United Airlines: Securing Customer Loyalty That Money Can’t Buy

It’s not about points or free gifts anymore; it’s about what money can’t buy.

United brand image
(Image via United Airlines)

It’s not about points or free gifts anymore; it’s about what money can’t buy.

This is what Praveen Sharma, VP of loyalty for United Airlines, tells me about what it takes to keep customers loyal to brands in an age where consumers have more power and options than ever before.

MileagePlus, one of the airline industry’s most successful loyalty programs, is built around creating customer experiences — not just free flights, like most frequent flyer programs. According to Sharma, these experiences can include a training day with your favorite pro sports team, or a session in a flight simulator, VIP luxury venues and other experiences that are not for “sale.”

By allowing MileagePlus members to use their points for aspirational experiences that deliver emotional fulfillment vs. just a free airline ticket or upgrade to First Class, United Airlines’ customers remain loyal to a brand, regardless of price. As a result of rewarding customers in unexpected ways, and by allowing members to choose their rewards, MileagePlus is the largest loyalty program in the industry, with more than 100 million members.

So what’s in your loyalty program? Chances are, you’re still offering one free product for every 10 purchased, or points redeemable for a free hotel night, for 10 percent off their next purchase of $200 (not a big deal by the way), and other way-too-common ways for rewarding customers.

Loyalty today is not about price. It’s not about “free” anything. As United Airlines has discovered and proven under Sharma’s leadership and dedication to providing emotional value over monetary value, it’s about the “feelings” you create among the customers you serve. Feelings come from how you are treated, unexpectedly and expectedly.

For example, a friend of mine flies United almost weekly, all over the world for his business. When he had a tight connection at a large airport with terminals far apart, there was a car waiting for him at his gate, ready to take him to the next gate. That kind of attention to individual customers’ issues and acting on imminent needs is what creates brands like United Airlines that last not only for a customers’ lifetime, but for generations of customers over decades of change.

No matter how large or small your brand may be, there are many lessons here for every business for creating loyalty programs that enable your sales, profits and marketing ROI to soar to new heights.

Here’s just a few tips from Sharma and myself:

  • Build an Ecosystem: Build a network of partner brands that reflect your brand’s standards and value, and complement or support your offerings. Align with brands that can provide experiences for your customers beyond your product line, that offer supplemental experiences, services and products, and are as eager as you are to reward each others’ customers with new offerings and ideas.
  • Build Your Data Capabilities for learning and communicating instantly across all channels your customers use: mobile, phone, email, social. Communicate on what matters to customers, not just what matters to you.
  • Use the Rule of Five to send tips, ideas, informational notices, updates on services, products or, in the case of United, changed gates or ETAs. Send five messages about the customer before you send one message about what you have to sell.
  • Create Points of Engagement that enable you to learn. Surveys still work, but so do other tools. Consider creating a loyalty board with a diverse mix of customers to learn firsthand what you need to do to keep loyalty up and growing via evangelism. And insert a one-question survey each week on your website to keep the dialogue and insights flowing.
  • Never Set the Loyalty Trap. Some companies and business models wittingly and unwittingly “trap” customer loyalty with sales models that make it really hard to switch brands. SaaS contracts are an example of how this can happen, because of the upfront time and energy required for most subscription-based services. Once you get clients set up to use your product, trained and “vested” with time and money, it is hard for them to cancel that contract, even though you’ve given them many outs, because they will lose too much time and money to start over. However, these traps, when set intentionally, rarely work. If your onboarding, product functionality, service, support and other aspects do not meet expectations and trigger satisfaction more often than not, customers will make the effort to change and will tell everyone they know to go with them.
  • Reward Loyalty With Experiences, not just product. Consumers define a brand’s value to them by the experience and emotional value delivered more than anything else. Price and customer service can be replicated quickly and easily by just about any competitor. But experiences and feelings of achievement, appreciation, joy and security, not so much. This is why MileagePlus offers experiences of a lifetime that money can’t buy; like the training day with a professional sports team or flight simulator sessions mentioned above.

