Social Commentary in Authentic Brand Messaging

Should brands act, behave and communicate like people? Authenticity must be the measure. The content of any social commentary needs to be driven from the core principles of what the brand stands for — rather than from a cookie-cutter response at what competitors may be doing or saying.

Should brands act, behave, and communicate like people?

I’m sick and angry. It may seem like 1968 this past week — but folks, it’s 2020. Can’t we have a generation raised that eschews privilege based on race, and just respects each individual, all individuals, with love and merit as our default?

Obviously this is a personal perspective, and thank you for allowing me to indulge. So let me also ask again: Can and should brands make such statements of their own?

Content: Getting Past the Predictable to the Unique

This past week, I was fortunate to listen in on a Direct Marketing Club of New York “midweek recharge” teleconference on COVID-19 and brand loyalty, led by current DMCNY President Ginger Conlon and Deb Gabor, principal and founder of Sol Marketing (Austin, TX). How ironic that our inboxes are filled with “We’re all in this together” type messages from brands, while this past week we’re also very much reminded that, in reality, we really are not all in this together. People of color are disproportionately affected by COVID-19, just as they are with police brutality and a host of other societal aspects.

Gabor was insistent that brands very much act like people — and should. Authenticity must be the measure, however, in what they have to say, she reported. The content of such messages needs to be driven from the core principles of what the brand stands for, rather than from a cookie-cutter response at what competitors may be doing or saying.

With regard to COVID-19, one might think of ways brands could communicate to customers about how they are protected when doing business with the brand. But is this the best, first message?

Perhaps, a more important constituency might come first: how these messages are stronger when they focus on employee well-being and a thankfulness for first-responders and essential workers. I duly appreciate Wal-Mart and Amazon brands for emphasizing these aspects in their current advertising and marketing. Certainly, these brands are not without vulnerability. There’s much attention on such brands regarding living wages and labor participation in the management of their business strategies, even as they hire thousands of workers amid this employment crisis.

Unique Statements Anchored in Core Values and Empathy

We cannot forget about empathy, and how this must be part of any brand social commentary regarding race, gender, sexual identity, or housing and economic status. As Americans, we need to draw a line anywhere where discrimination and hate, ambivalence or indifference, rears its ugly head. Ben & Jerry clearly shows where it stands on Black Lives Matters, and minces no words:

Even in the world of ad tech, we’ve seen some powerful statements, such as this one from San Francisco-based TechSoup, a company which offers software solutions in the philanthropy community, and is putting its resources to work. In an email, CEO Rebecca Masisak and Chief Community Impact Officer Marnie Webb co-wrote:

We need more than the reallocation of resources; we need systems changed. We need to be a part of that, in our organization, in our communities, and in our country.

This is what we are doing right now to address a piece of the crisis in the U.S.:

• Continue to investigate our own privilege so that we can embed racial equity into our work.

• Make the reach of our platforms available for the voices that need to be heard. Right now, at this moment, that means:

• Active listening

• Amplifying the messages of Black-led community organizations, philanthropists, and journalists

• Inviting others who want to make use of our platform to use it to share their messages and engage others in communication

• Raise money to defray the costs and support the optimization of technology for Black-led organizations and community groups.

Brands and Support for Democracy

Among trade associations, cheers, too, for the IAB (Interactive Advertising Bureau) for enabling its employees this week to dedicate paid time off each month to work for social change:

These brands are indeed acting like people — because they are composed of people (investors, owners, customers, employees) who are motivated to share their values in a powerful way. Not every brand may be in a position to speak on racial injustice, or COVID-19, with authenticity. But we — as members of the human race — might best stand for each other. What other choice do good folks, and good brands, have?

 

How to Integrate AI Tech Into Each Step of the Customer Journey

The Customer Lifecycle. The Sales Funnel. The Buyer’s Journey. All of these phrases are similar expressions of the same thing. They’re used to describe the process that it takes for a visitor to become a customer.

The Customer Lifecycle. The Sales Funnel. The Buyer’s Journey. All of these phrases are similar expressions of the same thing. They’re used to describe the process that it takes for a visitor to become a customer.

While the models and names of stages may have changed through the years, many agree that it can be boiled down to four simple components:

Awareness > Consideration > Decision > Loyalty

The No. 1 goal for most businesses is to generate more conversions (which primarily consists of sales). This can be through their marketing efforts, sales tactics, brand communication, conversion rate optimization, and other methods. Of late, many companies have developed critical competencies in using AI to nudge customers towards sales, and have improved their numbers drastically as a result.

AI, machine learning, and big data technology can all work hand-in-hand to improve the customer experience and support an optimized customer journey, which leads to more conversions in several key ways.

Let’s talk about how you can start using AI tech in each stage of the funnel.

Awareness

Marketing strategies these days are often heavily focused on the top of the funnel to build brand awareness and attract new customers. For many businesses, recognition is nearly equivalent to the value of their brand. Elena Veselinova and Marija Gogova Samonikov explain in their book Building Brand Equity and Consumer Trust Through Radical Transparency Practices that brand impact is a continuous process that insures purchases, cash flow, revenue and share value. Brand communication and experience creates and builds a loyal base of customers that do not consider any other brand.

