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!

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 http://www.theclubmobile.com 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.

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.

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.

#1 - TAKE OUT WITH NO SET MENU:
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 kitchenettesf.com 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.

#2 - COMBO SIT DOWN-MOBILE:
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.

#3 - MOBILE ONLY:
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?

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.