Tesco loyalty program offers TV to members, targeting to advertisers

by Marketing ON 3 April 2013

UK grocery giant Tesco are stepping it up a notch in the competitive space of customer loyalty programs, offering its Clubcard members free movie and television shows on the newly launched ‘Clubcard TV.’

The new service is a bid for Tesco to cash in on its rich database of consumer spending habits. As targeted advertising is increasing in importance, Tesco hopes the service will prove to be extremely attractive to advertisers.

Clubcard TV will be available to all 16 million Clubcard members by entering a 16 digit code on the back of their cards. The free content can be accessed via computes, with plans to extend the service to a range of devices including games consoles, tablets, Smart TVs, Blu-ray players and set-top boxes.

Targeted advertisements will be displayed at the beginning and during each program based on previous purchases and information stored on each customer’s Clubcard. Kellogg’s, J&J, Colgate and Danone are some of the advertisers that have signed up for the launch.

Behind Clubcard TV is the same team that developed Blinkbox, in which Tesco bought a majority stake in April 2011. In the last few years Tesco has acquired a number of digital services including ebook seller Mobcast, and online streaming services, Blinkbox and WE7.

The programming itself will be geared towards children and families, but content will span across comedy, drama, kids TV, romance, thrillers and documentaries. Tesco has promised customers it has no plans to ever charge for the service.

Global brands carve foothold in Australia as loyalty to home-grown decreases

by Marketing ON 11 February 2013

International brands are gaining a stronger foothold in Australia with shoppers warming to big-name multinationals over of local brands.

The finding comes from marketing services firm Epsilon’s ‘2013 Consumer Loyalty Study’, which uncovered a growing passion for overseas brands, particularly among the higher income segment and younger age groups.

Australians are more open to overseas brands than ever before, following the recent expansion of a number of leading international brands into Australia, including Zara, Top Shop and Christian Dior, and are becoming less loyal to local retailers.

But while shoppers are increasingly favouring global names, loyalty across the board jumped significantly over the past year, particularly among clothing retailers, which saw loyalty levels up from 16% in 2011 to 27% in 2012.

Across clothing, grocery, financial services and travel, the four sectors investigated in the study, one-third report being ‘extremely’ or ‘very loyal’ to the companies they use most often. Shoppers were most likely to feel loyal towards grocery and financial services brands.

However, another 30% of loyal customers in Australia across clothing, grocery, travel and financial services sectors said they would abandon their most frequently-visited stores for other stores if inconvenienced by incorrect billing, difficult refund policies and other negative experiences. The figure is slightly lower (20%) when the negative shopping or service experience is online.

“The definition of consumer loyalty is constantly changing, especially in such a dynamic market,” vice president of client services, Asia Pacific, for Epsilon, Michael Kustreba, says. “This research study serves as a valuable barometer of consumer attitudes and behaviour, and brands must attune to consumer feedback in order to be successful in the Australian retail market.”

The study also found 58% of Australian customers consider value for money as the best way to gain ongoing endorsement.

The research was conducted online or face-to-face as appropriate during the third quarter of 2012 with 408 respondents, mapped to the age and gender demographics of the general population.

The 5 content marketing types to convert prospects into sales

by Marketing ON 18 October 2012

A content marketing strategy should involve five types of content, including trust building, educational, community contributed, curated and conversion content, according to a marketing author.

John Jantsch, author of The Commitment Engine – Making Work Worth It, describes content marketing as a tool that moves prospects from awareness to conversion, in a blog post summarising his book.

“The creation and distribution of content has become such a significant aspect of effective marketing and community building these days that it requires a high place in the strategy conversation in most every business,” he writes.

“It’s difficult for many business owners and marketers to come up with a big picture view of the role content plays in the process of building trust, being found and acquiring clients.”

Jantsch’s five types of content that are required in a content marketing strategy to move prospects along the different stages of the purchase path are:

Trust building: bridge the gap from general awareness to building trust as a useful and knowledgeable resource (eg. how to articles, reviews, articles),
Educational: once you create awareness and trust a prospect will want to know more about your approach, solutions, story and organisation (eg. ebooks, newsletters, webinars),
Community contributed: get your customers involved in producing the content to nurture loyalty and community (eg. testimonials, guest blog posts, reviews),
Filtered: curate and aggregate content produced by others to filter insights for your audience (eg. curated posts, custom RSS feeds, social media sharing), and
Conversion: provide a call to action or hook to convert prospects to the action of buying (eg. events, case studies, ROI calculators).

In addition, content for a content marketing strategy should be created around the most important keyword phrases for your industry, the essential themes of education in your business, and your company’s core points of differentiation, Jantsch concludes.

Virgin Australia confirms Passbook app will land in Aus

by Marketing ON 11 September 2012

Virgin Australia has confirmed reports Apple’s Passbook app is already functional in Australia, and formally announced its support for the ticketing and loyalty app.

Passbook, which will feature in the upcoming release of Apple’s iOS 6 operating system, is designed to act as a central point for boarding passes, tickets and loyalty cards and touted to be a precursor to a mobile payments system.

Virgin Australia tweeted:

Virgin passbook

“The rumours are true, we’ll be supporting Passbook for iPhone – more to come soon! pic.twitter.com/S0xTzUAo“.

