Tesco customer.  I saw the value in their loyalty programme and I received significant value back every year from the programme.  I used their supermarket, their home shopping, their insurance products, their fuel and their credit card.

Yet I left them to shop at Aldi.

I’m also not the only one judging by the bags people use, and more scientifically, based on the results of the latest Kantar survey.  This shows Tesco’s market share has dropped nearly 1 percentage point in the last year (down from 29.6% to 28.7%) and is down 3 percentage points from its peak of 31.8%.  Given each percentage point is worth around £1.27bn, that’s a lot of sales value.

This isn’t due to lower sales overall - the market grew by 2.2%.  It’s also not due to customers trading down - both Sainsburys and Waitrose held onto their market share.  For me, this is more of a customer experience issue than a pricing one.

Obviously there is no denying that Aldi are significantly cheaper on many products than Tesco and it isn’t hard to see that these real savings today add up to more than loyalty rewards later.

However, that’s not the reason I continue to shop at Aldi - I actually like shopping there more than I like shopping at Tesco and the reason for this is fourfold:-

1. Store Format - At Tesco the stores are now just too big.  It’s great if I want something specific, but for a standard shop it just makes the trip take too long.  Walking down endless aisles past thousands of products I don’t want or need.  Aldi have smaller stores making the shop quick and simple.
2. Paradox of Choice - When selecting products, there is too much choice.  While this can be a good thing, when presented with 10 different types of sliced bread there is a tendency to pick something you recognise to help expedite the process.  The net result of this is that you pick brands you’ve used before or heard of and brands have a premium.  At Aldi there is limited choice, very few branded goods and typically one option for each.
3. Service - I’m not talking about customer service specifically, both brands have well trained, personable staff.  I’m talking about the way the tills work.  Aldi is specifically engineered for speed.  A whole shop is scanned at tremendous speed with packing done elsewhere at your leisure.  This means no real queues and no long waits.  Tesco checkout is just, well, slow.
4. Gamified - This is price related and is a personal aspect, but I like to compare purchases and keep the shop under a defined value.  Given the shop is typically 50% cheaper than my previous comparative Tesco shop, there is a pleasure - almost like a game - in seeing the final till receipt value.

I've given up a number of things to shift to Aldi.  I’ve given up a loyalty programme; I’ve given up home delivery; I’ve given up choice.  Ironically though, I feel like I’ve gained time (due to the quick shop), gained satisfaction (in making a smart choice) and gained money in my wallet.

The fact that I then blow that extra cash on eating out that weekend in simply a bonus - There’s no waiting for me to spend the value I’ve accrued.  I don’t need to wait for a quarterly statement, or redeem for a voucher.

So what would make me go back to Tesco?

• Better pricing/value exchange - that’s always a basic requirement.
• Better store layout - Make my basic shop quicker
• Better checkout experience - Speed up how the scanning/packing process

The number one thing though is to connect the satisfaction of shopping with the experience of shopping.  Tesco Clubcard doesn’t do that today for me - it’s not immediate enough, it’s not rich enough, it’s not connected enough.  Interestingly, Target Cartwheel which I’ve written about previously does seem to achieve many of these things.

Loyalty is still in the game and it still has a role to play - but at the moment for Tesco, it hasn’t kept pace with the market.  When your bags are lasting longer than your customers, you know there are issues to address. 

Feast or Famine: The next move for Netflix?

Something interesting happened recently in entertainment; there was a slight shift in the balance of power.

Netflix, traditionally a channel for reaching the content of other networks  became a producer in their own right.

Their new production, "House of Cards" was a shot across the bow for the likes of HBO and more traditional networks and at the moment it seems their $100m gamble is paying off with generally positive reviews.

A Netflix spokesman is quoted as saying:-

"We’re not releasing any data, but we are happy with the reception the show has gotten in the media, on social media and from our members in reviews"

This is a big deal for Netflix and they know it.  Ted Sarandos, Chief Content Officer is quoted as saying:-

"The goal is to become HBO faster than HBO can become us."

While this is interesting for the entertainment market, what's more interesting for me is the potential impact this series will have on both customer acquisition and retention for Netflix.

Clearly, unique, exclusive content is a major acquisition tool for Netflix, helping them draw in both new and lapsed customers.  This is a tried and tested model used by the likes of BSkyB who would in many cases pay over the odds for subsequent series of shows like 24, Heros or more recently Mad Men that had previously aired on free-to-air channels, hoping to bring those hooked customers across in the process.

