Divide and Conquer

Coupons.  Despite their long history - first appearing in the early to mid 1800’s and being used to great effect by Coca-Cola in 1887 - they are however strange beasts.

Every brand seems to want to give them – research suggests almost all of us use them – yet no consumer wants to be seen with them.

One of the reasons for this is that as we have a tendency to upward social comparison, we are more likely to want to align with those better off than ourselves – and as people tend to associate coupon usage more with less well off people, coupon usage overall has a negative image.

The modern word “coupon” derives from the French couper which means “to divide with a blow or stroke, to cut” which led to the word coupon which means “a portion that is cut of” - essentially describing how the coupon is actually presented.  However, the meaning of the word coupon today has less to do with physically how it is made available and more with how it is used – the association being more one of a discount.

Coupon perception can though span between money saving discount and deserved benefit, although at this end of the scale it’s typically called a voucher – probably more to disassociate it from its “cheaper” cousin. 

Whilst many of us may shy away from using a 20p off coupon, we wouldn’t think twice about a coupon which gave us a perceived exclusive benefit.

As an example, I was travelling on a flight recently and purchased priority boarding as part of my car park booking - a benefit which essentially allowed me to whisk through security and customs and something which many frequent flyer programmes offer as a feature. 

When I arrived, people were standing in a very long queue, which was even snaking down the entry stairs, and yet I had a “coupon” which allowed me to ride up the escalator and go through a dedicated channel with no hold-ups.  The cost of this privilege - £3 – the benefit (to quote a popular card brand) – priceless.

There is a very fine line between an unmerited discount and deserved benefit and it’s all in the positioning – how it is “sold” to the consumer and the reason for achieving it.

Clipping a coupon from a magazine for buy 1 get 1 free is obviously a mass campaign and smacks of penny pinching or smart consumer depending on who you talk to.  However, earning benefits based on purchase behaviour, perceived position or who you know turns it into a deserved privilege.

Another advantage of focusing on a benefit rather than a discount is that it tends to attract the more affluent consumer who, whilst not accounting necessarily for a larger share of the footfall or penetration will typically account for a larger share of the revenues – they will be loyal rather than shopping around based on who has the special offer.

In promotions I’ve worked on with FMCG brands where the campaign focuses on delivering a benefit, not a discount, there is a definite skew in participation and redemption to more affluent groups. 

Whilst less affluent groups tend to show initial interest, it is the more affluent who follow through to redemption.  However, providing a deserved benefit can be harder within an acquisition campaign than a retention one.

It is obviously hard to position something as a deserved benefit when quite obviously it is delivered via a non-discriminating channel such as a door drop or magazine coupon - however there are brands that have achieved this. 

Threshers famously managed to reposition a discount coupon to a deserved benefit by simply using viral elements so people thought they had access to a benefit that wasn’t intended for them. 

GHD created a programme called Blessed which was positioned more as a members only club than a mass loyalty programme.

Closer to home, I’m currently working with a hotel group which has created a programme which uses advocacy to drive through acquisition.  It’s positioning of secrecy which bestows privilege to those invited, allows them to offload inventory at discounted rates, without ever appearing to be discounting their brands.

It’s not the discount itself that is bad, it is how the discount is positioned and the perception as to why it has been granted that is key.

For them, the whole proposition is one of deserved benefit rather than cheap discount and they get to know their customers and potential customers at the same time.  (I’d love to tell you who they are and how you get access, but I'm sworn to secrecy – unless you’re a friend of course…)

Ironically, despite the negative image coupons have, usage has increased in the last year or so as people look to reign in their spending – however this is a false positive for brands.  These consumers are buying simply on price and won’t stick around for long or at all after the coupon has been used.

Better to make people want your brand, rather than paying people to take your brand - coupons can be used to do both, it just depends on how you position them.

Whilst the original definition of a coupon referred to the division of the physical paper, used correctly they can be used to divide good customers from bad – now that's got to be a challenge worth conquering.

Back to the future

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It’s coming and it will be game changing

T-Mobile are offering free texts – for life!  

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

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

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

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

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

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

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

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

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

So where is T-Mobile going with this?

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

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

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

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

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

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

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

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

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

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

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

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

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

I think it could be.