Friday, December 4, 2009

Mistaking a Habit for Brand Loyalty

These days, brands are looking for loyalty wherever they can find it. With consumers increasingly careful about spending, and even health insurance being seen by some as discretionary, brands need to hold onto as many customers as possible. Our recent work for a health care client suggests that what seem like automatic renewals may lull brands into a false sense of customer loyalty.

Think about it. When it comes to health insurance, most Americans still get their insurance through their job. Every year, Open Enrollment is the one time everyone can change health plans or coverage, no matter how dissatisfied they become with their situation. The rest of the year, people are locked into their health plan and coverage barring life events (e.g., birth, marriage, divorce).

Back in the day when people rarely changed jobs, it was also rare to change insurance providers. In fact, in our recent research with consumers who get their insurance through work, over a third have had the same insurance coverage (and the same job) for 10+ years, and over half have had the same insurance through work for over 5 years. However, job longevity is quickly becoming a thing of the past.

When it comes to changing health insurance coverage, just the thought of it can make people anxious. Consumers are skeptical of the motives of most players in the category (insurance companies, drug companies, employers), find it difficult to understand the total costs of treatment under different plans, and prefer anonymity for fear of repercussions on-the-job at renewal time.

By identifying life events that cause people to take stock of their situation – like getting married or starting a family or by providing or publicizing coverage options consumers really do care about (e.g., wellness and preventative care) -- shrewd marketers will have an opportunity to take share in the health insurance category. And as people who have been unemployed and unable to afford coverage hopefully find jobs and begin to enjoy coverage again, health plans will have a unique opportunity to increase enrollment.

Health care is not generally known for brand innovation, and customer has clearly been taken for granted, historically. That might change if a competitor found a way to get consumers' attention and make it easy for them to act on their dissatisfaction with incumbents during open enrollment or when life events occur.

Monday, October 26, 2009

"Fresh" Food Trumps All - 5 Ways to Be "Fresh"

The buzzwords are flying as food marketers look for new ways to appeal to still-stingy consumers. A recent report by Hartman Group found that “the picture is no longer black or white; it is a colorful mosaic where organic and/or natural intersects and overlaps with attributes such as local, fresh, sustainable, safe, green, quality, lack of additives and many more.”

Personally, I’m a big fan of “local” — it communicates a human dimension that I find msising from today's increasingly homogenous shopping world. When it comes to food, our research with consumers in August shows that the main benefit of local is that it's more likely to be fresher.

Consumers told us:
“Local foods are fresher and you are helping out your economy locally”

“(When local) there is less chance that they have been processed or preserved with mystery chemicals”

“Locally grown means that it takes less than 3 hours to get to me. Means the food is fresher and travels less (fuel, energy) to get to me.”
In fact, it turns out that what most consumers are really looking for when they say they prefer locally grown produce or locally raised meat is fresher food. So, the appeal of “local” is that it delivers on “fresh.”

Consumers not only prefer fresh, they are shifting their behavior and buying more fresh food in grocery stores and restaurants. Increasingly, they shop for that day’s needs and are not interested in food that requires defrosting. The explosive growth of farmer’s markets is one example of this shift.

When it comes to fast food, only “value” beats “fresh” among consumers as a reason for choosing one restaurant over another. We found that “fresh” also is the most compelling reason for trying a new menu item at a full-service restaurant. Restaurants of all types have noticed, and menus are shifting to emphasize fresh ingredients. McDonald’s is enjoying success with its fresh messaging.

Chipotle's reputation for food integrity and freshness has made it the No. 1 casual restaurant among Millennials. Our research showed that three out of five 20 to 24 year olds in California visited Chipotle in the past year, the highest penetration of any casual restaurant chain. Chipotle’s Millennial penetration in California is twice what it is among older age groups.

What’s a food, grocery or restaurant brand to do? Here’s a starter list of ways to be fresh:
  1. Location: Be available where consumers are shopping for fresh meat and produce – specialty stores, butcher shops & farmer’s markets — or allude to them in the menu.

  2. Packaging/Signage: Allow consumers to see through the package to the good food and ingredients inside. For restaurants, conjure freshness through signage

  3. Ingredients: Minimize processing and eliminate unnecessary ingredients. Pursue sustainable practices (and let customers know).

  4. Message: Credibly link to ‘fresh taste.

  5. Target: Millennials, mothers and Food Channel watchers.
The move to "fresh" is an opportunity for food, grocery and restaurant brands to connect to a powerful, positive trend. Find your voice and get the word out.

Sunday, September 13, 2009

Marketing to The Different Sides of Her

School is back in full swing, and we’re finally done with back-to-school shopping. Shopping with my 17-year-old, high school senior daughter proved eye-opening, as always. I was buying, but she was definitely calling the shots.

For jeans, she wants very low-rise flares. I want trouser-style dark wash jeans. She likes Pac Sun’s Tilt brand, but they appear to be closing them out. For back to school, they were only available in sizes 0 and 2 (she wears a 6 or 8), and the store was full of Bullhead brand jeans, which she's not into.

We tried Gap. Despite all their new styles and the big promotion around the 1969 brand, my high schooler pronounced Gap jeans still too high-waisted and unflattering. Then, the ultimate epithet: "They're for moms." Sounds like they still haven’t found the key to millennial appeal. On the other hand, I found the perfect pair for me there.

Funniest to me was her assessment of Aeropostale jeans – “they make me look like I have no butt.” I thought that was supposed to be a good thing. Apparently not for millennials.

I always have good luck at Banana Republic and convinced her to give it a try. Despite initial protests and millennial expectations to the contrary, she found her perfect fit jeans there.

The point is that understanding my receptivity to marketing depends hugely on context. Simply looking at where I shop and what I purchase tells a garbled story. Demographics- or purchase-based segmentation is not enough.

Women are often the ‘Chief Purchasing Officer’ for their households. That makes it key for brands to know who she's shopping for to really land their promotions and messages. Moms are not always in Mom-mode. And career women are not always shopping for career wear.

What’s a marketer to do? Talk to her. Find out which “her” is shopping on a particular occasion. Show you understand and respect her. Help her satisfy the different personalities she’s channeling when she's shopping.

Monday, August 24, 2009

Discounting While Preserving the Brand

Anyone who’s been shopping lately has seen it: the store wide sales, discounts, coupons and massive price reductions taken at the cash register. While back-to-school shopping last weekend, we saw it up close and personal. As a shopper, it makes me a little crazy not to know what the actual price is of the items in my hand and a little excited when it rings up as less than I calculated. As a strategic marketer, it makes me crazy to see across-the-board discounting on the rack and at the register.

In recent articles in Business Week, Retail Customer Experience, and elsewhere, the experts are weighing in on when, where and how to discount. There’s great retail advice out there. Kate Newlin’s recent article for Retail Customer Experience offers advice about the antidote to price-based competition. How do we kick our own addiction to price promotion? She asserts “We have to return our focus to the shopping (not buying) process, enhancing, entrancing, and engaging the customer and the salesperson in the dance.”

Kate advises clients on how to avoid discounting and how to contain the damage if/when they do by:
  1. Hiring front line people with a passion for the merchandise
  2. Branding the experience, differentiating on elements of style and design
  3. Changing the tone, acknowledging that the customer knows the economy is in free-fall and expects a deal
In an August 14 article in Business Week, Steve McKee shares 3 rules for discounting wisely. They should discount briefly: make the rationale behind the discount credible (and obvious) to consumers, so they don't perceive it as an act of desperation. They should also discount credibly: for a limited time to treat a specific condition. And last, McKee contends they should discount creatively: by focusing on other elements of the marketing mix. I agree with McKee that in your customers' eyes, your product is either worth regular price or it's not.

