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Rebates: The Loyalty Monster?

by Ron on Tuesday, May 18th, 2010

The Palm Beach Post recently ran a story about rebates and how frustrating it can be to redeem them. The article reprints the famous strip in which Dilbert confronts the three-headed Rebaterus monster and finally gives up trying to get his money.

Rebates aren’t something most small business have to concern themselves with, and they certainly aren’t part of Zavee‘s model. Nevertheless, they are an interesting touch point between marketer and customer. How large companies handle the complex questions about rebate redemptions may have implications for how smaller businesses deal with analogous situations in which the cost of making a customer happy may be to lose her altogether.

Consider what happens with a rebate: On the one hand, the marketer is willing to pass along an amount of money that may be significant both in absolute terms and as a percentage of the purchase price. This should create a positive interaction, especially for rebates that result in, say, a mobile phone costing the customer zero out of pocket. On the other hand, a redemption process that the consumer views as overly complicated or simply unfair can leave an unpleasant aftertaste and potentially threaten a relationship that may just be beginning.

Marketers have a legitimate reason for making the redemption process at least somewhat complex: preventing fraud. Fake bar codes and forged receipts are only two of the ways companies could be preyed upon if redemption were too easy. Moreover, some non-redemptions, or “breakage”, is attributable to consumers’ own inability to follow directions, such as mailing in the rebate by the deadline. Unfortunately, it is difficult for the consumer to differentiate between redemption strategies that are designed to protect the company (and, ultimately, consumers), from strategies that are expressly intended to increase breakage. And consumers do not seem inclined to give rebate marketers the benefit of the doubt.

We haven’t seen a great deal of discussion about the potential impact on customer loyalty of rebate redemption strategies, and we think there a great many unanswered questions. Here are a few that we hope loyalty professionals will consider and talk about:

  • If a consumer comes away from the rebate redemption process convinced that the marketer was attempting to (or did in fact) prevent her from redeeming her rebate, how long does that ill feeling remain? What are the variables that determine whether the consumer chalks it up to lessons learned or is lost to the marketer forever? Assuming that a given rebate redemption strategy will result in some loss of customer business, how do marketers calculate those losses in determining the ROI of a rebate program? Does the breakage always pay for the lost customers?
  • Do marketers take into account the propensity for frustrated consumers to share their experiences with their social graph, e.g., on Facebook and Twitter? What steps are marketers taking to participate in the conversation with consumers, e.g., to explain how the marketer’s redemption strategy reduces fraud and keeps rebate programs alive?
  • What are the fulfillment industry’s goals in structuring rebate redemptions? More specifically, is maximizing breakage an overt goal or merely an inevitable byproduct of loss prevention strategies? Is it reasonable for consumers to expect that marketers are capable of balancing their desire to prevent fraud with the customer’s desire to receive the rebate without undue difficulty or delay? Some companies have taken steps to make the redemption process easier, without changing the underlying eligibility rules, by walking consumers through the process on their Web sites. Is this the wave of the future, or do these marketers have unique reasons for making redemption easier?

At Zavee we don’t have answers to any of these questions but we hope the loyalty industry recognizes their importance and gives them the consideration they deserve.

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Using Social Media for Marketing Research

by Ron on Tuesday, April 20th, 2010

Bill Hanifin always poses the interesting questions every marketer should be asking – but might not be. In a recent post, Bill asks, “How do we gain insight into the customer preferences that drive purchase decisions?”

That’s almost a rhetorical question, because there many marketing research techniques available; Bill skewers discusses them in his post. Bill’s really fascinating question is, “How can we re-engineer our methods of collecting attitudinal data from consumers?” Bill proposes some ways in which Social Media can be part of the answer, and I’d like to suggest some others.

Lifestyle Boards/Moodboards/Market Research via designandtechnologystudentSome very quick background: Researchers use both quantitative and qualitative measures to figure out what consumers want and what makes them buy. Quantitative tools, such as telephone surveys, use statistical principles to draw inferences about a large group from the responses of a random sample of that group. However, they are subject to all sorts of bias (usually unintentional) that can affect the validity of the data. Online surveys are particularly tricky, since their self-selected sampling can never be truly random, which means they aren’t as quantitative as they might appear.

Qualitative tools, such as focus groups, don’t provide the comfort of statistics, but instead are intended to produce insights by probing more deeply into the motivations of consumers. This can get marketers to think in new and different directions. Although our experience with focus groups and other qualitative tools was very successful, they can be compromised by the small number of participants, the group leader’s personality, bias and skill, and by personalities within the group. Whether quantitative or qualitative, however, the data never “speaks for itself.” It’s always subject to interpretation, and sometimes to wishful thinking and oversimplification.

