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.

Changing the choice context can change the game

I saw a number of presentations from various UK startups in the last few weeks and one really caught my attention.

Playmob is a startup focused on linking charitable giving to the purchase of game items/actions.  When CEO/Founder Jude Ower presented she described the positive effect that linking a charity donation to the purchase of a virtual item had.  In one example she detailed how 80% of people who purchased the virtual item had never purchased one before and of those, over 30% went on to purchase more virtual items.

I found these stats pretty amazing.

The 80% alone would be a good result - getting people who hadn’t previously purchased virtual goods to buy them.  You could argue that they weren’t really buying the goods and instead just used the opportunity to be charitable - however, with 30% going on to purchase again, this suggests a change of decision.  

The introduction of the charity element had somehow changed the decision context and caused them to purchase an item they had apparently previously ruled out.

Obviously, as marketers, influencing customer choice is something we do all the time - this is the basis of sales promotions and loyalty programmes.  What intrigued me though was the sheer number of people influenced who had never purchased virtual goods before.  It seems they simply need a little push to flip their decision.

In another charitable example, there was a study by Karlan and List called "Does Price Matter in Charitable Giving?” and they identified that match funding for charitable donations - whereby every $1 the donor gives is matched by another $1 - increases the amount given per donation (by 19%) as well as increasing the number of donations (up by 22%).  What’s really interesting here though is that the amount matched doesn’t actually impact these numbers - whether it’s 1:1 match of a 3:1 match (e.g. $3 matched to every $1 donated), the resulting uplift is the same.

This suggests that when it comes to decisions to do something, it is not just a black and white binary decision - there are lots more variables at play.  

Sure, there will be a segment who will always say yes and a segment that will always say no.  But in the middle, there is a floating segment who just need a little extra nudge to flip a no to a yes.  It also suggests that people don’t commit as much as they could - with the match funding lifting the actual amount donated it suggests that people had a little more headroom but that this only went so far.  The promise of even more match funding would not influence them to go past their personal headroom target.

The decisions people make  - such as whether to buy a virtual item or not - depends on them making a number of decisions that lead up to the final choice.  In doing this, people tend to make compromises and tradeoffs to compare the likely outcome.  Evaluating the cost vs the benefit and looking at the different options in terms of the value they add.  What’s interesting here though is that it’s possible to change the choices people make by introducing additional options, even if they don’t actually go for that option.

This seems to be what Playmob had tapped into.  The game producers already had a model for getting some players to purchase items (typical less than 3%), but they needed something to change the context to influence others.

The decisions people make however really depends on the context of the choices available.

Using the example of a circle, that same circle appears large when surrounded by small circles and small when surrounded by large ones.  In the same way, a purchase choice such as a virtual reward may appear to be unattractive in context of the value it adds to the game, but becomes more attractive when combined with another, real-world benefit such as a charitable gift.  Likewise, in charitable giving - whether to give and how much to give can be manipulated by the introduction of an additional variable or choice such as match funding or gift aid.

Placing more variables into the mix can ultimately change a persons choices in more complex ways.  A good example of this was published in the research report entitled “Choice in Context - Tradeoff Contrast and Extremeness Aversion” by Simonson and Tversky.  

It had a study which provided two groups with two different sets of choices for the purchase of a new microwave oven.  In the first group they had 2 product choices which varied by price and quality, but with the same discount.  The second group had the same choice but with one additional product added with better quality, better price but less discount.  See table below:-

 

Microwave Choice	Group 1	Group 2
Emerson (0.5cu. ft. / $109.99 / 35% off	57%	27%
Panasonic I (0.8cu. ft. / $179.99 / 35% off	43%	60%
Emerson (1.1cu. ft. / $199.99 / 10% off	n/a	13%

 

What’s intriguing here is that in the first group, the lowest quality product won out with 57% of purchases.  In the second group however, this same product only attracted 27% of purchases because a potentially better product was introduced into the mix.  Participants were forced to make choices using a different context and with different tradeoffs and so in this case, the 2nd product won out overall with 60% of purchases.

Simply by adding in another product - albeit one more expensive - the researchers were able to increase the overall sales revenues by encouraging a greater number to select the higher priced item.

This also worked in reverse.  In a similar study, they introduced a lower quality choice into the mix and demonstrated how this encouraged the participants to then increasingly select the higher value/cost option.

So choice is not a static context - just because your products and offers have influenced some customers doesn’t mean thats the best it can be.  Changing the choice context can shake things up a little and create an additional nudge for customers - whether that’s making their first purchase or increasing/uplifting their planned purchase.

This isn’t just a one-off benefit though as can be seen by the Playmob example.  Having given users a reason to purchase by changing the choice context, they then went on to continue purchasing as this initial choice had broken down the barriers to future purchases, possibly through the forming of a cognitive bias such as the commitment bias.

In the context of loyalty marketing, using the reward currency to provide additional options and to change the choice context can be an excellent way of encouraging consumer trial or repeat purchase - simply by sprinkling a small number of points on different product options.  Also, like the match-funding example, the value of the points given isn’t directly related to the change of behaviour.

Changing the choices changes the context and ultimately can allow you to change the rules of the game.

Remarketing - Loyalty's "Groundhog Day"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Knowing the customers journey, not your journey is more important

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

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

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

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

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

Keeping your loyalty star rising

"If the stars should appear but one night every thousand years how man would marvel and stare" - Emerson

This is an interesting observation from the eminent US poet, lecturer and essayist Ralph Waldo Emerson and was written back in 1836 in his essay Nature.