Creating a strong level of brand awareness takes time and strategy. Companies spend millions of dollars on marketing campaigns and advertising to increase their reach and recognition, but AI tech is able to take the guesswork out of these strategies by analyzing huge volumes of consumer data for more targeted campaigns. For example, predictive analytics software can collect, track, and analyze datasets from past customers to determine which strategies or tactics performed well. These datasets are turned into reports with insights to guide marketing efforts and place relevant content in front of the most interested eyes at the right times.

With AI-assisted marketing, advertising strategies can be backed with data to optimize ad placement. Machine learning systems can even identify the best influencers for brands to partner with in order to reach relevant audiences and grow brand familiarity.

Credit: Venturebeat.com

Consideration

The next step of the buyer’s journey is often overlooked by marketers because it can drag on for a long time, depending on the product and the customer’s needs. During the consideration phase, a customer is already familiar with a brand or product but are unsure of whether or not to actually purchase. Customers will typically research the product’s reviews, compare prices to competitors, and look for alternatives during this stage. Due to this, the number of potential customers tends to narrow down considerably as they move from this step to the decision phase.

Brands must work to combat each customer’s concerns and questions standing in the way of a purchase decision. One of the best ways to do this is by offering personalized content that is relevant to each person, making it easy for them to find the information they are seeking.

AI systems can be used to predict a customer’s needs based on consumer data and previous online behavior, and then encourage conversions with a tailored UX or even a completely customized landing page that displays content relevant to that customer.

For example, if a site visitor has viewed a certain product page and played a video demonstrating its features, these actions can trigger an AI system to target them with personalized content that prompts a conversion if they don’t proceed to buy immediately. This content could be something as simple as an email message with more information or a display ad with a special offer for the specific product.

Credit: Personyze.com

Then there are platforms that use conversational AI tech (such as chatbots and voice assistants) to power automated, text- or audio-based interactions between a business and its customers. These platforms can understand speech, decipher intent, differentiate between languages, and mimic human conversations with great accuracy. Increasingly, they are advanced enough to even understand individual context and personalize the conversation accordingly.

Based on data insights, AI tech can curate content that matches up with the issues that are most important to that person, whether it be product features, immediate delivery, long term savings, etc. Customers respond quite well to personalized offers — an Accenture study reported that 91% of consumers are more likely to purchase from a company that sent them targeted deals or recommendations.

Decision

Once a customer moves from consideration to action, AI tools can be used to support a positive sales experience and eliminate any bumps along the way. If a customer encounters an issue while browsing the site, or during checkout or payment, it could be an instant sales killer, if it isn’t handled immediately by something like live chat.

According to multiple studies, one of the most frustrating parts about online customer service is long wait times. By using AI-enabled chatbots, companies can instantly answer common questions and resolve issues or roadblocks affecting the progression of the buyer’s journey. And customers certainly appreciate these quick response times. AI systems can significantly increase conversions with effective personalization and swift customer service.

Credit: AIMultiple.com

Loyalty

The last step of the customer journey is possibly the most valuable. Over half of customers reportedly stay loyal to brands that “get them.” Returning customers also tend to spend more money than new ones, and an oft-reported stat says that on average 65% of businesses’ revenue comes from existing customers.

Businesses (and customers) can benefit greatly from loyalty programs that are backed with machine learning technology. Starbucks famously uses AI tech to analyze customer behavior, improve convenience, and identify which promotions would perform best based on that person’s drink or food preferences, location, and purchase frequency. Their loyalty program uses this data to send out thousands of offers each day for the products their customers are most likely to buy. Their customer loyalty program grew 16% YoY last year as a direct result of their Deep Brew AI engine.

Credit: Starbucks app

While a positive shopping experience and great products are certainly important factors in a customer’s decision to buy again, data-driven marketing campaigns that encourage loyalty can also help a company to grow their numbers of repeat sales. Again, AI-assisted personalization techniques can boost the chances of a customer coming back for more, especially if they receive targeted offers or shopping suggestions based on previous interactions.

Credit: Accenture.com

The Wrap

AI is proving to be the tool of the future for marketers. It allows marketing teams to use predictive insights and analytical data to encourage and assist every micro-decision taken by consumers. AI systems not only help customers move along the buyer’s journey, they can also provide a more meaningful experience along the way, leading to more conversions and brand loyalty down the road.

Trust Capital Is the New Marketing Gold Standard

Now, more than ever, trust capital may become the new marketing gold standard, joining brand equity as a key metric for valuing a company’s relationship with its customers and prospects.

My father used to caution not to believe everything one heard or read. He was not a cynic but an optimistic realist. Nonetheless, like the majority of his generation, his basic intuition urged him to trust existing institutions and assume (that most dangerous word), that what they were saying or doing was for the common good. “Fake news” had not morphed from the lingua franca to become the lingua twitter.

