Enhancing digital coupon recall and usage

If asked, could you draw the Apple logo unaided?  

Can you remember all it’s simple features?  Is there a leaf or not?  Is there a bite out of it?  Which side?

Given the ubiquity of the logo on our devices and in the media, many of us would be fairly confident we could create a reasonable facsimile of the logo.

Researchers however put this to the test - or more accurately, put their participants memory to the test - and as expected, most participants were confident of their ability before starting out.  However the research showed that despite this confidence, only 1 in 85 actually got all aspects of the logo correct and less than 50% managed to correctly identify the logo when presented with a number of alternatives.

So, despite seeing it every day, we don’t really “see it” - we haven’t really committed it to memory sufficiently that we can recall its detail.  Remembering a logo is one thing, but what if we need to remember something more important.

From a marketing perspective, one of the most important things we need is for consumers to “remember to remember”.  

We’ve created the perfect conditions for the consumer to form an intent, we just now need them to carry that intent out at some future date.  We’re essentially relying on the consumers memory to prompt them at the right time; whether that’s to further research the purchase or to actually go on to buy it.

This ability to remember to remember is termed prospective memory and is basically defined as where an individual intends to perform an action at a later time.  This could be an event based prospective memory such as "give a message to a friend at the next meeting” or could be time based such as "remember to go to the dentist at 10am on Friday”.

As marketers, we rely on a consumers prospective memory for the call to action to be executed and unfortunately we're relying on something that is extremely fallible.  

Despite our reliance on this prospective memory, there has been little understanding of how it works or how it could be improved.  This is changing though and in recent years there has been a real surge in research studies around prospective memory - and this couldn’t come at a better time.

With the ever increasing transition of marketing from paper based coupons to digital, we are potentially removing an important aide to memory recall.

One of the key parts of prospective memory recall has been found to be a target cue.  Using the example of a grocery coupon, where the consumer has seen the offer and made a decision to take up the offer they would traditionally have taken the paper coupon and put it somewhere to act as a cue when at some point later they went shopping.  This may have been within their wallet or purse or next to their shopping list.  The point is, the physical coupon would have acted as a target cue to trigger the intention at the point it was required.

As coupons move digital however, it’s very easy to browse offers in an email or via an app and select which ones you intend to take up, but then the offer is gone; the email disappears or the app remains unopened. For these digital offers, we’re relying on the prospective memory of the consumer to help them remember they signed up to the offer and to then go on to purchase the product at some point in the near future.

There could still be a target cue -  the event of shopping - but even then, if they have signed up to a number of offers, how likely is it that each offer will be remembered.  At this point we’re then relying on the target cue of the product itself - when (if) they see it and that they remember it’s on offer.

We’re putting a lot of pressure on someones prospective memory - to recall they have signed up to offers and to then recall what offers they have signed up to.

So how can we counter this to ensure we more fully link the intent to take up the offer with the activity of shopping.

Well this is potentially a two step process:-

• First - We need to get the consumer to remember to check for offers so that they can be reminded of which products to look for.  
• Second - We need to get consumers to do this every time the shop - we need it to become habitual.

It makes sense to start with the second step first as this is the end state we want.  Essentially, we want the process of checking for offers to become habitual for the customer.  When an activity is habitual we don’t think about it directly, it’s just linked into a wider script we have for the parent task.

As an example, when we drive a car, we don’t have to remember to put the key into the ignition or make sure the gear is in neutral, we just do this automatically.  This task is not being held in prospective memory; we don’t have to remember it.  Getting the use of offers routine then and linked into the wider task can help it to become habitual and move it from something that needs to be specifically remembered to something that simply gets done.  Checking the offers available/opted into then allows individual product offers to provide a reminder - a target cue - which can help to prompt the consumer to find and select the product.

Before this can become an habitual activity however, we need the consumer to start doing it and remember to continue to do it. This essentially relies on prospective memory, with the consumer forming an intent to check the offers when they go shopping and to then actually carry this out.

Anything we can do to help strengthen activation of a prospective memory will be key to helping to turn the task into something that becomes habitual.

One approach that researches have showed works well is when people form implementation intentions.  This involves identifying when and where they will execute the intention and what cues will be present - basically visualising themselves carrying out the task.