Takeaway

No matter how big or small your business reach, or how large your customer database is, you can define and deploy strategies and experiences to create loyalty. Think big, think differently, and think about the “emotionally rewarding” value that your brand is uniquely set up to deliver — time and time again.

Building Your Brand Religion

Even with the most finicky of customers in an increasingly chaotic and complicated world, lifetime value and brand loyalty can still be achieved. But not how you might think. It’s not the loyalty programs, frequent purchaser points (only 35 percent enrolled redeem these, per Forrester Research), and free gifts that stack up the purchase orders for a given customer. And it’s not the great service that can be matched by your competitors, either. It’s something much deeper. The same something that keeps the church pews warm, tithing coffers full and baptismal fonts busy.

Even with the most finicky of customers in an increasingly chaotic and complicated world, lifetime value and brand loyalty can still be achieved. But not how you might think.

It’s not the loyalty programs, frequent purchaser points (only 35 percent enrolled redeem these, per Forrester Research), and free gifts that stack up the purchase orders for a given customer. And it’s not the great service that can be matched by your competitors, either. It’s something much deeper. The same something that keeps the church pews warm, tithing coffers full and baptismal fonts busy.

The secret to lifetime value and referrals from your customers is really no secret at all. It’s simply the psychology of hope, loss and rewards, and trust that has made religion the biggest industry worldwide. Without question.

Consider:

If loyalty were dead, all of this money could not be generated from the millions of loyal believers who give up, on average, nearly 3 percent of their annual incomes to their religious faiths. If you take just U.S. wage earners with an annual income of $40,000, that comes up to about $93 billion a year in tithing—the equivalent in revenue for the worldwide video game industry in 2013, according to Gartner Research. And you wouldn’t have nearly 44,000 people attending a single group’s service on Sunday where the only product being sold is hope.

While we direct marketers are clearly selling more than hope as we peddle tangible products and services to millions of customers each year, our marketing ROI could truly become divine if we follow even just a few of the tenets from religious psychology. The primary tenets or cornerstones of all successful religions are:

1. Hope or faith in a better life (in this case, an afterlife);

2. Trust in your leaders to guide you with integrity;

3. A sense of community, or like-minded souls who have the same values, ideals and beliefs; and finally,

4. A fervor so strong about your beliefs that you are willing to spend much of your time on this earth spreading your faith’s gospel and bringing others into the fold—all on your own time, at your own expense and without any pay (besides the joy of knowing you brought eternal joy to others).

These are the same four cornerstones that make for successful branding and must be present in any brand’s marketing programs today.

Hope: All products are emotional purchases—your car, life insurance, clothing, furnishings and even food. Each time you swipe that payment card, you are doing so with the unconscious hope of gaining some intangible value associated with that product. Be it status, safety, reliability, an image that will attract romance or job opportunities for you, or a break from the fear of failing your children, spouse or job. What is the hope associated with your products? And yes, this applies to both B-to-B and B-to-C.

Trust: I’m not sure if there has even been a lower level of consumer trust for big brands as there has been in the past decade. Regardless of what industry you are in, trust is fleeting and hard to get, even for a small moment in your customers’ lifetime. Consumers are eager to find brands they can truly trust to stand behind their promises and products, and to actually put consumers’ interests, and those of the community at large, ahead of their own. There a few who do that well. Tom’s shoes is a great example. Even though the company sells a pair of shoes for around $65 which costs it $9 to make—earning it a profit of around $56 a pair—people love and trust Tom’s, because it promises to donate one pair to a needy child for every pair sold. And Tom’s produces evidence that it really fulfills this promise. The leaders of Tom’s shoes are right up there with the rich pastors of the world for selling hope that the world can be a better place, providing people with a means to make it that way, operating with integrity and cashing in on millions at the same time.

Community: Also known as “congregations,” we flock toward people with like values to feel safe, validated and empowered. Many people lose their faith at some point in their lives and question the religion of their childhood, and a large number of these fallen-from-faith adults stay true to their religion at the cost of losing a community of support, friends and a trusted network to be there when they are in need. Leaving is too high a price. The same applies to brand communities. Brands that bring consumers together for events or group discounts like “Family and Friends” create unbreakable equity as consumers pay a price to switch that is far higher than money, in many cases.