Social Media opens up a world of possibilities for marketing researchers, agencies and marketers. Several characteristics of Social Media tools make them ideal for provoking creative thinking and producing insight:

  1. Penetration. Although it is not equally dispersed across age, education and income cohorts, access to Social Media is extensive and growing, even among older consumers.
  2. Speed. Social Media can be used quickly – almost in real time on mobile devices.
  3. Opt-in. Social Media is inherently permission-based. This may not make it easier to find a random sample for an online survey, but it does make it easier to find consumers who will share their opinions, insights and experiences because they want to rather than because – as in the case of focus groups – they are being paid and fed.
  4. Location-based. Social Media is increasingly being integrated with location-based applications. Location is a variable that does not exist for most focus groups, which usually take place in dedicated facilities.
  5. Interactivity. Social Media is … social. The interactions among participants in a focus group frequently are the most valuable part of the group. Social Media facilitates similar interactions on a vast scale.

How could researchers leverage these attributes? Here are a couple of ideas, all of which are qualitative in nature:

  • Discussions on Facebook pages. Marketers could start conversations on issues that range from very concrete questions, such as opinions on new packaging ideas, to strategic issues such as potential line extensions. Consumers also would be able to launch their own discussions, which the company could either moderate or simply monitor.
  • Scheduled conversations on Twitter. Marketers could use Twitter as an extension of the conventional focus group. Many more voices could be heard over the same period of time than with a typical group.
  • Location-based feedback. Suppose a large restaurant chain wanted a snapshot of server performance during the lunch rush, or a retailer wanted to evaluate restocking at every mall-based store. Consumers could check in at each location and provide real time feedback, including photos and video. This would provide data from a much larger, more varied and possibly more knowledgeable group than mystery shoppers, at a fraction of the cost.
  • Consumer-generated video. Focus groups rarely depart from a conversational model. But it might be very useful for consumers to shoot videos in response to specific solicitations by the marketer. “Make your own commercial” campaigns are a start in this direction, although to be valuable the campaign should encourage consumers not to be constrained by the company’s current marketing.
  • Meetups/Tweetups. Marketers could use Social Media as the nexus for live meetings with consumers. Moderators could ask questions of the group, which could be responded to with live Tweets.

I am sure that others can come up with further – and doubtless better – ideas. These techniques are likely to be low in cost, but they definitely have some kinks or at least raise some issues. For one thing, all research involving Social Media takes place in the open. This is not always a problem but if keeping the subject of the research away from competitors is a priority, the research is not a good candidate for Social Media. Second, there is no way to control – or even verify – the composition of the participants. A marketer who wants specific cohorts represented in a focus group will not be satisfied with Twitter-based groups. However, this lack of control doesn’t have to be a bad thing, if it’s dealt with creatively. For example, a marketer of adult diapers might be tempted to decide against using a Twitter-based focus group because Twitter users are too young; but men in their 20s may have valuable insights into a product that is marketed to women over 60. They have grandparents, after all, and their perspective on their grandparents’ experience with the product might be very valuable.

The discussion above involves using Social Media qualitatively. However, it may be possible to use Social Media for quantitative purposes. According to the Los Angeles Times, a team of researchers at HP Labs has developed a computational model that uses the volume of tweets about a movie and their overall sentiment about the film to predict its box office performance over its first two weeks of release better than any other standard measure. The rationale for this result is completely beyond me, but if the methodology stands up, and the results can be replicated in other areas, we may have to rethink what we mean when we say we are looking for statistically significant results.

The Zavee takeaway:

  • Marketing research is both art and science, and it influences decisions that affect all of us.
  • Social Media is expanding the range of marketing research techniques, usually while reducing costs.
  • If you think marketing research might be right for your business but the expense has kept you away, try to find a research firm that uses Social Media. You might have to make some compromises on methodology, but you may learn a lot more than you expect.

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The Positive Side of Negative Reviews

by Ron on Tuesday, April 13th, 2010

Actor, author, shortstop or chef, no one likes a negative review. But when we were developing the Zavee business model we decided early on that we would have to include negative as well as positive reviews. The goal we set for ourselves was to create a framework for reviews that were accurate, timely and fair – and that meant including negative reviews.

Our commitment to getting reviews right stemmed from our insight that reviews were another form of Social Media and, as such, were going to be a vital component of the Zavee experience and value proposition. We also learned, based on research with merchants, that many business owners who expressed concern about potential harm from fraudulent, malicious or even accurate negative reviews also intuitively understood the benefit of hearing about issues directly from the customer affected.