The research also shows that people better remember to perform a delayed task when the target cue (the trigger) is encountered in the context of an ongoing task associated with the delayed intention than when the cue is encountered in a different context.  To put it another way, someone trying to remember to use a grocery product coupon will be more likely to recall the offer when in the supermarket - if this was the implementation intention - than when they see the product in their cupboard at home.  

The real trick here is what is termed the encoding - ensuring that the thing to remember (the offer) was specifically linked to the right target cue (being in the supermarket) and to the time (when you plan to shop).  

Encoding implementation intentions has been shown to improve prospective memory performance substantially - between 2-4x - so this works.

This linking of prospective memory intentions into a wider task can also help them to become habitual as it ties them to the bigger task such as grocery shopping which is much easier to remember due to more obvious target cues (i.e. empty cupboards!!)

Thinking about the issue with digital offers, it may well be good practice to not only allow someone to indicate their intention to take up the offers, but also to indicate when they will do it.  This could involve them flagging a likely location for the shop and a date when they may carry this out - forming an implementation intention for checking offers and linking it to a wider task of grocery shopping.

Doing this would also have the added advantage of allowing us to switch the prospective memory task from being an event based one (going shopping), for which we can’t influence the trigger cues, to a time based one which we can.  For example, knowing the intended date and time of the shop we could use an additional target cue such as adding a diary reminder to flag up at the agreed time as well as a location based notification when the customer is in the vicinity of the selected store at the appointed time.

Strong target cues which we can control also help to overcome another weakness within prospective remembering - which is that prospective memory is typically impaired when the current task is demanding.  

So if someone is busy doing something requiring a lot of memory based thinking, then it is less likely they will remember an intended action unless the target cue is highly salient.  Using the context of remembering a grocery offer, you could argue that the mere act of grocery shopping in a busy store with kids in tow is a taxing enough task on its own - trying to remember something that was on offer to you 5 days before will be less likely.  However, using time and location based notifications which are closely linked to the broader task of shopping makes it more likely that the intended task - using offers - will be remembered.

Retrieval of the intended task is also interesting as its not just triggered based on target cues - although these are shown to be very powerful.  

Interestingly, in one study by Kvavilashvili and Fisher (2007), they found that when participants were given a task of phoning the researchers back the following week, the participants typically recalled that task over the week around 8-11 times.  Many times this recall was found to be associated with trigger cues related to the task such as seeing a telephone.  However, more interestingly, around 40-50% of recollections were completely untriggered - they just popped into the participants head.

Knowing we recall an intention 8-10 times before its intended implementation could be a useful characteristic if directly catered for within a digital offers solution.

If consumers will randomly remember the need to check for offers a number times during the week, it may be possible to include functionality to reward this recall.  

For example, building in a “need” to review offers in the app - maybe to check for changes such as a better offer - could create a reason to check the offers regularly, helping to reinforce them and also ensuring that any date/time based implementation intention is still correct.

This whole area of prospective memory is still an emerging research area with differences of opinion as to exactly how we remember things and how this could be improved.  That said, given our increased reliance on the consumers memory as we remove physical target cues, combined with our ability to intelligently create new, highly relevant ones suggests this is an area we should pay more attention to as marketers.

The end of the line for payment cards?

Payments cards are a legacy of the last century.

Their design was necessitated by a need to be able to communicate the identity of the holder and the provider/guarantor of the funds. This resulted in a physical card format, originally paper, more recently plastic which has since proliferated in our wallets as both payment choices and payment providers have ballooned.

Originally used in the 1920's, the first payment cards were issued by merchants with customers having a different card for each merchant. Seeing an opportunity to simplify payments for customers and possibly to create competitive advantage, several companies in the late 1930's started to accept each others cards. However it wasn't until the 1950's when Diners Club, Amex and Carte Blanche came about that the wider concept of a payment network was created.

Now customers could use a single card to pay for goods and services and since then the expansion of merchants accepting these has grown to cover almost every conceivable category and territory. Indeed, the latest contactless cards are finally opening up new sectors like transport or fast food which have been stubbornly cash based up until now.

Whilst this has made life simpler by removing the burden of physical cash, it is not however how people think about money.

The use of these plastic cards has forced us to channel our purchases through them as we attempt to manage our finances but ultimately our finances are more complicated and granular. This means we tend to carry more than one card - a debit card for every day small payments, a credit card for personal spend, a second credit card for business spend, an Amex...just in case.