It is though still as relevant an observation nearly 200 years later.

When we first see something it gets more pleasing and likeable the more we see it.  Known as the familiarity principle, it is something advertisers leverage when they constantly expose us to their advertisements across ever increasing channels.

These adverts leverage the mere-expore effect that essentially states that repeated exposure to something increases perceptual fluency which is the ease with which each subsequent stimulus can be processed.  This then follows with the branded goods we go on to purchase and is the reason we simply pickup the same brand repeatedly - perceptual fluency makes it easy -  we don't have to think about it.

However, this only works to a point. In the research paper "What's in a name? Reputation Building and Corporate Strategy", they showed that "the higher a firms visibility per unit of sales [...], the worse it's reputation. ", even when the exposure is mostly positive.

As the saying goes, familiarity really does tend to breed contempt.


This is obviously interesting (and has implications) for above the line marketing, but how does it impact below the line marketing?

• If every one is doing daily deals, does anyone really care anymore?
• If every store has a sale, are we excited anymore?
• If every day we receive another offer, do we read them anymore?
• If every activity has points attached, do we collect them anymore?

Groupon was is a great example.  It was new, engaging and different and it took customers, merchants and the market by storm.

Google offered to buy them for $6bn and recent "valuations" suggested $30bn.  But then competitors jumped in - lots - including retail behemoth Amazon.  With reports suggesting though that Amazon is only selling a handful of deals, 80% of subscribers to deal sites never buy a deal and merchants running away in droves, this would appear to be a sector who's star has already peaked.

Over exposure of both the offers and the approach has meant customers are starting to tune out.


In a similar way with loyalty, if every activity is "sprinkled" with points, there is a danger of points fatigue and ultimately ambivalence towards the points.  Using points on all activities, especially those not related to any monetary exchange can devalue the points and make them appear worthless.

Brent Houlden, leader of Deloitte's Retail Practice in Canada highlights this when he says:-

"...Point collecting is losing its lustre... Loyalty programs tend to go stale over time. If you want to continue engaging customers, you need to continuously reinvent your program"

In a recent McKinsey iConsumer survey where consumers were asked why they had posted online comments / reviews - something loyalty programmes are keen to encourage - only 6% said it was to gain points.  On the other hand, almost 40% did it because they liked it or liked helping others.

This is something a well designed loyalty programme can also foster and encourage.  In a blog entitled "Loyalty: More than Just Points" it discussed how Starwood Hotels’ emphasis on guest service interactions are the key to producing loyalty saying:-

"It is telling that Starwood, so tightly branded by its loyalty points program, places such emphasis on service interactions as the first component of guest loyalty.  And it is that passionate loyalty, Starwood’s “Loyalty Beyond Reason” that inspires guests to share their experiences, recommend properties to their friends, and rebook."

This is not to say points programmes in themselves have a problem, it's just that in a competitive market where almost every retailer, branded product or hotel chain has a loyalty programme  customers will simply become ambivalent to them.  The programmes and their mechanics have become familiar and the danger is that this ultimately leads to contempt and thus consumers tuning out.

In order to attract, engage and retain customers you need to do more to make programmes standout and continue to stand out so as to make people "marvel and stare".

7 Principles of Loyalty

From time to time we're asked what makes a good loyalty proposition. Whilst each programme should be designed around the unique properties of a brand, it's customers and the relevant objectives, there are some common elements we use when thinking about different aspects of the programme.

1.Subscribe; not bribe – For people to feel motivated they should feel that they are making smart decisions. A loyalty programme should not appear as a bribe - something that would taint the brand - and instead should appear as added value which customers want to sign-up to.

As the book Scoring Points puts it, better a "chosen" than a "given", but it's also wider than this; not just about whether the customer has chosen it, but the customer also needs to feel chosen - they need to feel it's not a bribe. Within recognition for example, people are more motivated when recognised based on a stated behaviour they have exhibited rather than a one size fits all.

Nectar demonstrates this principle very well in it's latest innovation; their iPhone app. Customers are provided various points offers from Nectar partners, but rather than simply awarding these at POS when the customer makes a purchase, instead the customer has to say "I want it" - they have to subscribe to the offer; this ensures they value it more and that they see it as a smart choice.

2.Loyalty is a journey not a destination – A well designed loyalty programme is made up of many small individual behaviour changes which link together to create deeper engagement. The programme should make it clear what these behaviours are and look to encourage them through the reward and recognition design.

Increasingly, recognising wider interactions as part of this is becoming more important as it allows a programme to start the journey earlier in the buying decision process. When designing a programme, consider all elements of the customer journey, how to highlight and recognise these to customers and how to move people along and up using the tools within the programme.

3.Recognition: it’s own reward – Don’t underestimate the value of recognition in it’s own right. A simple “thank you” can be very powerful and for some the mere act of accumulating points can be motivating in itself. Harness all avenues to recognition including new forms that are coming out of the increasing trend of gamification within loyalty.

This can also provide a great way of engaging less frequent or less valuable customers by providing recognition as a reward in itself and not tied to expensive rewards which they cannot accumulate or access.

4.Show me the value – Customers need to see a value exchange; they need to understand that their activities are an integrated set of steps to a given goal and that this goal is achievable. However, don’t confuse value with money. Whilst monetary value is important, value can also be achieved through social currency and privilege.

Whilst highlighting to customers what rewards are acheivable, it's worth remembering that many customers will underestimate the amount they spend (and could spend) with you and so early on, rewards may look out of reach. Focus on the reward itself and what other people are achieving (social proof) and not simply on the cost.

