Where Earth Day Meets Big Data

When marketers laud the advantages of big data, it’s usually in the B-to-C marketing context. Sustainable fabric company Thread LLC takes a different approach. By using granular supply chain and social impact data, Thread helps customers improve brand integrity and increase the marketability of core products. For this special Earth Day blog

Happy Earth Day 2014! For this week’s Marketing Sustainably blog post, I welcome Adam Freedgood as a guest blogger. Adam Freedgood is a sustainable business advisor and co-founder of Third Partners, a New York-based firm that helps organizations implement strategies that create new revenue opportunities, reduce waste and improve environmental performance. He is also a sustainability expert on the DMA Ethics Policy Committee. —Chet Dalzell

Sustainable Product Companies Benefit From New Breed of Big Data
When marketers laud the advantages of big data, it’s usually in the B-to-C marketing context. Sustainable fabric company Thread LLC takes a different approach. By using granular supply chain and social impact data, Thread helps customers improve brand integrity and increase the marketability of core products. For this special Earth Day blog, I sat down with Thread CEO Ian Rosenberger, Director of Community Development Kelsey Halling, and Director of Marketing Frank Macinsky to learn how Thread is using big data to unlock new sales opportunities through positive social and environmental performance.

Q: What Does Thread Do?

Rosenberger: “Thread recycles trash from the poorest neighborhoods on the planet and transforms it into fabric. We then sell the fabric and the story of how it’s made to companies that are trying to be more responsible.”

Q: Other than recycling, what about your business model makes you sustainable?

Rosenberger: “In addition to holding ourselves to the highest supply chain standards on the planet, we’re a certified B-Corp, which means sustainability is in our corporate DNA.”

Halling: “Traditionally, the fabric business is linked to environmental and social problems, not solutions. Beyond being a recycling company, we are also interested in social impact.”

Q: What are some of the problems associated with the typical fabric supply chain?

Rosenberger: “There are huge problems with textiles. From labor practices to environmental pollution, many brands’ supply chains don’t measure up to their marketing. For example, last year at this time thousands of people died and were injured in the Rana Plaza factory collapse in Bangladesh. Thread exists because we think brands need a more responsible source of raw material.”

Q: What do you mean by “more responsible source of raw material”?

Halling: “We use ‘responsible’ as the overarching term covering social and environmental concerns. Today there’s a lot of greenwashing out there. A recent study from Rank a Brand shows that hundreds of apparel companies talk about sustainability, but only a fraction follow through with real action or data. It’s a big deal to be able to put proof behind the claims.”

Q: There are many companies recycling plastic from various sources for various products. Why did you focus exclusively on fabric as the end product for your material?

Rosenberger: “We saw an opportunity to conduct good business while solving an enormous global problem. First off, we believe fabric can end poverty.” The textile business is one of the dirtiest on the planet, both socially and environmentally. We offer a 100 percent transparent supply chain solution. By giving data to other companies, we are creating a new market for getting a billion pounds of trash off the streets. In Haiti and Honduras we have already pulled 70 million plastic bottles.”

Macinsky: “The great thing about the fashion brands we are speaking with is that the industry is a trend setter in a lot of ways. As more brands get involved and interested in this transformational shift in the way we do business, a lot of people will benefit worldwide.”

Q: Big data typically refers to marketers using consumer data to target marketing messages more effectively. How does Thread’s outlook on big data differ?

Macinsky: “Our key differentiator is powerful stories involving people. We are tasked with finding qualitative data about how people are impacted positively by our product. We think in terms of ‘triple bottom line’ metrics: positive impacts on people, business and the environment.”

Halling: “We’ve been tracking data since the very beginning. As we are setting up supply chains, we are measuring financials, efficiency and the impact we are having socially and environmentally. We track job creation, training hours, pounds of trash, and even the lifecycle carbon emissions associated with each step in our supply chain.”

Q: That’s a huge amount of data mixing qualitative and quantitative units. How does a Thread customer digest it all?

Macinsky: “As a fabric company, our product goes into consumer goods. Our job is to give our partner brands a very simple distilled story so they can turn that around.”

Halling: “It changes from company to company and from consumer group to consumer group. From the list of bragging rights we provide, brands choose the attributes that are most in line with their marketing strategy. Our impact report summarizes some of the data insights.”