As marketers are learning, people will say whatever they want to whomever they want, and merchants don’t have the power to control their customers’ conversations. They can, however, do two important things.

First, they can listen, learn and respond. Thanks to Social Media, including reviews, merchants can make necessary adjustments to their business almost in real time. This is something that every business should be doing, all the time, through every available channel. Twitter and Facebook are great listening posts, but reviews are a channel that exists solely to provide feedback about the customer experience.

Second, merchants can participate in the conversation. By actively engaging with their customers merchants can address problems quickly and publicly; they can provide perspective that helps customers evaluate reviews; and they can favorably shape perceptions about the business.

  • Responding quickly is important because unresolved issues tend to fester. Responding publicly is important because it gives the merchant the chance to address at one time a concern that may be shared by many customers.
  • Actively participating is the only sure way to get the merchant’s perspective into the conversation. Both the manner and the substance of the merchant’s response can help customers determine how much weight to give a negative review, while the absence of a response does nothing but add credence to the reviewer’s complaints. A measured, factual response may not erase the impact of a negative review, but at a minimum the merchant will have extended the relationship with the customer and demonstrated both interest and respect.
  • Simply committing the time and effort to engage customers in conversation sends a positive message to all customers and can go a long way toward shaping perceptions of the customer experience. This can reinforce the positive experiences of current customers and build loyalty, but it also can lead non-customers to have a favorable impression of what it would be like to be a customer. In other words, an impressive response to a negative review can actually bring in new business.
Creative Commons 2.0

Reviews (via fengergold)

In benchmarking Zavee against other sites that feature reviews we observed a wide disparity in the treatment of key issues. Some sites filter reviews while others list them all chronologically. At least one site that uses filtering algorithms has had to defend itself against allegations that it improperly manipulated the placement of reviews. We decided not to filter or change the placement of reviews, because we believed that the less we intervened in the substance of reviews, the more confidence shoppers would have in them and, ultimately, in the Zavee brand.

We also observed that some sites permitted reviews (both positive and negative) that described experiences that had occurred long before the review was written. We thought reviews that were dated were so likely to be inaccurate that it would be unfair to both merchants and shoppers to have them on our site. We also were concerned, as many merchants seemed to be, that on some review sites there there were insufficient safeguards against fake reviews or even fake merchants.

We addressed these problems by requiring that any shopper who wanted to review a merchant had to have made a purchase from that merchant within the previous 30 days and by permitting only one review per purchase. Zavee solicits a review after every transaction, and the shopper’s My Zavee page lists recent transactions and the time remaining to submit a review. Zavee automatically rejects reviews that do not meet these rules.

We also were concerned about reviews that, while perhaps not fraudulent, seemed hostile or malicious. We initially considered moderating reviews, the way we moderate comments on Zavee Thinking, but we decided not to. There is nothing wrong with having editorial standards for reviews – we are, after all, responsible for the content on our site – but we thought the better way to deal with potential problems was to let shoppers and merchants have their say but remove reviews that violated our Terms of Use.

Because we passionately believe that reviews should be a dialogue, we also made it easy for merchants to post responses to shopper reviews. Merchants are automatically notified whenever they are reviewed and have 7 days to post a response. Responses appear with the original reviews and always show up together in a search. Shoppers can respond the the merchant’s response, and the entire conversation is threaded so it can be seen by everyone who sees the original review.

The Zavee takeaway:

  • You can’t control what your customers say, but you can listen, learn and respond to concerns – almost in real time.
  • Use negative reviews as a conversation-starter, not a relationship-ender.
  • How you handle unfavorable reviews can shape perceptions about your business, for future as well as current customers. Treat reviews as an opportunity to be impressive – you may be surprised by the results.

Update (4/14/10): MediaPost’s Marketing Daily reports that S.C. Johnson has been receiving substantial negative feedback, including reviews, about a new pet care product – and tells Marketing Daily that it is bringing the feedback to its product development team for consideration.

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The Boutique Mentality

by Ron on Tuesday, April 6th, 2010

They aren’t always quick to see it, but local merchants have some built-in advantages over national chains and big-box retailers. There’s no denying that local merchants find it hard to compete on price. But consumers don’t care only about price: they care about service, too, and that’s a real opportunity for local merchants.

A recent survey found that women increasingly are shopping for clothing online. How does that news help local merchants? A whopping 84 percent of those who reported taking their business away from bricks and mortar stores did so because of poor customer service. And customer service is where local merchants have an advantage over larger competitors. Owners and managers of local businesses usually are closer to the customer, and are often the first to hear about issues or concerns. They have the ability to react to customer needs and even break (or change) the rules if circumstance dictate.

