Tesco ClubcardTV part of a new trend?

When it comes to innovative ways of going to market, airlines have traditionally been the bellwether.  From basically creating the modern day, database driven loyalty programme through to their innovative yield management for maximising profits, the airline industry typically sets the standard that all other industries follow.

So when someone like Jeff Katz, (Currently CEO of Nextag, a global digital shopping network and former VP at AA/CEO of Swissair/CEO of Orbitz) highlights another trend in the airline industry that's likely to cross-over into retail, it's worth paying attention.  

In a recent article for Fast Company entitled "Fasten Your Seatbelts: The Future of Shopping Looks a Lot Like Airline Travel", Jeff describes how over the last few years, airlines have basically deconstructed their product offering to provide the cheapest price for the base commodity - an airline seat.  All the value add elements such as luggage allowance, in-flight meals and seat selection have been stripped back and then re-purposed as benefits which can either be montised to those customers who value them, or used as recognition rewards for valuable customers like frequent flyers.

Discussing this, Jeff says:-

Airlines have taken a commodity (a seat on a plane) and caused us to change our view about what we’re buying and how we’re buying it. It’s no longer about buying a product at the cheapest price, it’s about selecting and paying for a package of services that we value most--from an aisle seat, to a faster security lines, in-flight meals, rewards for frequent patronage, or in-flight Wi-Fi connectivity

He then goes on to discuss how retail may actually start to follow this trend.  Deconstructing the retail experience and then rebuilding it with additional, value add options that customers can either buy into if they value them or be provided with for free if they are frequent shoppers.  

It's hard to imagine right now how this may look as you can't really see a clothing retailer "unbundling" their changing room or a supermarket "unbundling" their late night opening hours.  However, as technology improves and customers are able to shop using their own smart phones such as in the new Sainsbury's "Mobile Scan & Go" initiative, you can see how this suddenly changes the landscape.

Being able to scan goods and simply walk out of the store, bypassing tills is a real benefit.  Scanning products as you shop allows for personalised pricing, so elements of yield management can start to be introduced - scanning an item with a longer shelf life remaining could actually cost me more for example.  Tying this into the loyalty programme like the airlines do could allow for certain products or product ranges to only be available to loyalty card holders or to be bundled differently so that a "Silver Tier" customer gets a free bottle of wine with their ready-meal which a normal customer doesn't.

However this manifests itself, I agree with Jeff that this unbundling trend that airlines have started (and which Ryanair continues to push the boundaries on) will cross over into retail and some retailers are already putting a toe in the water today.

Online retailer Amazon for example is already doing something like this today with their Amazon Prime offering, providing customers with additional benefits, including free shipping, a free book rental per month and unlimited instant streaming of movies and TV shows.

In the UK, Tesco is trialling Clubcard TV, a service for its loyalty card holders which, like Prime, looks to provide free entertainment content in recognition of their customers continued loyalty.  The website describes it as:-

"Offer[ing] thousands of movies and TV shows for free. There are no schedules, no subscriptions, no fees – as long as you are a Tesco Clubcard customer and you have access to the internet, you’re free to enjoy Clubcard TV"

Also like Amazon Prime, Tesco "Delivery Saver" provides free delivery for online grocery orders for a single, upfront payment.

Whilst these offerings are more about bundling products to enhance the retail experience rather than unbundling them, it does demonstrate how the retail experience is being taken wider than the basic shopping experience.

It's clear that competition is increasing and retailers are always looking for more ways to deliver the right value to the right customers.  If unbundling/bundling can create a differentiated retail experience, catering to the price conscious consumer at one end and the convenience conscious consumer at the other, then it's a trend that's sure to continue.

3 reasons why CBA Pi pivots retail

Commonwealth Bank of Australia have just launched a video showing their new merchant payments solution called Pi.



This is truly interesting for a number of reasons:-

1.  As with previous innovators in this space such as Square, they are bringing together a number of different parts of the value chain within a single platform.  Watch out if you currently make money out of ePOS, stock control or loyalty!

2. They are creating a platform which is both open and closed - just like Apple.  It's open in that developers can build custom applications that add value (it's based on Android), but closed in the sense that CBA own it and will ultimately control it.  This is not something I've seen before from Square or PayPal.

3. The platform blurs the boundary between the user (the retailer) and the customer.  Any payment terminal allows interaction with the customer, but normally only in the sense of identifying themselves or possible picking their chosen payment type (check / credit account).  With Pi though the customer can truly interact, chosing for example how to pay amongst friends and I would assume select how they want to receive receipts.

The increasing use of tablets within the retail space is opening up more and more opportunities to create engaging customer interactions.  Unlike dedicated terminals or tills, with a tablet the scope is limited only by the imagination of the developers.  By CBA providing a platform like Pi that allows developers to create new functionality they benefit by having a constantly evolving merchant solution which they control.

CBA say on their website, "Pi is the future of business".  I'd argue it's also possibly the future of ePOS, e-receipts, acquiring, stock management, loyalty and anything else the merchant may think of or need.

Mutualistic Marketing - The Loyalty Cuckoo

As everyone knows, many Cuckoos will lay their eggs within the nests of other species.  This activity, known as brood parasitism, relieves the parent cuckoo from the investment of rearing young or building nests and so they have more time to spend foraging for food or producing offspring.  It also lets them mitigate risk by distributing their eggs amongst a number of different nests - taking the phrase "not having all your eggs in one basket" to it's literal conclusion.

The word parasite can seem quite negative but it literally means "one who eats at the table of another" and it is just one type of symbiotic relationship.  Another type of symbiotic relationship is known as Mutualism and this is where two organisms of different species interact in a relationship in which both parties derive benefit.

As with biology, where different species have evolved to benefit from and to other species, we are seeing a similar evolution within marketing.

Credit card loyalty marketing for example could be classed as a parasitic relationship as it essentially benefits from the merchant (the host) spend without providing it with any real benefit back.  However, this is changing with the advent of transaction driven marketing.  With companies like Cardlytics allowing merchants to interact directly with consumers through targeted offers that are based on card spend, they now stand to gain from this relationship, moving it from parasitic to more mutualistic.

This is not just about adding value back to merchants though.  It also begins to change the loyalty paradigm for many sectors, including loyalty providers.