Q: How is the data Thread captures different than leading supply chain tracking mechanisms in the apparel world—for example, Patagonia’s supplier tracking tool?

Halling: “We have a saying that we track everything ‘from ground to good.’ When we say we know our supply chain, it means we are literally on a first name basis with the people involved. Some apparel companies claim to know the factories where stuff is made. They run audits, verify codes of conduct, etc. We take it way further than that, back to the moment bottles are picked off the street.”

Q: What positive social impact can Thread show so far?

Halling: “To date we are supporting 2,000 to 3,000 income opportunities for the poor in Haiti and Honduras. In the first quarter of 2014, our supply chain supported 221 jobs and about 2,700 income opportunities with $100,000 paid to small businesses, and we have huge growth opportunities ahead.”

Q: What data would you like to have that you do not have today?

Halling: “We think our partners and consumers would respond well to more real time data like GPS tracking, so they could actually see movements as they are happening. Even the data we have is groundbreaking. Environmental impact tracking is not widely done in the developing world. It’s a real culture shift.”

Macinsky: “I’m most interested in tracking outcomes on how Thread is benefitting people in their homes, workplaces and actually proving what jobs and income opportunities mean to people. For example, do cleaner streets mean fewer health problems?”

Q: Can we expect to see your use of big data in products on store shelves soon?

Macinsky: “You sure will. Our first partnership is with a bag manufacturer called Moop. That product will be available in May.”

Q: Will Moop be talking about specific social impacts?

Macinsky: “For the first launch, the focus is on some of the more digestible tidbits of data we have to offer. We are starting with the basics like the number of plastic bottles that go into a product, jobs supported and similar stats. Long term collaboration will increasingly focus on the social storytelling side.”

Q: Who do you want to connect with in the marketplace?

Macinsky: “Our focus right now is on talking to brands that want to be more responsible in their supply chains.”

Halling: “We are excited about the larger impact that happens at volumes to help disrupt the textile industry. The industry is this multi-billion dollar force in the world, but it is still murky and hard to get data on supply chains. There is still tragedy happening. It doesn’t have to be that way.”

Loyalty Programs? We Don’t Need No Stinkin’ Loyalty Programs!

Without fear of (much) argument, it’s a fair statement to say that all companies want, and try to generate and achieve, optimum loyalty from their customer bases. They should want this, because study after study shows the financial rewards of having loyal customers. Some companies reach this goal through superior value delivery, built on quality products and services, and positive, consistent customer experiences. For the past several decades, many companies have relied on customer loyalty cards or programs, by which they can track purchase behavior and give rewards for repeat and volume buying activity.

Without fear of (much) argument, it’s a fair statement to say that all companies want, and try to generate and achieve, optimum loyalty from their customer bases. They should want this, because study after study shows the financial rewards of having loyal customers. Some companies reach this goal through superior value delivery, built on quality products and services, and positive, consistent customer experiences. For the past several decades, many companies have relied on customer loyalty cards or programs, by which they can track purchase behavior and give rewards for repeat and volume buying activity.

Customer loyalty programs are especially popular among retailers. During the years, retailers have found these programs to be powerful business tools within their highly competitive markets. But some retailers have completely disavowed loyalty programs, either never initiating them in the first place or canceling them, in favor of reduced pricing. In fact, this has become something of a trend. What’s behind it?

Let’s start with the biggest retailer—Walmart. The company has long claimed that a loyalty program isn’t needed because its prices are so low. Walmart believes that loyalty programs can, indeed, provide excellent information about customers who participate; however, as one Walmart executive put it: ” … some of the loyalty programs are very expensive, and we don’t think that serves everyday low cost and everyday low price.” Lower-than-competition everyday prices has been Walmart’s merchandising and marketing mantra since its inception. But, at least for groceries and sundry products, that often isn’t the case. Supermarket chains like Save-A-Lot and Aldi’s, neither of which has a loyalty program, will often beat Walmart’s item-for-item pricing by a significant margin. And other competitors can use their loyalty programs to selectively pick products, and individual customers, to offer pricing—which undermines Walmart.