I have one more tip. Retailers have the data to know which merchandise drives the sale of additional items, but still take across-the-board discounts. When they have to discount, smart retailers promote the items they know will lead to increased units per transaction at full or close to full price. This allows them to continue positioning themselves as the leader in their core driver categories and reinforces the brand for better days ahead.

Do you know which items or subcategories drive basket size? How well does your promotional strategy line up?

Monday, August 10, 2009

Using Mobile Apps to Build Customer Loyalty

When my kids were little, we knew where every public restroom was in town. At any moment, one of them might have to "go." Not only did we know which stores had public restrooms, we knew exactly where the restroom was located inside the store. Whether it was grocery store, the drugstore, book shop, video store - or somewhere in between - wherever we were, we could get a kid on the pot in less than 3 minutes.

So, I smiled when I saw that Huggies was doing a mobile campaign. Potty training is a big deal in kids' lives, and having the Disney characters "call" to talk to a 2 or 3-year old is her or his dream come true. The potty-training kit tie-in is clearly designed to generate measurable sales from the promotion. But will it get moms to buy Huggies training pants? Thankfully, potty training is a relatively short-lived stage for most kids. The real play here may be to build a relationship with the mom so she chooses Huggies diapers for her next child.

What would be truly useful to parents with kids who are potty training? While we knew the restroom map by heart for our small town, once we ventured outside Mill Valley, we were in trouble. We would have loved a mobile app that used GPS to show all of the public restrooms within a block or some self-selected distance of our location.

Come to think of it, that could be useful for another set of Kimberly Clark customers, too. Obviously, different positioning, imagery and langauge would be key, but the same basic data would be helpful for Depends users, who are getting younger all the time.

Saturday, August 8, 2009

Redefining Multi-Channel Retailing to Get Results

Health care is top of mind for lots of folks, these days as health care reform seems hopelessly bogged down in Congress. Meanwhile, costs continue to escalate. It's well-documented that providing home care is far less costly, more comfortable and potentially more effective than caring for patients in the hospital. And effective home care for chronic conditions can even help to avoid hospitalization entirely. Home care has been a fragmented industry about which information on effectiveness, patient satisfaction and comparison pricing has been hard to get.

Enter Walgreens. I've written before about the drugstore chain's move to provide in-store clinics for walk-in patients as well as clinics that operate at company workplaces, like Disney World in Orlando and Harrah’s in Las Vegas. In a throw-back to the days when doctors made housecalls, Walgreens is now offering home health services.

Through its acquisition of OptionCare, Walgreens delivers home infusion, respiratory/oxygen and medical equipment services through more than 100 accredited home care facilities in 36 states. The extension into home care means Walgreens can meet its customers' OTC and prescription needs, as well as their needs for infusion services, respiratory therapies and durable medical equipment.

In some ways, the move parallels Best Buy's acquisition of the Geek Squad, which extended the retailer into helping customers make their consumer electronics work. This is a new type of multi-channel retailing. It's not just about store, mail, web and phone orders.

Best Buy's in-home services represent a move out of consumer electronics retailing and into home integration or simply into making stuff work. Similarly, Walgreens in-home services represent a move out of the drugstore category and into longevity or independent living.

Which retailer will be next to see the opportunity to redefine multi-channel and transcend their category?

Thursday, August 6, 2009

Going Green to Broaden Appeal

The recession has breathed new life into doing it ourselves. Whether it's home cooking, sewing, entertaining at home, or home repair, consumers of all ages are doing more of it. As home sales have dropped off a cliff, home center stores like Lowe's and Home Depot have repositioned themselves away from home improvement and toward home repair.

Our work in the category shows these two locked in a battle for share. A year ago, Home Depot looked to be on the decline but more recently has been resurgent in multiple markets. We conducted research with homeowners this Spring that showed Home Depot was distinctive in its appeal to 30-year old homeowners. Teaching homeowners to rely on the home center when they're young is a strategy for assuring customer loyalty as they grow up.

Yesterday, the Home Depot Foundation and Habitat for Humanity International announced they are expanding their Partners in Sustainable Building program into a $30 million, five-year effort to construct at least 5,000 homes to meet Energy Star guidelines, or even higher green building standards. Given millennial interest in doing good and all things green, this promotion may grow and strengthen Home Depot's hold on this prized target. As Carol Phillips pointed out in a recent blog post: "Gen. Y is on track to become the greenest and most humanitarian generation in U.S. history. If one wants to do business with them they had better be very green and very nice to their fellow mankind."

In a category where merchandise and store experience are largely the same, social conscience and social responsibility may help consumers tell brands apart. Could be good news for causes, and brands that embrace them.

Wednesday, July 29, 2009

Big Retail Can Get Local - A 5-Step Approach

While conspicuous consumption is out, people are still buying stuff, entertaining (mostly at home), and traveling (more, shorter trips closer to home). The newly cost-conscious are still in search of interesting social environments and diverse shopping, consuming and learning experiences. What’s changing is our perceptions of who provides them.

In the '90s, Starbucks tapped into a collective search for the third place - there was home and work, and then there was Starbucks. The chain grew like topsy, and now has over 11,000 stores in the U.S. alone. It’s not surprising that the CEO of Starbucks, Howard Schultz, is trying to recreate the local coffee house experience. He is tuned into the trends of our times, and has publicly lamented the "commoditization" of the retail coffee experience. What’s surprising is the clumsy approach he has taken with 15th Ave. Coffee & Tea. Launching another brand in the same category, and trying to distance it from the Starbucks mother ship follows solid brand management theory. But it misses badly on the reality front. It seems “everyone” knows that Starbucks is behind the veil, and the effort is reflecting badly on the brand that’s badly in need of a pick-me-up. See the July 28th Harvard Business article by Peter Merholz for one of many on this topic.

What’s a national brand to do to try to get local? One approach is to give local store management greater authority to support local causes. By becoming a visible and active member of the community, big brands demonstrate commitment to the issues that matter to their customers. This puts the spotlight back on employees as an important part of the brand’s personality again.

Whether it’s sponsoring a “float” in the annual Memorial Day parade, or getting store employees to walk in the parade and hand out goodies along the route, or supporting flower planting or fund raising or other community initiatives, neighborhoods afford ample opportunity for store personnel to get involved. And let’s face it, it’s the people that are hardest for another brand to copy. Peet’s people are different from Starbucks people. Not better or worse, but different. For Starbucks to get local, it’s going to be the people who work in the stores in a particular town that make it so.

Here then are 5 steps to help national brands get local:
  1. Create loose guidelines for store managers to follow
  2. Give them a budget to do something meaningful
  3. Let them find the local causes or events they and their teams want to support
  4. Show them how to measure their impact
  5. Get out of the way
I wonder what they’d come up with. Whatever it is, it would be more relevant, Starbucks brand-enhancing and customer loyalty-building than 15th Ave. Coffee & Tea.

Sunday, July 26, 2009

Local Has Cache

Retail vacancies are on the rise in our town and others like it across the country. City Councils and Chambers of Commerce debate mostly useless tactics that will take months or years to have an impact and don't have the funds to do much about the problem. In a recent story in the Wall Street Journal, Joseph Epstein made the case for judging a city "by the number of blocks of interesting shops it contains."

I tend to agree with Epstein's friend, sociologist Edward Shils, who made the observation. I am not against chain stores - they have hard-working employees, just like the independent stores, and face similar challenges finding and retaining customers and talent. But to a great extent, their takeover of malls and street locations across the country has led to a homogenization of the urban and suburban landscape and of the customer experience. We've gained consistency and predictability at the expense of being surprised and delighted - it's the triumph of brand management over brand, which it a topic for another story.

Though lots of people are concerned about these changes, there has been little organized response, or at least little coverage of any organized response. The WSJ ran a story in June about campaigns in multiple cities across the country to save neighborhood stores. It profiled the 3/50 Project, which encourages shoppers to pick three independently owned businesses and spend $50/month at each one.