That’s not always the case anymore. MediaPost shared the following on Mar. 19:

“The news business is battling public distrust. Nearly half of respondents to a new Axios/Ipsos poll said they do not trust traditional media ‘very much or at all” to accurately deliver information about the COVID-19 virus.’”

That distrust should inform how marketers must rethink their approach to customers and prospects as we plunge into a new and uncertain era.

On Jan. 19, the 2020 Edelman Trust Barometer published this worrisome finding:

“… despite a strong global economy and near full employment, none of the four societal institutions that the study measures — government, business, NGOs and media — is trusted. The cause of this paradox can be found in people’s fears about the future and their role in it, which are a wake-up call for our institutions to embrace a new way of effectively building trust: balancing competence with ethical behavior.”

If “disbelief” is the new normal gut reaction to our foundation institutions, it goes without saying that our commercial messages, however well wrapped in engaging narratives are likely to need the “suspension of disbelief” to be effective. That almost certainly means stepping back a little (or a lot) from our “act now” knee-jerk impulses and asking ourselves what we need to do to achieve that “suspension,” to establish the critical trust that my father suggested might be missing.

Building Trust With Customers and Prospects

If we look at the Amazon ethos, building credibility item by item, on-time delivery by on-time delivery, rapid refund by rapid refund, trust impacts each transaction more than efficiency. Not surprisingly, that same Edelman study found “ethical drivers such as integrity, dependability, and purpose drive 76% of the trust capital of business, while competence accounts for only 24%.”

Trust capital may become the new marketing gold standard, joining brand equity as a key metric for valuing a company’s relationship with its customers and prospects.

But how can we measure integrity, dependability and purpose? It may be easier said than done. Perhaps a good starting point is looking backwards.

How much feedback have you had from your customers, especially negative feedback? (We all love compliments but we seldom learn from them.)

One of my first jobs was to read complaint letters, research what had (or had not) gone wrong, and then write for the signature of the CEO, a truly personal answer. The number of “thank you” notes we received was the best lesson you could have in the value of real personalization.

If you don’t have a strong culture of responding to every complaint, not with a form letter or email but with a thoughtful and helpful personal communication, you should put one in place, now. If I can’t talk to a knowledgeable and helpful human being instead of an algorithm, like many others, I’m gone and your trust capital has tanked, or at best, taken a hit.

A recent blog post from Yes Marketing put it this way:

“In a world driven by access to options, an emotional connection with a brand can be the tipping point for consumers when deciding where to spend their dollars.”

You certainly want it to tip your way, and that means doing whatever is necessary to establish and retain that emotional connection and trust.

Whatever we do to build trust capital during these uncertain times, even if not immediately measurable, is certain to pay big dividends when the crisis is past.

 

Engagement, Loyalty and Sharing Superior Experience

There’s one element of loyalty I might add that should not be overlooked: the immediacy of sharing … good and bad. But for once, let’s look at the good side of experience sharing:

customer loyaltyNext month, hundreds of marketing professionals will gather in New York to fete numerous business leaders in our field at the EDGE Awards (June 6, this is Marketing EDGE’s only national fundraising event).

Among the honorees is Hal Brierley, who recently discussed how the loyalty business hinges on meaningful engagement. It really doesn’t matter what generation you are, if a brand is not engaging its stakeholders, there can be no loyalty, right? Says Hal, “In my mind, what the consumer wants is simplicity and immediacy of rewards.”

The rise of “Zombie Malls” also says something about loyalty. The future of retail may very well depend on who can best engage, who can deliver an experience, who can reward — and how will these tangibles and intangibles manifest.

But there’s one element of loyalty I might add that should not be overlooked: the immediacy of sharing … good and bad. But for once, let’s look at the good side of experience sharing:

I was in Saks Fifth Avenue’s flagship store last week, midday, and on the main floor — and I thought I was in a museum. Quiet. Attentive salespersons aplenty. But hardly a shopper in sight, back among the high-end jewelry counters where I entered the building. When the elevator door opened on the shoe department, eighth floor, it was the exact opposite — a beehive of shoppers everywhere, and it seemed to be multi-generational. (Sak’s calls its shoe department, “Shoes 10022” and I’d say it’s a destination.) Maybe shoes lend themselves to physical shopping – simplicity and immediate rewards – you walk in, try them on, buy them and walk out. There was scarcely a single customer, they were in groups — this was a social shopping phenomenon.

Remote shopping, courtesy of Amazon and others, can replicate shoe-buying well enough, but even a brand like TOMS, which started online, quickly expanded to retail distribution to achieve scale. But scale doesn’t equal loyalty. I wear TOMS partly because of the social responsibility tie-in, and they’re comfortable. I’m part of a community of TOMS wearers, instantly recognizable by the heel. I know Adam Ruins Everything – so I get it, but there’s still plenty of kids in the world that appreciate a free pair of shoes, and profit isn’t evil. Affinity is tribal by nature.

Take the perfect cup of coffee … Liz Kislik’s quest for a “quality” latte is both funny and a tasteful lesson in a superior customer experience. Sometimes we’re punished when we wander from our tried-and-true. Simplicity and a 90-minute delay in rewards appears to have sealed the deal for her — but I loved the way she blogged about it, too.