Indeed, customers such as respected blogger Dave Winer who had previously (and publicly) turned off his Netflix account then made an about turn and switched it back on specifically because of this new content.

So there is no question that exclusive content can be a big draw for new customers.  However with "House of Cards" Netflix is also chalking up another first.

They have launched the whole of the House of Cards series in one go.  Original programming made available like a box set from the get-go.

This is really significant as traditionally broadcasters would utilise a high profile series to draw in audiences regularly at an appointed time; keeping viewers restricted and waiting with baited breath for the next episode.  For commercial broadcasters these episodes would be timed to maximise the audience and hence the revenues from advertisers.  It would also provide the opportunity to gain from the halo effect of viewers staying tuned into the channel for longer pre/post airing.

For Netflix however, this doesn't matter;  their revenue comes from subscriptions, not advertisers.  Without this restriction they have provided a veritable feast of television, allowing subscribers to binge on the whole series in one sitting if they like.  Whilst figures aren't available from Netflix directly, it has been reported that a "significant portion of fans binged on the entire series in the first weekend".

It's worth contrasting this with another form of entertainment, that of social games.

I'm currently hooked on the popular social game "Clash of Clans" which uses all of the best gaming mechanics to keep me playing, progressing and in the flow.  The more I play the more I unlock.  If I had access to everything all at once - if I could feast on all it offered - then I'd tune out pretty quickly.  It would be fun, but there would be no challenge.  Instead, they try to balance the game play, including the strength of foes I have to battle based on my current experience and level achieved.

In discussing the winning formula of the game design, the blog Deconstructor of Fun highlights how the game supports different types of play, saying:-

"Not all of the parts of the core loop are equally important as the importance of each part is influenced by [the] player's ongoing goal in the game, which creates different style[s] [of] game play [,] from resource gathering and building, [to] heavy [and] active battling"

Creating this "flow" within social gaming that ensures players are hooked with a fun and entertaining experience takes data.  They need to constantly monitor usage of the game and adjust the mechanics as users progress or they see usage drop at certain points.

Now Netflix are not short of data but i'd argue they're not really getting the maximum value from it as game designers do.

They are well known for their detailed data analysis of their customers viewing habits in order to serve up better and more targeted content.  Currently, around 75% of Netflix customers select content to watch based on their recommendations and Netflix aim for this to be higher.  Mohammad Sabah, Netflix Senior Data Scientist is quoted as saying:-

"The ultimate goal is to show Netflix customers content they’ll view to completion and then recommend the next thing they’ll view to completion"

The problem Netflix have though is the classic situation all retailers face; the consumer has choice.

There is an increasing plethora of streaming services and so whilst recommendations are important and so is exclusive content, the real key is that consumers "value" Netflix.   The stickyness from content only lasts for as long as the content is "exclusive".  Letting customers essentially burn through that exclusive currency too quickly may in fact reduce the time period its effective for but also the extent to which customers actually value the content.

PSYBLOG recently reported on an interesting study that looked at how consumers valued chocolate based on how they consumed it.

In the study, the consumers were split into 3 groups with one told to give it up completely for 1 week, the next given a big bag and told to gorge and the final group, acting as a control, given no chocolate related instructions at all.  At the end of the study, the groups were given more chocolate and asked to rate the experience.

Those who abstained reported getting more pleasure from the chocolate than either the gorging group or the control group.  Not only that, but they also savoured it more - in essence they valued it much more because they'd been restricted.

Getting the balance between feast and famine is key to keeping customers involved and ensuring they continue to value your product/service.  

It's early days for the Netflix experiment but it will be interesting to see if they start to introduce some of these restrictions on consumption to gain additional loyalty; managing the flow of their customers.  You could easily see top rated Netflix consumers - those who watch more shows, over more hours and engage more with other viewers via social media - being given the ability to watch new exclusive content more quickly than others.  This would then provide social currency into the mix, ensuring those customers stay loyal longer and encouraging others to strive to level up.

If you want to stop your brand falling down like a House of Cards, it's worth looking at how game mechanics can strengthen those bonds.

Game mechanics are not just for games.

Curiosity = Loyalty3

cu·ri·os·i·ty - noun
1. A strong desire to know or learn something.
2. A strange or unusual object or fact
3. An app that has hooked over 500k people

That last point is strongly linked to points 1 & 2 and also provides some interesting lessons for loyalty programme design.