According to the organization for every $100 spent at a store, $25 more stays local if spent at an independent store vs. a chain store through payroll, taxes and other expenditures ($68 vs $43). Compared to buying online, all of that $100 comes back to the community. We buy a lot online, and shop at chain stores as well as independents, but I worry that the amount spent locally is not enough to make our town one Shils would judge favorably.

The whole idea of supporting local products and merchants appeals to consumers. Farmers markets are booming, and chain stores saw bigger declines than independents this past holiday. While sales at independent stores declined an average of 5.0% vs. 2007, retail sales overall were down a record 9.8% meaning that chains saw bigger declines: Barnes & Noble (- 7.7%), Best Buy (-6.5%), Borders (-14.0%), JC Penney (-8.1%), Macy's (-7.5%), The Gap (-14.0%), and Williams-Sonoma (-24.2%).

The Institute for Local Self-Reliance, a Minneapolis nonprofit research group, has found that community efforts to support local merchants can help to insulate them from the worst of the recession. Their research shows that independent retailers in cities with buy-local campaigns saw holiday sales decline less in 2008 than those in cities without them (3.2% vs. 5.6%). According to ILSR, there are about 100 buy-local campaigns active across the country. Could be worth bringing up at the next city council meeting instead of the next lame brand or beautification campaign.

Have you visited an independent retailer in your town lately?

Thursday, July 16, 2009

Social & Fun - A Winning Combination

More retailers are getting their toes wet with social media. And that's turning out to be fun and save money.

The recession has not been easy on most retailers, and marketing budgets have been slashed. Not to fear - social media is inexpensive and contests that emphasize fun over the value of the prize are winning customer hearts and minds these days.

Whole Foods is the latest to get with the program. The upscale grocery held a contest to hit the 1 million Twitter followers mark. But unlike the Lottery, where higher cash prizes fuel a Lotto frenzy, in Twitterdom, small gestures have a big impact. So, Whole Foods offered a million grains of quinoa and $50 gift card to the millionth follower.

According to Mike Duff's story on BNET Retail, they offered up 10 more $50 gift cards — and 50 more pounds of quinoa – as rewards for Twitter pals who could came up with clever five-word summaries of their food philosophies. The additional awards will be parceled out through the end of the contest period, which is Friday, but the first of the “micro-philosophies” winning a gift cards was: “Can you pronounce those ingredients?” Others entries that the company highlighted include “Peanut butter goes with everything.” And, my personal favorite: “Just say yes to chocolate.”

No doubt, many of these followers are not and will not become die-hard loyal customers. But a good number are or will, and their care and feeding is worth far more than a few hundred dollars. Oh, and since the retailer gave away Whole Foods gift cards, the money they spent comes back to the cash register, hopefully as partial payment on a much larger grocery tab.

Friday, July 10, 2009

Earning Customer Loyalty By Serving Up Fun

For five years, Chik-Fil-A has been celebrating "Cow Appreciation Day," giving guests who come to the restaurant dressed in full cow regalia an entrée, choice of side and a drink for free. This year's celebration starts today (though the official holiday begins on July 14) and the promotion is expected to draw over 130,000 visitors to Chik-Fil-A.

While Emily Bryson York's story in Ad Age calls the promotion a "gimmick" and a "stunt," it is actually something more than that. It is one example of the fun side of the brand. The event has gained momentum since its inception, and operators expect to serve free meals to as many as 150 cow-clad customers in their stores today! They have even extended the event by hosting parties for groups to come in before Cow Appreciation Day and eat while working on their costumes.

The whole thing is very tongue in cheek, and designed to win smiles, and fans. It's more engaging than than just offering discounts, and fun for those who dress up as well as those who don't.

Chik-Fil-A's emphasis on grass-roots marketing and its focus on fun are having seriously positive effects on the bottom line: as of June, systemwide sales were up about 10% year to date, and same-store sales at malls and stand-alone locations were up 3%. That's a whole lot better than the industry as a whole, which is down almost across the board this year vs. last.

Just another example of how fun makes (dollars and) cents.

Sunday, July 5, 2009

Brands that Build Consumer Confidence

An NPR story earlier this year talked about small ways people could regain their feeling of being in control of their own destinies amidst the bumps and bruises of this recession. “Washing your car yourself…buying a small amount of stock” were some of the suggestions.

Fast forward to stories about the Obama's vegetable garden and thousands doing the same thing either coincidentally or because of their example. According to a survey by the National Garden Association, 43 million US households plan to grow their own fruits, vegetables, and herbs this year, up 19% from last spring. These are boom times for Burpee seeds, Ball canning jars, and Scotts Miracle-Gro. The Wall Street Journal ran a story recently about booming sales for devices to help rooftop and balcony gardeners produce plentiful fruits and vegetables in containers. Savings on food costs are an obvious benefit of growing and canning your own. But there’s something else at work here.

By learning how, and caring for the seeds and plants that put food on the table, home gardeners gain a feeling of control, and have colorful reminders of their own competence: the bigger the tomatoes or the more flavorful or more plentiful the crop, the greater the ability. And capability ladders up to feelings of confidence - something we need more of these days, as rolling layoffs and the ongoing recession continue to spook markets and individuals.

Gardening has played role in building feelings of competence on a massive scale before. According to Wikipedia,
“Victory Gardens were vegetable, fruit and herb gardens planted at private residences in United States, United Kingdom, Canada and Germany during World War I and World War II to reduce the pressure on the public food supply brought on by the war effort. In addition to indirectly aiding the war effort these gardens were also considered a civil "morale booster" — in that gardeners could feel empowered by their contribution of labor and rewarded by the produce grown. Making victory gardens became a part of daily life on the home front.”
Businesses that can help consumers feel a greater sense of control and competence stand to win big – in sales and by building their confidence. I wrote about the boom in sewing classes and home sewing earlier this year, before seeing the morale booster angle to the story.

New concepts like Tech Shop may also fit the bill. TechShop is a 15,000+ square foot
"membership based workshop that provides members with any skill level access to tools and equipment, instruction, and a creative and supportive community of like minded people so you can build the things you have always wanted to make. TechShop is perfect for inventors, 'makers', hackers, tinkerers, artists, roboteers, families, entrepreneurs, youth groups, FIRST robotic teams, crackpots, arts and crafts enthusiasts, and anyone else who wants to be able to make things that they dream up but don't have the tools, space or skills."
From a single location in Menlo Park, Tech Shops have been added in Portland, OR, Austin, TX, and Durham, NC, and more are reportedly in the works.

The recession is eliminating jobs, draining our savings accounts and eroding our confidence. Learning a new skill could turn out to do more for our collective confidence than any politician's speech or rise in the Dow. Welding classes, anyone?

Thursday, June 25, 2009

Engagement is the New Loyalty

Historically, loyalty has been the “get more” industry, offering customers a reward for purchases – more purchases generate more discounts, points or other rewards. All the effort has focused on motivating a purchase, and on the person making the purchase.

A recent Financial Times story is the latest in a series of wake-up calls for discount-driven, points-based loyalty programs and the retailers that promote them. The CMO Council study found that:

Big brands' best customers have been defecting in droves since the beginning of the US recession. By this year, more than half of a typical US brand's most loyal shoppers in 2007 had switched to rival products. A two-year analysis of 685 grocery and pharmacy-stocked brands, using data from 32m consumers’ supermarket loyalty cards, found that in 2008 the average brand lost a third of its formerly highly loyal customers.

If points are out, what’s in? To earn customer loyalty, smart brands are becoming engaging, immersive, interactive and fun. One example is a unique promotion by Hyatt featuring, 'random acts of kindness' like unexpectedly paying a customer's bar tab. The point is to maximize surprise by having no apparent program or pattern. This approach can do more to delight customers and build buzz and goodwill than another 100 points in any traditional loyalty program.