Evangelism: We love telling friends about a great purchase and then getting great satisfaction (really, decision validation) when they buy the same thing. It is our innate need to know we are making wise choices that others believe are wise, as well. This is particularly strong when it comes to our faith. The Mormons are famous, partially due to the recent Broadway musical, “Book of Mormon,” for their aggressive missionary program—whereby they have 80,000 missionaries evangelizing all over the world paying their own expenses, and working for free to build the church’s membership base. Why do they do it? Because they truly believe they have found the secret to a happy life and an even better afterlife, and they are compelled to bring others into their joy. This same need to share sources of personal joy with others applies to customers. Like religions, brands just need to create the tools to make it easy to do. Religions like Mormonism and Rick Warren’s Saddleback Church have a book that members share with others. Religious-like brands have discounts and free trials for loyal customers to share freely.

When you find the right tools and provide the right incentives to your loyal customers, you can engage free marketers for your brand who will work on their own time, at their own expense and for the reward of knowing someone else loves your products, too! Seriously, what more can a brand want? (Other than a tax exempt status!)

As you start a crafting a new marketing plan, throw out the four Ps and starting focusing on the above “Four Cs”—the cornerstones of your brand’s religion—and see how quickly you reap the rewards in this lifetime (and the next!).

Are Coupons the Key to Mobile Marketing?

Mobile commerce has exploded in recent years—and mobile coupons are responsible for much of this growth. In fact, mobile coupons are redeemed 10 times more than print coupons and the number of mobile coupon users is expected to reach 53.2 million by 2014. Combine that with the increase in mobile usage by consumers on the go, and it’s clear that mobile coupons are the perfect solution for growing your small business and attracting customers on the hunt for discounts through their mobile devices.

Mobile commerce has exploded in recent years—and mobile coupons are responsible for much of this growth. In fact, mobile coupons are redeemed 10 times more than print coupons and the number of mobile coupon users is expected to reach 53.2 million by 2014. Combine that with the increase in mobile usage by consumers on the go, and it’s clear that mobile coupons are the perfect solution for growing your small business and attracting customers on the hunt for discounts through their mobile devices.

The Mobile Marketing Opportunity Is Real
eMarketer estimates that nearly 20 million US adults will redeem a mobile coupon this year, including coupons or codes received via SMS, applications and mobile web browsers; quick response codes for redemption online or offline; and group buying coupons purchased via mobile. More than 70 percent of US adult digital coupon users will redeem a coupon or code on a mobile device for online or offline shopping in 2014.

The mobile coupon audience will post double-digit growth rates annually through 2016, driven by continued smartphone and tablet adoption and the proliferation of digital channels offering coupons easily accessed by mobile, such as mobile apps, daily deal and group buying sites, email, and social networks. eMarketer expects that by 2016, mobile coupon users will represent nearly 83 percent of all digital coupon users. This is huge!

The Revenue Opportunity
There are a number of different ways to engage consumers and drive revenue opportunities, including:

  • Coupons: Mobile coupon redemptions in the U.S. will exceed 53 million this year. The mobile coupon audience will post double-digit growth rates annually through 2016, driven by continued smartphone and tablet adoption. (Source: Business Insider 2014)
  • Geo-Targeting: Geo-targeting has boosted the success of SMS-delivered coupons, with retailers seeing high redemption rates from coupons sent to consumers close to their stores.
  • Loyalty Programs: Consumers expect to be rewarded for brand loyalty, particularly millennials. A 2014 poll by Bond Brand Loyalty indicates that 6 in 10 millennial respondents would switch from brands they buy and two-thirds would change when and where they shop, if it meant getting a better loyalty program.

Don’t Forget the Tablet
Year after year, tablets are becoming an increasingly important part of a brands mobile strategy. According to eMarketer, in 2014, 80.2 percent of mobile coupon users will use a tablet for redemption, compared with 75.4 percent who will do so on a smartphone. Tablets are frequently used for in-home digital purchases, which boost tablet coupon redemption.