As an example, consider a retailer looking to get closer to their customers.  Setting up and running a loyalty programme would be a costly endeavour and while there are many benefits to running their own scheme, at a basic level they may simply want to be able to identify customers (and prospects), based on their value so that they can communicate with them and encourage repeat purchase.

Traditionally, without a loyalty programme the only method to do this was advertising - getting a message out there far and wide in the hope it hits the right customers.

However, what if you can find someone who already knows your customers and your competitors customers - already knows how much they spend and how frequently.  You might want to strike up a relationship...

This is where mutualist marketing comes into play.  Working with payment providers like card issuers, retailers can create well designed acquisition and retention campaigns without running their own loyalty programme.  To use the cuckoo example, they can put their eggs in someones else's nest, albeit with their permission and for mutual benefit.

This isn't just limited to card issuers though.

Google provides a great example of an acquisition host, letting merchants and brands target their services based on google search resources in a mutually beneficial relationship.

What's really changing though is the number of hosts (vendors with data) and their ability to collect, retain and utilise behavioural information in the form of transactions and interactions.

Whether is location based checkins, TV viewing or sports/fitness tracking services, these are becoming increasingly sophisticated and more importantly utilised.  At the same time, they're providing additional ways for a brand to target the right behaviours without the expense/investment of a dedicated loyalty solution.

Pepsi for example has recently run a promotion that tied up with reward company Kiip to offer fitness "achievement rewards" when a user logs activities such as runs through fitness apps such as Nexercise and MapMyRun.  Rather than trying to get consumers to enter on-pack codes to interact with Pepsi, they have instead chosen to interact with the consumer at the point when they may actually want a Pepsi.

There has been talk about the divide that may be created between the data "haves and have nots" - in evolutionary terms, a data survival of the fittest.  However, like all things in evolution, it was never going to be that simple.  Just as symbiotic relationships form in nature to ensure species survive, the same is true for us.

The data "haves" are essentially leveraging their data for the "have nots", creating a mutualistic relationship which benefits both sides.

This means on the one hand your loyalty strategy should take account of all routes to your customer, not just the ones you can create - using other peoples "nests" may just let you focus on growing your business and distributing risk.  On the other, a strong loyalty programme may also prove a real data asset that you can leverage for greater synergies.

The question as to what your loyalty strategy should be has just gotten a little more complicated.

You and Yours (3 key loyalty trends for 2012)

At this time of year, thoughts tend to be about you and yours. This however may be a continuing theme going into 2012 as I think loyalty marketing is going to become a lot more interested in "you".

This is more than just mass personalisation or segmented communications. I believe 2012 will be about individual engagement and empowerment as consumers provide more and more data, expecting increased control over it and better experiences being delivered because it.

You (and your data)

Back in 2006, Time Magazine named the Person of the Year as "You". Pointing out the cultural shift that social media had begun to bring, they recognised that it was democratising communications, with people sharing with each other and big institutions and governments beginning to lose control. They described it as:-

"[The] founding and framing [of] the new digital democracy. It's [..] about community and collaboration on a scale never seen before [..] about the many wresting power from the few."

It's unbelievable to think that this was 5 years ago now and Facebook was just starting out and MySpace was king. Whilst the tools we use may have changed, the pace itself hasn't. Social media has indeed wrestled power from the few leading to Time Magazine nominating the Person of the Year in 2011 as "The Protester". Highlighting the role of social media in showing injustice and gathering support they said:-

"One of the unequivocal generational virtues of these movements has been their use of the Internet and social media."

It's not just in politics that we're seeing this democratisation however. Consumers are also gaining more and more power with the UK government for example recently announcing that they plan to give consumers more control over their data by releasing it back to them. In describing this they say:-

"[It] will give consumers increasing access to their personal data in a portable, electronic format. [..] Individuals will then be able to use this data to gain insights into their own behaviour, make more informed choices about products and services, and manage their lives more efficiently."

Outside of government, some of the biggest collectors of personal data are loyalty programmes and so I'd fully expect them to begin taking part in these kinds of initiatives, allowing members to use their data to better understand their buying habits, but also to unlock more relevant offers and promotions on their terms. Indeed, many of the companies signing up to the UK midata initiative are companies with their own loyalty programmes. Generically termed VRM (Vendor Relationship Management) or PIDM (Personal Identity Management), I think 2012 will be the year when we start to see this trend gaining ground.

Your Behaviours

Increasingly, as you carry out an activity you leave a trail of bread-crumbs which others can use to follow you. Whether its location information that your smart-phone tracks, items you view but don't purchase or the TV programmes you watch (and then discuss on Twitter), all of this information is out there waiting to be collected and used.

This data is providing insight into previously hidden behaviours. Bricks and mortar retailers will start to get the same visibility as that enjoyed by online retailers, seeing those customers who have visited, but not bought or which items they viewed before purchasing. TV advertisers will have more visibility of which adverts were seen by which individual customers, allowing them to create a true ROI from awareness to purchase.

This is all being made possible by a combination of smart-phone/tablet penetration, innovative new apps and an established social graph. Using tools like twitter and Facebook as identity management, companies can collect together and refine this raw information from apparently disparate sources.

People are already using twitter for example to comment in real-time on TV programmes and this experience is being enhanced through new applications like Zeebox in the UK and IntoNow from Yahoo in the US. Zeebox co-founder Ernesto Schmitt says:-

The emergence of net-connected TVs; the mass proliferation of companion devices like smartphones, laptops and tablets; and people's expectations that entertainment will be socially connected felt like a perfect storm. The time was right to revolutionise TV

Increasingly using "fingerprinting" technology, these applications can automatically detect what TV programmes you're watching and any associated advertising. Linking this to your loyalty purchase transactions is simply the obvious next step and something i'd expect to see appearing in loyalty programmes in 2012.

Your Experiences

Apple changed the face of electronics retail. By combining great looking products with a great in-store experience they managed to make the electrical stores more of a destination than a retail outlet. Others have quickly followed, most notably Dixons in the UK with their pilot store Dixons Black in Birmingham. As offline retail increasingly struggles against online, especially where the products are more commodatised like in electrical, then the focus is shifting to the in-store experience. Using a combination of knowledgeable staff and well presented products, retailers are fighting back.

As retail expert Clare Rayner of Retail Acumen says:-

When you don’t offer anything special then the only thing you can do is compete on price… and that’s a downward spiral where the retailer with the deepest pockets to “buy their customers” is going to be the winner.