In case you missed it, Curiosity is a new iOS and Android app in which people slowly destroy layers of a huge cube with the mission to reveal what's inside.  It's like a multi-player pass the parcel in which there can only be one winner.


The cube is apparently made up of 64 billion tiny blocks which users have to destroy one block at a time until a single layer is completely removed and then they begin on the next layer.

Thats it - In terms of gameplay, it could be argued that it's a little lacking.

However, if thats all you got from it - a Zen like feeling from destroying blocks and making patterns in them - then I can't imagine it would be anywhere near as popular as it is.  Instead, the game locks onto some powerful gaming mechanics employed by more complex ecosystems like Farmville to provide a rewarding and addictive experience.

These can be summarised as:-

• Social - Everyone taking part - like a shared experience.  Connect it with your Facebook account and you can see how your friends are doing.
• Reward - There is something to aim for even though no one knows what that something is.
• Gamified - There is skill involved and you can "level up" to get a perceived advantage.  Destroying more blocks earns coins and these in turn can be traded for tools to destroy even more blocks.

It's these 3 points combined that make Curiosity both an interesting take of gameplay as well as a great model for Social Loyalty.

People will download and play with the app for different reasons, either because they've heard about it and are curious (social element) or are intrigued by the possibility of the final prize (reward).

Whichever path brings them into the app, both then play a part in retaining them.

The "gamified" element though is also very important in keeping people playing - essentially keeping them loyal.  Users will very quickly tire of simply destroying blocks one at a time.  Instead, by recognising their activity and rewarding this with coins that in turn can be used to purchase tools to increase their activity, Curiosity is looking to maintain "flow" in the gameplay.  Keeping users somewhere between boredom and anxiety.

This is enhanced further, as these additional tools give users an advantage over others, something expressed within the social element by being able to compare your stats to friends.  Solo gameplay is rarely as rewarding as that played against others.

Just using these 3 simple mechanics, Curiosity shows us in a stripped back, minimalist way how to engage and harness peoples attention.  There's no fields to plough, crops to plant or farms to build - it's as basic as it gets, and yet it still works.

The lesson for us in loyalty is that it's not about how complex your programme is or how many rewards it has - it's all about the design and how this too can engage and harness the customers attention.

Many loyalty programmes today are one dimensional - simply using rewards as the mechanic to drive people forward.  Increasingly though Social Loyalty programmes look to harness the power of social currency as expressed and magnified through a gamified experience to add depth to the programme and turn into into a more rounded, 3-dimensional experience.

It's Loyalty³.

Balancing big data with a big voice

Back in the day, loyalty communications were pretty simple.

You got a Welcome Pack when you joined and then periodic points statements after that.  The statements may have contained some offers, and if you were really lucky, these may have been personalised in some way.  Some people really pushed the boat out and sent individual mailings with specific offers, normally in response to a lack of behaviour, trying to get you back in-store.

Then email arrived and it became much cheaper to be relevant - or so we thought.  In practice it just became much cheaper.  Emails were sent, even if there wasn't anything particularly relevant to say and if you didn't like it... well you could always opt-out.  So what happened to that dream of 1-2-1 marketing?


Quite simply, it's actually pretty hard to be relevant all the time.

Sure you can use analytical techniques to target customers who you think have a propensity to do something.  Or you can respond to customers with trigger marketing based on their behaviours (i.e. not purchased in a little while) and send an email to encourage them back.  However, for regular communications it's much harder to create customised content for each member based on their exhibited behaviours - for many programmes it's just too hard (or costly) to be relevant.


But there is a simpler way - just ask the customer what they'd like through the use of a preference centre.

With an increasing number of channels and ways of interacting with customers, a simple opt-in/out marketing permission doesn't really cut it any more.  Customers are being trained by social networks like Facebook that allow them to manage who can access their data and for what purpose.

For example, with a simple Facebook wall post I can choose whether to hide that post or not, increase or decrease further posts from that friend, unsubscribe from further communications from that friend or unfriend them completely.  With apps, I get further choices - deciding whether that app/partner can for example access my personal information, access my friends or post on my wall.

LinkedIn go one better and intelligently look to help you control preference.  If you subscribe to a group on LinkedIn and opt in to receive updates via email, LinkedIn will proactively dial-down the frequency of communications if you haven't visited the group for a while.