Even with these different cards, they still don't align to our budgeting.

When we save for a holiday then the payment for that holiday comes from our savings (which may then have to be moved to our current account to then pay the credit card). When we incur business expenses, we have to pay for these through our personal account based on payments made by our company which are then paid to our credit card. We're constantly moving money around to make it work in a convenient way and we just accept it as normal. It's how things have always been done.

Then I saw BankSimple and saw what the future may actually hold.

There are a number of great ideas and innovations within the BankSimple interface, but in my opinion, one of the greatest is the ability to manage your money within goals.

Essentially these allow customers to decide what they actually want to use their money for (new car / holiday / home improvement / nest egg) and then can allocate funds automatically to this. BankSimple make decisions about how to invest this (long term/ short term) and the customer is always in control, able to change payments, end dates or simply pause the goal for a while.

This works because they are not forcing a customer to take out a new payment card or setup a new savings account to keep their money separate. Instead, BankSimple lets the customer worry about what they want to do with their money and they will work out the best way to manage this behind the scenes.

This jam-jarring prinicple is how people think about money. They decide on different goals/expenses and make allowances for these on a regular basis to try and manage their finances and keep within their "safe-to-spend" balance as BankSimple term it.

Where I think this could get more interesting is when you look at this combined with some of the recent announcements about mobile payments - from Google Wallet to Visa Peer to Peer. At present, all of these solutions have tended to look at linking in a payment card or bank account to make the solution work. The mobile wallet concept simply moves the payment card from a physical plastic device to a virtual one.

Indeed, Google Wallet allows you to simply swipe the screen to pick the right payment card before a single tap then allows you to pay, redeem a coupon and earn points. Launching Google Wallet they said:-

The launch reflects Google's efforts to simplify and redefine the shopping process for both consumers and businesses. [..] Because Google Wallet is a mobile app, it will do more than a regular wallet ever could

Whilst their desire was to redefine the wallet, instead all they've really done at this stage is substitute it.

Osama Bedier, VP of Google Payments is quoted as saying:-

Our goal is to make it possible for you to add all of your payment cards to Google Wallet, so you can say goodbye to even the biggest traditional wallets.

To me though, the bigger question is whether there is a need for payment cards at all?

In the BankSimple world where money doesn't visually reside within accounts and instead has more meaning attached to it based on goals and budgets, then you can imagine that these virtual wallets may be able to access funds in this more natural way.

• When I go shopping, I should be able to pay from my household budget
• When I pay for a holiday, I should be able to pay from my holiday savings
• When I pay for a car expense, I should be able to pay from the allocation for motoring expenses

Don't have enough money in my budget? Well then simply extend me a line of credit for that purchase in that budget.

This would immediately give me visibility that my car expenses are in the red, and I can choose to pay these down more quickly. Rather than an aggregated, monthly credit card statement with every expense stuffed into a single number, i'd have real visibility of my money as it relates to my life.

Technology like Google Wallet is fantastic and i'm genuinely excited about what it will offer in the short-term. However it's going to take some real visionary thinking like that shown by BankSimple to truly redefine our relationship with money.

When that happens I think the need for payment cards, as shaped by the last centuries requirements may actually become a thing of the past and mobile technology will redefine not only what we pay with, but how we manage that payment.

The future of customer interactions is yesterday

One of the interesting aspects of the rise in mobile devices is how these are reinventing established ways of doing things.

Things that we've been used to for decades have suddenly been made accessible and interactive by being combined with mobile devices like a smartphone.

Take the payment cheques for example.

This was a technology waiting to die. The thought of filling out a piece of paper to make a payment to someone else that then took days to transfer between accounts was an idea rooted in the last century. We're much cleverer now - allowing payments via a tweet or a simple bump of the phones. One of the most popular innovations however is remote deposit of cheques whereby customers can pay in a cheque simply by taking a picture of it. Banks such as US Bank, Chase and USAA have introduced it, with USAA originally pioneering this back in 2009 and now introducing the service to the iPad2. Having processed nearly $4bn transactions in just 2 years, this reinvention of an old technology has proved a hit with customers.

Taking this one step further, start-up Card.io have introduced a solution which allows a customer to make a payment by simply taking a photo of their payment card.