Retailers like Apple, Dixons, Game and Disney are starting to offer something special to turn the shopping experience from a physical one to an experiential one.

Apple do more however. They have turned the purchase process into a relationship. Making the stores also a centre for servicing and support through the "Genius Bar" as well as running seminars and training, they actually want customers to return. Whilst this isn't a loyalty programme in the traditional sense, i think it indicates how retail loyalty is changing. It can't simply be something stuck onto the side of the retail process and instead needs to be deeply embedded into the experience.

Expect to see more retailers upping the experience in-store and needing their loyalty programmes to help both support and drive this.

Conclusion

As these 3 key trends converge we're going to see a blurring of the lines between online and offline retail, with consumers having a more tailored and personalised in-store experience and with retailers gaining a better understanding of (and ability to influence) the end to end purchase process for each individual customer. Loyalty programmes play a key and central role in all of this as a means of proactively gathering consumer data in an opted-in manner and allowing appropriate reward and recognition to be given back.

This will result in "you and yours" - your data, your behaviours, your friends, your experiences - being a central theme for 2012.

I probably say this every year, but 2012 is going to be an exciting time in loyalty marketing!

Image credit:♫muxu's photostream

PayPal banks on convergence in offline retail

A recent PayPal blog by Scott Thompson, President of PayPal gives a strong overview of their future direction - and in a word it's convergence.

• The convergence of offline and online retail
• The convergence of social and retail
• The convergence of EPOS and payments
• The convergence of offers and payments
• The convergence of payments and loyalty
• The convergence of the purchase and the purchase decision

That last point is the most powerful - previously banks and payment providers like PayPal moved money.  It was all about the transaction with little regard for the person making it or the reason behind it.  However as Thompson indicates in his blog, this is changing:-

PayPal is re-imagining money and making it work better for merchants and consumers.  The act of paying for something should be as seamless as your decision to buy it. The future is about creating real consumer choice, flexibility and control over how people shop and pay.

Payment providers are realising the power they have within the data they hold and the relationships they enable, and now they are starting to do something about it.

PayPal are squarely banking on convergence across all of these areas into a single solutions provider - and obviously they would like it to be them.


They're not alone however, both Google and Square, amongst others, are competing in this space, bringing together mobile, payments, POS, offers and loyalty rewards into a single platform / eco-system.

The ability to drive a purchase from demand generation and follow it right through to purchase and post purchase recognition is something that is going to gain traction and there will be winners and losers.

I suspect any single vendor will struggle to dominate and open standards (or mass payment networks) will win out, but it does set the tone both in terms of customer and retailer expectations - and it throws down the gauntlet for all players within the payment and retail transaction space.

GOOGLE: Legacy - The Game Has Changed

In film Tron Legacy apart from some fantastic music from Daft Punk, there is an underlying story of the online world trying to break out into the offline world. They come close but with the risk of spoiling it for those that haven't seen it - Kevin Flynn (Jeff Bridges senior) manages to hold back Clu (Jeff Bridges junior) and his armies of "programs" - and in the process saves the free world.

However fantasy is great, but when fantasy starts to become reality things get a whole lot more interesting.

Google has steadily been taking control of the online world; beginning with search they have increasingly permeated all aspects of our online interactions from browsers, tablets, mobile, mapping and online tools.

You can almost imagine them uttering the words of Kevin Flynn in the film when he says:-

In there is a new world! In there is our future! In there is our destiny!

But things are changing.

Google are apparently looking to trial the use of coupons at till with retailers using NFC Android phones. Working with eftpos terminal manufacturer Ingenico they will look at a series of trials at retailers in New York and San Francisco.

Philippe Lazare, CEO of Ingenico was quoted as saying:-

Google wants a system where, when you enter a shop or supermarket, you receive a special offer on your telephone. At the checkout, you can take advantage of this offer" by touching your phone to the Ingenico POS terminal, which will be capable of reading the coupon and will automatically apply the discount to the shopping bill.

This may seem like a small piece of news but what's interesting here is the combination of online and offline services from search to location based services through to NFC and POS integration. In theory a customer could search for a product online via Google, be presented with an offer which they can then immediately use to purchase that product when walking into a store.

This ability to track online interactions through clicks and onto online purchases is something that Google and affiliate networks have been doing for years. However the ability to track these right through to offline purchases in-store really brings multi-channel retailing to life.

It also promises to change how loyalty programmes operate. You only have to looking at the number of loyalty programmes with online shopping malls to understand that these programmes really benefit from the affiliate revenue generated when they get members to shop in partner stores. Being able to drive these purchase decisions into everyday transactions however is the real key here.

But Google isn't the only player. Facebook is increasingly linking online and offline with Facebook Deals allowing offline merchants to create deals for online members. While this doesn't (yet) directly link the interaction to the transaction you can bet Facebook will be looking at how they increasingly make it relevant within bricks and mortar retailers.

There was an interesting blog by Adrian Hon in the Telegraph recently about the battle between Google and Facebook and while on the face of it they would seem to have very different businesses, in reality as Adrian points out:-

Google and Facebook are increasingly set up as competitors [for] sorting through the material on the Web.

While each has a very different approach; Google with its highly sophisticated search algorithms and Facebook with it's personal recommendations from friends they are both in the same business - namely monetising interactions between consumers and brands.

Google has done well in providing a more direct and accountable channel for marketing budgets but if Facebook can demonstrate better "bang for buck" through the power of personal advocacy they could see their revenues slowly eroded.

Not one to sit back and accept the status quo Google are firing on all fronts. From taking ownership of the channel itself (mobile/tablet via Android / PC via Chrome) to trying to develop their social strategy (and tying their employees bonuses to the success of this).

This latest effort of linking offline and online through POS is another step in this battle. Making marketing budgets increasingly accountable and in the processes owning the consumer interaction from search to purchase.

As Clu says in the film when looking to break out from the online world to the real world:-

Out there is a new world! Out there is our victory! Out there is our destiny!

While the battle for our attention online is intensifying, Google making a move offline suggests a whole new game and one worth keeping an eye on.

Low cost supermarkets put loyalty in doubt?

