Sales Promotion Comes of Age

I was speaking at the Retail Business Technology Expo last week and what was interesting is how payments, coupons and loyalty have all merged into a single entity.

Whether you were a POS vendor or a payments solution, everyone had a solution that included coupons and loyalty.

It’s interesting because coupons and loyalty have traditionally existed in separate universes.

Sure, a retail loyalty program may have sent out coupons and increasingly these may have been targeted to the member based on previous purchases.  However, coupons have tended to exist in the world of Sales Promotion rather than Loyalty Marketing.  Whilst both below-the-line activities, they have always had different aims.

Sales promotion is normally used for a push of a particular product or service.  Typically in support of a wider advertising campaign, a sale promotion is short term with specific aims - to get (more of) the product moving.  Indeed, the latin for promotion (prōmovēre)  means “to push onward”.

Due to the typically short term nature of many sales promotions, any customer data collected is normally transitory - being used to facilitate the promotion itself with additional calls to action, encouragement to continue with the promotion and identification of winning behaviours.  Once the campaign is complete however the data is typically lost - either immediately or simply due to the data ageing over time as there is no real reason to continue a dialogue.

Indeed, I remember conversations in the past when asking clients if they had a customer database where they referred to the competition entries currently lying dormant in a mailing sack in the corner.

Loyalty on the other hand is in it for the long term.  It’s not typically concerned with that single purchase and is instead aimed at getting a continued and regular purchase pattern.  By definition, to be a loyalty programme it needs to be able to both identify the customer uniquely AND be able to see customer behaviours (e.g. purchases).  This tends to necessitate having up to date data and frequent communications with customers.  It also tends to lead to insight driven decisions, promotions and communications.

As a loyalty marketer, you tended to feel you occupied a higher ground when it came to customer led marketing.  Looking down on sales promotion as it stuffed product into random customers baskets for free (really, how hard is buy 1 get 1 free!), with many of these being the very same customers who were going to buy it anyway!

However, what sales promotion did have which loyalty didn’t was that immediacy.  That ability to change customer opinion there and then.  To be able to shift product sales immediately, typically at point of purchase (or decision).  Sales promotion was glossy, it dangled from the shelf edge and lit up the packaging.

Loyalty on the other hand tended to be after the fact.  After the customer had made the decision and paid for the goods the loyalty programme would wake up and suddenly recognise that great decision you’d already made without us.  Sure we could communicate with you later and hope you remember our messages as you walk around the store, but we just weren’t as “shiny” as the sales promotion guys.

That really is all changing though and so are the rules that go along with it.

Sales promotion is tending to run via social media tools and smartphones.  Customer data flows from the moment they connect with the promotion.  Even when the promotion ends, the conversation continues through branded social media campaigns.  Whereas before it was a random affair, promotions can now be targeted based on previous purchases, previous campaign usage, friends campaign usage.

Just take a look at Target Cartwheel to see this in action.  

The customer signs-up using their Facebook account (now they know who the customer is and how to talk to them), then they select the coupons they want to use (purchase intent), then they let the customer scan their single “barcode” (sounds very much like a customer loyalty id) to make savings (and obviously link ALL their purchases to their customer account).

While they could have stopped there and had a very capable mobile coupon app, they’ve gone further and included gamification features as well.  New customers start off with just 10 coupons slots; however over time the customers can earn badges which help to unlock additional coupon slots to get even greater savings.  These badges are awarded for various behaviours including sharing the app and offers socially, using in-store features like self-scanning and through frequency of usage (based on amount saved).

Is this sales promotion or loyalty?  Well, it’s both and it means the customer gets the best of both.

Target get to know the customer uniquely, see their behaviours, target further offers and encourage frequent usage - that pretty much sounds like a loyalty program to me.  The offers though are still good old fashioned sales promotions providing money off, BOGOF, etc. and will be largely funded by the manufacturers.

Retail loyalty is changing as mobile, payments, coupons and loyalty all seamlessly blend together.  This is great news for consumers but will create a real battle in the industry as these areas increasingly converge.

5 Key Trends for 2014 - The Year of "Now"

The pace of change bounds on and 2014 will be no different.  Picking up on key trends that have been maturing during 2013, the following are my thoughts on how some of the trends are all coalescing around a single vision of “now”.

1. Enhanced Experiences
One of the promotional mechanics Coke are using for the launch of their new 250ml can is the product recognition app Blippar that allows consumers to use their smartphone to view the coke product and in response, the consumer sees the product become interactive, allowing access to a number of music tracks.