So as digital transformation disrupts, killing business models and creating new ones, what can a brand do? Keep it simple, delight the customer, and reward early and often — your customers will evangelize for you.

Customer ‘Loyalty’ — It’s Never a Sure Thing

As “Data,” “CRM” and the “Customer Database” continue the march toward the center of the marketing organization in tens of thousands of businesses, not surprisingly another “classic” marketing concept is rather “new” again — customer loyalty.

CRM keyAs “Data,” “CRM” and the “Customer Database” continue the march toward the center of the marketing organization in tens of thousands of businesses, not surprisingly another “classic” marketing concept is rather “new” again — customer loyalty.

Customer Loyalty: Where to Start

The right place to start in your consideration of customer loyalty and creating a loyalty program is simple, and yet relatively often, rather overlooked.

A simple question we ask when discussing the “loyalty” dimension of customer experiences and the customer data they produce goes something like this: What does success look like when you implement a customer loyalty program?

The answer to that varies — but the worst answer is “nothing.”

“Nothing” is never determining what the end in mind should be for your customer loyalty program in the first place. When organizations invest in defining the outcome they seek, they are roughly 20 percent of the way to success. As the axiom goes, “If you spend 90 percent of your time defining the problem, you’ll solve it in 10 percent of the time.”

What Can We Expect From Loyalty Initiatives?

So what should we expect from a customer loyalty program? Here’s a partial list we’ve heard from the brands where we’ve used customer data to inform and improve customer loyalty:

  • You keep those customers longer
  • You generate more social referrals
  • Those customers buy more often (frequency)
  • They are less sensitive to pricing and increases in particular
  • The cost of customer acquisition can actually be lower
  • Exchanges and returns decrease “naturally”
  • You recognize profit growth

These are all very real outcomes you can expect from a high-quality customer loyalty program built around your unique customer and your business.

How Does Loyalty Really Work?

This is the best question to ask. Most organizations I’ve worked with on managing a customer base (customer database) to drive business performance begin with a gold, or black card, a name for an elite club or a space they will convert to lavish “loyal” customers with attention.

5 Data-Driven Strategies to Feed Your Customer Obsession

The digitization of our culture and marketplace has made it even more important for marketers to be customer advocates. Every bit of content we create, every retargeting campaign we develop and every customer journey we attempt to map … all this must be tied to superior and engaging customer experiences. It’s the only reason marketing exists.

The digitization of our culture and marketplace has made it even more important for marketers to be customer advocates. Every bit of content we create, every retargeting campaign we develop and every customer journey we attempt to map … all this must be tied to superior and engaging customer experiences. It’s the only reason marketing exists.

This Forrester Research recently claimed that companies obsessed with customer experience are more profitable and see higher growth. Consider Amazon, Nike or Mercedes Benz, where innovation is part of the culture. Consider how an obsession with innovation at Apple and Google translates to customer delight in their products. For the rest of us, it may be harder without that kind of a culture behind us, but frankly, there is no longer a choice for marketers: Each of us must adopt an attitude of obsession with customer satisfaction. Then, we need to employ a systematic approach to optimizing everything we do toward customer value. The key question to ask at every point in your day, “Is what I’m doing adding real value to a large number of high-value customers?” If not, change it or dump it.

Like any change, in life or business, it starts with attitude. If you don’t work for a customer-obsessed company, can you successfully meet the demands of your market and rise above the competition? At a minimum, companies must embrace that digital and customer experience is everyone’s business—great ideas and the seeds of change can come from anywhere, regardless of title, but do need to be cross-functional and valued to blossom.

It’s time to make this transformation personal. Consider how you can use the technology you have to adapt the customer experiences that you do control, and demonstrate success to the rest of the organization. This proof of concept approach is a great way to get more budget, too. Incremental change is great—improvements to a campaign for next time or an adjustment to the timing for a triggered message are good starting points. However, more is needed.

We must re-think the customer experience across an ecosystem, and not just a set of interactions with owned media or branded touchpoints. Collaborate with other suppliers and influencers to focus on digital efficiency so that you can react in “right time.” Right time is an alternate to “real time” that recognizes that immediacy is not the most effective reaction in all situations. This is especially true since the customer journey is non-linear.

Thinking differently can be difficult inside an organization—especially if you are successful. Often, good ideas are limited because of the way we ask questions about our customers or our marketing programs. A research experiment with third graders provides some proof of why creativity goes beyond tactical application of cleverness or humor. (The video is about two minutes long.)

The project gave two groups of third graders the same assignment—to make a picture out of a triangle. When the assignment was narrowly defined, the pictures came out nicely, but not that different from each other. When the assignment was not defined, the pictures came out wildly different—and much more creative!

Don’t just wait for disruption to come to your industry—learn to disrupt your own business. Truly aim to understand whatever is blocking your path to innovation and customer connection. Consider some of these strategic elements that can help you break free of legacy patterns and test new ideas.