5.Much cheaper to be relevant – Standard mantra for CRM programmes is Right Message, Right Time, Right Channel. This still holds true and behaviour change can be much more effective when the message is relevant.

The principle also applies within the programme design itself as designing a programme to acquire and retain the right customer segments can be much cheaper than a mass programme for all.

6. Facilitate (don't initiate) advocacy – Take every opportunity to turn the scheme inside out and make it social. Word of mouth is very powerful but it must be genuine and not purchased. Giving people ample opportunities to share means they actually will. With many retailers seeing traffic more than double with the integration of Facebook “Like”, this can be a very powerful mechanic.

Don't expect customers to simply share the scheme though - it's unlikely many customers will say "join this great loyalty programme". Instead, build in the ability to share achievements - whether this is a reward they have redeemed for, a purchase they've made or a tier/level they've obtained. People are more likely to share achievements and share them more regularly than they are to make formal recommendations.

7.Create reasons to stay (and stay loyal)– This is not about locking people in, but instead is about ensuring they understand the value they have (and will lose) if they leave. Points do this very well, with people building up deferred value they don’t want to lose. Many programmes also use recognition mechanics like tiering which help people to build up more invested value if they concentrate more of their purchases with the brand.

One area to watch out for though is a programme design which actually causes disloyalty. For example, if your tiering structure allows people to "top out" and the customer sees no benefit to continue, they will start to shop around to build up loyalty standing with other brands - essentially playing the tiering field.

Keep in mind that points and tiers are not the only tools for creating a sticky programme - privileges, social connections and content can also be very compelling, as can increased game playing elements like leader boards, levels and status.

I've no doubt people have their own versions of these principles - and additional ones that they use. Feel free to share and discuss.

The art of collecting

I was never a big sports fan, but for some reason collecting Panini football stickers was a big part of my childhood. I couldn't really care less about the teams or the players - most of whom I'd never have recognised - it was just the collecting itself which was exciting. Being able to swap with friends and if you were really lucky, getting the silver ones with the club badges on.

It seems nothing has changed - Panini are still pushing out sticker books and kids are still collecting them.

It's not just kids though - many people like to collect - whether it's shoes or stamps.

I'm not talking about pathological collectors -those who feel a need to collect things so that it affects their ordinary life. Like the guy from California (why is it always California) who just had to recently sell his banana themed collection.

I'm also not talking about those who's desire to collect something first drives them to extraordinary lengths. For example, the 15 year old Parker Liautaud who was first to collect the FourSquare Last Degree Badge by checking in at the North Pole.

What I'm talking about is those more normal people who just feel compelled to make that next purchase or seek out that next item.

Given that collecting is such as powerful force within frequency marketing programmes - whether its people collecting points or the sales promotions at the local petrol station where you collect glasses - understanding how people start collecting is important to get a loyalty programme up and running.

At a simple level the act of collecting is essentially one behaviour that is linked to a previous one - to be a collector you must by definition have started.

In the famous article on The Endowed Progress Effect by Nunes & Drèze, they showed how you can kick start people into collecting by simply making them feel they have already started. By awarding people with points upfront, the members were more likely to continue collecting and would actually collect faster - showing increased engagement or desire to collect. They described the reasons for this saying:-

[Previous research] demonstrated that interrupted or uncompleted actions engender a strong motivation to complete the action and psychologists agree that once a person accepts a task, for whatever reason, he or she tends to stay on that course until the goal is achieved

So part of getting people to collect is to get them to feel their collection is both incomplete - so there is more to do - and that they have already started collecting and so feel compelled to continue.

It's one thing to get people started however, but how do you keep the behaviour going. How do you get them from one behaviour to the next, and more importantly, how do you get them making increasingly larger commitments - giving you a greater share of wallet or opening up a new category they haven't purchased in before.

In the book Yes! 50 Secrets from the Science of Persuasionthey discussed ways of getting one large behaviour change by essentially "softening" people up in the first instance. Linking one action to another by starting with something small and seemingly insignificant to then get them to do something bigger which they wouldn't ordinarily have accepted.

The example given was an experiment that asked home owners in a posh neighbourhood to display a large sign on their lawn (6' x 3') saying "DRIVE CAREFULLLY". When asked first off for this, only 17% complied. However when they were asked two weeks before to display a small sign in their window saying "BE A CAREFUL DRIVER", the compliance rate shot up to 76% for the larger sign.

The book goes on to explain why this happened saying:-

"The evidence suggests that after agreeing to the request, the residents came to see themselves as committed to worthy causes such as safe driving. When [..] approached a couple of weeks later, they were motivated to act consistently with this perception of themselves."

This softening or "Priming" as it's described in the book Nudge: Improving Decisions About Health, Wealth and Happinessworks by aligning peoples thinking - for example, simply asking people who they might vote for makes them more likely to actually go out and vote.

This becomes key within loyalty through ongoing communications. We know for example that communications sent across multiple channels increase overall response rates within a campaign and this is probably in part because the first communication "primes" for the subsequent one. Combining this with some form of low risk call to action suggests that subsequent messages for a larger commitment would get a far greater response rate.

Members of a loyalty programme have traditionally been called collectors. To get the best out of a programme though it is probably also worth treating them as collectors and building in specific mechanisms which encourage both the initial behaviour to get them started in their collection as well as helping to direct them ongoing to maximise it.

How to train your dragon (or customers)

Hiccup is a teenager who's a little different - he doesn't really fit in with the rest of his Viking village who are dragon slayers - and have been for centuries. Instead of slaying dragons, he ends up befriending one and in the process changing the perceptions of the whole village.