Another innovative use of the smartphone was demonstrated by Tesco in Korea when they transformed outdoor media from being passive to interactive. Recognising that people didn't always have time to visit a store, but had to make time to stand, waiting for a train, they decided to bring the store to them. Using outdoor media within the station platforms that mirrored store shelves, customers were able to add goods to their virtual basket by taking a snap-shot of items they wanted. These were then delivered that day so that orders made on the way home could be enjoyed that evening. With sales reportedly increasing by 130% and registered users up 76%, this cross-over from old school media to new media struck the right note with customers.

This can also be applied to loyalty interactions between customers and a brand.

Startup Punchd is looking to change how traditional paper-based punch card promotions work. Moving the card to the smart-phone and replacing the punch with a QR code - and in the process they are revitalising punch card loyalty programmes. Recently purchased by Google, this start-up is offering retailers a cost effective (free) solution for tracking and rewarding customer frequency. Better still, they are then utilising this data to provide retailers with reporting and the opportunity to target communications, something the paper based solution alone could never provide.

Another start-up has done the opposite of Punchd and used a paper based solution to create a cutting edge loyalty programme. Blitzly uses paper cards with unique codes on them to let retailers reward customer purchases. Aiming to create loyalty for smaller retailers who don't have the POS infrastructure in place, the Blitzly solution is both simple and elegant. Each retailer is given a set of cards which are uniquely linked to them, this then allows Blitzly to track customers by retailer, providing reporting and insight for the business and ensuring that only points earned at that retailer can be spent there.

It's not just silicon valley start-ups however they are using the mobile phone to augment traditional customer interactions.

Within the Nectar programme for example, the standard paper coupon has been moved onto the smartphone. This not only allows customers to see all of their coupons in one place but also provides a means of having more up to date coupons based on current behaviours. The usage of coupons is further simplified by not requiring the customer to present them at the time of purchase and instead, simply opting in when they see it.

Sears are currently testing the integration of QR codes with traditional catalogues to let customers get more information such as product videos. This combination of offline media with online content is something loyalty programme catalogues could also utilise.

Although some solutions such as QR codes or Punchd need an app installed which typically isn't there by default, this doesn't deter many customers. In a campaign run by Australian product coupon specialist Letterbox Deals, they reportedly saw 25% of customers using a QR code to submit their entry for a deal - for a campaign that went to 1.3m Sydney households. Even more interesting, 60% of customers who entered via the QR code downloaded a QR reader for the first time.

Sometimes using offline solutions, whether it's printed catalogues, unique printed codes or paper punchcards can be the most effective choice to reach customers. However, combining these with online technologies such as smart-phone/tablet technologies can bring a different angle, increase speed of response and allow ongoing tracking of those interactions.

Article first published as The future of customer interactions is yesterday on Technorati.

Is it the end for traditional retail (or the beginning)

Ever since the first e-commerce site was launched there has been a perceived battle of online and offline retail.

Online retail with it's apparent advantages of economies of scale, the ability to focus on the niche and the low start-up costs. Offline retail with it's higher costs to serve, reduced range (compare a high street book store with Amazon) and limited catchment areas.

But offline retail has one real advantage - it's physical.

I can see, and touch what i'd like to buy. I can compare products next to each other. I can assess size and appearance. This physical connection is not required across all product categories - which is why traditional music shops have struggled - but for many types of product, seeing it in person can be a necessity.

However, the lines are blurring and its less about offline or online shopping and more about convergence (or multi-channel retailing in retail lingo) - and the mobile device in your pocket is enabling this.

In a recent article in the Wall Street Journal, Forrester's e-commerce analyst Sucharita Mulpuru asked the question

"If somebody buys from a mobile device in your store, is that a Web sale or a store sale?"

This is interesting as for many people, one of the issues of buying in a store is actually the costly sales assistant. Yes I need someone to help sort out the actual purchasing of an item, but I'm less inclined to believe they can help me to select the right product - do they have the knowledge - and that they have my best interests at heart - how are they compensated.

The great thing about the integration of online and offline through the mobile device is that I can stand in front of a product in store and access reviews and pricing information instantly. I don't need a sales assistant to tell me why it's a great product, I have access to hundreds of reviews from real people to tell me if its a great product.

One retailer who gets this is Best Buy.

In a recent video they did for the National Retail Federation's 2010 Retail Innovation & Marketing Conference, they demonstrated their view of mobile integration within offline retail.