There was an interesting result for the second year running in the latest Which? supermarket customer survey. This wasn't about the winner which was Waitrose (again), or the runner-up in second place Marks & Spencer - you could almost have predicted both of those. Instead it was about the brands which took the next two top spots, Aldi and Lidl (coming third and fourth respectively) and the distinct lack of two of the biggest retailers in the UK from the top 5 altogether with Sainsbury's and Tesco at 6th and 8th place.

You could immediately argue that in this climate, price was a major factor in swaying customer opinion - but then discount brand Netto came bottom of the table with just 41% back in 2010. Plus the top two spots were taken by Waitrose and M&S - neither of which you would describe as every day low price retailers.

In fact, the top 5 retailers in the 2011 survey all managed to increase their customer satisfaction score with Morrisons overtaking Sainsbury's by moving into 5th place with a 3% lift in satisfaction and ASDA increasing by 4% to 53%.

Yet Tesco stayed static at 49% and Sainsbury's actually went down 1 percentage point in customers opinion to 57%.

Outside of customer satisfaction, the most recent Kantar WorldPanel Survey shows Tesco holding it's market share and Sainsbury's showing a marginal lift for 2011 - however both Aldi and Lidl have shown almost double the lift in sales growth at almost 10% - almost twice that of larger chains and the market overall which is growing at around 4%.

So what's going on?

• Why is it that the two biggest retailers in the UK are getting scored lower by customers than discount retailers?
• Why are these retailers actually going down in customers opinions when all other retailers are on the up?
• More interestingly, why are these retailers not seeing an effect to market share if customers have such a low opinion of them?

The answer is I think, in a word - loyalty.

Uniquely both Tesco and Sainsburys have a customer loyalty programme which recognises and rewards customers for all of their purchases. Whilst a loyalty programme in itself cannot mask customers opinions on other factors such as pricing or service, it does create a very "sticky" customer proposition. Through a combination of regular customer communications, relevant and targeted offers and the inherent reward value within the points currency, customers are minded to continue purchasing even when the overall experience may not be on a par with others.

There may be other factors driving the lower scores attributed to these retailers which are more to do with their size and coverage of the UK market than simply pricing and service. In trying to be a jack of all trades, they are essentially a master of none. Whereas Waitrose, M&S, Aldi and Lidl each have specific customer segments they serve, both Tesco and Sainsburys look to serve all segments within one single store. This naturally creates complexity in both range and choice (Finest / Taste the Difference / Basics) - something which is known to cause more customer angst.

Again though, the loyalty programme allows them to respond better to this in the long run by being able to target relevant messages and promotions to customers within specific segments. This is more easily done online (and both Tesco and Sainsbury's see their online scores matching/exceeding M&S offline), but will always be a problem within the offline store due to the scale and range.

Loyalty will only stretch so far however and as other retailers provide more breadth of locations, increased range and competitive pricing this will be continually pulling on customer loyalties.

For the moment though I think both Tesco and Sainsbury's are seeing the benefits of their respective loyalty programmes, allowing them to hold onto market-share in highly competitive and increasingly price orientated market.

ASDA launch a loyalty programme?

UK supermarket retailer ASDA has publicly stated a number of times that it doesn't believe in loyalty programmes. CEO Andy Bond famously said "You can't buy loyalty with plastic points" and their website actually has a page describing why they don't do "loyalty", saying:-

At Asda we reward all of our customers for their loyalty by charging low prices every day of the week, all year round.

ASDA has always prided itself on being an Every Day Low Price retailer. In a article last year, ASDA said:-

EDLP is very much at the heart of our pricing strategy. [The aim for 2010 is] sucking out the promotional money on offer from our suppliers [in order to] invest all of it in lowering prices across the board.

The problem with an EDLP strategy though is three-fold:-

1. Hard to prove - Will consumers really believe you when you state you have the lowest prices. With so many deals around, so many different brands within the same category and so much HiLo style pricing strategies even within EDLP retailers, consumer are confused about what a low price really is.
2. Lacks Engagement - Even if a customer sees initial savings on their first shop, this quickly becomes "normal" on subsequent shops meaning the whole EDLP strategy becomes forgotten. It may work initially for acquisition, but fails in the long term when it comes to retention.
3. Encourages dis-loyalty - When EDLP are mixed with sales promotion activities this actively creates dis-loyalty. It plays to a promotional audience who will shop around and only buy products on special offer. Long term, rather than EDLP locking consumers in with a trusted promise, the sales promotion activity simply dilutes it.

When reviewing various retail loyalty programmes a couple of years ago, COLLOQUY stated “A marketing strategy focused solely on sale prices and promotions not only faces diminishing returns, but can also actually breed disloyal customers [..] retail marketers have an opportunity to shift their focus from EDLP towards loyalty drivers that build true customer engagement, larger transactions and improved margins.”

Despite all this talk about not doing loyalty programmes and how an EDLP strategy in some way doesn't fit with loyalty, have ASDA in fact actually launched one?

ASDA had recently strengthened its Every Day Low Prices (EDLP) strategy with a Price Guarantee. Not just a "refund the difference" guarantee, but a 10% less guarantee.

They state "We'll guarantee your comparable grocery shopping is 10% cheaper at ASDA or we'll give you the difference".

As an example they say:-

Your comparable grocery shop is £110 at ASDA, £100 at Tesco, £111 at Morrisons, £125 at Sainsbury's and £130 at Waitrose. Tesco are cheapest. 10% cheaper than Tesco's £100 comparable grocery shop is £90. As such in total you'll receive a voucher for £20.00 to ensure your comparable grocery shop is 10% cheaper at ASDA.

This is a bold promise.

Of course there are those who point out potential issues with this such as the breadth of products covered. Whilst 15,000 products are compared, about 10% of products are deemed "unique to the retailer" and are not included.

However in a recent article in Which? where they tested this promise, it did deliver (even if 50% of products couldn't be compared with Morrisons). Although ASDA were the cheapest overall, they were not 10% cheaper and so they gave a refund.

What's different about this programme for ASDA though is that they now have the potential to both provide every day low prices and to build increased customer engagement - and here's why.

ASDA have made it really easy to check prices after a shop using their online website or in-store using their iPhone app and as part of this process the customer can register their email address.

And there we have it - they have created a loyalty programme.

They're connecting purchase data to customer data, creating the ability to run a loyalty programme. This isn't a points programme, it's a uniquely ASDA loyalty programme. But it is a loyalty programme.