1. Use the Data You Have to Zero-in on Key Segments. Use microtargeting to really get to know your customers. Dig deep into customization and personalization opportunities to find the small, yet potentially profitable subsets of your market and niche offerings.

2. Separate the Signal From the Noise. Being able to do so is a powerful intoxicant: If I can just repeatedly do that one perfect thing that will really drive our business forward, I’d dominate our market and be a hero. Problem is, identifying that one perfect thing is very hard. Marketing analytic models may be more accessible than you think—and perhaps are no longer a luxury, but an imperative for understanding the customer needs—and predicting future behavior. Bring these practices closer to the campaign management and segmentation strategy—and give your analytics teams a seat at the table. Consider some of these key questions that analytics models can answer:

a. What dynamic forces are affecting my customer and how effectively am I changing to meet these changes?
b. Are there new market opportunities developing that I can take advantage of and become the industry leader?
c. Would this new product be interesting to our current customers? What must be true for customers to feel pain? Who are our most valuable customers, and over time? What outside factors impact customer loyalty and retention?
d. What are the characteristics of our best prospects?
e. Which marketing messages and campaigns are contributing, and when do they contribute during the lifecycle?

3. Marketing Automation Tools Are Slowly Evolving to Help You Manage These Changes, but you may need to bolt together point solutions in the meantime (especially if a big upgrade is not in your budget this year). Look to consolidate applications into a platform with data and process level integration to improve efficiency and effectiveness; work to integrate marketing technology with the enterprise infrastructure to reveal deeper insights into customers, partners and market opportunities. Here is a good reason to establish inter-disciplinary teams with IT and sales and customer service and legal to improve marketing contribution, vendor management, due diligence and governance practices.

4. Paid Placements (Native Advertising) Are Here to Stay. Spend your money on the right content and platform and understand which digital properties are performing best. Build budgets and relationships around content placement, sponsorship opportunities, syndication services and content recommendation platforms. Content marketing can’t be limited to owned and earned media if you need to reach larger and broader audiences.

5. Focus on Quality Content; we are all publishers now. Mobile will continue to dominate, so master its impact on your content and targeting. All our writing has to be compelling and adaptable across platforms, and written to the tastes of narrowly targeted personas. Automation tools help to make sure your content is repurposed with panache and context.

Clearly there’s lots of opportunity for growth in many areas of marketing success, particularly as we align our investments in areas where vendors have incentives to innovate. Scouring your budget for “past success” might be a good place to start: Given the advances in technology, will what worked in 2010 or even in 2014 work now in 2015? Please share your own tips and challenges for creating a customer-obsessed culture in your organization in the comments section below.

Marketing Success Is (Almost) All About the Data: Optimizing Customer Loyalty Behavior Initiatives

Much of what I’ve learned over the years about sales, marketing and customer service has to do with the critical importance of customer data, and how those data are converted to actionable insights. It’s how companies generate the right customer data, manage and share data the right way, and use it at the right time. It’s also how they use data to the best effect, to optimize loyalty and profitability, that makes them successful, or not, on an individual customer basis. Culture, leadership, and systems will facilitate effective information gathering, storage and application; and, CRM, CEM, ERP, or other acronyms notwithstanding, it’s impossible to be successful without having as much relevant anecdotal and dimensional content about customers as possible.

Much of what I’ve learned over the years about sales, marketing and customer service has to do with the critical importance of customer data, and how those data are converted to actionable insights. It’s how companies generate the right customer data, manage and share data the right way, and use it at the right time. It’s also how they use data to the best effect, to optimize loyalty and profitability, that makes them successful, or not, on an individual customer basis. Culture, leadership, and systems will facilitate effective information gathering, storage and application; and, CRM, CEM, ERP, or other acronyms notwithstanding, it’s impossible to be successful without having as much relevant anecdotal and dimensional content about customers as possible.

Bill Gates, often a prophet, said in “Business @ The Speed of Thought” (1999):

The best way to put distance between you and the crowd is to do an outstanding job with information. How you gather, manage and use information will determine whether you win or lose.

He might have added, had he really understood how to create and optimize customer loyalty, that what information, particularly customer-specific information, a company collects, and how they manage, share and apply it to the customer will determine how successful they can become.

One of my key sources for the uses of information gathered by customer clubs and, particularly, loyalty programs, for example, is friend and colleague, Brian Woolf (www.brianwoolf.com). Brian is president of the Retail Strategy Center, Inc., and a fountain of knowledge about how companies apply, and don’t apply, data generated through these programs.

In a Peppers & Rogers newsletter, for example, Don Peppers quoted Brian in his article, “The Secrets of Successful Loyalty Programs”:

Loyalty program success has less to do with the value of points or discounts to a customer, and much more to do with a company’s use of data mining to improve the customer experience. Top management hasn’t figured out what to do with all the information gleaned. You have all this information sitting in a database somewhere and no one taking advantage of it.

You need to mine the information to create not only relationships but also an optimum (purchasing) experience. The best loyalty programs use the customer data to improve not only promotions, but also store layout, pricing, cleanliness, check-out speed, etc.