Chanel Boutique on Wicklow Street (via chacrebleu)

One thing local merchants can do to exploit their natural advantages is to adopt a “boutique” mentality. One big difference between boutiques and other stores is their focus on providing a unique, personalized experience, not just selling a product. Customers often respond favorably to that experience, not just by paying extra for it once, but by becoming loyal customers and by sharing their experiences with their social circle. The combination of premium pricing, repeat business and word of mouth is exactly what local businesses want to achieve.
The boutique mentality isn’t limited to retail. There are boutique hotels, boutique wineries, even boutique auto mechanics – a really good one services my race car. Most boutiques are small, but they are defined by service, not size. A small retailer that doesn’t provide a unique experience to every customer isn’t a boutique; it’s just small.

Part of the boutique experience is the sense that the relationship with the customer doesn’t end with the sale. Whether it’s as simple as a follow-up phone call or as elaborate as a series of surprise gifts, boutiques understand that continuing to engage after the sale helps create customers who are not just loyal, but vocal.

The best boutiques thrive on data. Knowing and catering to customer preferences is the hallmark of the successful boutique, especially boutique hotels. But hotels aren’t the only boutiques that have access to data about their customers. With tools like Zavee, almost any business can learn who their best customers are, how much they spend and how frequently.

It may take some effort to fit the boutique mentality into a business that doesn’t already have it. It certainly takes commitment to make it work, because it requires a focus on the customer that isn’t second nature for every merchant. And it sometimes requires some investment, especially for businesses that are new to managing customer data. But it may be just what a merchant needs to compete in difficult times.

The Zavee takeaway:

  • A business that wants to charge more, generate repeat business and earn referrals from vocally loyal customers should think and act like a boutique.
  • Boutiques are customer-focused before, during and after the sale, and rely on data to understand customer preferences.
  • The boutique mentality can be applied to businesses in virtually every category; it just takes commitment and creativity.

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I’ve Been Annualized!

by Ron on Tuesday, February 23rd, 2010

Last Spring I attended a Loyalty Marketing Conference at which the head of Best Buy’s Reward Zone program described how her company planned to handle a problem that seems to affect many large loyalty programs: inactive members. She explained that while the company was not about to throw inactive Reward Zone members out of the program, they would eventually forfeit their points if they failed to meet an activity threshold. I didn’t meet the threshold, and I just lost my points.

Best Buy Logo

Best Buy

Why did Best Buy take this step? Is it something all loyalty programs ought to consider? And what does it mean for Zavee? At first glance it might appear that companies can safely ignore inactive members. They don’t do anything to tarnish the brand; many do make purchases, at least occasionally; and they don’t require much care and feeding.

In fact, all three of these assumptions are wrong. And companies that segment out inactive members from their loyalty programs are doing the right thing – provided they handle it the right way.

Although inactive members of a loyalty program may not be actively harming the brand, they are not evangelizing for it either. They may be willing and able to recount positive experiences and describe brand attributes, but they are hardly the brand ambassadors that the merchant thought it was getting in exchange for points or other loyalty currency.

This leads to the next assumption: that inactive loyalty program members remain valuable because they may not be completely dormant as customers. Here the risk isn’t that inactive members won’t shop, it’s that they will only buy on sale. Shopping only during promotions may be the behavior of a rational consumer, but not of a loyal one. Program members who shop only when the company has already reduced its margin arguably are the last customers who should be earning loyalty rewards. This is something merchants should bear in mind quite apart from the loyalty context: Customers who are purely (or predominantly) price-driven are a business’ least profitable customers because they return the lowest margin with their purchases. The return on investment of marketing to such customers is therefore lower than for other customers. Adding loyalty exposure only adds to that cost.

Finally, maintaining an inactive program member incurs hard costs. Programs that use physical cards have to print, issue and occasionally replace them. In the aggregate, data processing and storage needs are higher than if the program were limited to active members. Reducing the size of the program by setting inactive members to the side may reduce these costs.

How should a company handle the pruning of inactive members? Best Buy’s approach seems pretty good.

  • First, the company communicated its intentions clearly and repeatedly by email – not that I paid a lot of attention.
  • Second, Best Buy didn’t pretend to create an aspirational environment in which I could keep my points if only I shopped just a little more. I was so far from the activity cutoff (which was clearly disclosed in the email) that it would have taken the purchase of a high-end home theater for me even to get close.
  • Third, the company increased its engagement with members who met the activity threshold by issuing reward certificates.
  • Finally, they didn’t drop me from the program altogether. This was something the Best Buy exec emphasized at the conference. Taking away unused loyalty points from an inactive member sends the message that loyalty is a two-way street. But dropping a customer from the program sends the message that the customer should shop elsewhere. That isn’t a message any retailer wants to send. Instead, I was “annualized” – my point balance will be reviewed annually and I can keep my points if I shop enough.