Preference centres essentially help to manage this by giving customers control over what communications they want to receive, about what topics, over what channels and at what frequency.  Email marketing specialist Adestra reports that preference centres can have a real impact on unsubscribe rates, suggesting that giving customers choice keeps them engaged.  Digital marketing specialists Smart Insights provide some advice on the use of preference centres suggesting that you don't offer what you can't deliver.  If you provide choice in terms of topic or frequency, make sure you have the content and capability to manage this.

If you google preference centres however, they seem to be a feature of email marketing but, little else.  This is I think needs to change.


Preference centres need to become a key feature of loyalty programmes to control preferences for all aspects of the programme and to help manage some of the innovations that are just around the corner.

• For gamification features, members are going to want control about what achievements are posted to which social channels and when.  This  "social currency" is where the key value is within gamification, but that value will only work if the member feels in control.  
• Vendor Relationship Management (VRM) functions will allow members to manage their loyalty data and which partners and/or applications can access this on their behalf.  Like Facebook, members will expect to be able to control both who has access to the data and what data is shared.  They'll also want to able to terminate these relationships at will.
• The "Internet of Things" will bring a host of interactions that can be recognised and rewarded, but members will want to be able to control what can be seen (and recorded) and what can't.  Just because my toothbrush can tweet it's usage, doesn't mean I want it to.

With an increased focus on "Big Data" and the headlong trend to get more and more data from more and more sources it can sometimes be easy to forget that there is a customer at the heart of that data and they'd actually like to be heard.

Sure, we can use the data to work out when someone might be pregnant based on their purchase patterns, and this can be really useful to both the retailer and the customer.

We could also just provide the customer with an easy way to tell us and to give them a big voice...

What we can learn from PayPal's shunning of skeuomorphic design

Skeuomorph is an interesting word.

It's from the Greek for vessel/tool (skeuos) and shape (morphe) and is basically used to describe something which retains the design cues from an original product, even when these aren't necessary anymore. Examples would include digital music players which have the look and feel of a real-world device like a car radio or online calendars that present information in the style of a paper, month by month calendar.

In many ways, a Skeuomorph is positive as it allows us to transition from the old to the new; letting people understand how something works as it replicates the look and feel of the original. The example below shows how the iphone calculator look and feel is based heavily on the extremely popular 1977 Braun ET44 calculator, even down to the button colouring.

However, skeuomorphs can also hold our thinking back. Rather than trying to re-think a problem with newly available technology, it is sometimes easier to try and transfer the existing solution into a new medium.

Digital advertising for example simply tried to transfer the understanding and heritage of the physical world into the digital. The direct mail campaign morphed into the email campaign and the outdoor poster into the banner ad. It took a different kind of thinking from a young upstart called Google to approach it in another way back in 2000. Google did away with the visual aspects and instead focused on the relevancy, linking text based adverts to search terms. Combined with their innovation around ranking/click-thrus, this helped propel Google to the number 1 position.

Google hasn't done too well in another domain however - namely digital wallets. When people talk about digital wallets, they discuss taking your existing payment cards, loyalty cards and paper coupons and essentially digitising these into a smart phone application. Indeed, the Google Wallet even shows a representation of a credit card so you can choose how to pay.

The problem with this though is it's trying to solve a problem people don't have and doing it by simply moving what people have and do today into another medium. In reality, you are simply exchanging a leather folder for a smart phone - it's skeuomorphic design. What it's not really doing is challenging how people pay.

Of course, I'm not a payments expert, so I'll leave it to someone who is, namely Jack Stephenson, Director of Mobile, E-Commerce and Payments at JP Morgan Chase who said:-

"Consumers don't really have a mobile payment problem. Ninety-five percent of the time, paying with cash and credit cards actually works pretty well. Consumers have a mobile shopping problem. There's a difference."

While I agree with the first part of Jack's observation, I don't really agree with the latter. Consumers don't have a mobile shopping problem either, they have a money management problem - and many of them don't even realise it.

As I've discussed in a previous blog, if we're going to change how consumers pay, we should take the opportunity to change how consumer think about payments. Instead of being bounded by a skeuomorphic requirement to replicate the old, we should look to invent the new.

And that's just what PayPal have done.

Paypal are looking to reinvent our relationship with money. Not just our physical money or payment cards, but all of our liquid assests, from loyalty points to gift cards. If it can be converted into cash, PayPal will let you use it.