Fun also works for engaging employees. The VP of Brand Experience for a national retail chain we know tried something fun after attempts to get her store teams involved in a new promotion by offering them points and coupons fell flat. She offered to have the VP of Store Operations wash cars for the winning store team. The promotion took off by tapping into the team's sense of humor.

The message to CMO’s is clear: In the new world of frugality, where conspicuous consumption is "out," marketers need to move beyond consumption- based programs to engage and even entertain us.

Points are out. Bring on the fun!

Wednesday, June 24, 2009

Making Mobile Work for Marketers

While pundits debate mobile’s uses as an marketing medium, examples are all around us of brands experimenting with this new medium. New to the fray is General Growth Properties, a mall developer and owner of Water Tower Place in Chicago, Fashion Show at Tyson's Galleria outside Washington and South Street Seaport in New York. According to a recent story in Mobile Marketer Daily, the mall operator partnered with Mobisix to extend its email-based The Club program to include The Club Mobile, an alerts service that relies on SMS.

These are clearly early days for what’s being billed as the nation’s first national mall-based mobile advertising network. And it’s understandable that General Growth would follow its retail customers’ embrace of offer-driven loyalty. Here’s how the program currently works:
Consumers who sign up online with mobile number and other preference data at will receive discounts and offers via regularly scheduled text messages. Those who sign up stand a chance to win a $1,000 shopping spree.
The loyalty business is waking up to the fact that earning loyalty requires more than offering customers deals. At Loyalty EXPO earlier this month, there was lots of discussion about the shortcomings of across-the-board discount oriented programs and the need for a more nuanced approach.

Here are a three ideas for General Growth and others like them to harness the unique opportunity that mobile affords them to drive profitable business to their tenants and provide real value to end users:

  1. School’s out, and moms are looking for low cost things to do with the kids. Mobile alerts about local mall activities like face painting, story telling, and other goings-on would be welcome news and smart uses of SMS for moms on the go.

  2. People are looking for value, and stores are offering all kinds of discounts and deals on services like gift wrapping, not just merchandise. Marketing these service type deals in advance of a shopping trip may fall on deaf ears as they really become relevant once the shopper is at the mall. Mobile alerts about tenants offering free gift wrapping, or other services would be useful and again, don’t require any additional spend or discounts beyond what the retailer is already offering.

  3. Shoppers at high-end properties like General Growth’s are tuned into good-works and brands with a social conscience. Malls are a great venue for supporting those good works. Whether it’s hosting a local area clean up that gets the locals involved or a pancake breakfast honoring the local fire department, the mall is a gathering place and natural community venue. General Growth could use other media to promote these events in advance and mobile to promote them the day they’re occurring to drive participation.
General Growth is in deep trouble. So are malls in general. As CB Whittemore suggests in her recent blogpost “Rethinking the Mall & Uncovering Retail Creativity” the next stage for retail is socializing the retail environment – and I would argue, that extends to the mall experience.

Increasingly, community is where we make it…and that includes the mall.

Sunday, June 21, 2009

Loyalty’s Changing – What’s Next?

According to a recent story in DMNews,
“Retailers are looking to get more from their loyalty systems because people will collect membership cards and shop at whatever store is most convenient, so [these programs are] not really building loyalty.”
Offers, points, discounts and rewards can be motivating. Until they become ubiquitous. When they’re everywhere – which one can argue is the case today – they become ineffective at best, and potentially counterproductive.

So, what works in this new age of frugality and points/rewards-based program saturation? What are today’s consumers looking for – besides a great price?

Featured at the recent Loyalty EXPO in Hollywood, Florida, SpeedPass by ExxonMobil is one of the examples of a brand that understands this shift and is gaining traction with consumers. No one would say that filling the gas tank is “fun” and everyone who drives has to do it on a regular basis. ExxonMobil came up with a secure way to speed up the process so drivers could get back on the road and onto the rest of their day faster.

Consumers with a SpeedPass fob on their key chains can pay for gas or convenience store merchandise simply by waving the fob in front of the scanner. That saves time – no digging around for cash or a payment card, no need to enter a PIN or sign a receipt. And SpeedPass is more secure than cash or cards – no card information or personal details are stored on the fob, so there are no financial or privacy concerns if the fob is lost or stolen.

The program provides real value to consumers, and the data on utilization, average transaction size, and gasoline market share shift bears that out. In addition to these quantifiable benefits, the fact that SpeedPass only works at Exxon and Mobil casts a halo back on those brands, particularly with millennial consumers who are more tech-inclined and more impatient that the rest of us.

It’s back to the basics of what makes experiences compelling in the first place. Things like service, opportunities for personal interaction or to learn something new, an escape from the daily routine, help in solving a problem, or features and functions that save time – these are meaningful to consumers. And they create stickiness – they engage consumers in ways that are enduring.

Monday, June 15, 2009

Twitter-Powered Retail Business Models

A lot of people are on Twitter these days. Most are trying to figure it out, wondering whether and how to use it. For many, it’s a way to meet people online who share common interests. A friend of mine is thrilled with the contacts she has made with others in her field across the country and around the world and gushes “I never would have met these people if not for Twitter!”

But to me, the interesting news in Twitter-dom is the potential of the medium to enable new local business models and new formats. Thanks in part to Twitter, Meals on Wheels no longer just refers to home-delivered meal services to people in need. As reported in the Wall Street Journal last week, “New technology has been a game changer, allowing trucks to pick and move to where the customers are on short notice."

Here are three concrete examples that illustrate a range of new ways Twitter is helping locavores find and eat great food.

With no retail storefront, no waiters, no tables or silverware, dishes, or hardly any overhead - KitchenetteSF serves fresh takeout-only lunches Monday through Friday from the garage door of their warehouse in the Dogpatch neighborhood of SF.

Their chefs have worked at some of the best kitchens in the Bay Area: Foreign Cinema, Chez Panisse, Incanto, Eccolo, Betelnut, Fog City Diner etc. Menus are posted on the blog at the end of each day for the next day’s lunch.
“Whatever we find that is super fresh and delicious is what we’re serving. Everything will be organic, local, street food inspired, spontaneous, affordable, handmade from scratch, and delicious (we’re eating this for lunch too!)"
The easiest way to know what’s for lunch today is to follow KitchenetteSF’s tweets so the menu comes to you. And over 1,000 people are following the tweets of this self-proclaimed “spontaneous organic covert nourishment” innovator.

Last month, Chez Spencer in SF added a mobile component to its bistro repertoire with Spencer on the Go!—according to Urban Daddy the first food truck to serve white tablecloth French fare. With 1,001 Twitter followers as of today (6/15/09), the converted taco truck serves customers in SoMA on weekend evenings, and will soon be a regular at the Ferry Building farmer’s market during the day on Tuesdays and Thursdays.

Kogi BBQ is run out of a truck serving Korean-barbecued meat inside Mexican-style tacos in Los Angeles. The company operates the kitchen in superhip, late night hangout, The Alibi Room, but the truck is its direct to consumer business. KogiBBQ currently has over 31,000 followers on Twitter.

According to the Wall Street Journal, more truck operators are following Kogi’s example and have begun using Twitter to post messages on followers’ cell phones, alert customers of their whereabouts and even ask for tips on parking spaces. These things are not hard to do - they just take creativity and follow through.

Today, creators of movable feasts are using high tech to drive up close and personal local experiences. Could the Helms Bakery Truck, the Good Humor Man, and the Oscar Meyer Weiner Mobile find new life in a Twitter-powered world?

Tuesday, June 9, 2009

The Art of Serving Customers

I spent part of last week at Loyalty EXPO in Hollywood, Florida with smart people from retail, consumer packaged goods, and banking, and vendors to those industries to talk about the business of creating loyal customers.