This recent addition to Coke Zone in the UK is interesting in that it suggests two trends.  Firstly, whilst the solution is not strictly speaking traditional loyalty, it does point to an interesting trend about being able to both recognise and reward the customer not just at the point of purchase, but during the consumption/use of the purchase.  This type of enhanced experience could be utilised at any point in the sales cycle, from pre-purchase through to purchase.

Whats interesting about this is that the consumer doesn’t need to enter product codes, send in coupons or even redeem a download code, they simply point their phone at the product.  It’s something that can done “in the moment” as they are experiencing the drink itself, and allows the everyday experience of drinking coke to be enhanced with an interactive overlay.  Coke aren’t the only ones doing this, Blippar (and apps like it) are enhancing everything from magazines to beer mats to ketchup.

It does however speak to the trend of “now” and how being able to provide recognition and interaction as close to the originating event/action is ever more important.

The other part of the Coke Zone promotion - and the second trend it suggests - is the use of Spotify to stream the music tracks rather than provide downloads, and this ties nicely into the next trend.

2. Access, not ownership
Time magazine had a headline at the start of this year saying “Spotify and YouTube are just killing digital music sales”.  Apparently users are choosing to stream music and video as and when they want it rather than purchasing the item; albeit digitally.  Its interesting because 10 years ago, back in 2004, the BBC News website had a headline entitled “Will Napster kill high street record stores” and in January 1990 the Seattle Times has an article entitled “Vinyls Final Days - CDs are gobbling up the market of that old dinosaur, the album"

Things move on and technology and tastes change.  People still want to listen to music, but they want it on their own terms and they want it now.  Broadcasters and publishers alike are scrabbling to keep up with the change as consumers vote with their (virtual) feet and move on.  NowTV from Sky is a direct response to the success of streaming services like NetFlix and Lovefilm.

Even the darling to tech innovation, Apple, is on the back foot.  Streaming service Spotify is now the second biggest revenue service for music publishers after Apple with rumours that it could overtake Apple iTunes in under 2 years.  Whatever the reality, its clear that consumer tastes are changing again and the advent of 4G that enables streaming on the go is only likely to make this move at an ever quicker pace.

In this environment where the purchase transaction is replaced with an all access subscription to content now, the concept of a customer changes.  As competitors provide access to the same content in a different coloured box and essentially commoditise access, creating wider and deeper relationships that don’t just focus on the next purchase but span the total relationship will become ever more important.

3. Ephemerality
In Mission Impossible, Jim Phelps is given a mission via some device such as a tape machine which always finishes with the line “this tape will self-destruct in 5 seconds”.  The purpose of this is both security - so others can’t intercept the mission - but also relevance - Jim either wants the mission or he doesn’t, the information has no value after it has been communicated.  This “ephemerality” of the message is also becoming more relevant to those of us who aren’t secret agents.

When people first start using twitter they don’t always understand how to use it; the more people you follow the more tweets come pouring through your feed and the more out of control it can feel if you try to consume it like a news feed.  This feed is presented as a constant stream of information and the stream can soon become a torrent if you’re not careful.  Instead, twitter is best used as a means of taking a “pulse” - when you choose to read your feed you see what is there at that point.  You don’t go scrolling through days (or hours) of history, the point is to be in the moment - in the now.

Speaking about this in The Atlantic in an article entitled “2013: The Year ’the Stream’ Crested”, reporter Alexis Madrigal says:-

The Stream represents the triumph of reverse-chronology, where importance—above-the-foldness—is based exclusively on nowness.  No matter how hard you sprint for the horizon, it keeps receding. There is always something more.  

In response to this, some solutions are taking ephemerality seriously and building it into the heart of the offering. Snapchat is a great example of one way this is working, with people sharing pictures at that moment for consumption at that moment.  There is no preservation or history, no ability or need to roll back and look at something from last week.  The whole point is that it’s relevant now and Snapchat defines it as:-

If we can't disappear completely, let's leave as little of a trace as possible. Let's be water vapor, a passing fog, not the stream.

With consumers drowning under these ever increasing volumes of “now", it raises the question as to how we plan and communicate to consumers.  Madrigal highlights this further in his article saying:-

When the half-life of a post is half a day or less, how much time can media makers put into something? When the time a reader spends on a story is (on the high end) two minutes, how much time should media makers put into something? 

This isn’t suggesting that we don’t communicate, just simply that we think about how this communication will be relevant and it’s longevity.  It also introduces some thoughts about where else it’s possible to build ephemerality into our wider marketing programmes.  Either way, we can expect to see more of these types of applications in the future as consumers increasingly try to both manage their time and their privacy.