Firms that do this are able to double their profits. When these elements are not addressed, all you’re doing is teaching the customer to seek out the lowest price.”

Tesco, one of the world’s largest retail chains, is using its customer information for a number of marketing and process initiatives. In his book “Loyalty Marketing: The Second Act,” Brian described how Tesco leveraged customer data drawn from its loyalty program to move into offering banking and financial services:

With information derived from its loyalty card and enriched by appended external demographic data, they can readily develop profiles of customers who would most likely be interested in basic banking services, as well as an array of related options, ranging from car loans and pension savings programs, to insurance for all types of needs—car, home, travel and even pets. It costs Tesco significantly less than half of what it costs a bank to acquire a financial services customer. Without a doubt, having detailed customer information gives them a competitive edge.

A few years ago, Tesco parlayed its offline customer data to also become the world’s largest online grocery and sundries home delivery service. Additionally, Tesco uses its customer data to target and segment communications to the millions of its loyalty program members by almost infinite demographic, purchase and lifestyle profiles. In his book, Brian notes that Tesco can create up to 150,000 variations of its promotion and reward statement mailings each quarter. These variations, as he says, ” … are both apparent and subtle, ranging from the product offer (i.e., which customers receive which offers at what price) to the content of the letter and the way it is personalized.”

Tesco is absolutely a company that knows how to leverage customer information. Its customer database contains not just demographic and lifestyle data, food spending in stores and on home delivery, but also specifics about its customers’ interest in, and use of, a diverse range of non-food products and services. As Bill Gates’ statement suggests, incisive and leveraged customer data has enabled Tesco to put distance between itself and its competitors, in both traditional and non-traditional retail markets.

An understanding of the real value and impact of customer information, and a disciplined plan for sharing and using the data to make a company more customer-centric, is needed more than ever. A good analogy, or model, for CEM and loyalty program effectiveness or ineffectiveness in building desired customer behavior, may be what can be termed the “car-fuel relationship.” A car, no matter how attractive, powerful and technically sophisticated, can’t go anywhere without fuel.

Not only that, to reach a desired destination, the car must have the right fuel for its engine, and in the right quantity. For customers, the car is CRM and its key data-related systems components (data gathering, integration, warehousing, mining and application).

The destination is optimized customer lifetime value and profitability. The fuel is the proper octane and amount of customer data.

Leading-edge companies are focusing on customer lifetime value as a destination. They are collecting the right data and using the right skills, processes, tools and customer information management technologies to make sure that key customer insights are available wherever they are needed, in all parts of the enterprise. Jeremy Braune, formerly head of customer experience at a leading U.K. consulting organization, has been quoted as saying: ” … organizations need to adopt a more structured and rigorous approach to development, based on a real understanding of what their customers actually want from them. The bottom line must always be to start with the basics of what is most important to the customer and build from there.”

I completely agree. It’s (almost) all about the data.

1-Trick Ponies and Customer Loyalty Behavior

About 30 years ago, Paul Simon wrote a song entitled “One-Trick Pony.” The song describes a performing pony that has learned only one trick, and he succeeds or fails with the audience based on how well he executes it. As Simon conveys in the lyrics: “He’s got one trick to last a lifetime. It’s the principal source of his revenue.”

About 30 years ago, Paul Simon wrote a song entitled “One-Trick Pony.” The song describes a performing pony that has learned only one trick, and he succeeds or fails with the audience based on how well he executes it. As Simon conveys in the lyrics: “He’s got one trick to last a lifetime. It’s the principal source of his revenue.”

For a long time, I’ve seen this song and its message as something of a metaphor for what challenges many companies endeavoring to create customer loyalty behavior and more effective customer loyalty programs.

A key reason companies have a difficult time achieving stronger customer loyalty is they fail to provide full value and emotional relationship fundamentals. They focus on satisfying customers exclusively through basic rational and functional benefits, which is often too benign and passive an approach to create lasting value.

Mostly, they emphasize single-element or minimal element tactical approaches with customers, such as pricing, merchandise, loyalty cards or points-based programs, without determining (either before programs are launched or after they are up and running) whether this is sufficient motivation for building a long-term relationship. Smart marketers know, for instance, being a low-cost provider can be a trap and that only overall perceived value will prevail. In the United States, chain discount retailers like Caldor, Bradlees, Jamesway, Value City, Ames and Filene’s are either in trouble or have gone out of business, while Target, Costco and Walmart, with strong brand equity and high perceived value, have sustained.

Being a low-cost provider means that brand and customer strategies get little emphasis, and they require little investment. Let’s be honest. Cutting costs seems safe. The downside is it usually does not produce much loyalty (customer or staff), strategic differentiation or profitability.

In a 1980 Harvard Business Review article by William Hall (written, parenthetically, about the same time Simon wrote “One-Trick Pony), he reported study results comparing companies that competed on differentiated customer value vs. companies that competed principally on cost. On any important measure—return on equity, return on capital, and annual revenue growth—companies delivering both rational and relationship value beat the price competitors every time.