The dragon he befriends is the most powerful and feared Night Fury dragon, but due to an injury, he cannot fly without assistance from Hiccup. Becoming friends the two of them go on to work together - Hiccup the rider providing direction and the newly named Toothless the dragon providing power and support.

As the official blurb puts it for new film "How to train your dragon":-

Hiccups world is turned upside down when he encounters a dragon that challenges he and his fellow Vikings to see the world from an entirely different point of view.

Whether it changing from slaying dragons or changing your diet - change itself can be hard.

It is normally easier to do what you've always done. Sometimes you may think about change, dwell on it, work out the alternatives - but ultimately do nothing.

This is also the topic of a new booked called Switch: How to Change Things When Change is Hardby authors Chip and Dan Heath which discusses why change is difficult for us and techniques that help.

Unlike the film however where Hiccup is the rider of a dragon, the book describes how decision making for us is similar to a rider and an elephant, saying:-

Our emotional side is an Elephant and our rational side it's Rider. Perched atop the Elephant, the Rider holds the reins and seems to be the leader. But the Riders control is precarious because the Rider is so small relative to the Elephant. Anytime the six-ton Elephant and the Rider disagree about which direction to go, the Rider is going to lose. He's completely overmatched.

Whilst this is a great book for looking at how to manage personal change - and I highly recommend reading it - it does raise some interesting thoughts about how to make change easier for other people, providing three simple rules:-

1. Direct the Rider - Resistance to change is more often lack of clarity about what needs to be done


2. Motivate the Elephant - The Rider can't get his way by force for long - it's critical to engage peoples emotional side


3. Shape the Path - Normally a people problem is actually a situation problem - you may need to make changes to make change easier (think Nudge)

For example, they describe a case study in the book about a campaign to encourage healthy eating. Rather than use a standard message of "eat a healthier diet" or provide a long list of good and bad foods the campaign had a simple message - drink low fat milk.

Knowing that milk is the largest source of saturated fat in a typical Americans diet, it was felt that if they could change this to low-fat it could make a big difference.

To support this the campaign had two messages.

The first, directed to the Rider was simple and provided crystal clear direction - "Next time you're in the dairy aisle of the grocery store, reach for a jug of 1% milk instead of whole milk"

The second message was to the Elephant - looking to appeal to the emotional side by visualising the problem saying for example that a single glass of milk had the same fat as five strips of bacon.

The campaign worked in changing behaviour - resulting in a shift in market share for low fat milk from 18% before the campaign to 41% after it.

These same techniques apply in a commercial sense when looking to change consumers behaviour. For example, a credit card issuer is always looking to increase card usage - to make their card front of wallet and to increase it's usage across a customers share of wallet.

Whilst you could send a communication pointing out how using the card more will provide greater rewards - this is just too generic. The Rider - the rational side - will be contemplating various options - but not taking any action.

If instead to drive card usage you provide crystal clear direction - use your card in this category - then it suggests you are more likely to get people actually doing it.

A typical example of this would be to suggest using the card within supermarkets as for a card issuer, this represents both a large and regular transaction - something which is more likely to drive increased usage across other categories.

This can be seen in the example below from the new Amex Express Rewards card which highlights increased points earning in supermarkets:-

Amex have then combined this with simple messsages about the reward that can be obtained for the points earned - providing something to appeal to the Elephant - the emotional side.

However, this is nothing new and there are many campaigns of this nature across reward credit cards.

One thing that is missing from these types of campaigns though is the shaping of the path - in essence removing barriers which may still confuse the Rider or make them operate on autopilot.

For example, the problem with getting people to use their credit card in supermarkets may not be as simple as just asking.

• There may be concerns about what people think - Does using a credit card mean I can't afford to buy food?


• There may be concerns about managing personal finances - If I use my card for everyday spend, will I remember to pay it off; will I overspend?

In order to ask people to use their credit card in supermarkets, we may need to first address the reasons why they aren't, helping to alleviate concerns and Shaping the Path.

One thing is clear though, simply asking people to spend more on their card is probably never going to work in the same way that simply asking people to eat healthier rarely works.

If you want change - if you want to train your customers - then this new book suggests that you'll need to think about how you speak to the Rider, engage the Elephant and ultimately make it easier to do business with you by Shaping the Path.

Back to the future

I’m very excited.  I’ve just got the new Dan Brown novel “The Lost Symbol” and already I’m a third of the way through it. 

Without giving away the plot to those who haven’t got it yet, it’s safe to say that it includes the usual mix of secret societies, mythology, symbology and real life locations in a way that really brings the novel to life – and starts you questioning reality based on fiction.

However while this blog isn’t a book review what did intrigue me was a section in “The Lost Symbol” where one of the lead characters demonstrates how breakthroughs in science today were actually already documented in ancient texts centuries ago.  From string theory to multi-dimensional universes, all of these things were apparently discussed in ancient documents.

Now I don’t know how true that is, but the reason it struck a cord was because I’ve also been reading some older books recently including Hidden Persuaders by Vance Packard (first published in 1957) and Propaganda by Edward L. Bernays (first published in 1928).  What’s really interesting about these books is that barring a reference to steam ships in Propaganda and shortening in Hidden Persuaders, you’d be forgiven for thinking they’d been published recently.