To support this they have separated the decision to purchase from the method of purchase. After buying through PayPal you then have 7 days to indicate how you'd like to pay for the item and this could be from a combination of:-

• Money you've saved for it such as a travel savings
• Money you have on a retailers gift card
• Money you have in loyalty points from a frequent flyer
• Money you have in your checking/current account
• Money you have access to from your credit card
• Money you don't have access to yet - so it lets you spread the cost over 3 equal payments

Any and all of these types of funds can be used to pay for the transaction. Now you can save for something and then literally pay for it from your savings.

It's worth watching the following videos from Finextra to see how really revolutionary this is.

Skeuomorphs can help us to transition people from the old to the new, but holding onto the old can also limit our ability to truly transform how we do business.

For loyalty, the collecting of points hasn't really changed fundamentally since the original paper stamps back in the 1930'. Even Google startup Punchd is simply transferring the paper punchcard to a smart phone medium.

Maybe it's time to rethink loyalty recognition for a new era. #gamification

"The Internet of Things" is the new Sorcerer's Apprentice

In Disneys Fantasia, Mickey Mouse as the Sorcerer's Apprentice brings to life everyday objects such as brooms and buckets to help him with his tasks of cleaning - what starts as a good idea though ultimately ends with terrible results as he fails to be able to control them.

Whilst Mickey may have gotten out of his depth, this thinking of everyday objects being brought to life isn't just a fantasy.

Obviously not in the literal sense we see in the Sourcers Apprentice (although that would have been great!), but more in the sense that previously inanimate objects can now start to record their activities. Termed the "Internet of Things" this was discussed in part by a talk at DICE by Jesse Schell about gamification and how this may extend into everyday items and tasks. (The video is really worth watching if you haven't previously seen it)

What Jesse discussed in terms of earning points for brushing your teeth has now been enabled by start-up Green Goose. Using a combination of intelligent stickers or product add-ons, Green Goose claims to be able to track any activity, from cleaning your teeth to drinking a class of water. The system utilises a base station linked to your internet connection to allow the different tags to communicate activities wirelessly and for these to then be tracked centrally. Each device/sticker includes a 1 year battery making them truly untethered and so there is no syncing required, you just use them (or not) and see the updates online.

There are obviously implications for this within industries that care if you do these activities, whether that's a tooth paste manufacturer or a dental insurance company. If the Green Goose solution gains traction and most importantly open standards then we could easily see products in the future including these kinds of monitors as part of the manufacturing.

Already the car insurance industry is using tracking products within cars to provide more cost effective insurance for young people or low mileage drivers based on when they use their car and how they drive it. Green issues aside (lets assume it's a hybrid/electric car) - imagine if that technology could also be used by the car manufacturer or tire producer to track the miles you drive and to reward you for that, giving you feedback on how to get the best from your purchase, when it needs to be renewed/serviced and discounts off your next purchase.

Internet of Things pioneer, Kevin Ashton said of this:-

The problem is, people have limited time, attention and accuracy—all of which means they are not very good at capturing data about things in the real world. [...] If we had computers that knew everything there was to know about things—using data they gathered without any help from us—we would be able to track and count everything, and greatly reduce waste, loss and cost

But it's not just waste, loss and cost in terms of the tasks we're tracking, but also the marketing budgets of the companies we purchase from. Knowing who uses the products, how often and for how long can enable targeting of spend and offers to customers based on their current and potential behaviour.

Originally Green Goose was positioned more as an energy monitor, letting you track time spent in the shower, riding your bike versus taking the car or turning the thermostat down rather than up. The idea was to track these little decisions in real-time as well as the potential financial savings you accumulated so that these add up to a "nest egg" value which provides a nudge to do more.

Great in terms of saving my money, but not necessarily great in unlocking savings from companies who provide the products and services.

Their new positioning suggests a movement to tracking wider activities including many they haven't even thought of. Opening this up to developers (which they have) means more solutions and more ways to commercialise it. Companies wanting you to use their products and use them more often will soon be able to tap into a continuous stream of data about how and when people are consuming them bringing in a wealth of information and requiring new ways to reward and recognise this.

The challenge for both brands and consumers however will be the same as that faced by the Sorcerer's Apprentice - once we start providing/collecting this information, can we keep control of it, manage it and get the best benefit from it... or will it simply overwhelm us.

(images copyright Disney)

The problem with foursquare...

Foursquare is seen by many as a template for a new style of loyalty programme - trading physical rewards for virtual achievements in the form of badges and showing how tiering can be scaled horizontally, not just vertically. Whilst these achievements may technically be valueless, they do seem to provide value for Foursquare with various reports indicating that it is still the King of location based services with up to 5x more check-ins than rival, Facebook Places.