Virgin Australia’s Melissa Thomson provided more detail in an emailed statement.

“Virgin Australia is planning to release mobile compatible technology allowing guests to store boarding passes using Apple’s new Passbook application,” Thomson said. “We believe that we are the first Australian airline to offer this service to our guests. Boarding passes stored in Passbook will be automatically displayed on guests iPhone screen at time of boarding.”

The tweet was in response to a report from the A ustralian Business Traveller who said a Virgin Australia passenger, Shaun Lorrain, checked in for a flight from Adelaide to Sydney on Friday using the airline’s mobile website; iOS 6 detected the check-in and offered to save the information into Lorrain’s Passbook account.

“Today after checking in last night and adding it to Passbook, I went straight through Adelaide Security to the lounge,” Lorrain told AppleInsider. “Had my breakfast and then proceeded to the gate. They took my iPhone and scanned it the exact same way they would have if I was using the web URL that they text you for a boarding pass.”

Passbook will also aid airline travellers by providing up-to-date information on delays and boarding gates, Marketing understands.

Four airlines are believed to be rolling out Passbook support for their passengers, with Electronista reporting American Airlines, United, Virgin and Delta preparing for iOS 6-carrying customers.

Originally published on Marketing‘s sister site Macworld. Additional content by Marketing staff.

Qantas to use Kerr’s allure in loyalty war campaign

by Marketing ON 20 August 2012

Supermodel Miranda Kerr is to front a new campaign for Qantas Club in the airline’s bid to fight off competition from Virgin Australia’s frequent flyer program and give the brand a younger image.

The campaign featuring the Australian model will cost around $1 million and is part of Qantas’s biggest marketing push since the 2000 Olympics, the Australian Financial Review reports.

It’s designed to engage with current members, attract new members and highlight the benefits of Qantas Club, in follow up to the airline’s recent launch of its new positioning – ‘The spirit of Australians‘.

Kerr says Qantas Clubs give her a ‘home away from home’ while she travels as well as a few indulgences. “I’m very excited to be involved in this campaign. As a frequent traveller, I know how important it is to have a space where you can relax and unwind, or stay connected until your flight departs,” she says.

The work sees Kerr expand her role as one of the airline’s ambassador and add to her roster of endorsements including David Jones and her own brand of skincare products. Qantas has not renewed its deal with long-term ambassador John Travolta, the Fin Review reports.

The campaign will run in Qantas channels via Qantas Frequent Flyer emails, qantas.com, in terminal and outdoor.

Net Promoter Score: the most valuable tool for companies serious about their customers?

by Alex Andre ON 18 August 2012

With online retailers growing four times faster than traditional bricks and mortar outlets, competition is rife between brands in the digital space. And in businesses such as ours, the customer experience can quite often be a ‘virtual’ one, potentially making customer loyalty even more challenging.

There are so many different ways to measure customer loyalty and seek feedback, it’s almost too hard to know where to begin, and all too easy to get lost in the detail. But at the heart of any good retail operation, online or offline, there is one concept that remains the most accurate indicator of customer loyalty – the likelihood of your customers recommending you to others. It’s also a very strong indicator for your businesses future growth.

Net Promoter Score (NPS) is a tool fully embraced by some businesses, yet to others still remains a completely foreign term. We recently started measuring our NPS at Edible Blooms, and the value we are getting out of it is just incredible. If you’re not using this concept in your business, I urge you to seriously consider it.

I’ve outlined some tips below that might help you get started, or perhaps make a few refinements if you already have it in place:

1. It’s a simple concept – so keep it simple!

All you need to do is ask your customers to rate out of 10 how likely they would be to recommend you, and let them provide additional feedback if they’d like to. If they score 1-6 they’re deemed as a ‘detractor’ of your brand, 7-8 a ‘passive’, and 9-10 a ‘promoter’.

How many customer surveys do you get sent asking for feedback? Does your likelihood to respond increase the shorter they are? I know mine does. Don’t be greedy wanting to know every intimate detail of their experience, if it reduces the number of respondents your data becomes less accurate anyway.

So keep it simple – it makes it easier to implement, and might even be the difference between implementation or being in the ‘too hard basket’, and it also makes your data more accurate by hearing from more of your customers, because you do want to hear from them – all of them.

2. Timing is everything…

Make sure you ask the ‘big question’ at exactly the right moment, whenever that may be for your business. You want to get a measure of their complete experience with you.

One of the most critical aspects of our customer experience is when the gift is actually delivered to the recipient, so we ask our customer (the sender) the big question two days after the gift has been delivered, and this timing is proving spot on. It allows for a very accurate NPS, and also gives us the opportunity to remedy the situation if need be in a timely manner, not two weeks later when the customer is long gone.

Our timing hasn’t always been right. Before launching NPS we did ask our customers for feedback, but it was too early, before they could really assess how we went. Since launching NPS our number of respondents has increased by more than 10 times. We still have a way to go before we get 100% response rate, but we’ve managed to improve this dramatically by getting the timing right. And we also feel more confident of the accuracy of our score (currently 70), knowing we’re hearing from more customers.