One thing I particularly liked in this thought piece from Best Buy is the linking of the physical product to online information. This was something I discussed on this blog back in 2008 and it's great to see a retailer with this on their radar.

Another interesting retailer is Starbucks. They have recently partnered with "new kid on the block", social network FourSquare, which they describe as:-

People use foursquare to "check-in", which is a way of telling us your whereabouts. When you check-in someplace, we'll tell your friends where they can find you and recommend places to go & things to do nearby. People check-in at all kind of places - cafes, bars, restaurants, parks, homes, offices.

So basically I can let FourSquare know where I am at any time, and they will let me know if my friends are there as well, plus it will automatically update my other social networks like Twitter and Facebook with my location. However, FourSquare aren't doing this just for fun as their website goes on to say:-

We all have our local hangouts and foursquare keeps tabs on who's the most loyal of all the regulars. If you've been to a place more than anyone else, you'll become "the mayor"... until someone else comes along and steals your title. It may sound a little silly until you see the list of places that are offering freebies to our mayors - free coffees, free ice-cream, free hotel stays - it pays to be a foursquare loyalist and check-in whenever you go!

And there's the magic.

FourSquare get to know where you go and how often - and this is what Starbucks is buying into.

They have partnered with FourSquare to develop a reward programme which recognises people for frequent visits. The rewards at this time are simply a "Barista Badge" (badges are a big thing on FourSquare), but this is just the beginning. Speaking in the New York times Bits blog, Chris Bruzzo, Vice President for Brand, Content and Online at Starbucks says:-

“It’s where the intersection between digital and physical starts to get interesting. Starbucks loves that, because we’re always looking for that intersection, which we think is the evolution of social networks.”

I think this is a very interesting development - whilst it may be the evolution of social networks I think it's actually the evolution of retail.

This "intersection between digital and physical" is all about enabling and tracking customer interactions. Regular readers of this blog will know I've spoken about recognising and rewarding this interaction before - and this is what Starbucks are doing.

In some senses the interaction is more important than the transaction as the interaction is further back in the buying process - if you can get someone to interact with you more often you have a better chance of converting this into a transaction - a sale.

The forward thinking retailers are recognising this and also recognising that traditional retail loyalty solutions are in the most part reactive - rewarding a decision that has already been made.

Of course there is a hope that the loyalty programme influenced this decision, but retailers like Starbucks and Best Buy are also ensuring that their loyalty initiatives are working harder and smarter - engaging customers before the purchase - and this is the traditional space for more mass above the line marketing; another area which is seeing a convergence - this time between above the line and below the line.

To me this is the real future of retail and retail loyalty.

Not only the convergence of channels but also the convergence of marketing. Engaging, recognising and rewarding customers across channels - before they purchase - before they are even a customer.

This isn't the end of traditional retail - it looks to me like it's just moved up a gear.

[Image credit Physorg]

It’s coming and it will be game changing

T-Mobile are offering free texts – for life!  

This is currently a specific promotion for customers joining the reward programme during the next month or so and who top up with £10 this month and continue to do this each month thereafter.

However, this is significant because it won’t be long before a competitor responds and free is difficult to beat. 

Look at the credit card market and the 0% offers.  They basically eroded their own market to the point where almost no one takes out a card anymore without some form of 0% deal, whether this is for balance transfers or retail spend.

Music downloads are another example.  Technology outpaced the publishers, providing music when and where people wanted it rather than how the music companies wanted to control it.  Once the horse had bolted and people got used to “free”, it has become a difficult thing to undo.

Free texts will go the same way.  Once people see SMS less as an individual purchase and more as a service, charging for texts will be dead.

Whilst putting “free” onto something can increase attention and gain new prospects –these don’t necessarily translate into customers.  Worse still, if the element of the product or service being given away as free doesn’t support a business model which can be charged for – and more importantly – which customers want to pay for, then this can simply erode marginal revenues for all.

However “free texts” aren’t really the whole story – they are not really free, they are just un-metered within an overall service provision.  This means they are becoming more akin to mobile data contracts or home broadband, where within the restrictions of “fair use” and a monthly commitment consumers can basically use as much as they like.

Seth Godin makes an interesting point in his latest blog post when discussing the issues around brands making something free

People look at the free revolution and say, "oh, that could never work. If I gave x, y or z away for free, I'd fail." They're right. They will fail... If they keep the model the same and just give away stuff for free.