In Propaganda, Bernays describes one of the problems facing society, saying:- 

“[] today, because ideas can be instantaneously transmitted to any distance and to any number of people, this geographical integration has been supplemented by many other kinds of grouping, so that persons having the same ideas and interests may be associated and regimented for common action even though they live thousands of miles apart” - 1928

Indeed he quotes H. G. Wells who had written in the New York Times “ Modern means of communication – the power afforded by print, telephone, wireless and so forth..[].. have opened up a new world”.

Bernays then goes on to describe some of the tens of thousands of groups listed in the World Almanac – which I guess would be the fore bearer to Facebook Groups – listing groups such as the “Association to Abolish War”, the “Anti-Cigarette League” and the “Ayrshire Breeders Association” – all of which can now be found on Facebook in one form or another over 100 years later.

Whilst we think that social networking may be something wholly new, in reality we have simply changed the channel – made it more visible and accessible – but we haven’t really changed the underlying activity.

In Hidden Persuaders, Packard describes some of the techniques being used by agencies in the 50’s to sell goods.  Given this was over 60 years ago, little has changed.  Yes, phrases like “the little woman” when referring to a housewife wouldn’t play so well these days; however when he describes some of the issues marketers faced back then, we’d do well to pay attention.

For example, when discussing the issue that “you can’t assume people know what they want” he uses the case of a major ketchup company who decided to change their bottle design based on customer complaints.  In interviews most customers indicated they preferred the new bottle the company was considering however when it was then launched it was overwhelmingly rejected in favour of the old bottle – what customers had stated when interviewed didn’t match with what they did in practice.

Almost 30 years later, one of the biggest global brands made exactly the same mistake when Coke launched it’s new flavour in 1985 after extensive customer research which indicated it was preferred - only to find it was wholly rejected by the public and had to be pulled.  This despite blind taste tests indicating they really did prefer the newer recipe.  The book Yes! 50 Secrets from the Science of Persuasion discusses this and indicates that it probably had more to do with the psychology of “scarcity” and how people react when they think something is in short supply or they are losing something.

Going even further back, in 1894, Richard Sears, co-founder of Sears said "We Can’t Afford to Lose a Customer” and so to help retain customers he used a number of techniques over the next 10 years including:-

• Printing testimonials from satisfied customers
• "Club Order Program" - Encouraging customers to combine their orders with friends or neighbours to share in discounts
• "Customer Profit Sharing" - giving the customer a one-dollar certificate for every dollar spent.

Keep in mind, this was over 100 years ago and we essentially have a company utilising a loyalty programme, peer based feedback and elements of social networking.

Sometimes I think we get so wrapped up in the technological advances that we forget that what's important is not how we say something – the technical channel by which it’s transmitted - but what we have to say and even more importantly what we actually do.

Times change, technology moves on – but basic human needs and desires remain the same – and success depends on meeting and exceeding these, whatever century we are in.

Is it loyalty or is it addiction?

I have a confession to make… I’m an addict.

This isn’t however a drug addiction (or any other kind of substance), but I do tend to partake at least once a day.  What am I addicted to… well I’m kindof ashamed to say, it’s Farm Town on Facebook.

I realised I was addicted when I came home from holiday and within an hour had logged on.  Interestingly I’m not alone either – I've seen many people using their laptop in public and on the screen was Farm Town.  In fact, for those of you that haven’t heard of it, count yourself lucky, you’re not one of the 18.5m monthly active users, 6m daily users or the 1.1m fans. 

This got me thinking.  How was I so easily hooked in and how does it continue today to attract – no demand – my attention.  In fact, what has actually gone through my mind is how could I unlock and leverage this level of stickiness and loyalty for use in customer retention programmes.

At this point it’s probably worth explaining exactly what Farm Town is and in my opinion, why it is so sticky.

Farm Town is an online game which allows you to build and develop a virtual farm – going through the motions of ploughing, planting and harvesting and then earning an income from crops sold.  In this respect its a Tamagotchi style application as it requires regular attention to harvest crops before they go bad – so in order to continue to take part you have to continue to log on. 

However, as you build up money you’re able to extend your farm and buy buildings, animals, fencing etc. to personalise your farm as well as being able to grow more crops – and earn more income.

There are many reasons at play for why this game is addictive.

At a high level the stickiness of Farm Town is based on goal directed behaviour – using various mechanisms to set out different goals requiring specific interactions that draw people deeper into the game one step at a time.

To achieve this the game uses a form of tiering to unlock features. 

In the early days for a new player, it is possible to rapidly rise through these tiers and begin to unlock different crops, buildings etc.  This starts to create a feeling that the higher levels are achievable so you put more effort in to get there – however the higher the tier, the more effort is required.

This to me is one of the key aspects of the design which makes it so clever, the tiering is always achievable, but the more you do, the harder it is to get to the next tier.  Having experienced getting to higher levels and and the crops or buildings this unlocks – essentially setting you apart from other “newbies” – you want to achieve more – to keep climbing the ladder.

I’ve seen similar stickiness in an FMCG loyalty programme I’ve worked on where participants were able to partake in online games for little or no points and redeem points for prize draws.  It might be expected that where consumers are not forced to make a purchase to take part or where they constantly “redeem out” by taking part in prize draws, that there would be an element of wear out.  In practice though we saw the opposite of this.

Where we see increased online interaction - whether this is no points or low points interactions – we see a direct correlation to increased retention.

What I think makes Farm Town more powerful is that taking part is rewarded not with more of the same, but with more!  Increased interaction provides increased privilege.

The tiering is also clever in that it essentially creates two currencies.  Growing and harvesting crops earns “coins” which are the base currency to purchase more crops, extend the farm, add paths, buildings, fences and trees.  Money isn’t everything though – I’ve earned over 1m “coins”, but I still can’t purchase what I want as I need to earn “experience points”. 