This leads into the next trend for 2014, that of communications context.

4. Communications Context
CRM matra talks about the Right Time, Right Place and Right Message when discussing about how to manage targeted and relevant communications.   Increasingly however there will be a new one added to this about Right Context.

If indeed, people are over communicated to and are starting to treat communications as a stream, then getting your message into the right stream at the right time will be critical.

Whether it’s email filtering or mail box redirects, people are just trying to limit what gets through the gate before they even look at it.    However, when the message is more directly related to the context of what they are doing then they are more likely to review it.  Messages sent via social channels like Facebook and LinkedIn tend to be consumed in a different context to general email.  Gmail for example has introduced tabbed email folders that automatically separate emails into difference contexts such as Social or Promotional so you can choose when and if to read them.

Discussing this treatment of email, in recent article on Tech Crunch, Peter Yared, CTO/CIO at CBS Interactive is quoted as saying:-

Mail systems are evolving to match the new volume of email, and users will increasingly see only algorithmically vetted emails. Some other emails may be shown below the vetted email, and the rest will flow away into temporal oblivion, just like uninteresting social posts from a few hours ago

Responding to this will mean being more flexible in where a message is delivered.  A siloed approach to communication with specific campaigns for specific channels will be replaced with cross-channel capability that allows the relevant message to be communicated to the customer at that channel at that time, whether it’s a POS till receipt or a in-app notification.  Just as important, and tying back into the previous trend, the message will also need to disappear as quickly as it appeared if it subsequently becomes irrelvant.  Context is king.

5. Quantified Self
Finally, a trend I’ve written about previously looks to be continuing to gain ground in 2014 and continuing with this overall trend of the “now".

With an increasing use of wearable and connected technologies becoming available, more and more people are starting to monitor more day to day activities.  At CES 2014, amongst the many “quantified self” technology launches, Sony showed off its life logging app and kit called the Sony Lifelog which not only tracks activities like walking or running, but also claims to know how you’re travelling such as by train or cycling and linking this information to your behaviours such as social interactions or photos.  This is a real extension of the basic “fitness” apps current available and is starting to extend into recording more day to day activities.

It’s interesting that the core value of this technology is quickly recognised with Marketing Magazine headlining the article “Sony makes a data grab”.  However Daniel Matte from tech consultancy Canalys goes one step further and indicates that with all this data, the winners will those that both grab user attention and keep it by providing actionable insight saying:-

“The end goal of these companies is to provide actionable advice and not just data logging [..] I don't think the average user frankly cares if, for example, they slept eight or nine hours. What they want to know is whether that was adequate and what they can do to sleep better, eat better etc. [..] Creating change should be the primary goal these technologies are striving for"

With this area continuing to grow and dedicated industry conferences just on the use of Personal Information, the challenge for loyalty programmes - typically the largest uses of consumer data - is not only how to integrate this level of behavioural data, but how to provide members with actionable insight - with utility value.

All 5 of these trends really do coalesce around the concept of “now” - from enhancing the experience the customer is presently having, utilising real-time data about where they are and what they are doing and communicating relevant and timely messages that cut through the stream - 2014 as ever is about grabbing a consumers attention whilst you have it.

Will Shell's re-introduction of service revitalise loyalty

There seems to be a never ending trend to automate and self-serve.

• Retailers are introducing self-scanning solutions.
• Train stations are introducing 24hr ticket machines.
• Health care has introduced self-service diagnosis such as NHS Direct
• Amazon has introduced automated delivery drones (well, not quite yet…)

There is less and less human interaction and an ever increasing expectation of getting what we want, whenever we want it.  From the companies point of view it reduces costs, increases availability, increases capacity - and for the customer, it may reduce prices (or suppress price rises) and increase availability.

So it was very strange to drive up to the petrol forecourt last weekend and be greeted by a smiling employee eager to fill up my car.  

This is something in the UK that died out in the last millennium.  In fact, we haven’t had forecourt attendants since the 1970s.  As small, owner operator forecourts closed and big, national brands dominated, the forecourt attendant was replaced with self-service pumps.

So why now - why has Shell re-introduced the forecourt attendant at a time when fuel prices are at their highest and fuel retailers claim margins are wafer thin?  Surely they’d want to continue cutting costs, automating processes and widening the roll-out of “pay at pump” technologies.