3. Give your detractors a voice

These are the people you want to hear from the most – it gives you the opportunity to make things right. And to do this you need to find out what went wrong. Build an extra space in your NPS form for comments, and give them a phone call if need be – that personal connection not only helps you get to the bottom of what really went wrong, it also increases your chances of turning them round!

We had a detractor last week we called within 10 minutes of them hitting the ‘submit’ button on their NPS survey. She was completely blown away by our responsiveness. She actually re-submitted her NPS survey, and this time completed it as a promoter. Just giving them a voice – sometimes that’s all it takes.

4. Use it to initiate change

A measure is only as good as what you do with it. And with NPS this couldn’t be truer – if you do nothing with the valuable feedback and insight generated through this tool, then you’ve missed the point.

Make sure you have a process improvement system in place to initiate change and prevent other customers experiencing what a detractor has already warned you about. On a positive note some great customer insight comes from promoters, make sure you do something with this as well, leverage from it.

5. Resource accordingly

Make sure you have an owner of your NPS in the business, a person or a team who are responsible for reporting on your NPS, and more importantly reviewing and actioning the results that come through. Whether it be contacting customers in a timely manner or managing the process improvement process, these are both key aspects of NPS that need to be appropriately resourced for.

Our relationship manager owns this process for us. Customers requiring a call are contacted within 24 hours, and process improvement is actioned almost straight away. The value we’re getting out of our NPS is testament to the priority she gives it.

6. Good or bad – use it as a motivator!

One of the most powerful ways to deliver a message is with an example of a customer’s experience with you – whether you’ve made their day… or ruined it. (Hopefully not the later on too many occasions!)

Use examples generated through your NPS to motivate your staff. Whether they be used in staff training or to make the team feel good about the amazing customer experience they deserve a pat on the back for.

7. Your goal – convert that detractor into a promoter

It’s certainly possible – some of our best advocates are customers who had a poor experience initially.

How do you do this? Contact them in a timely manner, listen to them, then do all you can to make things right and encourage them to return so they can put you to the test on their next experience with you.

8. Embed NPS into your organisation

To get the most out of NPS, it needs to be embraced by everyone in your organisation to some extent, obviously some more than others, but everyone needs to be across it and supportive of it.

Make it your number one measure. It should be right up there with sales performance, or even above it… you won’t regret it.

How to mobilise – analysis of IGA’s mobile loyalty program

by Joe Barber ON 7 August 2012

Joe Barber lays bare Ritchies IGA’s mobile loyalty program to illustrate that in mobile marketing short-term campaigns are misguided – while this truly powerful program goes all but unnoticed.

Omni-channel retailing is an evolution of multichannel retailing, but enveloping the premise of a seamless singular strategy to the consumer experience through all shopping channels: mobile internet devices, computers, bricks and mortar, kiosks, television, catalogues and so on.

Over the last eight years, I have seen thousands of mobile implementations across five countries and am still bewildered by the inability of Australia’s major retailers to understand that the mobile is not just becoming an important adjunct to extend a media plan or tactical concept but, in fact, should be considered as the core upon which all extended media decisions are leveraged.

The majority of mobile executions in Australia, especially those formulated by agencies, are short-term tactical executions that fail to really deliver the massive potential mobile can deliver. Follow-up is limited, business process integration is all but ignored and the mobile is treated as little more than a ‘size challenged’ desktop. Treat mobile as just another digital channel and you’re destined to be overrun by those that acknowledge its power, understand its ability to create a true one-to-one relationship with a consumer and consider the impact of mobile as potentially significant as the deployment of a national interoperable EFTPOS network.

In some regards, my commentary is extremist to try and make a point. Unfortunately, the lack of true integration and creative adoption is more prevalent in Australia than in the US, the UK and many other countries; however, one implementation that started with a creative vision around five years ago is definitely worth analysis and is delivering some fascinating results. Despite winning an award, the program is all but under the radar from mainstream agencies and yet major brands and IGA are experiencing some astonishing results.

In store promotion Back in 2007, Fred Harrison (Ritchies IGA CEO), Richard Robinson (an independent mobile consultant and former CEO of Simon Richards) and Adam Trescowthick (investor and CEO of Third Screen) began discussions on the adoption of mobile within the framework of Harrison’s supermarket business. The discussions went beyond the ad hoc tactical execution and explored a core integration of mobile into business systems and Ritchies’ Community Benefits membership platform – some very insightful omni-channel retail thinking.

The program concept was simple in principle: once a week as the impact of letterbox flyers begins to diminish, members of the program would receive a high-impact animated graphic along with text explaining six special, member- only offers – discounts, package deals and other incentives. Importantly, as I’ve expressed so many times with mobile, the program delivered a simple high-value benefit to the recipient. Harrison has always been regarded as a man looking to push the envelope and to challenge traditional thinking – this time to explore the untapped potential of mobile.

Some would say he’s a man with a vision and willingness to take calculated risks. After running some controlled, low-impact tests, the initial phases of the program showed some interesting signs. The trial stores attracted good membership numbers and the data collected revealed increasing visits and increasing spend – that’s more sales, more often.