Some of these principles apply to Zavee more than others. As a registered card program we don’t have the hard costs associated with loyalty cards, and unlike single-merchant programs we hope that shoppers can always find merchants they want to do business with. Instead of an annual cutoff based on activity we will forfeit a shopper’s unpaid reward balances only after 24 consecutive months of no activity.

However, the main difference between Zavee and a typical loyalty program is that Zavee is also a social shopping platform. Because active users of the program receive more and better information from fellow shoppers we believe that activity will largely be self-reinforcing. Shoppers who frequently write reviews and communicate with other shoppers will gain influence in the Zavee community as well as the opportunity to earn rewards and direct charitable contributions.

The Zavee takeaway:

  • Dormant loyalty program members are bad for the brand. So are dormant customers. Increase your engagement or reduce your exposure, but don’t ignore them.
  • Calibrate offers to avoid providing price incentives to customers who are already driven predominantly by price. Those are your most expensive customers and least profitable sales.
  • Find ways to earn and reward customer loyalty that aren’t limited to price.

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Customer Service – For the Recession and Beyond

by Ron on Tuesday, February 16th, 2010

Here at Zavee we spend a lot of time thinking about what smaller businesses can learn from larger ones. We also think a lot about customer service. The current recession seems to us an excellent time for businesses to focus on customer service. Commentators seem to agree. Their reasons may be obvious, but they make sense nevertheless:

  • Retaining existing customers costs far less than acquiring new ones
  • When competing for customers, businesses often have to choose between offering more value (e.g., by improving service) or cutting prices
  • A good customer experience makes future purchases more likely, while a bad experience does the opposite

These posts focused mainly on larger companies, many of which have downsized their customer service staffs. There are anecdotal indications, if nothing else, that customer service has suffered as a result.

City Light customer account operators, 1945

City Light customer account operators, 1945

On the other hand, some larger companies are maintaining or even improving customer service. We think that these companies will be well positioned after the economy recovers because they will have generated loyalty and improved the value of their brand at a time when some of their competitors were cutting service or hiding from customers. Some are using technology: Comcast and Best Buy are by now well known as pioneers in the use of Twitter to learn about and respond to customer care issues. Other companies, such as Southwest Airlines, maintain high levels of customer satisfaction by making service part of the organization’s DNA (although no one is perfect). And I have had at least one potentially negative experience with a rental car company turn positive simply because a well-trained senior manager was on the scene and jumped in with the right approach and a fair solution.

Smaller companies have both a harder and an easier time maintaining customer service in a recession. Harder, because increasing expenses during a time of weak revenues may be difficult to swallow. Easier, because the cost-benefit analysis is much clearer. Some large companies may believe they can afford to exchange so much in sales for so much in customer service expense, but most small companies don’t think that way. Although there certainly are exceptions, most small companies realize that they can’t afford to give up sales to save money. They also realize that good service builds repeat business and long-term loyalty. Finally, they should also realize that customers talk – which means that good customer service can generate referrals: the least expensive but most reliable way to acquire new customers. The good news for small companies is that maintaining and improving customer service doesn’t have to be expensive. Here are some low-cost approaches to customer service that businesses can start now and keep in place even after the economy improves:

  • Listen to your customers. There are many ways to listen: you can use applications like Facebook and Twitter; you can send surveys to customers by email; you can call them on the phone; and you can chat with them at the point of sale. As long as you are sincere and open you will learn a lot about what you are doing right and how you might improve.
  • Empower your associates. Your customer-facing employees should be encouraged to engage with customers at every point of contact and empowered to offer solutions to at least some concerns or complaints. Anything that can’t be handled at their level should be referred to the appropriate person and dealt with promptly.
  • Use technology wisely. At Zavee, we use a third-party application called Zendesk to help us manage customer service. Clicking on a “Help” link from anywhere on the Zavee site opens our Member Services page, from which anyone (even non-members) can read our content, engage with others in a forum or contact us with a question, comment or complaint. This system creates a numbered “ticket” for every interaction, which is automatically flagged for followup by Zavee but also gives the user a way to follow up with us. It turns everyone in our organization into a customer service agent, because we never know in advance who will be the best person to handle the next ticket that comes in.
  • Don’t go it alone. In addition to blogs and other online resources, local chambers of commerce are a great source of information from businesses like yours in your own market. If you are located in South Florida, we invite you to join Zavee. Our marketing tools help merchants understand their customers better and our networking tools improve their ability to communicate with and learn from customers.