Coupons, geo-targeting, and loyalty programs can be offered, tracked, and monetized with a mobile engagement platform. Additional revenue opportunities include banner ads, mobile video, rich media and SMS campaigns. But keep in mind that more friction points in the redemption process will greatly reduce the use of mobile based offers. So keep it simple for consumers to redeem your offers.

The data from Black Friday on-line shopping as well as coupon redemption data from Cyber Monday should tell an interesting story for retailers who have made a strong commitment to mobile couponing to drive commerce and increase total purchases by incentivizing their consumers.

McKinsey Thinks Bland, Generic Loyalty Programs Are Killing Business – And They May Be Right!

A recent Forbes article by McKinsey, “Making Loyalty Pay: Six Lessons From the Innovators,” showed loyalty program participation has steadily increased during the past five years (a 10 percent annual rate of growth), with the average household now having almost 25 memberships. For all of that growing popularity, there are huge questions for marketers: Are the programs contributing to increased sales? And what is the impact of loyalty programs on enterprise profitability?

A recent Forbes article by McKinsey, “Making Loyalty Pay: Six Lessons From the Innovators,” showed loyalty program participation has steadily increased during the past five years (a 10 percent annual rate of growth), with the average household now having almost 25 memberships. For all of that growing popularity, there are huge questions for marketers: Are the programs contributing to increased sales? And what is the impact of loyalty programs on enterprise profitability?

Overall, companies with loyalty programs have grown at about the same rate as companies without them; but there is variance in performance value among industries. These programs produce positive sales increases for hotels, for example, but negative sales impact on car rental, airlines and food retail. And, companies with higher loyalty program spend had lower margins than companies in the same sector which do not spend on high-visibility loyalty programs.

McKinsey has noted that, “Despite relative underperformance in terms of revenue growth and profitability, over the past five years, market capitalization for companies that greatly emphasize loyalty programs has outpaced that of companies that don’t.” This, as they see it, may be indicative of hope among companies with programs that long-term customer value can be generated.

Within the McKinsey report, several strategies are offered for helping businesses overcome the negatives often associated with loyalty programs. Key among these are:

  • Integrate Loyalty Into the Full Experience
    Companies can link the loyalty program into the overall purchase and use experience. An example cited in the article is Starbucks, which has created its program to reflect the uniqueness of its café experience. Loyalty is built into the program by integrating payments and mobile technology, which appeals to its target audience.
  • Use the Data
    This may be the most important opportunity represented by loyalty programs. Data collected from the programs can offer competitive opportunities. Tesco, the largest supermarket chain on the planet, has been doing loyalty program member number-crunching for years through DunnHumby. Similarly, Caesars Entertainment has rich databases on its high-rolling program members. One retailer has combined its loyalty program with a 5 percent point-of-sale discount, building volume from its highest-value customers. In another well-documented example, a retailer has used its loyalty program data to identify future mothers before other chains, thus targeting offers to capture both their regular spend and new category purchases as buying habits evolve.
  • Build Partnerships
    As stated on so many occasions, organizations that build trust generate stronger, more bonded, customer behavior. This applies to loyalty programs as well, where there is ample opportunity to build cross-promotion for customers with non-competing products and services. In the U.K., Sainsbury, the major supermarket competitor of Tesco, has partnered with Nectar, a major loyalty coalition. Nectar has more members than Tesco, and participants can collect rewards across a large number of non-competing retailers. Through partnership, Sainsbury’s offers customers a broader and deeper value proposition; and Nectar also generates data from coalition partners, which it uses to better target promotions to customers.
  • Solve Customer and Industry Pain Points
    Numerous customer behavior studies have shown that people will gravitate to, and pay more for, better service. A perfect example of this is Amazon Prime, where additional payment gets customers faster delivery and digital tracking. This is good for Amazon (estimates are that members spend more than four times more with Amazon than non-members), its customers, and its suppliers, who also get access to Prime customers and the positive rub-off of affiliating with a trusted brand.
  • Maximize Difference Between Perceived Value and Real Cost
    Often, program elements can represent high perceived value without adding much in the way of bottom-line cost to the sponsor. The example cited is Starwood Hotels and Resorts where, through its Starwood Preferred Guest (SPG) program, there is a focus on personal leisure travel rewards for high-spending frequent guests.
  • Allocate Loyalty Reinvestment to the Most Valuable Customers
    Many companies have only recently come to the realization that some customers are more valuable than others; and, to be successful, loyalty programs need to target the higher revenue customers. In 2010, Southwest Airlines revamped its loyalty program to make rewards more proportional to ticket price; and this has better targeted the most profitable customers, as well as enabled the airline to adopt a loyalty behavior metric that is closely tied to actual revenue generation.