There are even customer rewards in the form of the 10% money back and this bit is quite clever. Using this scheme ASDA don't need to be the overall lowest price all of the time, they just need to be low. Non-loyal customers pay the sticker price, but loyal customers can essentially be refunded (or rewarded) any difference. By flexing this margin they'll be able to manage short-term benefit versus long term engagement.

This ability to link transactional data to individual customers will also give ASDA increasing insight on their customer base and allow them to begin mining this data in ways which retailers like Tesco and Sainsburys now take for granted.

Finally, It creates a reason for customers to further interact with the retailer online and on the move, continually reinforcing the ASDA price promise.

There are many ways to improve this programme to make it work harder, but hats off to ASDA. I think they may have the start of an interesting and powerful EDLP loyalty scheme - even if they don't like the word loyalty.

Is US DoJ Lawsuit actually a win for MasterCard & Visa

Credit card loyalty programmes took a potential dent last week when Visa and MasterCard settled a dispute with the US Justice Department. The dispute centred around the restrictions the card schemes placed on retailers about card acceptance and how they are able to promote or incentivise different payment methods.

To accept Visa or MasterCard, retailers have to essentially sign up to an "honor all cards" commitment. In principle this rule is a good thing as it means that wherever you see the card scheme logo, you can be assured your card will be accepted. The problem however is that increasingly not all cards are equal.

Card schemes typically charge merchants a fee for every transaction which ranges anywhere from 1-3%. This interchange fee is the cost of doing business if you want to take credit cards and as a retailer you cannot impose a surcharge to cover it. This basically means that whether I pay using cash, debit or credit card, I should pay the same price.

While for the consumer these restrictions sound fair, what really niggles merchants is the fact that these fees are increasing. Card schemes are free to set the interchange rates at whatever level they want and increasingly they are charging more for "premium cards" and "reward cards".

Again the principle behind this seems fair - if you want to access a better class of customer who has more disposable income, you need to pay a little more for the privilege. The problem though is that increasingly the bar is being lowered for a "premium" customer meaning merchants pay more fees across more customers and don't necessarily get more benefits.

The retailers argument is that as they cannot surcharge for these cards or refuse to accept them they are essentially held hostage to whatever the card schemes want to charge.

This has now changed though. While the retailer still has to accept all cards within a given scheme they sign up to, they can now incentivise customers to use other payment methods including cheaper credit cards. This could mean for example that a customer may be offered a 2% discount for using a cheaper credit card or debit card, making them decide at the POS whether they want 2% off now or pay 2% extra and earn reward points.

The value exchange and payment decision is suddenly going to get very complicated.

However, it's not all that bleak. The Visa and MasterCard settlement is actually quite clever and probably more of a win for them than a loss.

The first rule of the proposed settlement states:-

[Allow merchants to] offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment

This means that the offer at POS will have to be something like "2% discount for using debit card" rather than a "2% charge for using rewards credit card".

Given that consumers will have already seen the price of goods published and will have been mentally prepared to pay that price, this I suspect won't have such a great effect. In addition, the amount of rebate that can be offered is also very small on a per transaction basis - anyone who's enrolled in a card reward scheme knows that you have to spend thousands to get a small amount back. On a $50 transaction, any free gift worth around $1 isn't going to be worth having - I'll just have the points thanks.

While larger merchants can probably combine this with their own loyalty scheme, offering say double points for transactions using a different payment card, it is likely that highly loyal customers already have the merchants own payment card - so little traction here either.

For smaller merchants this is likely to work even less. They are in a constant battle for customers against the larger retail behemoths and so unless you're the only merchant for miles, setting payment hurdles higher is likely to just make footfall lower. Their only saving grace is the proposed rule:-

[Allow merchants to] communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network, or other form of payment

This tugging on the heart strings for a small mom and pop store is likely to be more motivating than any discount on other payment mechanisms.

Also, don't expect consumers to win in this deal any time soon. Attorney General Eric Holder said:-

We want to put more money in consumers’ pockets, and by eliminating credit card companies’ anti-competitive rules, we will accomplish that.

However, any potential savings that retailers make out of this won't be passed on to the consumer in lower prices, they will simply go into greater profits for the retailer. The experience in Australia when they halved interchange fees showed that basically consumers get less rewards on the cards, pay more in bank fees and end up still paying the same price. While this settlement is slightly different, it certainly won't result in savings for consumers. If anything it will move money from consumers pockets in the form of points and into retailers pockets in the form of increased profits.

There is though I think a happy medium here.

For many merchants, especially the smaller ones, they don't have the ability to recognise and reward customers in a meaningful way either due to purchase frequency or the running costs around a loyalty solution. What this judgment does do is provide a wake-up call for banks that they cannot keep retailers at arms length and expect them to just payout for a loyalty programme which is basically there to create stickiness to the bank - not the retailer.

I think now is the time for banks to embrace retailers and provide added value back to them in return for accepting their cards. Banks have a wealth of data and very sophisticated loyalty platforms. The opportunity to create a win-win here for banks and retailers is immense and if the judgment delivers this it will have been worth it.

Boots to generate value from customer relationships

It seems coalition is the buzzword of the moment, and I'm not just talking about politics.

Nectar and Airmiles have already seen recent competition from Barclaycard Freedom for the multi-merchant loyalty model, but now high street loyalty behemoth Boots has announced their intention to open up their Advantage card to other partners.

Although most Boots Advantage card holders are also members of another large loyalty scheme like Tesco Clubcard or Nectar, with 16m members they can hit the ground running with regard to engaging other partners - not least using their aquisition of Dollond & Aitchison which they have just pulled out of Nectar.

It's also not surprising that this is happening given the ownership of Boots by private equity firm KKR.  They will be looking to maximise their investment of over £11bn when they first purchased Alliance Boots and a 16m customer database is certainly one asset that could provide profitable returns.

Looking at coalitions though, what's clear from the current government is that brand identity can become diluted.  With most news reports referring to the government as the "coalition government", "Liberal Conservatives" or "LibCons" it's evident that sharing the platform with someone else can force individual brands to be pushed to the back a little more.  For any partners looking to join the Boots Advantage programme, it may be difficult for their brand to shine as brightly as Boots.

So what's the attraction for any potential suitor to join a programme like Advantage?