The Zavee takeaway:

  • If you think the recession is time to double down on customer service, you’re right. If you think it’s time to cut back, think again.
  • It may be easier for you to provide excellent service than a larger competitor, because you are closer to the customer. That’s a key point of differentiation – make the most of it.
  • Customers talk. Make sure they have only good things to say about you.
  • Don’t stop once the economy improves.

Update (2/18/10): “Poor Customer Service Costs Companies $83 Billion Annually” provides a useful summary of an impressive global research report (pdf) on the high cost of poor customer service.

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Can Social Media Help Toyota Repair Its Reputation?

by Ron on Tuesday, February 2nd, 2010

As most of the world now knows, Toyota’s US unit has announced the recall of approximately 2.3 million vehicles to repair a condition that has resulted in gas pedals sticking while the car is being driven. Safety issues are perhaps an automaker’s greatest threat, and Toyota clearly is taking the situation seriously. The company has even halted production of the affected vehicles until the problem can be solved. Nevertheless, according to auto blog The Truth About Cars, the Japanese business publication Nikkei (think Wall Street Journal) claims that the crisis “is seen as a major dent in the side of the leading Japanese automaker’s reputation as a builder of reliable automobiles.”

The Toyota issue is the largest product recall since the rise of Social Media, but it is not the first. In November, 2009, UK stroller manufacturer Maclaren recalled approximately one million strollers after reports that children were getting their fingers caught in the folding mechanism. The company put recall information on its web site, which, according to the New York Times, promptly crashed. Like Toyota, Maclaren’s stellar reputation resulted in a case of “the bigger they are, the harder they fall.” Time reported that parent blogs were merciless toward the company. Maclaren posted a video PSA to YouTube announcing the recall and the availability of a repair kit, but apparently did not take advantage of either Facebook or Twitter to communicate with parents.

Moving Forward?

Moving Forward?

Toyota is already receiving some criticism for being insufficiently engaged with its customers. The company has a page on its site dedicated to the recall, with links to FAQs and a video news release consisting of talking head sound bites from COO Jim Lentz along with ad-quality footage of the cars and the factory. The video is disappointing: Lentz’s comments sound blandly reassuring but never manage to engage. Today’s Ad Age reports that Toyota’s video is now on the company’s Facebook page, where it is said to have been well received. If the video is posted on the Toyota page, however, the company has not made it easy to find. Most of the wall postings appear to be from car owners and most are in the “I love my Toyota!” genre (it’s not called a fan page for nothing). There appears to be no company-supplied content relating to the recall (unless that video is there somewhere) and certainly no conspicuous attempt to leverage Toyota’s 70,000+ Facebook fans.

Toyota does have a presence on Twitter, but until yesterday the company was using the feed to point to information on the company’s web site. On Monday afternoon Lentz spent 20 minutes fielding questions on Twitter. The Q&A was announced only shortly before it began, and greater lead time might have yielded more participants. However, car bloggers such as @jalopnik and its editor @raywert were on the feed as well as several Toyota dealers. Although this was not the smoothest exercise, it strikes us as a good first step toward engaging with customers, not just making announcements to them.

Toyota is using a wide range of media to announce that it knows how to repair the faulty parts. Now let’s see how Toyota uses Social Media as it tries to repair its reputation.

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NBC, NYT and Loyalty

by Ron on Tuesday, January 19th, 2010

In the course of an entertaining post about NBC’s current “two hosts, one spot” late-night nightmare, Dean Bairaktaris asks, “Where is everyone’s Brand Loyalty? Is it with NBC, Leno or Conan?” This is an insightful question, because the expensive and embarrassing contretemps has been presented largely as Jay vs. Conan, Old Guard vs. Young Turk, homespun vs. hip.

via mashable.com

via mashable.com

The potential impact on NBC as a major media channel has largely been ignored, except in posts like Dean’s, as Conan is widely presumed to be able to shift his audience, more or less intact, to Fox or another media outlet. But it’s fair to ask whether the broadcast networks actually have brand equity apart from the shows they carry. Is there an “NBC-ness” to the Tonight Show (or any other NBC program) that would not carry over to another network? That arbiter of absurdity, The Onion, would certainly say no.