This second currency of experience points is earned by working – helping others by harvesting or ploughing their fields or building your farm with additional buildings, paths and fences.

Now this bit is very clever, because if it was all about the money you’d simply plough the whole farm, plant crops and maximise revenue.  However to get higher earning crops you need experience and this means giving land over to farm buildings and to helping others. 

By combining 2 different currencies, one which measures “transactional behaviour” and one which measures “engagement”, it leads the participant to interact in a way which creates deeper engagement.

Some loyalty programmes attempt to do this – just look at frequent flyer programme tiering with it’s use of base and bonus points.  However, I’ve never seen a programme that has so visibly recognised the difference between transactional behaviour and engagement.  The recent Huggies programme  “Enjoy the ride” was a great example of an engagement currency – but then missed the opportunity to combine this with a transactional currency.

The social interaction cannot be ignored either. 

You get increased benefits by having neighbours and increased earning if you work your neighbours farm – this ensures that people want you to be their neighbour and you want to be theirs. 

Having neighbours or seeing other farms as you work them means you begin to see people who are at higher tiers, who have bigger farms, who have crops you can’t plant – all of this acts as “social proof” which further spurs on activity.

I think this is one area that many loyalty programmes today still haven’t grasped.  Many brands are so nervous about connecting consumers together that most programme interactions are largely centralised and push based.  However the power of social proof – or in effect the ability to compare your performance to that of others – is well known to stimulate increased activity.

What I think the developers of Farm Town have done very cleverly is to create a really well designed journey which drives early engagement, rewards interaction, encourages peer comparison and recognises increased experience.

Obviously for many people the simple pleasure of building a farm is what drives them to participate – it might not be an addiction - but whether they like it or not, they are being played as much as they are playing. 

PS. In case you’re interested, this is my farm ;o)

Nudge Nudge, Wink Wink. Know what I mean?

There was an interesting addition to the urinals at work this week – each one had a small red bulls eye stuck onto it.

Now bear with me on this blog post before you run off thinking I’ll be discussing the men's cloakroom – I will however be linking that addition to the urinal to loyalty marketing…

The bulls eye was in fact trying to achieve the same effect as the image of the fly that was famously etched into the urinals at Schiphol airport – and that is to improve the aim of men and hence reduce spillages – and it works, reducing spillages by up to 80%.

Men weren’t asked to change their behaviour, instead the addition of the fly image caused men to automatically try to hit it.

This type of solution has been termed a “Nudge”, documented in the book of the same name as:-

Knowing how people think, we can design choice environments that make it easier for people to choose what is best for themselves, their families, and their society

Whilst this is a very noble thought, many companies have been using this type of solution for many years – not to help people (explicitly) but to sell products. Retailers (and brands) for example know the effect of product positioning on shelves and overall store layout on the sale of products.

One of the interesting examples from the book however is the story of a School Food Services Director, responsible for school meals across a large city school system. She found that by moving around how food was positioned – where desserts, french fries or carrot sticks were placed – it was possible to increase or decrease consumption of certain foods by up to 25%.

This is stark contrast to the large scale public campaigns there have been in the UK to encourage healthy school meals by restricting choice – and the backlash this has caused in some cases.

This is in essence the point of the Nudge approach – it’s not about taking away things but instead making subtle changes to the environment to encourage the desired behaviour – termed “choice architecture”.

Obviously this can work in positive and negative ways. If required, the schools could easily have promoted unhealthy options as much as healthy options through the positioning.

An example more related to loyalty marketing is what I presented in my last blog post where I discussed how when visibly reassuring people about the security of their information, people provided less personal information than when this was hidden away more. This security information (or lack of) is in essence a form of “choice architecture” or a nudge.

Within loyalty marketing there are a number of key behaviours that many programmes are looking for. This may include initial programme acquisition, usage of cost effective online channels, or getting members to redeem - and a Nudge could help in these areas.

We’ve used Nudges across a number of loyalty programmes and indeed built whole programmes around them.

For a card network, we ran a programme which rewarded retailers for simply asking customers “Can I put that on your <card network> card” – and the results were impressive. Simply asking for a particular brand of card resulted in people picking that card type out of the wallet in preference to their normal card.

In another programme we provided “concierge” style rewards which allowed people to redeem their points for anything they wanted. These types of rewards are typically aimed at high value/premium customers but the issues with them can be two fold. Firstly, giving ultimate choice can actually limit redemption; as Nudge discusses:-

More choice isn't actually in keeping with human nature - in fact people can be overwhelmed by choice and either choose to do nothing or choose poorly when presented by many options.

The second issue can be around sourcing and fulfilment; whilst being able to source anything can be a great “sell” for the programme, in practice this can take time if each request is unique and individual. Instead, we used Nudges to to help “prime” members by presenting ideas for rewards they could use their points against.

In line within priming theory, if we make suggestions for something and then ask what people want, the original stimulus in the form of the reward ideas results in more requests within these categories.

Nudging is an interesting concept and whilst we probably use many of the techniques currently through a combination of common sense and experience, explicitly considering how we can Nudge members along a defined customer journey can help keep programme costs down and increase member engagement.

So next time you see a fly in the urinal, think about your customers – or maybe wait until you’re at least out of the bathroom ;o)

PS. The title was just an excuse to link to the classic Monty Python sketch.

Too good to be true

A phrase i’ve heard a few times this week is “it’s too good to be true” – and I’ve not just heard it, I’ve said it.