Well I think it’s for 3 main reasons

1. Customer Experience

2. Differentiation

2. Forecourt Margin

The first reason, customer experience, is an interesting one.  

On the one hand, customers want quick service and high availability/capacity at a forecourt - I basically don’t want to queue for my fuel or queue up to pay for it -  so this would seem then an obvious place to invest in automation so as to move customers through quickly.  On the other hand, with all fuels being pretty much the same and all forecourts offering the same services, the customer experience is pretty much the same across all brands - there is really no ability to create a stand-out customer experience.

However, with the new forecourt attendants, Shell would appear to be trying to change this, describing their role as:-

“[..] Designed to help drivers with advice on fuels and fuel efficiency, basic car care and safety tips… including checks on oil levels, screen wash levels, tyre pressure and tread. All Shell Forecourt Attendants have been trained by the Automobile Association (AA) to be able to carry out a range of car care tasks for Shell customers"

So this is moving Shell from simply being a outlet to re-charge the fuel tank into a destination to get re-acquainted with your car.

This ties nicely into the next reason which is differentiation.  

In a crowded market, with increased competition from supermarkets, what can a brand like Shell do to stand-out.  If your product/service is basically homogenised, as is the case with forecourt sales, you need to do something to stand out from the crowd.  Price is not an option as the brand leaders don’t have wider supermarket sales to fall back on.  Sales promotions have worked well, but they are hardly ground breaking or innovative and probably won’t reach the heights of the 1980s when people were encouraged to collect glasses or soup bowls.

Serviced fuel however creates a point of difference - and one which people will be more likely to value, helping to obfuscate other properties such as price or location.  Recognising this point of difference, Melanie Lane, General Manager of Shell UK Retail is quoted as saying:-

Across the industry, UK forecourts are generally not considered the most inviting and customer service-focused environments, and we aim to do something about that. The reintroduction of forecourt attendants will be a welcome addition for many of our busy customers.

I suspect however that there is also a revenue opportunity at the heart of this.  

One interesting aspect of the attended service is that I can’t actually pay for the fuel with the attendant.  Given I can pay for a burger with a virtual currency like BitCoin, it wouldn’t be a stretch to give the forecourt attendants the relevant technology to allow them to take payments.  However, this would remove a golden opportunity for me to wander about in the well stocked forecourt shop whilst waiting for my car to be filled or washer fluid topped up.  

Given that forecourts can be earning around 30% margin within the shop versus around 3-5% margin on fuel, it makes sense that Shell would want to get me spending less time filling the tank and more time filling the shopping bag.  I’d only need to spend £10 in the forecourt shop to double the margins earned on a £60 fill up - so this would seem a no brainer really.

This is not unique to Shell however - ironically, service is also being re-introduced due to automation in other sectors.  

Online supermarket sales for example now account for increasing percentage of all sales, with these set to double in the next few years and brands such as Tesco - the global leader in online sales - seeing around 8% of all sales being done online.  This means an increasing number of customers are very rarely setting foot within a supermarket store - and these are valuable customers, spending almost 3 times as much per shop.  For these customers the brand lives or dies based on the front line delivery drivers.  Like the forecourt attendants, these people are bringing a little last-century magic to the modern shopping experience.

As Which? pointed out in a survey of online shopping, the delivery experience can be key saying:-

"As it’s my first time, he presents me with a free pack of Waitrose and John Lewis magazines and recipe cards — a nice touch. He also offers to unpack.  Items arrive in 11 colour-coded bags — green and white for store cupboard and bright blue for fridge and freezer. It makes unpacking a doddle"

Contrasted with another supermarket where the experience is less than perfect:-

"The driver rings just after 8pm to ask if he can arrive earlier. That’s fine — but when he asks me to come out and wave at him so he gets the right house, I’m a little less chuffed. It’s a cold, wet night.  Nine bags sloppily packed. The vegetables are lumped in with the eggs and dried spaghetti, and the washing-up liquid is in with the crisps"

Whilst there is no doubt that Shell will be looking to maximise margins on every customer visit, it can’t be denied that the nostalgic value alone in these austere times adds significant differentiation and a richer customer experience.  Both of these are critical to increased customer loyalty and provide a warm fuzzy feeling that a plastic card and points alone cannot achieve at POS.  

As retailers look to increase these one-to-one customer experiences - delivered by their front line staff -  it will be key that they are well managed to get the best loyalty value.  Based on my personal experience, I can certainly report that Shell seems to be doing a good job so far judging by their courteous forecourt attendant when I visited.  It will be interesting to see how this new service unfolds.