Archive for the ‘Loyalty’ Category

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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Tape This to Your Fridge (or Maybe Your Monitor)

by Ron on Tuesday, November 3rd, 2009

Maybe it’s a sign of our collectively diminishing attention spans, but magazines (and blogs) seem to run more and more articles that are basically lists. There’s even a term for it: the “listicle”. (Want to guess what the graphic equivalent is called? Right, it’s a “charticle”!) Listicles often reflect shallow thinking and lazy writing, but sometimes they provide tremendous value, collecting and condensing a great deal of knowledge into the kind of piece you want to print out and tape to your refrigerator door.

I’ve recently come across two listicles of the latter kind, both from sources every small business owner should be following. The first is from Mashable, which provides all sorts of valuable information about social media. This post by Ross Kimbarovsky, who co-founded an online community of graphic designers that now exceeds 43,000 members, offers 10 Small Business Social Media Marketing Tips. In addition to its overall clarity and conciseness, this post adds value in two interesting ways. First, it goes beyond Twitter and Facebook to explain some less widely known tools, including mobile/local social network Foursquare and brand consistency tools such as Namechk. Second – and at least as important – the post suggests both a basic and an advanced strategy for each of the 10 tips. This approach provides a road map for small businesses that are just starting out in social media or are unsure how extensive a commitment they want to make. This post recognizes that different businesses will have different needs and appetites for social media, shows businesses how they can mix and match different tools and provides a framework for increasing the utilization of social media marketing over time.

Deep in Conversation

Deep in Conversation

The second post comes via the Conversation Agent blog: a compendium of 25 Must-Read B2B Marketing Posts. I haven’t read all 25 yet but so far every one has been thought-provoking and several have provided significant value to our business; I imagine you will feel the same way. Business-to-business marketing frequently gets overlooked in the rush to market to consumers, so it’s great that some of the best minds in the social media space are paying attention to the needs of the B2B marketer.

This is by no means an original observation, but it really is amazing how much useful material can be found just by spending a little time searching the Internet. It’s even more amazing how many talented people have done so much of the heavy lifting by finding, evaluating, collecting and editing valuable source material for marketers like us. We hope you find these posts as worthwhile as we have. Please let us know how they work for you.

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A Culture of Listening

by Ron on Tuesday, September 15th, 2009

We all like to think that we listen to our customers. But do our employees do the same? Two recent experiences – one involving me, the other involving our CEO, Alan Pleskow – brought home how vital it is for everyone in the organization to listen to the customer.

Photo courtesy of www.inventorspot.com

Photo courtesy of www.inventorspot.com

The full stories are hilarious (let us know if you’d like to hear them), but in brief what happened was this: Alan mentioned to the associate at a golf course pro shop that he almost got lost between the gate and the driving range because the signs were confusing and hard to see. The response: “Well, if you didn’t see them, how do you know the signs were bad?”

In my case the associate at the car rental counter gave me a rate that was lower than what was in my reservation. When I returned the car (ironically, after attending a loyalty conference) I was charged the original, higher rate. After frustrating encounters with several employees the manager finally intervened. “What would you like me to do?” he asked. I asked him to check his records and I soon had both a corrected contract and an apology.

These experiences (and others like this) have something important in common: the employees who jeopardized (or in Alan’s case, ruined) the customer relationship were not managers, let alone owners.

As an owner or manager you can’t be everywhere at once. What can you do to ensure that your associates listen to customers the way you would? How can you create what Nielsen Research calls a “culture of listening”?

We have a few suggestions:

  1. Set the tone from the top. If you are serious about establishing a listening culture make sure you live up to your own expectations – and make sure your employees see you in action.
  2. Make listening to the customer a core element of your strategy. You probably don’t need the complex processes big companies use for this but you should have some consistent way to integrate the voice of the customer into your planning and operations.
  3. Require listening skills. Train the employees who need help and deal with the ones who can’t or won’t improve.
  4. Empower employees to act on what they hear. It is counterproductive for employees to listen to customers if they are unable to respond in a meaningful way. Create a process for employees to take immediate action, even if they can’t always fully satisfy the customer.
  5. Reward listening. Listening to customers isn’t always about fielding complaints. Sometimes customers have good ideas about products, pricing, store layout, etc. Provide incentives for associates to turn customer input into revenue, productivity or profits.

So even if you listen to your customers, do your employees? And if you aren’t certain, there is one sure way to find out. Ask your customers. And listen.

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