By early 2010, after many revisions of thinking and process, the mobilisation of the membership program finally got the approval to roll out across all 70 Ritchies stores. Based on early trial results, it also saw support from IGA Distribution, the wholesale partner of the IGA retailers. Through a commitment from the Victorian merchandise manager, the program took on a new life, whereby IGA Distribution took over the purchasing and Third Screen managed the creation, distribution and member management of the program, leaving the retailers to do what they do best, which is sell merchandise.

Harrison says, “It has been an interesting ride exploring how to properly capitalise on mobile.” The original program had around 65,000 members with an early target to get to 100,000. Harrison adds, “A significant percentage of our overall sales are now from within the mobile program and we are able to get some great insight into our consumer behaviour from this key group of members of the program.” In time, the data will become critical to decision- making across the business.

Where this mobilisation initiative varies from traditional implementations is the massive commitment made to integrate the core transaction systems into the mobile architecture, creating a powerful closed loop system able to track and measure from the push messaging campaign right through to in-store purchases. The point of sales systems are ‘aware’ of memberships and those entitled to mobile exclusive offers, avoiding the challenge of linking the device and the transaction. This commitment is what now delivers IGA some insightful tracking and measurement results. There’s nothing anecdotal; it’s all real and auditable down to a single handset.

Distributor Metcash was supportive of the mobile program and became more involved, delivering some immediate benefits in the ability to assist retailers to talk directly to their wide customer base. The unique structure of the Metcash and IGA store network has traditionally meant that Metcash does not interact directly with the end user – the customer – but the mobile program gives it the opportunity in association with its retailer base.

Metcash and Third Screen are now in the process of rolling out the program to all interested IGA stores. Other retailers outside of the Ritchies IGA network are also coming on board. There are a number of store owners working with Third Screen, which already has over 100,000 members and a new revised program goal to have 250,000 by the end of the calendar year.

The membership of the mobile benefits program is constantly monitored and within the past year it has seen a growth in what is referred to as the ‘cheer squad’ group: those that are 100% committed to the cause. This group is now around 20% of the total membership and includes 70% of the total spend of the program.

Segments

Closely following the ‘cheer squad’ are the ‘paid-up members’, and there has been an impressive movement from the ‘supporter’ group to the ‘paid-up members’ over the past 12 months, which has also seen the percentage of spend in this group increase by over 2%.

The ‘supporters’ group and the ‘uncommitted’ group now account for 63% of the membership base, which is down from 69% a year ago.

As mentioned above, the program is based on a weekly MMS offer being sent to the opt-in database, making it unique in the market. The MMS allows the suppliers and retailers to deliver a rich media message directly to the member’s phone. The message is typically sent as an animated gif with the initial slide indicating which IGA store the message is coming from.

The message includes a unique offer from each of the banner retailers, so the store owners have the opportunity to create an offer they believe will generate sales. In addition, there are four or five offers organised by Metcash directly with the supplier base. The offers are across all categories and are usually extremely well-priced.

Various offers

Has it registered yet? Not only is the mobilisation program deeply integrated with the transaction systems, integrated into the marketing, dovetailing with the letterbox flyers and delivering the consumer real benefits and savings, but it’s hyper-local. The complex message management system built by Third Screen in conjunction with Metcash allows for automated local specials to be inserted and managed right down to store level. In fact, the system can enable the tailoring of offers directly with suppliers targeting specific groups of members or even an individual member based on transaction history. Now that’s powerful.

As the program is attached to an existing loyalty program within the store, or a custom created and managed program if one doesn’t exist, all that the customer need do is purchase the promoted products, swipe their card and the reduced price will automatically be deducted – and this is all automated through the cashier.

Third Screen has integrated the program across all the IT platforms within the store network and creates end user reports for the participants. Ongoing analysis of the data is showing significant increases in sales for the promoted items. A typical weekly report is shown below demonstrating the value in the data collected. This report shows the effectiveness of the mobile offer (the red spires), as against the previous six months of sales of the product within the membership database. Yes, by integrating the systems with the membership system, it’s possible to track historical sales against the impact of the mobile campaign. For the data analyst, that’s terabytes of data and analysis heaven!

Weekly report

The seven-day spikes within the above graph represent catalogue promotion periods for this product – which are over a seven-day period as against the five-day promotional period for the mobile offers. As a result of the reporting, the store owners are also learning more and more about their customers and the Metcash team is learning more about which offers work best within the mobile space and for the membership. That’s almost a three times greater impact on sales than for the same product promoted through catalogues. It’s no surprise that brands are now working directly with the Metcash team to drive sales.

The store network joins the program free of charge with the key commitment that they merchandise the offers in-store as requested to provide a unified national integrated and uniform program. Point of sale materials act as advertising for the program in-store and underwrite the ongoing growth of the program for all banner groups.

As the database of members grows, offers are now being created based on previous shopping habits. Third Screen is able to identify a group of shoppers – be that at a category level (e.g. liquor) or at a product level (e.g. dog food) and the Metcash team are then able to work with the supplier base to deliver an offer that is relevant and targeted to the members who will respond. The advantages of this are obvious in creating better offers for the membership. Plus, reducing the target audience gives a significant lift in the ROI for the supplier.

The goal of the program is to ensure that the membership database is fresh and shopping with IGA as much as possible. It plays straight to the heart of all marketing and promotional objectives: more revenue. Research undertaken on the Ritchies IGA database in May 2012 showed that for the previous three months (February to April):

up to 40% of the membership shopped on average weekly,
up to 67% shopped on average monthly, and
over 96% of the members shopped at least once in the three- month period.