Loyalty programs continue to grow, but they are also tending to become more closely integrated with brand-building and multichannel customer experience optimization. But, there is also lots of commoditization and passivity were these programs are concerned—sort of the “If You Build It, They Will Come” syndrome at work. And, of course, there’s a mini contra movement among some retail chains, where they have removed established loyalty programs—or never initiated them in the first place—in favor of everyday low prices and more efficient performance.

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.

New Developments in B-to-B Loyalty Marketing

Business marketers have much to gain from retention marketing. Business customers tend to be fewer and more valuable—meaning you can’t afford to lose even one. But how do you keep your customers active and buying from you, versus the competition?  How do you prevent defection? Let’s look at the traditional approaches to retention marketing in B-to-B, plus some new developments in loyalty marketing being adopted by B-to-B marketers today, including social media and gamification.

Business marketers have much to gain from retention marketing. Business customers tend to be fewer and more valuable—meaning you can’t afford to lose even one. But how do you keep your customers active and buying from you, versus the competition? How do you prevent defection? Let’s look at the traditional approaches to retention marketing in B-to-B, plus some new developments in loyalty marketing being adopted by B-to-B marketers today, including social media and gamification.

Traditional Approaches in B-to-B Retention Marketing
Given the importance of customer retention in B-to-B, business marketers have a long history of investing in loyalty drivers. The most basic approach has been—simply—superb account management.

In a well-run company, the sales team in charge of any given customer will do its best to understand what’s going on in the account; sell to them the way they want to buy; deliver on time; develop new products to serve their evolving needs; solve any customer service problems; cultivate deep relationships with the specifiers, influencers and decision-makers throughout the account; and generally provide the best possible products and service levels. It is this basic approach that has stood the test of time in account development.

But as buying has become more complex, businesses have developed additional strategies to deepen customer relationships and engender loyalty. For example:

  • Data-driven segmentation and differentiated treatment. Not all customers are created equal, so segmenting customers by value and treating them differently is a strategy that works well in business markets. Some companies will identify their top accounts—based on margin or on top-line revenue—and provide them with special perks, pricing and service levels, such as:
    • Corporate-wide purchasing agreements, where all buying across a far-flung enterprise can benefit from pre-negotiated contract pricing.
    • Dedicated sales teams, some of them even housed on site at the customer’s operation.
    • Dedicated customer service phone lines, where the service personnel can develop an ongoing personal relationship with individuals in the account.
    • Special status, like Gold Customer or Preferred Customer, programs that may include access to discounts, free shipping, invitations to events and other perquisites.
  • Incentive programs. Taking a page from the consumer world, some business marketers have found success with frequency marketing programs that reward customers for certain behaviors, such as repeat purchase. These programs are not universally applicable in business, but they have their place, particularly when the purchase cycle is short and purchase behavior can be tracked.
    Rewards programs are typically applied in businesses that mimic consumer purchasing behavior, like office supplies. Staples, for example, runs a thriving business rewards program targeted to its small-medium business customers. Financial services and telecom have also done well with frequency marketing programs in SMB, examples being American Express OPEN, the MasterCard Business Bonus program and Verizon’s BusinessLink.

New Developments in Loyalty for Business Markets
In the last few years, B-to-B loyalty marketing has benefited from the arrival of new tools that support the goal of deepening relationships with business buyers. Social media, for example, has created an easy, low-cost way for companies to build communities and foster engagement. Social media is being applied across the B-to-B marketing spectrum, from prospecting via viral pass-along, to enhancing customer relationships, to surfacing and solving customer service problems.