The soon-to-be-announced decision by The New York Times to put some or all of its content behind a pay wall also involved a debate over the brand equity of the Times versus that of its content (in this case, the paper’s prominent columnists). An outstanding article in New York Magazine details some columnists’ concerns that in its pursuit of subscription revenue the Times would be sacrificing its position as a leading online news brand, giving up both traffic and influence (as well as premium advertising rates, apparently).

I think the two situations have a lot in common. In both cases, the underlying question was whether the locus of customer loyalty is the channel (NBC and NYT) or its content (shows and columnists). I’m not sure the answer is the same in every case. I don’t think broadcast TV networks are differentiated enough to generate brand loyalty, but I’m not sure that’s equally true of newspapers (I grew up reading the New York Times so I might be biased – or just conditioned).

For small businesses, the lesson is to think about what aspect of your brand your customers are loyal to, and not to assume that all customers are loyal to the same thing or for the same reason. You want the locus of loyalty to be your overall brand so that customers will stay with you as your business changes, whether those changes involve staffing, product assortment, location or even store closings. However, until you have the conversation with your customers, you can’t be sure that they are loyal to your brand or to your personable store manager, convenient location or frequent sales.

As a smaller business, you have the ability to engage with customers directly and provide an overall customer experience that embodies your brand’s unique promises and values. Larger brands often (but not always) provide a product experience that is not as closely connected to the brand. This is an advantage for smaller businesses which, unlike large brands, should never need to market brands and products separately. To leverage the direct connection with customers, treat loyalty as a two-way street. There are many ways to demonstrate your loyalty to customers, but the easiest is to listen to what they have to say.

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You Can’t Buy Customers. You’re Lucky If You Can Rent Them.

by Ron on Tuesday, December 15th, 2009

In a recent post on his “positive disruption” blog, Tom Martin makes the point that “You Can’t Buy Customers. You Have to Earn Them” and asks for reactions.

His basic point is that with few exceptions marketers who deliver a substandard experience are no longer able to hold consumers captive. One reason is that new and better products are easier and cheaper to develop than ever. The other reason is that it’s now so easy for consumers to inform and influence each other that bad experiences have nowhere to hide.

My list of exceptions may be longer than Tom’s. His example is AT&T and the iPhone but it’s easy to think of others: How many cable providers can you choose from? How many electrical utilities? How many airlines fly the route you want to travel?

I’m also not completely sold on the notion that good, new products can rapidly drive out bad, old ones. I think that probably depends a lot on the category. The barriers to creating, say, a new social network application, which we have done at Zavee, are not the same as the barriers to creating a new car.

Where we agree completely, however, is on the importance of access to information. It isn’t just that media companies are no longer the gatekeepers and large marketers are no longer the only ones who could pay the price of access. It’s that the web is finally sorting itself out as a communications medium, with public micro-messaging streams (a la Twitter) as the primary focus for disseminating and accessing information such as links.

So, does an environment in which consumers have lots of information and lots of options mean that they are hopelessly fickle and not worth talking to? Does it make sense to invest in a brand if consumers are making purchase decisions based on information and reviews from each other rather than messages from the marketer? What are marketers actually paying for?

I think that a strong brand is more important than ever in today’s environment. First, consumers who maintain for themselves a highly efficient information market are being rational, not fickle. Marketers need to participate in that market, not resist it. Second, consistency with the brand promise is one of the things that consumers will test for themselves and tell each other about. This favors brands whose promise is clearly defined and well communicated, something that still requires investment. Third, consumers want – and now can demand – relevance.  This, too, favors brands that are strong and highly differentiated. Finally, as Tom himself has persuasively argued, there is always a place for brands that inspire passion.

Bill Hanifin recently wrote about Chick-fil-A, a brand in a highly competitive category (fast food) that uses a mix of quirky advertising and old-fashioned promotion to build passionate loyalty. And while Bill refers to Chick-fil-A as an offline brand, the company’s  Facebook page, which isn’t updated very often (the Events section doesn’t list the opening Bill attended) has more than 1.23 million fans.  It would not take much for Chick-fil-A to leverage these fans into a powerful online community.

Marketers never “bought” customers. At best they took advantage of inefficiencies in the information marketplace, inefficiencies that are rapidly disappearing. Marketers now should look to “rent” customers long enough to prove their relevance, demonstrate their value, inspire loyalty and deserve passion. It’s a tall order, but as Chick-fil-A shows, it’s possible – and worth it.

