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.

"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.

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.

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?

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.

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?

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.