When speaking with a potential supplier of kiosks we we’re discussing the business model. Basically, the model was defined as “you pay a monthly rental and we pay you a guaranteed monthly ad income which is more than the rental”. My first reaction was “why isn’t the UK plastered in these kiosks if they are essentially free” and secondly “it sounds too good to be true”.

Another occasion where this phrase raised it’s head was at some consumer focus groups we were doing. In the groups the proposition was presented and there was an obvious positive reaction, even a “wow” from one or two and then the dreaded phrase - “its too good to be true”.

Why is it that when presented with a fantastic offer we sometimes actually push it away. Well to answer this question it may be good to look at it from the other way – why do people fall for offers that are too good to be true – or scams. The Office of Fair Trading in the UK published a report recently looking at this.

In the report they point out a number of techniques that scammers use.

Scarcity Cues - whereby scammers make the offer seem in some way personalised to the consumer – making them feel as if they have done something special (or need to do something) to obtain it.

Induction of behavioural commitment - which uses small types of compliance to draw the consumer in - thereby causing victims to feel committed.

Visceral triggers – focusing on basic human desires and needs - using triggers that make potential victims focus on the huge prizes or benefits on offer.

Whilst I’m not suggesting we should be acting as scammers, it interesting that the report states “A successful scam involves all the standard elements of the 'marketing mix' and the building of a relationship between marketer and customer – that is, between scammer and victim.”

Unlike scammers, loyalty marketing does actually have a genuine offer and benefit – however it still needs to break through to consumers who may be wary of anything that looks like something for nothing.

When designing a loyalty proposition it’s important to balance innovation and generosity with what is perceived as realistic and appropriate. There are ways however to “soften” the programme.

Get people involved with small steps that introduce a “commitment”

Nunes and Dreze showed in their now famous loyalty marketing research on “Endowed Progress” that giving people a points bonus upfront – even where these points didn’t take them any closer to a reward in real terms – made consumers more motivated.

Essentially the consumer feels they have already committed to the programme and have invested value and so are more likely to want to complete the process. A small step that makes the “too good to be true” offer suddenly seem achievable.

It’s because of you…

What the Endowed Progress report also showed was that, at least for initial programme participation, people were more motivated when they we given a reason for any initial points bonus.

Even where this reason was “seemingly arbitrary” (i.e. “because you came to the store today"), it made them feel they had in some way earned it; that it was in a sense “because of them”.

Allow people to feel they are “gaming” the scheme

People like to feel like that are out-smarting “the system” – this illusion of control was found within Casinos when people were playing craps and it was shown that people tended to throw harder for high numbers and softer for low numbers - feeling they could in some way outsmart the randomness of the dice.

Letting people feel they have control over acheiving the rewards, whether this is reality or not can help turn it from something that is “too good to be true” into something which can be earned or acheived.

Avoid visual clues which might cause people to think something is too good to be true

Blogger Rowan Wilde discusses the issue of using an asterix when marketing a product or service saying “nothing else quite says ’serious strings attached’ like an asterisk…Instantly your offer is too good to be true”.

Obviously when an offer is presented it may have restrictions attached, either due to legislation or simply to balance supply and demand.

Consumers aren’t however fools - they understand that if the promotion seems to offer more value than the product itself can support, then a restriction like “1 per household” is “fair”. However as Rowans points out, it is better to be open and honest about these restrictions rather than trying to hide them away in the small print, going on to say:-

Loyalty only comes through trust > trust is only gained by honesty > honesty can only be built by being as open as possible. Being as open as possible means that sometimes you need to display things the way the consumer really wants them.

To ensure that your marketing programme is not dismissed out of hand as being “too good to be true” you need to consider how consumers will position it and provide perceived hurdles and positive validation to ensure they see it as accessible and deserved.

In psychology there is a term known as “confirmation bias” which is essentially the tendency to interpret new information based on preconceptions and to avoid conclusions which contradict prior understanding.

In essence, if consumers already have an understanding of what a loyalty programme is, how it operates and what the value exchange is, they will look at any new proposition through this lens. This means that if you have a significantly new approach, you need to consider how this is communicated in the context of existing programmes otherwise it is likely to be written off as too good to be true. In the words of Tolstoy:-

The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him.

Do you agree? ;o)

The Theory of Consumer Demand

I wrote a few weeks ago about an emerging trend towards people leasing their lifestyle. Rather than buying and owning physical, tangible goods, people are instead getting used to buying into a service or renting a product.

I was pleased then to see a recent announcement by Riversimple - a company which has been setup with the aim of redefining personal transport – to launch a new hydrogen fuel based car and they don’t plan to sell a single one.

Riversimple have a highly disruptive and innovative approach to marketing their cars – not only will they not be selling them - choosing instead to just lease them - they will also not be making them.

Not actually manufacturing a product is obviously not new - big brands like Nike have pioneered the approach of outsourcing the manufacturing to low cost labour economies and using the savings to invest heavily in promoting and building their brand as well as research and development.

This is not however what Riversimple plan to do. Instead, they plan to “open source” their design and development so that others can work with them as well as having a distributed manufacturing model which will allow for more localised production.

When describing their overall approach they say:-

This aligns the interests of the manufacturer with the interests of the consumer and of the environment - everyone wants cars that have a long life span with maximum efficiency and minimum materials usage.

Whilst I love this approach and think their model is great, I don’t actually agree with this.

In an article written in the 1950’s entitled “Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand”, author Leibenstein discusses the reasons for consumer demand and separates these into Functional and Non-Functional.

Functional demand is defined as demand for the qualities which are inherent in the commodity itself – so for a car this would be the basic desire for personal transport.