Quite simply it's acquisition.  The benefits of tapping into a large shared membership base can bring great benefits to a new brand joining, with a loyal base of members keen to maximise their earning and willing to change their behaviour to do so.

When Tesco for example joined Airmiles back in 2002 they say searches for the nearest Tesco store jump 450% and they issued 1m new Clubcards.

The other side of this though is tied into the reduction of brand identity, with customers becoming more loyal to the programme than the participating brands.  When Tesco's for example saw an influx of Airmiles customers, it was reported in Scoring Points: How Tesco Continues to Win Customer Loyalty that Sainsbury's saw a corresponding loss of 1% of sales volume - equal to losing 60,000 of it's most valuable customers.

Another potential advantage though of a coalition programme is the shared earn & burn model.  With many brands not seeing enough frequency to remain front of mind or enough value to make the loyalty currency attractive in it's own rights, then a model which contributes to a wider and more open currency seems like the natural choice.  In fact, if you ask customers what they want these come out as key aspects.

For example, the Home Retail Group which recently launched Nectar points at Homebase to replace the previous Spend & Save programme said:-

In-depth consumer research that showed Nectar points were more attractive to customers as they are more flexible and can be earned and redeemed at a much wider range of outlets.

When part of a coalition, it's sometimes better to see it as a marriage of convenience - just like the Lib Dem and Conservative coalition.  Neither political party would have chosen the situation, but the benefits of working together and representing a majority of the electorate outweigh the alternative.

For coalition loyalty the situation is similar.  No company would ideally look to encourage focus on another brand, but sometimes the benefits outweigh the risks.  Increasingly however partners are looking to protect their brand at the same time as benefiting from coalition loyalty.

Tesco for example has managed to navigate a route with Airmiles which allows them to be part of the coalition programme, without in any way devaluing their own brand or their own loyalty programme - really having the best of both worlds.  Shell is another example - offering a variety of rewards within their Drivers Club programme including Airmiles and now being part of Barclaycard Freedom.

However, with an increasing number of UK coalition programmes to choose from, each offering different benefits and potentially different audiences, brands now have more choice - including creating or keeping their own proprietary programme.

What is increasingly not a choice is whether to have a loyalty programme at all.

As Justin King, Chief Executive of Sainsbury's recently said in The Times about retail loyalty:-

"There will be a big difference between the haves and have-nots"

So whether the choice is joining a coalition, creating a coalition or setting up a propriety loyalty programme - it's clear that loyalty marketing has evolved into the business tool to generate value from customer relationships - a value that Boots are obviously keen to increase.

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]

Could Tesco be challenged by Alice?

Alice? Who the [heck] is Alice? More on Alice later, however as the song suggests, what seems established - living next door to her for 24 years - can change - as she leaves in a limo.

It's interesting how on a day to day basis things never seem to change and yet when you look back over a few decades you see huge changes in the way we live that just aren't apparent in the small increments of daily life or come as a sudden and unexpected shock.

This came home when I saw a news item about some footage that had recently been found and digitised that documented life for Cornish miners from 1920 and 1960. This was footage from the film unit of Holmans of Camborne - once the biggest employer in the area with over 3000 employees at it's height.

They had been around for over 100 years at that point and looking at the footage of thousands of people spilling onto the streets after a hard days work they probably never thought things would change so much. Yet now in Camborne, in place of one of the factories is that icon of retail, a Tesco store.

The only thing we can really be sure of is that nothing will stay the same.

Companies are started by entrepreneurial people who see an opportunity to challenge the status quo - they grow, become established, dominate the industry and eventually become the status quo. The challenge is that there will always be someone else who comes to it fresh, spots a new way of doing something and ultimate changes the face of the industry.

Grocery retail is one such industry which has seen big changes as they have changed from many smaller, independent retailers where the manufacturers had the balance of power to the current situation with a small number of very large retailers who now seem to hold all the power - and the customer relationships.

The manufacturers continue to look for ways to rebalance this situation - building relationships directly with consumers through a variety of means including on-pack loyalty schemes such as the latest offering from Tropicana with Juicy Rewards, but ultimately they don't have a direct purchase relationship with the consumer like the retailer has.

This is a situation that many can't see will change any time soon - and one which the retailers are increasingly maximising.

However, for someone from the early 1900's where brands were stocked behind the counter and the retailer picked and packed the goods for you, our modern day self service supermarkets would appear alien - yet they disrupted the status quo and become dominant.

In the same way, there is a new upstart on the block that could possibly challenge this hold the retailers have - they are called Alice.com.

Alice is a site which allows you to purchase FMCG goods online - nothing new there, many supermarkets offer online shopping - but which fundamentally changes the balance of power by providing a more direct relationship between manufacturer and consumer. They describe their approach saying:-

You order from Alice just like you would a retailer, but behind the scenes we work like a marketplace, allowing participating manufacturers to sell directly to you...This direct platform eliminates the retail middleman and saves lots of costs that can be passed directly on to you. And in addition to saving you money, the Alice marketplace allows participating brands to have a direct relationship with you—to reward you, personalize things for you, and work smarter for you.

What makes this service even more interesting is guaranteed free shipping on everything and the fact that it's accessible from your iPhone - so when you actually run out of something you can simply re-order it there and then - no lists. As they say on their website "Need toilet paper? There's an app for that."

The truth is no one really wants to spend their valuable spare time walking round a supermarket looking for toothpaste and toilet roll, but while we also have to purchase food for the week ahead it makes sense to do it together. However, if the increasing number of "delivered meals" services such as Dining made easy or established player Wiltshire Farm Foods start to gain ground whereby the consumer can simply order their menu for the week and have it delivered fully prepared - no waste and no hassle - then a service like Alice.com could fill the non-food gap.

I don't know if this kind of offering will ultimately break the grip of the large retailers, but it's also unclear if these retailers can continue to expand, increasing the lines they offer and the corresponding monopoly on consumers wallets.

What I am sure of though is that there will always be someone ready to challenge the status quo and even better where this provides more choice for the consumer.

Is the Poken mightier than the pen?

Social networks may have made the online world a much more connected experience – allowing us to connect with someone we know (or would like to know) or become a fan of a brand that we want to hear more from - but what about the real world. 

How does someone connect with a brand in store, or connect with each other.

Okay, I know it’s a stupid question - we’ve been doing this “offline” for millennia – we talk, we exchange details.  However this typically involves a pen and something the Chinese invented over 2000 years ago – some paper.  If we do this a lot then the paper may be pre-printed in the form of a business card.