Perhaps as many as half the people there were all about points programs - from the card issuers and payment solutions to the brands that participate in redemption programs. These programs, once approved (which can take time), are a fast way to roll out a consumer benefit without involving many people inside the organization. Bypassing employees on the front lines – whether in the bank, the store or the call center, there are lots and lots of them – makes implementation easier.

Plenty of speakers have run the numbers and vouched for the ROI on these points-based programs. A few were emphatic about the importance of making programs multi-channel, the most important channel being the store. All were adamant that the name of the game is to segment customers, and make different offers to different folks based on their profile and what you want them to do.

I didn’t hear anyone talk about pulling the idea of segmentation through to the in-person experience – so, we’re left treating all walk-ins the same because we haven’t taught employees in the stores or branches how to tell customers apart or how to serve them distinctly. However, by leaving front-line employees out of the story, points and other rewards programs miss the point (pun intended).

Customers have multiple channels for accessing brands today. They go to the store or branch for a few basic reasons. They are in a hurry or need help. They want personal attention and interaction. They want to “kick the tires” literally or figuratively, or they want reassurance that you know what you’re talking about or that your offer is a good one.

These moments of in-person interaction can be a brand’s best loyalty builders. Talbots rolled out its Classic Awards program about six months ago and was one of the featured speakers at the conference last week. According to CRM Manager Lisa Chalmers, the company recognized the opportunity to drive program enrollment by training associates to have a dialog with customers on the selling floor about it.
“Our point of view is that the rewards program provides something outside of the merchandise to create a relationship and dialog with our customer when she’s in the store. We want our associates to interact with the customer earlier in her store visit, and not wait until checkout. So, we created talking points for them to intercept the customer, and send emails to the stores with scripts for how they can engage the customer.”
The near-in opportunity is for retailers or banks to use their sales associates to help drive enrollment and redemptions in traditional card-based points and awards programs. The bigger idea is to turn this around and view loyalty programs as just one more topic associates can use to engage customers in a relevant conversation that deepens their relationship with the brand.

Here’s a new idea for building loyalty and boosting sales: think about redirecting some of the money spent promoting points programs to training the front line in how to serve distinct customers the way they want to be served.

Wednesday, May 27, 2009

Coupons and Customer Loyalty? It’s not what you think!

We're talking about customer loyalty with clients and prospects a lot these days. Everyone wants it – some are working strategically to achieve it. Many more seem to be focused on short-term demand generation tactics, which can have surprising results from a loyalty standpoint.

Coupons are a great example of how a tactic aimed at generating demand for one participant in the value chain may build loyalty for another. Coupons are generally top-of-the-funnel tactics that convert consumers from considering to trying a product. Loyalty comes later – and brands work hard earn it. In general, the product usage experience is most important in building repeat purchase and loyalty.

According to research by IRI and Platform A that was conducted in late 2008 and reported on last month, “More than 90 million US consumers (78% of retail shoppers) currently use newspaper coupons, and 40 million (40% of shoppers) say they are likely to use coupons accessed online.”

No wonder newspapers are stuffed with all those inserts and circulars. In addition to being one of the only remaining revenue sources for newspaper publishers, most shoppers report that they actually use them. Who are these shoppers? The same IRI study found that nearly one out of every four newspaper-coupon clippers is likely to be age 65+. That means three of every four are under 65!

For a whole variety of reasons, coupons are shifting online. Q Interactive found that as the recession has worn on and as more people are more comfortable online, online coupon usage has increased significantly:
“From July to October 2008, consumers printed an average of 477,000 coupons per month at Q Interactive's online coupon site Cool­, a 33% increase over the first six months of 2008, and a 124% increase compared to the monthly average for the full year of 2007.”
According to Q Interactive, Google has an application that lets the user scan a barcode in a store into their phone, press a button and search for comparison prices at nearby stores. This app would seem to work best for categories that people are willing to shop around for - more expensive goods or where the risk of getting it wrong is high. In other words, not groceries, where we know people tend to go to the same store(s) for the vast majority of their purchases. Rarely is a coupon worth an extra trip to another, less familiar grocery store.

Cellfire is a new digital coupon service that works on consumers' Smartphones and computers and is relevant to grocery and specialty retail. Kroger frequent shoppers can link their grocery savings card to their Cellfire account, and the coupons they select are immediately loaded to their grocery savings card. The coupons are applied automatically on qualifying items and reflected on the receipt at checkout when the card is presented. Once a coupon is used or expires, it's automatically removed from the Cellfire account. Sounds a lot more complicated than Safeway's program - all a shopper needs is to sign up, have a phone number, and purchase anything the retailer has on special for its loyalty program members.

For groceries, some time soon, we’ll be able to retrieve coupons on our Smartphones and have scanners read them at checkout just like they read paper coupons today. In this scenario, where does the equity flow – to the brand whose coupon I just redeemed so easily? To the retailer who accepted the digital coupon? Or to the app or the device that brought me the coupon and allowed me to avoid having to cut it out or remember to bring it with me to the store?

Each player in this story has its own customer purchase funnel at work. Online and newspaper based coupons are effective at driving trial for food and CPG brands (including store brands). New services related to digital coupons may build loyalty for the device and application developers, not the product or store.

IRI speculates that "we’ll be seeing CPG manufacturers using online coupons to court a new generation of consumers and build loyalty during these cost-conscious times.” I suspect online coupons will build awareness and trial among a new generation of consumers, and increase their loyalty to their Smartphones!

Friday, May 22, 2009

Locally Grown Food - 3 Steps to Get the Word Out

Before a recent business trip, I bought a bottle of Crystal Geyer spring water at the airport. Nothing terribly remarkable about that…until I looked at the label. Since I’ve been doing a lot of packaging work lately for CPG brands, I took special note of the label on the water bottle. And that’s when I saw it – my bottle was “By CG Roxane”. Not only that – it was bottled “at the CG Roxane Source in Olancha, California, in the California Sierra Nevada Mountains.” In case I didn’t know where that was (which I didn’t) there was a map showing Olancha, CA near Mt. Whitney.

I’ve written before about the local movement relative to fresh produce. USDA and others are careful to point out that locally grown food is not necessarily safer than food from farther away. But it seems consumers are not satisfied with government assurances about the safety of the food supply in general, and they like the greater ripeness that sourcing produce locally affords. In some respects, “Local” has become short-hand for “Safer” and "Better."

The trend is accelerating and taking on new meaning. QSR Magazine’s May 18 issue reported on Chipotle Mexican Grill’s move to source some of the produce used in its 800+ restaurants locally. The story reports that Chipotle:
“will expand its local produce program this summer, purchasing at least 35 percent of at least one bulk produce item in all of its restaurants from local farmers when it is seasonally available. This represents a 10 percent increase over last year's program, the first of its kind for any national restaurant chain.

"Under its local produce program, Chipotle expects to have more than 25 local farms in its network that will supply some of the romaine lettuce, green bell peppers, jalapeno peppers, red onions and/or oregano served at the 860-plus Chipotle restaurants nationwide."
What’s new is that the trend toward knowing where our food comes from is extending beyond fresh produce to other categories. My bottle of Crystal Geyser is one example. Another is from last week's USA Today, which reported the launch of the Frito Lay’s campaign promoting the:
“80 local farmers from 27 states who grow the potatoes used to make its Lay’s potato chips. “Lay’s Local” is the brand’s biggest 2009 campaign, featuring 40,000 in-store displays customized for each state…Ads and regional store displays announce that the product is “locally in Texas.”
At the same time, Atlantic Monthly’s current issue (May 2009) features a story about the trend to locally grown meat. Apparently, lamb is among the winners here. As Corby Kummer, an Atlantic senior editor and the curator of the food channel on, reports:
“Lamb offers several advantages to the budding locavore. Sheep are easier to raise and require less pasture than cattle, so aside from poultry and pork, lamb is the local meat you’re likeliest to find from small farms.”
What’s behind this drive to know the source of our food? Perceptions about safety and freshness are clearly part of the motivation. Sustainability and carbon footprint may also be factors. In today’s virtual world, interest in local sources may also be a quest for personal connection to a time and place.