Customers can almost always locate cheaper products or services. Ultimately, they will invest a greater share of their purchase dollars with suppliers who create stronger emotional bonds and deliver superior perceived value. Competing on price, or any other single dimension, may pull away customers from other suppliers in the short run, but it will be difficult to keep them for long. Price is rarely a sufficient “barrier to exit,” and is more often an invitation to churn.

The same thing often holds true for incentive programs. Many consumers participate in programs like supermarket bonus clubs and airline frequent flyer programs, but they aren’t particularly effective at producing greater loyalty for any one airline or any one supermarket chain. Customers are often members of several programs, and the most active users tend to be those who would have been frequent purchasers, anyway. The incentive and reward structure more often benefits the already loyal rather than increasing loyalty. Gift programs, travel, dining, entertainment, merchandise, and cash award programs, and other plateau and pre-selected response stimulus programs are having an increasingly difficult time breaking through the clutter to provide unique, differentiated customer value.

Some of the online incentive programs have positively increased transactions, mostly among younger, female and active surfing potential buyers. To keep these incentive promotions from being one-trick ponies, they must be carefully targeted to the right consumers and at the right time. These programs must have four effective elements: ability to attract prospects to the website and, once there, to generate consideration, preference, and purchase. Getting infrequent buyers to purchase more often, or frequent buyers to place larger orders through the use of incentives, will hinge on how well companies leverage their customers’ profiles. Even more basic, it must be well-understood what customers perceive as value and what it will take to optimize their repeat purchases. The essentials for bricks and mortar product and service providers are virtually the same.

Generic, cookie-cutter and “me, too” discounts or incentives don’t do particularly well at increasing overall customer “share of wallet,” because they don’t sufficiently reward the customer for their enhanced purchase activity over time. All that’s really required to meet the customer halfway is infusion of some targeted, personalized elements to the incentive program to make them more attractive and beneficial.

The first step is to segment customers who should receive different incentives. This can be done through both basic data analysis and applied, or pilot, customer research. For example, for large customers who purchase infrequently, the company might have determined that, if they offer special discounts made within the near future, say 60 or 90 days, these customers would find that attractive. Customers who purchase frequently but in low volume amounts might be offered a discount on their next order, so long as it is larger than their last order. The array of potential loyalty program offerings can be customized based on identified needs.

What about incentives for customers who are both frequent and large volume purchasers? Well, start by saying “thank you” to them. Few things are more appreciated than thanks, and few companies express their gratitude as much as they should. Many forget to thank their customers altogether. This is especially critical for Web-based companies, or ISPs and cable companies, where the purchase experience is frequently virtual rather than personal. Thanked customers are more likely to go out of their way to provide positive referrals and testimonials.

Paul Simon’s song lyrics conclude: ” … the bag of tricks it takes to get me through my working day.” Companies would be well-served to have a bag of experience and customer loyalty tricks, using disciplined research and customer data to identify them, rather than relying on only one—price—to get them through.

Avoiding the One-Night Stand

Stating that all customers are not created equal is hardly an oversimplification. But, just like the pigs in Orwell’s “Animal Farm,” some customers are more equal than others. No company has unlimited resources to equally service or support all its customers. Repeat buying power, the essence of customer loyalty, is everything. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable.

Stating that all customers are not created equal is hardly an oversimplification. But, just like the pigs in Orwell’s “Animal Farm,” some customers are more equal than others. No company has unlimited resources to equally service or support all its customers. Repeat buying power, the essence of customer loyalty, is everything. Some customers are worth a great deal, some may become more valuable over time, some may be valuable for a brief period but may be easily lured away, and some are never likely to become valuable.

At minimum, companies need to segment their customers so they can determine how much longer that customer will remain with them, how much revenue each customer will contribute, how much and what kind of services the customer should receive, and what efforts will be needed to keep them whether they are new, at risk, or even already lost. Also, if a company is changing product or service focus—such as beginning a new customer experience management or frequency marketing program—decisions will have to be made about which customers it wants to retain.

Just as companies are becoming smarter about keeping the customers they want or “firing” less attractive customers through stepped-down services, they have to invest more upfront, at the beginning of the customer life cycle, in learning which potential customers will be the most valuable over time. This goes beyond segmentation. It is almost pre-segmentation.

Here’s a prime example. The business of gaming in Las Vegas, Atlantic City, numerous riverboats, Indian reservations and offshore is built not on a house of cards, but a house of numbers. At Las Vegas casinos like the Rio, those players who gamble $1,000 a day with the Rio, whether they win or not, receive the designation “hosted guests.” These are the kinds of customers the Rio works hard to acquire. Their level of play accords them VIP status, with more “comps” (free dinners, show passes and other gifts). Each hosted guest has an individual staff host assigned to check on them and provide any needed services.

The host is actually a highly paid, personal customer service representative. It’s an important position, which casino operations like the Rio consider pivotal to their success. The hosts cultivate relationships with the players; and VIP players are encouraged to call their hosts before arriving at the casino, so the host can have show tickets, restaurant reservations and suites set up, per the player’s profile.