So where is T-Mobile going with this?

Well there are two interesting issues within the mobile telco market.

1. Market Saturation – Everyone who wants a mobile has one – there are very few new new customers so brands need to increasingly look at ways to attract customers from other brands and then retain them.  Witness the plethora of loyalty programmes being introduced such as Orange Bright Top-Ups or O2 Treats which are looking to reward customers for their continued loyalty.

This new promotion from T-Mobile also works in that it has an attractive proposition - “free texts” – which will attract and acquire customers combined with a lock-in based on losing the benefit if you cease to top-up regularly.

2. Product Saturation – Increasing competition has meant the cost of voice minutes and now texts has been increasingly driven down to the point where customers have more than they need – brands can’t really differentiate in this area any more.

As pointed out in the blog I’m Cellular “As prices fell for a voice minute of use (just as with Long Distance before that), subscribers could afford to purchase more minutes for their dollar, but at a point their demand was sated and they had no desire to consume more.  SMS has certainly provided an unexpectedly large increase in data use, but that is, like voice, largely played out.

So the business model has changed and the new growth area has moved on – in this case it’s data – with data predicted to double revenues over the next 5 years.

The blog I’m Cellaur does highlight another potential issue:-

Although (like prepaid) these [flat rate] plans are simple for subscribers to understand, and very attractive in avoiding unpleasant surprises, they invite unrestrained use with no marginal revenues.

So the real issue for T-Mobile will be in how to continue to increase revenues in the future if everything is based on a flat rate fee. 

Well when people stop worrying about the cost of the service, they will start to concentrate on what can be delivered across the service.

As we’ve witnessed with the iphone and it’s unlimited data contract – expect a deluge of digital services such as music, applications, location tools, social tools and games.

And for all other brands – the prospect of free unmetered SMS and data opens up a world of possibilities for creating closer relationships with their customers.

Is “free” SMS really game changing and a win-win for all? 

I think it could be.

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.

Make the easy things easy and the hard things possible

I was reading a recent post from the blog brandgym about blyk, the new mobile phone operator who provides a "free" mobile service to 16-24 year olds, funded by advertising revenue. Although this is an interesting proposition and I have to admit, one I thought would fail quite quickly when I first heard of its launch, what struck me most was how it came about. Apparently the founder of blyk, Antti Ohrling got the idea from the free morning newspaper, Metro and thought if it can work for papers why can't it work for mobile.

The mobile sector is however well known for commercial innovation – from the creation of pre-pay mobile in the mid-90's to the emergence of mobile virtual network operators (MVNO) like Virgin Mobile.

Looking at the recent headlines I thought how this contrasted with the automotive industry which is obviously struggling at the moment in the wake of people pulling in on their purse strings, with new car sales down almost 40% - the commercial model for selling cars seems to have changed little over the years with car dealerships affiliated with a car manufacturers.

Whatever the business, one of the fundamental aspects of gaining a sale is to make the purchase process as simple as possible – removing or reducing any barriers that may exist. When purchasing a new car there are a number of "barriers" to overcome. The most obvious is liquidity – does the customer have the cash or access to the cash to purchase the vehicle - if the customer can't raise the funds then there is little possibility of a sale. Increasingly though another barrier is depreciation – with new cars typically losing 40% of their value in the first 3 years and up to 25% of their value when driven off the forecourt, the decision of new car versus used car is increasingly difficult.

Buying a new car is essentially an emotional decision – it makes no sense rationally as the only advantage over a used car is the "factory fresh smell" and the knowledge that no one else has driven it. In the current economic climate, emotional decisions are going to be much harder to come by with customers instead thinking about every pound they spend. What is interesting though is that odds are someone working today will still be working when the current slowdown is over – so money isn't really the issue – for many people it's the commitment. Not knowing what may happen in the next 12 months means people will be less likely to want to commit themselves financially.

So if car manufactures want to sell cars they need to address two issues – managing depreciation - so new cars don't look so irrational when compared to used cars – and facilitating purchase. I'm not suggesting these are necessarily easy things to answer (or the only things) and obviously car leasing and loans help to address the issue of having upfront cash. However they do little to address depreciation or commitment issues and finance brings its own issue; anyone who has insured a newly financed car will have thought about "gap insurance" – that product which covers the shortfall between what you owe for your car and what the insurance company actually pays out.