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A Few (More) Words About Word of Mouth

by Ron on Tuesday, December 8th, 2009

Recently on Zavee Thinking we posted about how word of mouth (WOM) is simultaneously very powerful yet very fragile. It’s powerful because there is no stronger influence on a purchase decision than the recommendation of a trusted, knowledgeable individual. It’s fragile because so much can intervene to prevent that recommendation from being made and acted on. This post is about how merchants can make WOM less fragile by increasing the chances that a recommendation from the right customer will reach the right shopper at the right time. (Apologies in advance for the length of the post – this is something we think about a lot.)

The obvious place to start is at the point of sale, where the merchant has the most direct ability to influence customer satisfaction. Here we are talking primarily about intensity and latency: how strongly an emotion is felt and how long the feeling lasts. One clear way to increase the intensity and latency of customer satisfaction is to provide an over-the-top, mind-blowing, truly unforgettable experience at the point of sale (can we call it an OTTMBTUE?). That will certainly keep things top of mind! Unfortunately, the OTTMBTUE has a few drawbacks. First, not all categories and not all interactions are equally suited to blowing the customer away. Second, the typical means of providing an OTTMBTUE involves some form of payment to the customer, such as an upgrade or a free item. While merchants often have to make such a payment to an unhappy customer to right a wrong, applying that strategy in the hope of making a happy customer ecstatic can get very expensive – especially when the customer determines that she should be treated that way at every visit.

On the other hand, it is possible for creative merchants to create extremely high levels of customer satisfaction without giving away too much margin. One of my favorite examples is Tesco, the UK grocery chain. Stuck between a premium chain and a discounter, Tesco repositioned itself as a service-oriented brand. From 1995-2004 the company produced a campaign starring Prunella Scales and Jane Horrocks that used the tagline “Every Little Helps” (we would say, “Every Little Bit Helps”) to demonstrate Tesco’s commitment to the customer. If you’ve never seen this spot you’re missing a treat.

Another way to increase the latency, and perhaps the intensity, of customer satisfaction is to communicate with the satisfied customer early and often. Car dealers and some hotels, among others, get this half right: they email surveys to customers almost immediately but rarely follow up. If a customer gets a phone call after submitting a survey, it is more likely that the customer had reported a good experience or a bad one? Of course it’s important that merchants address issues raised by customers – but surveys may not be the best way to keep a delighted customer both happy and talkative. If a merchant can identify a very satisfied customer at the point of sale, a phone call several days later – just to chat, not to sell – can reinforce the feeling of satisfaction that the customer took away from the store. (Having conversations on social media is also a good idea.) The customer feels special because in fact she is being treated special. The merchant can’t treat everyone this way, and it may require an investment to learn which customers should be treated this way, but reinforcing customer satisfaction can increase the length of time the positive emotions remain top of mind and may even add to them.

Latency and intensity are both about time: the longer the customer’s intention to recommend the merchant remains top of mind the greater the likelihood that the customer will encounter someone who will act on the recommendation. Another factor is confidence. In order to act on a recommendation, the potential customer must have confidence in the recommending customer both generally and within the specific domain. If a customer is not someone who inspires confidence generally there is not much the merchant can do about it, but the merchant should know better than to treat that customer as a source of potential WOM.

via iproclaim.com

via iproclaim.com

However, the merchant can help a customer become more knowledgeable about the merchant’s domain and thereby increase the likelihood that a customer’s recommendations will be taken seriously and acted upon. Domains where the inherent level of difficulty is high are natural categories for this, and, indeed, internet legend Gary Vaynerchuck (almost 850,000 followers on Twitter) got his viral start posting how-to videos about wine on YouTube. Imagine a customer who leaves Gary’s store not just having received solicitous attention and paid a fair price for good wine but who has received an education, too. That customer not only is more credible as a recommender in the wine domain but probably has wine (and Gary’s store) top of mind for a longer period of time than otherwise.

The final point at which WOM is fragile also involves time: the person who receives the recommendation must be at or near the point of intention if he is going to act on it. Even if everything else lines up – a delighted customer leaves the store and immediately meets a friend who trusts her judgment generally and her knowledge of the domain specifically – the recommendation will not be acted upon if the friend has no intention of making an imminent purchase in that domain. Is there anything the merchant can do in this situation? It depends. If the friend has no interest in the merchant’s domain there is really no point to the recommendation. If this is not the case, however, the merchant can try to capture the friend’s contact information and leverage the recommendation as a reason to communicate with the friend (if the friend opts in). If the friend is disposed to trust the customer’s recommendation the merchant may be able to convert the friend to a customer the next time the friend is near the point of intention based on the prior, unsuccessful recommendation. Finally, by continually communicating with the satisfied customer, and indeed by repeatedly providing a positive experience, the merchant increases the likelihood that the customer will again encounter the friend (or perhaps a different one) closer to the point of intention.

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