Twitter can help smart marketers capitalize on this seemingly growing desire to know where our food is from, and get around the systems integration required to make real-time inventory information available online. Here are 3 steps for food marketers:
  1. Set yourself up on Twitter using your brand name and the relevant geography you serve.

  2. Tweet a few items that are new and / or particularly fresh or locally sourced each day, and where they're from.

  3. Invite people to contact you to find out if you have what they’re looking for.

Monday, May 18, 2009

Millennial Gamers Brand Loyal?

For today’s teenage boys (and everyone around them), the array of gaming platforms and games is dizzying. There used to be one dominant brand – Nintendo, Activision or Sega, depending on the year. Now there are multiple, rival, strong brands, and multiple generations or line extensions that coexist instead of being phased out, and online as well as in-person play options. Ebay and other auction sites ensure that old formats never really die, they just get traded online. Similarly, Game Stop and Amazon, among others provide access to a national market for buying and selling used games.

Mobile gamers are the top of the gaming pyramid. According to a just-released study by AT&T Wireless and PopCap Games:
“86% of mobile gamers also play video games on one or more other devices. The most popular gaming devices among mobile gamers, other than mobile phones, were: Computer (76%); Console: (41%); and Handheld game device (24%). Fully 17% of mobile gamers consider their mobile phone to be their primary device for playing video games. Among all mobile phone gamers, 53% signified their desktop or laptop computer, and 23% indicated their video game console, as the device on which they play games most often."
As a result, gaming households now have a crazy variety of gaming hardware. In our 2-millennial home, we have Mac computers, a Wii Fit that was a Mother’s Day gift this year (but not a regular gaming Wii), a Playstation 3 that we use to watch BlueRay movies as well as play games, and an XBOX360 but without the internet hookup (for now, until Netflix comes adds more movies to its on-demand offering to make getting online worthwhile), all of which were purchased new. In the last year, our 13-year old son sold his PS2 online and bought a used GameCube and a used GameBoy. And thanks to him, I now have PacMan on my iPhone.

I asked him why he wanted the GameCube and the GameBoy – “because the games are cool.” Same for the PS3. And the XBOX360. He likes the games. It seems that the creation of format-exclusive games has fueled the growth, sustained the proliferation, and enabled the coexistence of multiple gaming platforms. Among 13 year-old boys, news about cool new games travels by word of mouth. These young guys go to each other’s houses to play, and learn about games from one another.

In fact, it appears that for some gamers, exposure to a game on one platform is a factor in their decision to buy it in another. For others, reviews are key. The AT&T-PopCap study found that:
“When making the decision to purchase a game for their mobile phone, women are twice as likely (28% vs. 14% of men) to do so based on having played the game in question on another device such as a computer. Conversely, 30% of males indicated that printed or online reviews factor into their mobile game purchasing decision, compared to just 8% of females."
Millennials play the field when it comes to gaming platforms. EA’s right – it’s in the game.

Wednesday, May 13, 2009

3 Ways For Local Businesses To Benefit From Being Community Insiders

Being a believer in having a vibrant local business community, I want to support our town’s local businesses whenever I can. Recently, I spent over 3 hours at a recent Business Task Force meeting discussing ways to increase the vitality of our local economy. Putting my money where my mouth is, I set out last weekend with my 17 year-old daughter to run pre-prom errands as much in town as possible. We had the dress but needed it hemmed, needed a slip and had to schedule appointments for hair and makeup before the big event.

First order of business was getting the dress hemmed. In our town, there are several dry cleaners that do alterations. We went to the most exclusive one first and struck out. We struck out again at the number 2 provider. Apparently, people in our town only need their clothes altered on weekdays. Neither store had any one on site on a Saturday morning to pin the hem.

With two strikes against us and determined not to strike out on the dress-related errand front, we abandoned our local businesses and set off to Nordstrom at the nearby mall. They didn’t have the slip we wanted, but offered to order it and ship it directly to our home at no charge. Great service!

Next, we asked in a tentative voice if they would hem a dress that had not been purchased at the store. The timid associate who helped us with the slip asked a colleague and was told “no.” It seemed to us that the colleague hadn’t actually listened to the question – we asked our timid associate to ask the department manager. We got the answer we were hoping for, and the alterations lady appeared on the spot! Nordstrom has always gotten service. And they understand their customers’ lives. Score one for the Seattle chain store!

When it came to the hair and makeup appointments, we again went local. Here, the providers were far more tuned-in than the dry cleaners. We found a few who were willing or even planning to come in on Sunday (our high school’s prom is always on Sunday night, for some reason). One enterprising salon had created a Prom Special, a package deal for hair and makeup. Smart marketers at work!

What’s up with the alterations people? What can other local businesses learn from these vignettes? Here are three ways local businesses (providers of products and services) can take advantage of the fact that they are community insiders:
  1. Make your services available when people in your town are likely to use them. Whether it’s the seamstress at the dry cleaner’s or the local coffee house, if you’re not available when potential customers are about, you’re not only missing a revenue opportunity you’re risking falling off the community’s radar. The last show at our local movie theater usually gets out around 11 pm. Almost all of the stores in town close at 6 and most restaurants and coffee houses close at 9. Affluent people are strolling back to their cars with nowhere to linger. Give them an opportunity to come in and buy something!

  2. Make it your business to know what’s going on in your town, and tailor your offerings for local needs, tastes and events. Unlike command-and-control chain stores, local businesses can be more nimble. As the hair salons in my Sunday prom story show, being tuned into the local community can give local merchants an edge on the competition in the surrounding area. By offering specialized products and services (e.g., hair and makeup for the prom or box lunches for the mountain play every Sunday in June), they earn incremental revenue and as importantly, they motivate residents to give them a try when they might not otherwise, and have an opportunity to turn them into more frequent customers.

  3. Help consumers extend the useful life of their purchases. As sustainability grows in appeal and shoppers become ever more frugal, interest in maintaining and repairing clothes and other items rather than simply replacing them is already on the increase. Expect it to continue. Being known as the place that can help people to get more use out of their clothing is on-trend and personal. It's more natural for a local business to provide these services.
Smart seamstresses will see an opportunity to help consumers make their clothing last, and will make themselves available to fit their schedules. Those who don’t figure it out will continue to reduce their hours until they are no longer in business, unless Nordstrom drives them out of business first.

Tuesday, May 5, 2009

Is Price the only ‘P’ that Matters Now?

As consumers and retailers settle into the new frugality, IRI reported last week on the emergence of a new generation of Americans – the Downturn Generation. As shoppers, this generation is adopting practices similar to Depression-era shoppers, implemented both to weather the recession and to keep a close eye on spending long after the recession ends. This marks a dramatic change in how consumers shop and what they buy.

When people lose their jobs, they value their time differently. In today’s economy, convenience-based value propositions are losing their appeal as people are repricing their free time. In fact, IRI found that “65% of shoppers reported that price is becoming more important than convenience in their purchases."

But how do they know when a price is a good deal. In conversations with homeowners in December, it was clear that they are well-aware of the current price of items they buy regularly. Under those circumstances, consumers are generally able to evaluate an offer, and know when they are being overcharged. This may be changing.

A recent NY Times article about today’s consumer mindset the title of which says it all: “Never Mind What It Costs. Can I Get 70% Off?” The point of the story is that consumers are numb to 50% off offers, giving rise to a vicious cycle of discounting to motivate a purchase. Trouble is, this type of downward price spiral does not build loyalty. In fact, it’s the opposite of loyalty – it rewards customers for being fickle. And it requires retailers to reorient their value chain to make up for what they lose on the top line by selling more. While many have famously claimed “we’ll make it up on volume,” few have actually succeeded.