As for generating customer purchase data, Walmart has a “scan & go” app for mobile devices, which allows customers to scan their own items as they shop; and this provides the company with valuable information on what customers are purchasing, the length of time they’re shopping in the store, and what offers and coupons might drive future purchases. Walmart uses additional methods of understanding individual customer purchases. One of these is Walmart credit cards. Another is reloadable MasterCard and Visa debit cards. A third is “Bluebird,” a prepaid debit card which functions as Walmart customers’ alternative to having a checking account, with which they can make deposits, pay bills—and shop at Walmart. Like Tesco is already doing in the U.K, Walmart has been considering development of its own bank, which would provide even more customer data.

Asda, a Walmart-owned supermarket chain in the U.K, also has no loyalty program. It’s the second-largest supermarket company, behind Tesco; and, as in the U.S., newer low-priced chains, such as Aldi, are actively competing with Asda. In place of a loyalty program, Asda believes it provides customers with what they want most, a “great multichannel retail experience.” The chain, according to executives, focuses on the key fundamentals: prices, quality, convenience and service. Alex Chrusczcz, Asda’s head of insights and pricing, offers two explanations of how the organization is endeavoring to build customer loyalty:

  • “Aspire to treat customers equally, or you’ll create a fractured brand and shopping experience. If you have someone paying one price and another customer with a coupon paying a different price, the perception of the brand is becoming fractured. Make sure it’s consistent.”
  • “Be pragmatic in terms of technology and analytics. They aren’t a silver bullet. Use these tools and combine them with the experience of your team.”

From my perspective, the second explanation is common sense; however, the first statement is really questionable—even counterintuitive, if a subordinating goal of loyalty behavior is to help drive customer-centricity. Simply put, all customers are not equal in value; and marketing strategies which treat them as such often create lower revenue.

In the U.S., regional supermarket chain Publix has no loyalty program. The company doesn’t have, as a result, the ability to track, at a household level, what customers are and aren’t purchasing in their stores. What Publix does, instead of loyalty cards, is try different alternative approaches to build sales. One of these, for example, was to test a program where shoppers could set up an online account where they could digitally clip coupons; and then, in the Publix store, the discounts they’d set up online could be automatically applied by typing in their phone numbers. Publix also has a BOGO program for their own brands, and accepts competitors’ coupons in their stores.

Some retailers do more than emphasize the sales and service fundamentals. They build genuine passion for, and bonding with, the brand by creating a more human, emotional connection. And, though there are few organizations like this, retailers such as Trader Joe’s are the exception that proves the rule. Trader Joe’s has no customer loyalty program. What they have is enthusiasm, achieved through differentiated, every-changing customer experiences, enhanced by upbeat, helpful employees. This has enabled Trader Joe’s to generate sales per square foot that are double the sales per square foot of Whole Foods. So, another way of stating that Trader Joe’s creates loyalty behavior without a program is to say: The shopping experience is, defacto, the loyalty program.

Now, we come to retailers which had customer loyalty programs, usually of long-standing, and elected to discontinue them. Actually, much of this has been done by one organization, Cerberus Capital Group, the early 2013 purchaser of multiple regional retail supermarket chains from Supervalu (Shaw’s, Acme, Star, Albertson’s and Jewel-Osco). Calling the new positioning “card-free savings,” and reflective of the first strategy stated above by Asda, each of the chains issued statements with themes like “We want buying to be simple for all, so that every (name of company) customer gets the same price whether a loyalty card has been used or not.” Additionally, and again like Asda, these chains have said they will go back to the basics: clean stores, well-stocked shelves, reduced checkout time, clearly marked sale items and creation of a more customer-focused culture. Some of their executives have also theorized that the chains will now adopt a more local-level approach, rather than customer-level, to their decision-making, and that individual store managers will now be more actively involved in driving successful performance.

So, the chains acquired by Cerberus appear to believe that “sunsetting,” or eliminating these programs, is a calculated risk and that they would still find good ways of providing value to retain more loyal customers, as well as incentives for those with the potential to move from purchase infrequency. Most analysts, however, felt that Cerberus eliminated the programs largely because the chains they purchased were either not mining card data, or not effectively analyzing and applying this material for better marketing and merchandising, thus making the loyalty systems too expensive to maintain.

Cerberus has entered into takeover discussions with California-based Safeway, which also owns Vons and Pavilion. If this sale takes place, it’s a good bet that these chains will also drop their reward cards, because Cerberus-owned supermarkets clearly don’t need, or want, no stinkin’ loyalty programs.