Where the data analysis shows that members have not shopped, a program has been created whereby the member is targeted with an offer to entice them back in-store and that, if this offers elicits no response, a phone call is made and if the member wishes to opt out they are opted out.

The rules dealing with how lapsed shoppers are managed are constantly being reviewed, with the overall goal being to ensure that the membership database on any given day is as fresh as possible – this leads to higher redemption rates and better ROI for the participants.

This is an incredible focus on the most important thing in business: the customer. The efforts to re-engage and deliver extra special benefits leading to a direct phone call is a level of customer focus that so many have forgotten and ignore by hiding behind digital systems. Without digressing too far from mobile, this level of core philosophy weaved through a new technology is seemingly obvious. Think about how many lists and loyalty programs you’ve joined and in two years have never been ‘touched’ regardless of being a regular shopper or not having returned for two years. Maybe some mass mailings or email spam, but personal targeted SMS/MMS messages and then a phone call? Imagine how important and special as a customer that would make you feel. Expensive maybe, but think of the viral impact and word of mouth. That’s something I’d tweet about and suddenly there’s an extra 3000 people hearing about the incredible personal attention given by IGA.

These promotions are aimed at engaging with the membership at more than price and product. There are many opportunities for free-thinking suppliers to engage with the membership and generate interesting outcomes; it’s not always just about increasing sales. For me, a mobile evangelist, the vision of Harrison and Trescowthick combined with the Metcash IGA team has created one of the best examples of how to capitalise on mobile by integrating into foundation systems, linking with transactional data and analysing in a manner that challenges even the most seasoned retail analyst right down to full localisation. When you think of SoLoMo (social, local, mobile) or omni-channel retail, then here is an outstanding case study of persistence, innovation and success. Thanks to Fred Harrison of Ritchies IGA for sharing the data.

As a final thought and now my chance to dream… imagine if this data were combined and linked to non-grocery behavioural data, such as clothing or general household items. Imagine being able to target consumers based on their local shopping area, their food buying habits and the types of clothing they enjoy, to target shoes or homewares that suit this specific demographic and present a high-value offer to a well-targeted audience. The ROI would be staggering and the shared insight between participants would generate fear among the most seasoned retailer if they weren’t participating. But that bigger picture mobilisation thinking is still some time away and the innovation shown originally by Harrison unfortunately is not commonplace and usually stifled anyway by the external suppliers who are engaged and meant to be creating and designing the innovation.

Seven things to avoid in a customer loyalty program

by Nick Spooner ON 11 July 2012

The recent fervour around customer loyalty programs has reached fever pitch, as retailers try ardently to win a share of consumer spending, which by all reports is subdued or declining. The trouble is, with everyone trying to get in on the action, consumers are becoming more discerning and more critical of programs that don’t deliver.

Today, most people have signed up to dozens of membership rewards programs – frequent flyer programs, frequent shopper programs, credit card rewards points programs, daily deals sites or promotional mailing lists – but how successful are these programs in driving loyalty?

Loyalty programs, at their core, are all about changing long-term consumer behaviour, so that a customer presented with two or more choices will opt for the choice that they perceive rewards them best. The ultimate goal is that over time this behaviour is transformed from a conscious choice into an unconscious loyal habit.

There are several reasons why dangling a loyalty program carrot to entice a consumer to shop is not as simple as it may first seem. Here are seven loyalty sins to avoid:

The program is not generous enough to adequately reward or motivate loyalty, or is designed in such a way that redeeming loyalty benefits takes too long or is too difficult. This can be summed up with the phrase, “It’s just not worth it”. Phoney or miserly loyalty rewards are usually the result of incentives being tied to old, non-customer objectives such as increasing a retailer’s market share, populating a database or market research.
The program is a copy-cat scheme, designed with little understanding about what matters most to your unique customer, based instead on other existing programs offered by competitors. This is a ‘one size fits all’ miscalculation. It may be quick to build, but it leaves you with no distinguishable point of difference. Also consumers are loyal for a number of different reasons, not just the promise of points or vouchers, so you should invest time to understand what is most desirable and carefully create the program around the customer. For example, your customer may be drawn to exclusive experiences such as special events, one-on-one advice or ‘master classes’, and you may not need to offer discounts at all.
Staff culture does not have a relentless focus on the customer. Poor customer service is the enemy of customer loyalty. Having changed the customer’s behaviour and encouraged them to consider your brand, a negative experience can drive them away forever, or worst, prompt them to discourage others away too. Even average service that doesn’t recognise a VIP customer could also create a negative experience.
Poor-quality customer data and information or lack of use by marketing decision makers. Having collected information that was willingly provided by your loyalty program members –such as their date or birth, where they live and other contact information – combined with transactional data such as how often they shop and what they buy, many retailers do nothing to enhance the experience or engage with the loyal customer on an ongoing basis. It could be as easy as sending the customer a birthday gift voucher, a newsletter, or suggesting products that complement ones already purchased. Some innovative retailers use customer data very effectively, such as using it to design the store layout or product range, or inviting local customers to events in store or in the local community.
The program is not well monitored or was poorly implemented without enough testing. This is the ‘set and forget’ mistake and it means that the full potential of the program won’t be realised. If the program needs to be refreshed or just tweaked, you can discover this quite easily by measuring how well it is delivering the desired outcomes such as repeat purchases or higher value purchases.
Management thinks technology is the only solution. Loyalty is more than a card, so you can’t rely on swiping a card at the point of purchase to create a loyal customer. Even new digital channels that are breaking new ground in attracting, engaging and retaining loyal customers, are only as effective as the dedicated, knowledgeable and responsive team driving them. Technology is an enabler, not a solution all by itself.
Management has little involvement in the program and fails to staff the rewards team with senior business leaders.