Enter Starbucks into the fray. The brand that brought us the idea - if not the reality - of the Italian café experience, has been criticized for the high price of its lattes and is under siege from McDonald’s and Dunkin’ Donuts, among others. Last weekend, the retailer began a campaign to combat extreme price pressure and the media blitz behind McDonald’s McCafe launch. The campaign warns readers to “Beware of a cheaper cup of coffee. It comes with a price.” According to Starbucks CMO Terry Davenport and reported in an article in the May 1 issue of AdAge, “The ads lay out facts that separate Starbucks from the competition, such as its practice of buying fair-trade beans and providing health care for employees who work more than 20 hours a week.”

Are people today more sensitive to the need for worker benefits like health insurance? Do mass market consumers value the fact that Starbucks provides coverage to part time workers? Do they make the connection between the price they pay and the company’s ability to afford coverage? Two years ago, the answers would have been “no.” Starbucks is making us connect the dots between our values and our willingness to pay. It may give us a chance to see whether this recession has changed these perceptions. Kudos to Starbucks for trying.

Monday, May 4, 2009

4 Things Retailers Need to Know About Millennials

From the impact they are having on politics to their effect on the ways we communicate to how they are influencing every category of consumption to their spending and savings habits - Millennials are a force to be reckoned with. They are social. They want to be engaged. They seek authenticity and sophistication. Experiences that deliver will earn their loyalty.

The Economist Intelligence Unit conducted a study of Millennials last year and found that business executives believe them to care little about price, and most about convenience, style, taste, and peer recommendations. Are they right? Even when it comes to wine, recent research by Mintel/Simmons and the Wine Council shows that Millennials are different.

Here are key takeaways on what retailers need to know about millennials:
  • They want to be in the know: Millennials who drink wine are twice as likely to belong to a wine club (20%) and to drink at wine bars in the past three months (38%) than older groups, (Wine Council).

  • They want sophistication: Forty-one percent of Millennials who drink wine say they drink imported wine most often vs. only 24% of Boomers and 31% of Gen X'ers. For example 31% of Millennials have drunk a wine from NZ, compared to only 15% of Gen X'ers (Wine Council). And 40% percent of 25-34 year olds agree that more expensive wine tastes better compared to 31% of adults on average. (Mintel)

  • They are willing to spend more to make an impression: Millennials say they spend about $10 more per bottle than average across a wide variety of wine buying occasions. For example, Millennials say they would spend $40 on a bottle of wine for a special occasion compared to just $24 for all adults. (Mintel)

  • They value authentic experiences when they shop: Millennials are much more likely to purchase wine at a winery (33%), specialty liquor store (40%) or gourmet food store (20%). (Mintel)
Wine is a favorite discussion topic on Yelp, a vibrant millennial community. A quick review of the listings for San Francisco reveals a beehive of millennial (and other) enthusiasts advising one another on the pros and cons of different wineries, wine stores, wine clubs, and restaurant wine lists. Here's an entry by sascha "just let me" b. from March 20, 2009:
Berna, I do one of the K&L clubs (champagne) as well as the monthly club with Plumpjack. I enjoy them both for the fun of having new and interesting wines selected for me that I wouldn't necessarily seek out (or find) on my own. I think that K&L has some good buyers --- which is the key to a good club --- and PJs has a great buyer as well. Do I always like every wine? No. Am I always satisfied? Pretty much. The value is there, and if you can budget the guaranteed $40-$50 a month, it's a lot of fun, and will expand your wine horizons no matter what club you go with.

I also do some winery clubs, but that is a different value proposition: you're only getting one winery's output, and you better make fer dam sure that you know and like the winemaker's style and vision.
The headline for retailers trying to engage Millennials – make it real and create opportunities for Millennials to study up on your category, and to share their knowledge. Help them show they're in the know!

For food and drink marketers wanting a more intimate understanding of millennials, check out Brand Amplitude's upcoming proprietary study of millennial trendsetters, food and wine.

Sunday, May 3, 2009

Too Cheap to be Good? It Can Happen in Food

The recession grinds on and people continue looking for ways to save. Meanwhile, brands are trying to entice new customers to give them a try and to get past customers to buy again. Discounting is rampant in cars, shoes, hamburgers, cruise vacations, the high end, the low end – pretty much all around us.

The LA Times reported last week on the Fast Food Wars. Both KFC and Pollo Loco were giving away free food -- to introduce new products in KFC’s case and to increase trial in the case of Pollo Loco.

As the article points out, it’s not clear how attractive the customers are that find heavily discounted or free offers appealing. Here’s a flash – they tend not to be brand loyal. This may seem obvious, but the path to retail bankruptcy is littered with brands that were going to make it up on volume.

It's not only likely that KFC and Pollo Loco are attracting unprofitable customers. In addition, they may be turning off their loyal customers by devaluing their offering. And the potential lost revenues from these loyal customers are far greater than the potential gains from switchers gained through low price promotions.

Recent research with consumers, we found that there is a price below which people become suspicious of product quality. For brand-loyal canned goods customers, the magic number is $1.00. Below a dollar/can, these shoppers suspect the product can’t be any good. They buy the brands they buy and pay what they cost because they think they’re better. That’s one of the main advantages of having brands.

How does that jive with recent reports from Procter and Gamble that volume is off for major brands like Tide and Swiffer? To state the obvious: Food is not a cleaning product. Consumers may be willing to cut back on the latter before they cut back on the former. Second, there is something potentially nostalgic about canned goods. It’s possible consumers are stocking up on them as a way to reconnect with simpler times. Another possibility: smart home chefs are using canned goods to bulk up their home cooking, for example adding canned olives or canned chopped tomatoes to soups or chili or pasta sauce.

Whatever the strategy, it’s worth it for retailers, including fast food chains, to pay attention. Pricing too low can lead to greater lost sales than pricing too high.

Thursday, April 23, 2009

Leaders Build Loyalty Into Their Business Model

As growth becomes elusive, retailers are hunkering down to hold onto the customers they have. A recent Aberdeen Group report shows that "customer loyalty programs and similar relationship marketing initiatives are some of the most critical factors that are impacting retailers’ sales and customer retention performance under these current difficult market conditions."

Many store-based retailers have bolted loyalty programs onto their businesses, using points based systems, discounting and giveaways to drive repeat business. Meanwhile, leading e-tailers have created business models that make it so appealing to do business with them that it is too hard or too much bother for customers to go elsewhere. By offering extraordinary service, convenience, quality, or value, these brands have found compelling ways to cement their relationship with their customers and overcome purely price-based competition.

Zappos is a great example I wrote about earlier this week.

Amazon Prime is another great example of an e-tailer achieving loyalty without points or merchandise discounts. In fact, customers pay Amazon $79/year to enjoy unlimited "free" 2-day shipping, discounted upgrades to 1-day shipping and no minimum order size. We buy more from Amazon than any other ecommerce site, and Amazon Prime is the reason. That’s loyalty!

Shutterfly is attempting to increase customer retention by capitalizing on recent decisions by competitors, land-based operators Snapfish and Kodak. Both have announced they will no longer store pictures for customers who have not purchased merchandise from their sites recently. Shutterfly’s CEO, Jeffrey Housenbold, used those announcements as an opportunity to reach out to customers past and present with albums stored on the Shutterfly site and reassure us via email that there will be no forced deletion on his site. Our photos are safe, regardless of what or when we buy. Of course, the hope is that the convenience of having digital photos all in once place will lead to reliance on that site for prints, cards, etc.

Is it a coincidence that all of these examples are e-tailers? I don’t think so. The Aberdeen report points out that brick and mortar retailers are still worried about getting the plumbing right — only 37 percent of store-based retailers surveyed reported that customers can join their loyalty program via the POS system in stores. Meanwhile, e-tailers are free to innovate their business — and loyalty — models.