There is however some recent commercial innovation in the car industry. Hertz announced this week that it was entering into the car sharing market in London; providing cars for as little as £4 per hour – it isn't the first to do this, but it is probably one of the biggest brands. For many, this can be a great way of having access to a car without the cost or hassle of owning it. In fact physically "owning" things is becoming increasingly less of a requirement – whether its on-demand services like BT Vision for films or Napster for music, people are getting used to having access to something rather than actually owning it and websites like Zilok are now making it possible to rent things when you actually want them, from drills to drums. Car sharing may not be practical for many people but the ability to simply have access to a vehicle with minimum commitment and no associated ownership issues like depreciation could be offered through more flexible forms of financing.

So what has all this got to do with retaining customers? Well over the last decade or so, for many industries retaining customers has consisted of providing better services than your competitor – the customer was always going to buy, they just needed help in deciding from whom. Now things have changed however - the customer may not be buying at all!

For many companies what's required is a review of how you go to market to ensure that you make it as easy as possible for customers to do business with you – both existing and new - looking outside of your own industry could be a great place to start; who knows, the morning news paper could just provide that inspiration.

Retailers Need to Start Thinking Imaginatively

I was reading an interesting article today on retailers and their use of mobile within the buying process. I was quite surprised when it said that 40% of those surveyed said they already had an information-led mobile internet site or were considering building one – I'm guessing that there were more within that 40% that are considering it versus those doing it as the mobile channel is not something I've experienced in a major way from online retailers or any retailers for that matter. 30% of retailers questioned felt the use of mobile was unimportant and almost 50% didn't feel that the success of mobile and e-commerce are interlinked.

The article went on to say that the "survey showed the use of mobile among retailers is high but the benefits of having m-commerce capabilities are yet to be recognised"

Theodore Levitt said in his article "Marketing Myopia - Harvard Business Review" in 1960 that "Management must think of itself not as producing products but as providing customer value. It must push this idea into every nook and cranny of the organisation otherwise the company will be merely a series of pigeonholed parts, with no consolidating sense of purpose or direction". That statement is probably truer today than at any time before as customers are dealing with retailers across many more channels and are expecting the same level of service and recognition regardless. The buzz words in retail are "Multi-Channel Retailing" – having one cohesive customer centric experience across all channels rather than pigeonholed parts.

For many retailers though this is still a pipe dream – their e-commerce solution is completely separate to their EPOS solution, vouchers issued in one can't be redeemed in the other; customers (and hence purchases) in the online channel are known, customers in the offline channel are not. For some retailers there is almost a rivalry between online and offline with no real cross promotion of either channel, acting as if customers are either on or offline – but never both.

Retail loyalty programmes can help bridge the gap in this regard, acting as a centralised solution to bring together customers and transactions from all channels – providing a single customer view and a solution for creating and delivering relevant promotions back to all channels whether these are via email, SMS, direct mail or POS receipt. Even here though many retailers get it wrong – running a loyalty solution only for offline and ignoring online, or further muddying the water by running two loyalty solutions, one traditional and one via their store/credit card product – never the twain shall they meet.

In an ideal scenario I should be able to walk into a retailer and seeing something I like, text the product code to an SMS short code to get real time product reviews – if I like it I can order it there and then to be delivered, or pick it up and take it to the till. At the till I should be able to swipe my card and have the cashier know who I am, what I like to purchase and make a recommendation for something else I may like that is coming in next week. On my till receipt is an offer for something that I would like which I can go online to purchase. Going online I can see a history of all my purchases across all channels and can see items I've viewed before whether online or in-store via my mobile requests. If I choose I can post these to my social network profile so that my friends can see what I've purchased and react to this, comment on it and if they like it they can purchase it (and I may even earn some commission on the referral).

None of that is particularly hard to implement, but it's about putting the customer at the heart of the buying process.

Theodore Levitt went on to say that "the belief that profits are assured by an expanding and more affluent population is dear to the heart of every industry. If consumers are multiplying and also buying more of your product or service, you can face the future with considerably more comfort than if the market were shrinking. An expanding market keeps the [company] from having to think very hard or imaginatively."

Well we're not in an expanding market anymore – so retailers who continue to have expanding profits will probably be those who are thinking imaginatively and putting the customer at the heart of their organisation.