So, who does it well? The Woolworths Everyday Rewards program is a loyalty program that works well in driving loyalty. It offers regular supermarket shoppers a comprehensive range of benefits and various ways to engage and feel rewarded – from discounts, gift cards for multiple stores, petrol vouchers, exclusive offers, partner programs and competitions. The rewards are easy to redeem (some are redeemed automatically) and customers can engage with blogs and other social media channels to gain current information about what’s on offer.

I also think Myer are doing it well. The Myer One program is very popular with customers – nearly two thirds of transactions at Myer are made by Myer One members. That’s an impressive level of penetration, and also shows how the program is driving behaviour. Myer can further enhance its loyalty offering by analysing the transactional data such as frequency, monetary values, as well as basket contents to tailor offers and promotions. It also makes it very easy for customers to feel rewarded, by automatically sending gift vouchers to eligible customers, so they can realise the benefits of loyalty without the hassle of time-consuming redemption processes.

Retailers and service providers must recognise what loyalty means for their customers and design a program accordingly. Most people are loyal because it makes them feel special, so creating loyalty starts with creating a special, memorable, engaging experience.

Customer loyalty programs: too much love, not enough action?

by Bri Williams ON 5 July 2012

Loyalty programs are big business. From the local coffee shop to the leading banks and retailers, everyone seems to want a piece of the ‘customer engagement’ action leading to wallets full of loyalty cards and inboxes full of VIP offers. But are the majority of businesses wasting their investment by chasing hearts and minds when they need to be chasing hands and feet as well? Too much love and not enough action?

Importance of customer loyalty programs

On paper, investment in customer loyalty programs makes sense. According to Rob Bauder, a loyal customer is up to twenty times more valuable to a business than an uncommitted customer.

Further, your customers probably think they should be rewarded for their loyalty. An Ernst and Young survey of 9000 finance sector customers reported that almost nine out of ten insurance customers believed that loyalty was important, but 41% felt their insurer did not recognise their loyalty.

No wonder MYOB reported that more than one third of Australian small and medium businesses were set to increase their activity around customer attention and loyalty in 2012, with 39% stating their top priority was to ‘Focus on customer retention strategies’.

But loyalty programs are expensive, and my concern is that marketers are not getting adequate return on investment because they are concentrating on getting people to feel engaged with their brand rather than on habituation of brand purchase. Winning hearts and minds is nice, but hands and feet are what make the cash registers chime.

Customer loyalty behavioural model

Consider the following model that looks at the emotional and intellectual dimension of loyalty programs as well as the behavioural outcome. To maximise ROI from loyalty, there needs to be a combination of both.

Maximising Buyer Loyalty

Buyer ‘stickiness’ is what I refer to as attitudinal loyalty. It means on a like for like basis, your customer will choose you over your competitor because they have more of an emotional relationship with you. This is the battleground for the ‘hearts and minds’ of your market.

Buyer activity is how often the customer does business with you. It’s the battleground for the ‘hands and feet’ of your market.

Affective loyalty programs

High stickiness but low activity is what I call an ‘affective’ loyalty program. You have encouraged your customer to like you but not actively spend money with you. You’ve left yourself open to carrying a relationship without any real benefits. In romantic relationship terms, it’s like you’re stuck being platonic friends when you want more.

If you are running an affective loyalty program, you need to focus on driving more activity from your customers. Researchers at Curtin University in fact found that for small businesses to derive positive value from loyalty programs, they needed to concentrate on moving light customers to heavy or it could drive their business into the ground.

Transactional loyalty programs

High activity but low stickiness and you have a ‘transactional’ loyalty program. Here your customer might do business with you quite frequently but you have not managed to engage them, leaving you open to substitution. Now we’re in ‘booty call’ territory.

I place Woolworths and Coles in the transactional category because the core of their services are broadly interchangeable. As professor of marketing science at the University of South Australia, Byron Sharp, stated in an interview with ABC News, “shopping decisions remain far more influenced by store location and availability of parking.”

Transactional programs need to do more to engage their customers emotionally by drawing connections between the program and the customer’s identity.

Depleted loyalty programs

Low activity and low stickiness is a ‘depleted’ loyalty program. It’s one that needs radical overhaul because it’s not engaging your market and not stimulating purchase. Sorry to say, but spending money on someone who doesn’t like you or share themselves with you is well, not a relationship.

Local cafes tend to fall into the ‘depleted’ trap particularly when they use stored value rather than ‘punch’ cards. These cards might be great data sources to link the customer to the purchase but they fails the behavioural test of vividness; if you can’t see the outcome (i.e. how many coffees I need to buy to get one free) you are less likely to work towards it.