Meet someone you like and want to chat again, you’ll need to note down their contact details (or swap business cards).  Like the retailer and want to hear more from them, you’ll need to fill in an application form.

But that could be all changing.

New technologies are allowing people to exchange details when they meet, seamlessly between devices such as a mobile phone.  There is still a requirement to make that first move and start the conversation, technology hasn’t managed to help with that yet unless of course you count the opening line “Do you Poken?" as both an ice breaker and a request to connect.

You google, you text, you chat, do you poken?

The Poken is a cute little device that comes in various form factors such as a key ring and which allows you to connect with another person simply by tapping your Pokens together.

When you then plug the Poken into your PC and go online you’re able to see all the people you connected with in a timeline and crucially with all their contact details, social networks etc. that they have chosen to share.

A different route is via the mobile with one of the most popular applications being, as you would expect, on the iPhone.

Called BUMP from Bump Technologies this application allows you to exchange details by simply bumping two iPhones together. 

Using some clever latitudinal thinking, the phones themselves don’t actually exchange anything and instead the solution recognises the unique properties of the bump itself from each phone, matching these up centrally on their servers and then sharing details where a match is found.

It’s not just contact details which can be exchanged but also content like photos - “bumping” them from phone to phone.

Whilst these technologies have been around for a little while and the Poken made a few headlines and blogs at the SXSW about a year ago, they’ve yet to really mature and gain mass penetration and usage.

However I think they have so much more to give.

As facebook matured from being solely about connecting people to also connecting with brands, groups and causes, these technologies could enable the same thing in the physical world.

• Walk into a store and tap/bump to get immediate offers to your mobile
• See an item you like… tap to get it added to your wish list
• Want to join the loyalty programme, tap at POS

These solutions essentially allow you to be be you – not having to carry multiple cards or fill in multiple forms but instead, simply to tap a device to indicate your identity.

There are many arguments that these solution do nothing more than what could be achieved with Bluetooth today or NFC as it begins to roll out across mobiles. 

However that’s not the point – Poken for example is essentially nothing more than a proprietary RFID solution - it’s not about the technology, it’s about a simple, branded solution which people understand and feel in control of.

I think these types of solutions which allow identity to be easily captured in the physical world, whether it’s between people, brands or products will bring the same kind of advantages that we get in the online world – allowing interactions and relationships to be tracked and measured.

For marketers the online interaction has become an important measure – in some ways more important than the transaction - with the interaction being almost a “precognition” of the transaction itself.

Can technology like BUMP or Poken enable the same thing in the physical world?  It’s going to be fun finding out.

Democratisation of Journey fills me with Glee

Sometimes it feels like we’ve rewound time back to the 80’s.  Whether it’s the Virgin Airlines advert with Frankie Goes to Hollywood theme tune and Our Price record store (remember those) in the background, girls wearing leg warmers or the fact that Journey are now in the Top 10 chart with “Don’t Stop Believing”.

Whilst I have to admit to already owning this particular Journey track (and handful of other 80’s soft rock tracks), it does show how different the music industry has become.  With services like iTunes, providing access to millions of tracks, the charts are much more democratic – reflecting what people actually want to listen to rather than what they are told they should listen to.

Of course what people listen to is still influenced by media – whether this is Mass Media like the Cadburys advert which caused the Phil Collins track “In the Air Tonight” to reach number 9 in the download chart or Social Media which managed to get Rage Against the Machine to the Christmas number 1 and displace the “sure thing” X-Factor winner.  In the case of Journey their leap to the top of the chart has been influenced by the new hit E4 show Glee – which interestingly has also released a version that is running neck and neck with the original.

However, it’s not only the music industry which is benefiting from this democratisation of choice.  Waitrose opened up their CSR programme to customer choice about 18 months ago – and in the process have really engaged customers. 

Most corporate CSR programmes feel like little more than an attempt to stem criticism of any perceived obscene profits or sky high executive packages and customers have typically little choice, knowledge or even buy in for the nominated charities or “good causes”.

What Waitrose did instead is throw open their programme to the customers through their Community Matters scheme.  Each customer is given a token at the tills which they then place into one of three bins at the exit, with each bin representing a local charity which the customers have nominated that month.

I was in Waitrose the other day and stood watching customers as they placed tokens into the bins.  Two things struck me.  First, almost every customer placed a token into one of the bins so this scheme has very high participation(or a very successful nudge) even after 18 months.  The second was that many customers actually considered their choice before placing the token into the relevant bin – demonstrating engagement.

In one newly opened store they reported that “In the two months since opening we've had more than 200 customer nominations for charities to support [and] had so much feedback I had to order another box of suggestion slips.”

Although never explicitly stated, CSR programmes are also meant to provide a positive customer feeling which leads to ongoing loyalty – and this is exactly what Waitrose see through this scheme saying “[We’ve] been able to help local causes through [Community Matters], and in return, customers are remaining loyal to Waitrose.”

It’s also driving advocacy with one store reporting that “One school sent a text message to all parents telling them to shop with us and put their token in the school's box, as did a vicar when he mentioned us in his parish sermon.”

All of this for a token which on it’s own is next to worthless.  Each store gives £1,000 to the charities each month, based on the percentage of tokens received so an individual token would be worth less than a penny in real terms – and yet customers take part, interact, engage and advocate.

I’d struggle to be able to tell you what charity my regular supermarket supports or indeed if they support any – but after shopping at Waitrose I know that for that month at least, they’ll be donating some money to a local school playground.

Unlike me, you may not favour 80’s soft rock in the charts, but at least you can try and change it if you like by downloading what you want.  What Waitrose have shown is that you can provide that same level of democracy for customers – distribute over £2m in charitable donations – and reap the rewards of increased engagement at the same time.

Woolworths is dead – long live Woolworths

I think the news of the demise of Woolworths is probably a little premature – there is no doubt it's in trouble and the Woolworths of the future may bear little resemblance to the current chain – however I don't think that this is the end. The Woolworths brand has strong affection with many people who may not have shopped there recently but certainly remember it from their formative years. It's always been a strange store, selling a variety of goods from the famous pick and mix, through children's clothing, stationary and music/films, however in some senses this is probably what's caused its demise. With the pound stores taking one audience and the supermarkets taking another, Woolworths has struggled to know what it stands for.