In the area of enhancing customer relationships and fostering loyalty, the power of social media is being felt throughout the B-to-B marketing world:

  • Companies build the ranks of their followers on Twitter and LinkedIn, their “likes” on Facebook, and their RSS subscribers to blogs and YouTube channels. These connections then become another set of media channels for staying in touch, introducing new products, sharing ideas and case studies, and otherwise building an ongoing relationship.
  • Within social media environments, companies establish communities of customers and prospects around certain subjects, like technologies, products, events and other shared interests. In these forums, chat groups, blogs and other formats, like-minded people share ideas, expand their knowledge and make valuable connections.

One of the most exciting new developments in B-to-B loyalty marketing is the new concept known as gamification. The idea here is to build on people’s natural enthusiasm for games involving prizes, competition and recognition, and turn that motivation into a loyalty driver. The goal of gamification is to add gaming elements to otherwise boring processes and tasks, converting them into something fun, competitive and addictively engaging.

Marketers who want to introduce game design and mechanics to their loyalty programs can now take advantage of several new software platforms, like Badgeville, CallidusCloud and Bunchball. These tools are taking loyalty programs to a new level of interactivity, real-time feedback and social interaction, with some promising early results.

If you’ve experimented with loyalty programs in B-to-B, please share your experiences.

A version of this post appeared in Biznology, the digital marketing blog.

Social CRM Starts With Best Customers

If best customers — approximately 20 percent of your customer base — account for 80 percent of sales, then one would think identifying and striving to create a unique experience for those shoppers would be the goal of nearly every marketer on the planet.

I’ve been reading a lot about social CRM recently. Lots of talk about combining data and intelligence from multiple channels, how to merge and understand structured and unstructured data, and the critical role algorithms play in helping brands anticipate a consumer’s next move. But what struck me most while reading through the numerous articles and analyst reports was the apparent lack of focus on identifying and catering to best customers.

If best customers — approximately 20 percent of your customer base — account for 80 percent of sales, then one would think identifying and striving to create a unique experience for those shoppers would be the goal of nearly every marketer on the planet.

While I’m not suggesting brands abandon their efforts to leverage social media to connect, engage and influence all consumers, I am suggesting they think more strategically around identifying best customers and creating unique and special experiences for those customers. So, how should brands approach such efforts? Start with the following basics:

  1. Listen: To build a unique and engaging experience, listen to and understand the kinds of conversations customers are having and, specifically, what they’re saying about your brand. Insights gained through listening can often identify a shared passion (be it travel, sports, music, finances, etc.) that’s essential in engaging best customers in ongoing conversations.

  2. Learn: If your brand has a loyalty program and robust data, you’re already a step ahead. If not, you’ll want to conduct some proprietary research across your best customers to understand how they use the social web, and to inform your segmentation and marketing strategy further. This research will also be critical in developing enhancements to your existing programs and developing new social programs that not only appeal to your segments, but offer value.

  3. Engage: By now you’ve gained a good understanding of your key customers and influencers. The next step is to build a truly unique and special experience for them, leveraging all touchpoints: website, email, customer service desk and presence on social networks. Take the time and effort to build a lifecycle communication program for every segment, paying attention to community management. Rethink your loyalty programs — perhaps shift your focus from promotions to rewarding best customers for participating with your brand — be it their community contributions, social network activity or brand advocacy.

  4. Influence: As you begin to engage your best customers, don’t forget the “social” in social CRM. Leverage social tools to facilitate and encourage sharing and brand advocacy. Flag and thank active customers, and reward them for their advocacy.

Finally, track and anticipate what’s coming next. The greatest benefit of focusing on your best customers is the ability to manage and execute based off the data. Amazing things begin to emerge when you not only know who your best customers are, what segment they fall in, what products they like and how often they use them, but also their email activity, loyalty/purchase activity and social activity.

By analyzing this data, leading brands can build algorithms that drive lifetime value and improve campaign and marketing performance across channels. So for all of your thinking about social CRM, remember that the first group you want socializing their experiences with your brand are your best customers. Make their experiences with your brand memorable, and arm them with incentives and tools that enable them to participate and advocate for your brand.