Habitual loyalty programs

What you should be driving for with your loyalty program is high stickiness and high activity, in other words, a ‘habitual’ loyalty program. Sure your customers like your brand, but they are also actively putting their money where their mouths are. Importantly your loyalty program is driving habituation rather than just attitudinal regard, meaning your customers will be extremely difficult to dislodge from the relationship because you’ve moved beyond intellectual and emotional engagement, and created a habit of buying your brand. Let’s not kid around, this is the real-deal. Warning to commitment-phobes, this is a marriage!

Retailer Myer is trying to habituate behaviour through its Myer One program. Rewards are geared towards in-store use, connecting the value of the reward with revenue generation and customers receive personalised invitations and benefits, for instance a birthday voucher to enhance stickiness. The rewards are presented in stored-value card format, which is important behaviourally in two ways. First, it is a tangible representation of value that separates it from other mental bank accounts the customer will have, increasing it’s likelihood of use as a guilt-free purchase currency and second, the customer has the freedom to choose how to spend the reward, maximising their sense of personal control.

In the past I would have also placed Qantas in the habitual box. Qantas works hard to remind customers where their points can take them (vividness), partners extensively to make points generation easy, and uses membership tiers to motivate customers to increase activity. However, expiring unused but earned points, and restrictions on use of points reduces the ‘stickiness’ dimension and leaves Qantas close to transactional. Increasingly out of sight, out of mind.

Loyalty programs can be an important source of marketing for businesses but they come with a big, fat caution: love won’t pay the bills and action can be empty. Strike a balance of both and you will successfully drive habituation and through that, healthy ROI.

Challenges of Chinese banking: the complexity of Chinese loyalty

by Marketing ON 15 June 2012

Image credit: Iain Brew.

About the authors: Dr Chris Baumann is a senior lecturer in business at Macquarie University in Sydney and a visiting professor at Seoul National University. His research is on customer loyalty, competitiveness and East Asia (China and Korea). Dr Hamin is a lecturer in business at Macquarie University. Dr Rosalie L Tung is a chaired professor of international business at Simon Fraser University in Vancouver.

Chinese consumers are an important target market for banks, both in China itself and also overseas. A recent academic study tested for levels of business assigned to banks by Chinese bank customers. The investigation of Chinese banking behaviour found that ethnic Chinese have overall adapted their customer loyalty to local environments in Australia and Canada.

However, overseas Chinese’s savings held with their main bank are substantially higher than for local Caucasians. Based on the study’s survey of 645 Caucasians and Chinese in Australia, Canada and China, overseas Chinese on average assign 88% of their assets to their main bank compared to Caucasians who only allocate roughly 73% to their main bank. In contrast, the Chinese in China invest 70% of their savings with their main bank.

High loyalty levels of the ethnic Chinese for savings products require retention strategies by banks to sustain customer satisfaction with resulting customer loyalty of the ethnic Chinese. Marketing campaigns should offer products and services customised for the ethnic Chinese given that this lucrative segment is increasingly targeted by both local Western banks but also financial institutions from Asia and China itself.

The joint Australian/Canadian study also investigated borrowing behaviour and found that the Chinese have much lower loyalty levels than the Caucasians. When financial need arises, the Chinese draw on their own savings: with savings between 30-40% of their annual income, the Chinese have one of the highest savings rates in the world.

The ethnic Chinese are an attractive segment with enormous potential for growth, but their low loyalty levels for borrowing products require more aggressive marketing campaigns. Overseas Chinese are entrepreneurial and engage in real estate investments, making them profitable segments for new and increased loans and lines of credit. The challenge for banks is that this segment is highly competitive and shops around for the best deal, putting pressure on Western and Asian banks alike.

Western banks need to better understand Chinese consumers where the lowest loyalty levels were found in China itself. The Chinese in China only borrow 19% from their bank since Western and local banks are in direct competition to microfinance pools hui (the Chinese term for ‘club’). Huis are the cornerstone of China’s relationship-based informal Rotating Credit Associations where family and friends self-manage their finances. Therefore, banking products and services in China need to be positioned and promoted more competitively in order to deviate borrowing business from family and friends to the formal banking industry.

Details of the two studies referred to can be found here and here.

Read next: Dr Baumann’s previous article for Marketing magazine ‘Connecting with the new Chinese consumer’.

Apple’s ‘Passbook’ app could kick-start mobile loyalty and payments

by Marketing ON 12 June 2012

Apple released its iOS 6 update overnight to the usual fanfare, introducing a number of new features that could impact on the way brands interact with consumers in the mobile ecosystem.

At the head of the pack is the new native app ‘Passbook’ which grabs your boarding passes, tickets, store card apps (like Starbucks or CardStar) and the like and organises them. It also promises to make the loyalty card process a lean-back experience for consumers, by bringing up the appropriate card based on current location. For instance, movie tickets bought online can be stored in the app and, rather than having to search for the app and ticket, your phone’s GPS will sense that you’ve arrived, and load your ticket to the lock screen automatically, ready to be scanned.