Tuesday, April 21, 2009

Millennials & Loyalty – Oxymoron or No Brainer?

They’re between 13 and 30, spend over $20 billion a year and influence another $120+ billion in purchases. We live and work with them…we practically (and actually) raised them! But what makes Millennials tick? And more importantly, how do brands earn their loyalty?

On one hand, lots has been written about Millennials taking the word “fickle” to a whole new level. According to Iconoculture as reported by CNET, "You've got a generation of kids who've had an unprecedented amount of control of their media and they're not going to give it up. It does put out a challenge--for anyone in the media business--of how to keep attention in that media."

Bill Hanifin's latest research shows that "over 62% of global teens are apathetic to traditional advertising messages and 42% make purchase decisions based on the recommendations of their friends." As result, he concludes that "traditional methods to engage and retain best customers may not work with Generation Y" (aka millennials).

They snub well-known specialty retailers like Abercrombie for even more unique stores like Buckle. But trends change and (particularly young) Millennials look more narrowly for stores that resonate with them.

As a Business Week story on younger millennials points out, the challenge lies in striking the right balance in luring teenagers with cool and unique offerings but avoiding the slip toward ubiquitousness. "One of the interesting paradoxes of being a teenager is trying to be unique but not wanting to be singled out in a peer group." May be generalizable to all millennials.

At the same time, some have gained traction with millennials. Take ABC Family’s shift toward “hard-to-reach iPod-listening, Facebook-using, YouTube-viewing women, mostly ages 14 to 28.” As the network’s President, Paul Lee, told Variety "We ended up building a brand that's really resonating with that audience...The millennials consume obscene amounts of media, and the truth is this is a generation that wants to lie back and have great stories told to it."

Though they may be fickle consumers with short attention spans, ink has also been spent commending Millennials for being civic-minded doers. According to an April 14 story on AARP’s website (how ironic!) referring to Millennial Makeover co-authored by Morley Winograd and Michael Hais:
“Young adults who grew up in the shadow of the 9/11 attacks and saw the wreckage of Hurricane Katrina are volunteering at home and abroad in record numbers. The generation that learned in school to serve as well as to read and write, the Millennials were the first global Internet explorers even as they pioneered social networking for favorite causes at home. This civic generation has a willingness to put aside some of their own personal advancement to improve society."
So, which is it - fickle consumers? Loyal supporters of one or more causes? I think Millennials are both.

Will embracing social issues like Fair Trade (Starbucks) or shoes for impoverished kids (TOMS Shoes and Timberland) make millennials feel connected to the sponsoring brand, and turn them into loyal customers (and employees)? What about introducing new gizmos and applications to help millennials plan and save money? (Kraft's sponsorship of a new iPhone app that allows people to search for recipes and manage their shopping lists)?

What is the best way to build a loyal following of Millennials? What do you think?

Monday, April 20, 2009

5 Must-Do’s in Building Customer Loyalty

Many executives use loyalty programs to buy customer loyalty, offering discounts and giving away products or services, in the hope that they will make it up on volume. That said, success in implementing these programs and integrating the systems that support them has been somewhat limited.

According to an April 9, 2009, Aberdeen Group report: “Even though 53% of retailers surveyed indicate that customers can join their loyalty program on the retail website, the same is not true at the store POS. Despite the growth in online retail sales, store sales account for bulk of retail revenue and customer traffic. A mere 37% of all retail respondents reported that customers can join their loyalty program via the POS system in stores. This gap between the POS capabilities the retailers possess and POS processes that enable loyalty program implementation show that retailers are not taking advantage of the technology afforded to them."
Given the systems and other challenges in implementing “traditional” loyalty programs where customers earn points and redeem them for products or services, program design deserves careful thought. Here are 5 steps every executive team should take to ensure customer loyalty (and loyalty program success):
  1. Know whose loyalty you want

  2. Identify what you can do that will be motivating to them, as well as differentiating

  3. Get clear on internal expectations, roles and responsibilities

  4. Test and learn

  5. Rollout and measure
It’s probably not surprising that e-tailers are the innovators on this front. They tend to have newer systems, integrated databases, and more business model flexibility. Zappos is a great example of a leader and loyalty innovator. Founded in 1999, the shoe e-tailer has 7.4 million total customers, and 3.3 million of them have made a purchase in the last 12 months.

What do they do that’s so special? Zappos has a huge assortment – 230,000 SKUs of branded footwear – and offers free shipping in both directions. That means they have eliminated the downside to buying shoes (or apparel) online — i.e., the fit issue. At Zappos, there is no added cost to ordering multiple sizes of multiple styles and returning the ones that don’t fit. That’s standard for everyone.

What earns Zappos rave reviews and WOM is the way it consistently surprises customers with free shipping upgrades so their shoes arrive sooner than expected. Our work with women shows that shoes are one the fastest ways to her heart, It’s not only the free shipping and surprise upgrades that make customers rave about Zappos.

Employees are clear on the importance of building lasting customer relationships and on their roles in the process. Lots has been written about Zappos culture and the emphasis on delivering a WOW experience. One of the best descriptions is from an interview of Zappos CEO Tony Hsieh that Bruce Temkin of Forrester did last year.

The company has a clear focus on its target customer, knows what motivates her and appeals to that clearly and convincingly. They have employees on board, and use data to improve the customer experience. Delighting customers clearly pays Zappos dividends: Over 75% of purchases come from returning customers, and the company reached $1 billion in sales, generating over 30% comps the last two years, alone!

Loyalty pays. Doing loyalty right pays more.

Sunday, April 12, 2009

Drugstores Innovate to Increase Loyalty

Recent conversations with senior executives highlight a huge range of interpretations of customer loyalty and how to get and keep it. For some, it’s about offering discounts or rewarding customers with points toward discounts. For others, it’s about offering free stuff customers may or may not want.

The airlines popularized the the discount version of loyalty programs. American Airlines launched its AAdvantage loyalty program in 1981 and cards and points became the status symbols of the new loyalty. I know people who jump through hoops to fly enough segments to qualify for specific airline bonus programs.

While the programs arguably generate incremental bookings, building positive feelings toward the brand is a big part of the point. So, to see how well these programs have worked, regard for airline brands has to be considered.

Turns out the airline industry as a whole scored the lowest of all 43 industries tracked by the American Customer Satisfaction Index for 2008. In contrast, cigarette companies, wireless service providers, and banks -- not exactly topping anyone's list of favorite industries -- ranked higher than airlines, and were not even in the bottom 3! And airline tickets are a commodity, as the ever-growing number of web tools for finding the best fare demonstrate. So, overall, it's hard to say these programs have worked as intended.

Making it easy to join, and offering discounts for “members” like the airlines and grocery stores do, is one approach to loyalty. Recently, two drug store chains took a different approach by strategically selecting which relationships to invest in. Both have launched new programs that will help promote customer loyalty, even though they aren’t officially “loyalty programs.”

Walgreens just announced that it is offering free visits to its TakeCare in-store clinics for the rest of the year for workers who are laid off and have no health insurance. The assumption is that these workers will find new jobs, and when they do, they will continue shopping (and start paying) Walgreens.

CVS is also investing in a strategic group of customers. Though its partnership with Google, CVS pharmacy customers can now download their prescription and medication histories to Google Health accounts. Like downloads into Quickbooks, the ability to download into Google Health accounts may become standard. Google certainly hopes so. For now, CVS is the only drugstore to offer these downloads, and is betting the early adopters it appeals to are upscale customers who value the opportunity to manage their health-related information themselves, and will consolidate their prescriptions (and other purchases) at the drugstore that enables them to do so.

The urgency surrounding health care cost management and health insurance coverage is becoming a potent source of innovation and potentially of loyalty for retailers. Hopefully, health care providers and insurers will be similarly inspired!