WH Smith was in a similar position 2003, having no real focus and being undercut on all sides by the supermarkets. This changed however when they started to focus on their core offering - their books, magazines, news and stationary - and reduced focus (and retail space) on entertainment products such as CDs and DVDs. Understanding what customers valued in the store allowed them to ensure that the stores stocked what they wanted and to concentrate on when customers wanted it - leading to an increase in their store locations at places like airports and train stations. These decisions have changed WH Smith's fortunes – it may still have some way to go and the current climate isn't going to help, however WH Smith chief executive Kate Swann was clear in her vision when she said in 2004 "I want people in the UK to get to the point where they say, 'Of course I go to Smith's for stationery; of course I go to Smith's for books; of course I go to Smith's for my magazines.' That's what I want Smith's to be for."

Starbucks is one company for which it's clear what they stand for and that's great coffee. Before Starbucks came along it was possible to buy a coffee in the high street, but Starbucks redefined what coffee stood for. They set a standard for it, built a business around it and were very clear that it was all about the coffee. Every decision they made whilst growing into a global brand was centred on their belief in their product and how it should be enjoyed. Whilst others for example were creating flavoured coffee beans, Starbucks refused to adulterate their product and stood firm by their beliefs in keeping the product pure. They didn't always get it right though and in their early days their stance on not using low-fat milk initially bemused customers who had to go elsewhere to enjoy their "skinny" latte.

They learned though that there is a balance to be struck between giving the customer what they want whilst ensuring the business is focused on what its core values are and what it stands for.

Woolworths on the other hand has lost its way – it doesn't seem to stand for anything in particular and is a jack of all trades – master of none.

It was once well known and well respected for its children's clothes. After securing rights to the Ladybird clothing brand in 1984, Woolworths went on to launch a hugely successful range of children's clothes in 1986 which was supported by PR, TV and press advertising. Despite going on to acquire this brand in 2000, Woolworths have never really leveraged it to the full. Rather than building on this they went on to launch Big W which further confused customers as to what they stood for and subsequently failed and was axed in 2004.

Customer loyalty cannot be bought – either through discounts or points – in all surveys on customer loyalty, top of the list after convenient location is that the retailer stocks what they want - if a brand gets this fundamental wrong, all other efforts will fail. Any new buyer of Woolworths will need to first take a step back to understand what Woolworths stands for, what its key values are and then build a business around this. Reducing or removing product lines which run counter to this and focusing on what the customers want within the context of these values.

Only in this way will Woolworths be able to set itself apart on the high street and reinstate itself as a brand that customers understand and say, "I go to Woolworths for…"

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.

Customers Pay the Price for Quality and Service

I had some push back on my article "The customer is always right (unless they’re wrong)" where I commented that I felt price ceased to be a major reason for churn for existing customers. It was pointed out to me that although this may be true to a point, brands still needed to reassure their customers that they were receiving a fair price, even if they wouldn’t really know either way. This is evidenced by brands such as Tesco continuing to provide messages on "value" and comparisons to other retailers.

I was then reading an article on Retail Week by Mark Price, MD of Waitrose with the title "Cash-strapped shoppers might be chasing after value, but they can still appreciate quality". He raised the question that in these challenging times and the sudden need to realign around price, how a brand such as Waitrose, with a tradition of quality for over 100 years can reassure about price (and real value) without losing their quality credentials.

He then went on to outline how Waitrose is meeting this challenge by actually investing in their products rather than cutting back and cutting costs. They have invested in the quality of their own brand lines meaning these now stand up well against other own-brand and branded products. This has then been backed up with advertising saying that if you don't enjoy your Waitrose product they will refund and replace it.

To fight the challenge that consumers will naturally think that a "quality" product is automatically going to be more expensive they have introduced subtle ticketing in-store to communicate that they are the same price.

Most interestingly they are also investing in their staff - an area many businesses actually cut back on in hard times, reducing training and staff numbers. By investing in customer service training they are now seeing a 10 percentage point gap on mystery shopping scores between themselves and their closest competitor.

Mark finished of his article stating that they have improved their quality, value and price perceptions over recent months and are holding on to their customers. Waitrose it would seem are doing a good job of retaining their customers by building on the things that customers value – good quality and service – whilst reminding customers that they are still competitive on price.

I still maintain that price is not the number 1 reason for churn despite what customer research may say - but it would seem all brands in these more trying times need to consistently reassure customers that the price paid is fair for the quality and service delivered.

The customer is always right (unless they're wrong)

I was reading a loyalty white paper today from Accenture on retail loyalty. It was discussing a survey they carried out asking customers what they wanted from a loyalty programme. As expected (and as shown in many surveys before it), customers said that price was one of the top reasons for continued loyalty. The article continued by pointing out that one of the top reasons for loyal customers defecting to another retailer was also price.

Does this suggest that customers are only loyal to the retailer providing the lowest prices? Well evidently not or else there would be just one retailer in each sector with some very long queues. When was the last time you actually checked the price of things though?

Do you know how much a pint of milk costs - and if you do are you aware of how much it costs at the retailer next door? In practice customers say they care about "price" - but most are not actually aware of the price they are paying. This was born out last week when I attended some research focus groups for a credit card loyalty programme - customers were asked what elements of a credit card they considered important and almost all customers agreed that APR was top of the list. When asked though what the current APR was on their existing cards, no one could provide an answer.

Price it seems is more important in initial customer acquisition when customers will research the best options available, but for existing customers the price ceases to be something they really use to evaluate their relationship with the retailer. Many financial companies have actually taken advantage of this fact which is why there are financial products where the interest rate declines overtime - with the companies hoping that customers will not actively re-evaluate their relationship.

Rather than price, customers defect from retailers because of other factors including service, relevance and benefits.

If a store you frequent changes its range, ceases to keep up with your requirements or tastes or removes benefits it provided (or doesn't offer benefits competitors are promoting) then this will create moments of reflection when you'll begin to consider other retailer options. If this consideration turns into trial then price may well come back into the equation - more likely however a customer will actually defect if the service and experience they receive from the new retailer is considered better than they've been used to.

I'd argue that retaining customers is not about providing discounts, promotions or everyday low prices - its about how you treat customers and the service you provide. Feel free to ask your own customers - but I suspect they'll be wrong.