There’s even a higher echelon of gaming customers—those players who have a $1 million line of credit. They get the best suites and virtually everything the casino has to offer. They’re nicknamed “whales,” and with good reason. At the Rio, this means a suite with 7,000 square feet of space and bathroom sinks with gold-plated faucets. These players are relied upon to bet in the Rio’s secluded back room, called the Salon, where they may play baccarat and roulette with $100,000 chips.

In an industry like gaming, where the level of customer migration is very high, it is imperative that casinos not only keep the players they want but target the right customers in the first place. They do this in a number of ways, including geodemographic profiling for their acquisition. For the high rollers they’ve lost, many of the casinos make an extra effort to get them back, as well.

Advanced companies have begun applying “conversion” models, seeking customers who:

  • Need less direct motivation (incentive) or indirect motivation (promise of support and committed resources) to purchase;
  • Have demonstrated more resistance to claims and attempts to lure them away;
  • Are less price-sensitive;
  • Are more accepting of occasional value delivery lapses and are less likely to accept alternatives if the brand/service is unavailable; and
  • Demonstrate more positive attitudes about “their” brand.

In the retail automotive industry, as another example, potentially loyal new customers take less time making their purchase decisions, consider fewer dealerships, are less price-driven, and rely less on magazine articles and other media and more on previous experience and personal recommendation.

Some years ago, South African researchers Jan Hofmeyr and Butch Rice created an effective conversion model, which helped marketers develop and sustain effective customer loyalty initiatives programs for customers, both new and established. They found that, beyond customer needs and value delivery requirements, companies must understand the potential depth of a customer’s commitment to the supplier. Part of this means identifying the degree of customers’ tangible and intangible involvement with the company. Tangible involvement can include such factors as the actual dollar cost of switching to a competitor. Intangible issues include the emotional strength of the connection or the upset and insecurity created by switching suppliers. The model also measures the degree of attractiveness of competitive brands, based on what these customers want as prioritized elements of value.

Hofmeyr and Rice’s model also enabled them to view their clients’ marketplace in terms of users and non-users. Users can be divided into those who are truly committed and loyal and those who are “convertible”; that is, declining or wavering in their loyalty. Non-users—prospects and previous customers—are divided into potentially convertible and non-available (because they are committed to their current supplier).

Detailed analysis could then be developed for current customers and prospects. The percentage of current customers who are entrenched, or completely loyal, can be identified, as well as those who have moderate loyalty, shallow loyalty, or convertibility (true vulnerability). Non-users, or prospects, could also be identified in a similar manner: those who are available, or highly receptive to a competitive offer; and those who are ambivalent, but who would switch with the right value-based incentive. Other prospects, who have average or strong loyalty to their brand or supplier, are considered unavailable by the model.

The model has been used to plan the amount of advertising and promotional activity required for new customers and prospects, according to their commitment level and potential value. It has been applied in more than 50 countries and for scores of products and services.

On an everyday, or tactical, basis, companies should also always be on the lookout for customers who could represent more of a problem than the revenue they might contribute. Through our own research, we’ve identified seven such types of customers:

  • Non-Complainers—Customers who never express any negative feelings about performance or identify potential areas of improvement may just be hiding their disaffection. Marketing scientist Theodore Levitt has said: “One of the surest signs of a bad or declining relationship with a customer is the absence of complaints. Nobody is ever that satisfied, especially not over an extended period of time.”
  • Over-Complainers—Customers who tend to complain frequently, sometimes irrespective of whether their issues are really consequently or not, can beat down a company’s morale and overtax its support infrastructure.
  • Price Grinders—New customers who pressure their suppliers to lower prices on initial sales in return—they often promise—for future business that may or may not exist.
  • Chronic Defectors—When customers have a history of pulling their business without explanation or warning, this may be a sign that they’ll never be happy with any supplier’s performance. Their volatility and refusal to communicate issues makes them undesirable.
  • Friends in Need—These “quick-jump” customers who want to find new suppliers with great haste often don’t make purchase decisions very well, or they may have economic challenges.
  • Discourteous Slobs—Any customers who are chronically rude and verbally abusive, even though they may not contact their suppliers frequently, can undermine a company’s morale and operations. If they have reason to be upset or annoyed, that’s one thing. Their concerns should, obviously, be addressed and dealt with as quickly as possible. If the negative behavior continues, they’re probably not worth the effort.
  • Misfits—The needs of some new customers may simply not align well with the supplier’s ability to perform. If, for example, 99.9 percent of the deliveries to customers are made during normal business hours and the new customer wants delivery in the middle of the night, unless this customer truly represents a great deal of business, they are probably not serviceable.

If most people are like me—a statement always open to interpretation—virtually every day they will see content or promotional material from long distance telephone companies offering their latest and greatest low cost plans. Typically, they don’t try to find out about my business and personal long distance needs. They just try to push the plan. One of the enduring reasons for the high rates of customer turnover in this industry is the lack of scientific prospect targeting, and attempts to understand potential customers’ tangible and intangible switching issues, done at the outset. Perhaps it’s time for their conversion.

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.