Introducing the new feature, Apple’s senior vice president for iOS software Scott Forstall call it “the simplest way to get all of your passes in one place.” The ‘passes’ can also be updated when details change. For example, if your gate changes while you’re at the airport, the saved card in Passbook gets updated automatically. Forstall told developers at Apple’s Worldwide Developers Conference, which unfoled early this morning local time, that iOS 6 includes a new Passbook API (pass kit) for creating and updating passes for the app.

While the app is not a full mobile payments system, like Google Wallet, as it doesn’t store credit card or bank account details, it is a step in the direction of mobile redemption behaviour and might prove to be a smart road to easing consumers past concerns over mobile payment services.

Also of note to marketers is full integration of Facebook into the operating system, similar to how Twitter was integrated into iOS 5, placing Facebook links in default apps such as calendar, contacts and even the App Store itself.

Facebook events and friends’ birthdays, for instance, will now show up in your Apple device’s calendar. You’ll be able to post locations to Facebook directly from the maps app and post photos to Facebook directly from the photos app. You’ll also see apps friends like when you’re browsing through the App Store.

A raft of upgrades were also made to Siri, which now allows you dictate Facebook and Twitter posts, call up more information on sports and restaurants, launch apps and use it from your car, and the maps app which has been rebuilt from the ground up.

The upgraded software will give the iPhone a shot in the arm while the market waits for the next hardware upgrade, rumoured to include a larger screen. Apple will need to continue to evolve the iOS user interface, by adding proper support for widgets (including third party widgets) and add a broader set of APIs in order to remain on strong terms against the more open Android system, according to Jan Dawson, chief telecoms analyst at Ovum.

“Apple must find a way to replace the remaining third-party services, which are core to many users’ experience on the iPhone, with its own,” Dawson says. “It is likely to fix this problem with Maps in iOS 6, but it has a similar problem in web search, in social networking, and in PIM (email, contacts and calendar). Without really compelling offerings in each of these areas, Apple’s users will become increasingly ingrained in third party services which may be better supported on other platforms.”

Cash, points and steak knives

by Marketing ON 15 September 2010

The perception of many consumers is that most loyalty programs ask lots, but give little. This is fuelled by media reports of having to spend big just to get a bus trip to Shepparton. It’s a pity but in many instances commentators don’t understand the dynamics of programs that, if well structured, motivate customers to consolidate spend with certain brands.

However, if customers think they are getting short changed – in real terms or perceptually – all that great work in setting up a program will fast evaporate.

There are lots of elements to making your loyalty program work but one of the biggest challenges facing businesses is to determine its ‘currency’. Points that are able to be redeemed for merchandise or flights, percentage discounts, straight cash back, preferential access to special offers or VIP treatment – these are all valid and valuable options in providing value to customers.

But that’s not where you should start in dealing with this vexed issue. It really all depends on what you are trying to achieve.

Are you mainly focused on driving sales today or do you want to significantly improve the relationship you have with your best customers to build advocates? Identifying your primary objective is key – you can then build from there.

1. Sales today – if you are predominantly after increasing frequency of visits or average sales, this is best dealt with by providing achievable rewards as close to the point of purchase as possible. Cash back and percentage discounts (either instantly or by gift card redemption) are particularly effective in driving increased sales because customers can see the value in a transparent and immediate fashion. Priceline, one of Australia’s five largest programs by member number, does this really well with clear achievable hurdles and tiered discount rates.

But beware – cash rewards customers are loyal largely to the discount drug. They will move to a brand that offers that little bit more if nothing else motivates them to stay loyal.

2. Share of wallet – a points based program is, in theory, better structured to grow longer term share of wallet gain if the value equation – i.e. the earn to redeem ratio – is competitive and proportionately richer as spend and membership years grow. Make the time frame too long, the hurdles too high or the point’s life too short and then potential damage to the brand will be significant and long-lasting as the customer will feel cheated over a longer period of time. At best you will have just added a cost burden on the business with little benefit to the top line.

3. Lasting Loyalty – building longer term loyalty is, of course, much more than dollars back to the wallet or points in the bank. The key is building components into your loyalty strategy or program that reward – either directly or experientially – in an engaging and enriched fashion.

For example, the IKEA FAMILY reward program goes beyond year round points or discounts by offering a suite of benefits that, yes, includes offers for reduced pricing on certain products, but taps into the home family vibe of the IKEA brand by giving members a free cuppa in the restaurant. A simple and low cost feature that is, nevertheless, an engaging reason to spend time in store. Country Road for instance provides personalised shopping experiences for their top tier – one-on-one assisted shopping. What a great way to engage with your most valuable customers (and no doubt sell a lot more than if they shopped alone!)?

So what is in it for your brand? For instance if you were a food brand why wouldn’t you not only encourage but reward customers for developing and sharing recipe ideas? If you were a baby food product why wouldn’t you link new parents together so they can share tips and tricks – and importantly reward them for doing that? Wouldn’t your greatest blogger expert be not only recognised and congratulated but also rewarded with exclusive opportunities? The use of social media platforms opens this option up significantly.

Importantly building loyalty through emotional engagement will reduce the impact of any small differences in the earn-redeem value equation. It will be a richer, deeper relationship that should – if managed right – lead to truly loyal customers who become your advocates.

Now isn’t that better than a set of steak knives?