Non-Functional demand on the other hand is based on more emotional reasons – essentially demand driven by what others are doing or what others will think.

Based on this, rather than “everyone wants cars that have a long life span” – i.e.functional demand - I think what everyone wants is more non-functional, either what other people don’t have (Snob Effect), what everyone else has (Bandwagon Effect) or what everyone else can’t afford (Veblen Effect). This is the heart of consumerism and it won’t be easy to change.

That said, it has been interesting to see these effects at work with the Toyota Prius and how this was marketed.

Within the UK, when the car was launched a budget of £9m was allocated over 3 years with a specific focus on both functional and non-functional consumer demand.

From a functional point of view, they focused on the one big differentiator - the fuel savings – and so targeted the value conscious consumers.

From a non-functional point of view however they targeted two different consumer groups - those who were early adopters and who liked to have and be seen with the latest technology (akin to Snob Effect), and those who were conscious of the environment or at least wanted to be seen as such – hence a media mix ranging from National Geographic to Vanity Fair (Bandwagon Effect).

The big boost for the Prius came from celebrities, with Leonardo DiCaprio kicking this off in 2001 and many more then following suit. This really made the Prius mainstream and allowed it to break out of both the early adopters and the green movement.

On the website for Riversimple they say:-

Our vision is of a world where our relationship with the car has changed dramatically for the better, with new solutions in place for sustainable and responsible mobility.

If Riversimple could emulate the success of the Prius, focusing on both the rational and the emotional reasons for consumer demand, then combined with their innovative purchase model this could be a real game changer and we could indeed see dramatic changes within our relationship with manufacturers, suppliers and their goods and services.

Plus with a car that has doors which lift up, what’s not to like - I can see a Back to the Future remake already!

If knowledge is power is personal knowledge empowering?

Today I was told by someone that they hadn’t seen me for over 23 days, that I had lost 4lbs but was still overweight. In fact, after interacting for only a few minutes I was also told that my sense of balance seemed to have improved.

This certain someone wasn’t a tactless friend with a strange ability to visually gauge weightloss and posture but instead was my Wii Fit which keeps track of both my weight, BMI and exercise plan – when I use it.

The Wii fit is just one product that keeps track of your health and fitness – there are a multitude of other services online whether it’s fitness specific like Traineo or weight specific sites like Weight Watchers which allow you to set goals, plan meals and track your progress over time.

This isn’t just fitness though - there is an emerging trend toward what is termed “self-tracking” – whereby people utilise various tools to track key activities – from what they listen to, what they eat, where they travel, what they read, what they spend or how much energy they use.

Nike+ is probably one of the most well known self tracking solutions.

Like many manufacturers, Nike would typically be removed from the consumer, with retailers owning the consumer interaction and any ongoing relationship. With Nike+ however, they have essentially created a connection with some of their best customers as well as an ongoing interaction.

A recent article in Wired about Nike+ provided some interesting insights into self-tracking and the scale of it saying:-

By combining a dead-simple way to amass data with tools to use and share it, Nike has attracted the largest community of runners ever assembled—more than 1.2 million runners who have collectively tracked more than 130 million miles and burned more than 13 billion calories.

Now that’s loyalty and as strong a brand as Nike is, that’s a level of ongoing interaction they would have struggled to have garnered in more ordinary ways.

So providing consumers with access to information – their information – may actually help to build loyalty.

For many loyalty programmes it is typical for early behaviours to be indicative of future behaviours and engagement. For example, within credit cards, balances at 90 days tend to be indicative of balances at 14 months, so the challenge is to get people engaged with the right behaviours early on.

Apparently Nike found a similar pattern within it’s Nike+ service. For them the magic number was 5, whereby once a user had uploaded 5 runs they were then much more likely to continue using the service - making runs and uploading and sharing their data. As Wired puts it -

At five runs, they've gotten hooked on what their data tells them about themselves.

The thing which really interests me about this though is not just the “stickiness” which self tracking can bring – getting people hooked on the data - but it is the potential change (normally upwards) in behaviour as well.

Termed the Hawthorne Effect, the basic idea is that people who are observed change their behaviour. This is the idea behind the proposed roll-out of smart energy meters around the world – the hope being that as people see their energy usage and that of others, they will change their behaviour to bring it into line.

Rather than saying a watched kettle never boils, you could say a watched kettle may actually boil faster.

There are potentially a number of effects at work here though.

The first is the Observer or Hawthorne Effect as discussed, but there is also the Power of Communities – the principle being that peers influence behaviour and create an element of competition. Indeed, the Latin root for the verb “to compete” is "competere” which means “to seek together” or “to strive together”.

Whilst seeing your own statistics can be a powerful driving force, seeing others and having them see yours can be even more.

Whether it is positive encouragement, the fear of failure or just the simple desire to be the best, letting people see their data in the context of others can help to change behaviour.

The great thing is that these principles can be applied to many industries, not just health and fitness. All loyalty programmes gather information but typically this is kept locked away, being used at best to derive personalised one to one communications.

What Nike+ shows however is that if this information is presented back to consumers, it can actually make them more loyal and allow them to change behaviours. Essentially empowering them to take more control of a particular aspect of their lives and giving them visibility to compare, contrast and compete.

I think there is a great opportunity for loyalty programme owners to think anew how they can best use that most valuable of asset – the data – opening it up and making it work hard to better engage and retain consumers.

All that said though, my Wii Fit spends more time hidden behind the telly than being used in front of it – so I’m not hooked quite yet.