But as a (reasonably) dedicated Foursquare user, what's becoming clear is that the design of foursquare is really less about retention and more about acquisition. Sure, I'm still playing so it's done a great job of keeping me engaged - in essence retaining me. However at an individual behaviour level it is less convincing.

The challenges in terms of collecting badges ensures I continue to check-in, but each badge, once attained is essentially done. I don't need to do anything more for that badge, it's mine, forever. The same for mayorship. If I don't do anything more (and if no-one else checks in) then I retain that ranking.

Simplistically, Foursquare is a behaviour change acquisition programme, not a behaviour change retention programme.

Foursquare probably don't care too much - they don't need me to exhibit the behaviours necessary for the "Crunked" badge more than once, they just want me to keep checking in and to chase that next badge.

However, as we begin to echo these kinds of gaming and recognition mechanics into mainstream loyalty programmes, we need to consider the consequence of recognising a behavioural achievement only once.

We can see this consequence in traditional loyalty programme tiering. While tiering can be quite limiting in that it normally only recognises one behaviour - that of spend - it is also limiting in that it "tops out" with many scheme operators seeing customer behaviour begin to tail off once a customer has reached a designated tier level. In essence they have achieved it.

This isn't because the customer has given all they have, instead the customer has simply moved on to a competitor programme. They are "gaming" the whole loyalty eco-system, racking up recognition across different brands as they've exhausted the challenge (and the benefits) within that one brand.

This isn't just limited to loyalty.

Banks see the same behaviour around card fees. Where a customer is charged a fee but can essentially "earn out" that fee based on spend, there is a noticeable drop in spend once this earn out period has been met. Customers haven't stopped spending, they have just reached the goal or challenge set, even though this wasn't the intention.

Given that customers have a psychological need to finish what they've started and a competitive streak to do better, it doesn't make sense to limit achievement recognitions to a once only event. Instead, we need to make sure that they can keep progress, either to maintain that recognition or to lift it further.

Looking across to games, they recognise different levels of achievement for the same behaviour. The iPhone game Cogs for example provides a bronze, silver and gold recognition for different behaviours such as the time taken or the number of moves required. This means even when the task is complete, I can usually do better.

This isn't to say that one off recognition isn't important. Customers need to feel they have achieved something, "banked" it and can move on. However, if this is the only sticky retention mechanic a programme uses it risks losing focus on key, repeatable behaviours.

Behaviour isn't simply changed, it is maintained.

A great example of recognition which looks to maintain behaviour (if slightly unique) is United Airlines acknowledgement of frequent flyer, Tom Stucker, who has racked up 10 million miles on their programme. In recognition of this amazing feat, Stucker was given a unique (for the moment) titanium loyalty card and has had his name put on the side of a United Boeing 747. Whilst a tearful Stucker was overwhelmed by this recognition, the problem for United is they have just raised the bar again. There is now a new challenge to be achieved and you can bet there are some out there with their eyes set on it.

As we start to democratise our loyalty programmes, bringing in horizontal recognition and increasing the engagement through broader challenges and rewards we need to make sure we don't limit a programmes growth by letting a customer simply tick the box and move on.

Gamification expands the loyalty toolbox

I spoke at Marketing Week Live last week on the "Future of Relationship Marketing". It's always great speaking about the future of something as in theory nobody can question you; by definition the future is yet to happen - so I could be right...

However, whilst the topic was on the future, in reality the future is already happening, we just aren't seeing much of it within mainstream loyalty programmes (yet).

As I've written about previously, the presentation was all about Interaction Loyalty and the impact that recognising every interaction - every check-in, status update or product review - has on loyalty programme design and specifically reward and recognition.

Given the requirement to recognise activities which don't always have a nice neat margin attached to them, we also now need some different tools in the box to support this - and this is where gamification thinking comes in. Through gamification we can exchange rewards with actual value for rewards with social value and link recognition not just with rewards but also with core motivation. However, what's interesting to note is that gamification is simply a set of tools within Interaction Loyalty - not a new definition of loyalty itself.

Embedded below are the slides I used, feel free to review and comment.

Interaction loyalty vs 1 0

View more presentations from Mark Sage

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 in 2011 - A marriage of location, gaming and social

Predicting where things will be in the next 12 months is notoriously difficult as you don't know what you don't know, and an unexpected innovation can pop up at any time. However as respected journalist and technologist John Battelle said in his blog recently about the "next big thing":-

Often times what's directly in front of you is, in fact, the next big thing.

Something however that doesn't need any amount of prediction is that there will be a peak in the sales of commemorative tea-cups, plates, tea-towels and other Royal memorabilia in 2011. With the recent engagement of Prince William and Kate Middleton it seems we'll have the first Royal Wedding in a quarter of a century as well as an additional bank holiday for us Brits to enjoy it. 2011 will be the year of wedding fever, nostalgia, bunting and street parties.

This does neatly segway into another type of engagement however - customer engagement and the associated loyalty we look for from it. What 2011 looks like for loyalty is a little harder to predict - there are no fixed dates or big events. There are though some key trends that we are seeing in the wider market which will all impact on loyalty in some way - taking us one step closer to solidifying that customer engagement into wedded bliss.

No self respecting bride however would consider walking up the aisle without taking account of the Victorian tradition of taking something old, something new, something borrowed and something blue - and neither shall my loyalty predictions.

Something old - Coalition

Coalition programmes have been around for decades, starting with the original stamp collecting programmes. However they have really come of age now with existing programmes going from strength to strength and new programmes rolling out worldwide. Group Aeroplan has recently launched Nectar Italia and Nectar Chile and Loyalty One has taken stake in Dotz in Brazil. Now American Express has bought Loyalty Partners who run PayBack in Germany. Ed Gilligan, American Express Vice Chairman said of the deal:-

“The loyalty coalition model is growing rapidly in many parts of the world [and] Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings"

It's not just the growth of new programmes, the existing ones are also gaining strength, with Nectar UK recently following up it's new partner Homebase with leading utility company, British Gas.

This is a high growth, and increasingly competitive area so expect to see more of these programmes coming to a country near you.

Something new - Geo/Local

You can't have failed to miss the explosion of Groupon in 2010. It's meteoric rise culminated in Google trying to buy it for a reported $6bn and when that fell through they then managed to secure $0.5bn in additional funding. While Groupon has an interesting (but not unique) business model, what really makes it interesting is the local merchant aspect. Representing about 1/3 of all sales within the US, these independent retailers are a large pool to fish in, but the challenge has always been economies of scale.

What Google ad-words did for online marketing however, services like Groupon are doing for offline. Barclaycard Freedom is another example of scheme engaging the thousands of small independent retailers and although this has yet to become well established, I think the prospect of creating services that engage local merchants will grow.

The reason for this is simple - relevance. All brands need to be relevant to get cut through and it's much easier to be relevant when the marketing is from a local restaurant or retailer than when it relates to an increasingly sterile national (or global) brand. It also provides larger brands with the ability to target marketing spend more effectively, rewarding spend at locations that have room to grow without simply rewarding spend everywhere.

As Fast Company recently reported on Google's move into this area and it's recent move of Marissa Mayer from Search Products to Geo/Local, Google said

"Marissa is moving over to an exciting new role covering geo/local, which is crucial to our users and the future of Google" (emphasis added)

It's not just Google, Facebook or Foursquare that get this; location is going to be a key variable in our marketing toolkit in 2011.

Something borrowed - Gamification

Well 2010 was when gamification really burst upon the scene and along with it a lot of controversy about the term itself. However, despite the controversy most people agree that the idea of utilising gaming dynamics to help create motivation is worthwhile.

It's interesting that currently early adopters have been either online communities/e-commerce sites or offline automotive companies with both Ford and Nissan using gaming mechanics to improve driving techniques within their electric vehicles.

I think 2011 will see this become more mainstream, with full blown traditional loyalty programmes such as hotel, airline or retail loyalty utilising gaming mechanics explicitly. As I've blogged about a number of times this year, this one trend has the possibility to really lift levels of engagement within a loyalty programme and looking forward, to possibly remove the redemption currency itself (and the associated liability)

You don't get very far however within gaming mechanics before the need to go social kicks in - the real power being based on the bragging rights that come from achievement - and so this is the theme of the final predication.

Something blue - One word. Facebook.

Facebook has come of age. It now has the majority of the Western world assimilated into it's network. It has the lions share of their online attention (recently beating Google) and a depth of information on individuals that rivals Wikileaks.

Retailers like JC Penny and Best Buy are integrating their e-commerce offerings directly into Facebook and brands such as Oreo cookies are now driving all of their traffic to their Facebook page. The reason for this is simple - brands want to fish where the fish are, and Facebook represents a very big ocean.

What's interesting though is not the use of Facebook, brands have been doing this for a while now. It actually that Facebook is for many brands starting to replace their own online offering. I think in 2011 we'll start to see loyalty programmes actually launching their online offering directly within Facebook or at the very least, using Facebook Connect for security.

This will bring three huge benefits. The first is simplicity. Members will be able to login and service their loyalty accounts without any effort - no credentials to remember. The second is interaction. Members will be able to see posts from their loyalty programme directly within their social feeds - no email, no direct mail and much more immediate. The final benefit is social proof - members will be able to see what other friends are doing, what other friends have bought and what other friends have redeemed for.

Combine this with the potential that Facebook brings to virtual goods in the form of social gaming - something that Amex has recently introduced into the Membership Rewards programme and that Citi qucikly followed by introducing them into the Thank You programme - and you have a major change in how loyalty programmes are designed and deployed.

Whether proprietary or coalition loyalty, the marriage of these three main trends of location, gaming and social will change the face of loyalty over the next 12 months.

Image credits: Google T-Shirt, Badges,

What is gamification?

With the risk of sounding like a broken record - do I write another blog post about gamification.

Well in the last 6 months alone there has been an almost 300% increase in the number of blogs written about gamification and when you look at the twitter stats around the term gamification it's clear that the last 6 months have seen a significant uplift in chatter.

There was also a buzz around gamification at the Virtual Goods Summit and now it has it's own conference coming up, the Gamficiation Summit. The summit will feature authors such as Gabe Zicherman who co-authored the book Game-Based Marketing, released earlier this year that looks at how gaming mechanics can be applied within marketing programmes.

So far be it from me to buck a trend - this is obviously a topic which is both increasing in interest and dividing opinion.

People can't seem to talk about gamification without somehow linking in virtual gaming platforms like World of Warcraft or explicit real world gaming platforms like SCVNGR.

For me though this confuses the whole topic.

Gamification is not the linking of marketing efforts into games. It is not the evolution of marketing programmes into games. Instead it is the inclusion of gaming recognition mechanics into marketing programmes.

This is a subtle difference but it doesn't stop it from courting controversy.

Arguing that the term gamification is wrong, game designer Margaret Robertson from game design studio Hide&Seek says adeptly in her blog post

"Points and badges have no closer a relationship to games than they do to websites and fitness apps and loyalty cards. They’re great tools for communicating progress and acknowledging effort, but neither points nor badges in any way constitute a game".

Going on to say 

"games set their players goals and then make attaining those goals interestingly hard", contrasting this with loyalty programmes such as My Coke Rewards where she says "collecting enough My Coke Rewards for a Coca-Cola Telenovela Club Beauty Rest Eye Relaxation Mask is hard, but it isn’t interestingly hard."

This is very true. A loyalty programme such as a frequently flyer programme is not a game in the true sense. It does not have what Margaret describes as the "rich cognitive, emotional and social drivers".

However, whilst there are obviously people who love playing games for the games themselves and are drawn into the virtual worlds they create, if you took out the "points and badges" from these games so that there was no progress indicated, no achievements collected, no way to measure your performance against previous plays or your peers, you can bet the game play wouldn't last long.

These "great tools for communicating progress and acknowledging effort" do more than just communicate it - they positively encourage and motivate it.

It's these recognition and motivation mechanics that gamification is trying borrow and develop and not the ability to replicate the actual game play such as being able to "dump my sniper rifle for an energy sword"

The collection of points for rewards isn't gamification - it's simply one behaviour which is being encouraged and recognised. Instead, gamification is how this behaviour is integrated with other interactions, how these are orchestrated together and how overall goals are set, progress measured and achievement recognised.

It is possible to make attaining goals "interestingly hard" within the context of a marketing programme, and it doesn't need a virtual world or special powers to acheive it. Instead it simply needs to be interactive, responsive, timely and relevant to the participant.

Caution is still required here though. Just as I'd argue that a loyalty programme is not simply the provision of points for transactions which can be exchanged for rewards; gamification of a marketing programme is also not simply the awarding of badges and achievements for given behaviours.

Instead, the overall customer journey needs to be taken into account including how it is presented, communicated and shared. Awarding points or badges is the easy bit - making people actually want them, that takes great programme design.

As Margaret said, games should "make attaining those goals interestingly hard", and whilst the game play might be different, the sentiment should be the same.

Maybe there isn't so much difference between designing games and marketing programmes after all.