RFID chip automatically identifies loyal customers!

RFID chips instead of bar coded loyalty cards and key tags!  Is this is the future of automatic identification for customer loyalty programs?  In my opinion RFID chips will promote passive activity and result in difficulty “proving” the loyalty program is what drives the customer’s behavior. What’s your opinion?
http://www.mmrco.com/LoyaltyCIO/090401groceryRFID.pdf

 

 

 

Customer loyalty is how valuable?

Every once in a while I read an article and start wondering, who is missing the point, me or the writer? In this Advertising Age article, writers Hamish Pringle and Peter Field assert that customer loyalty isn’t as valuable as one might think. Actually what I think is customer loyalty is more valuable than most people think! The facts they reference and the conclusions they reached don’t exactly match up! Perhaps it’s all in their definition of customer loyalty?

Call me simple minded, but I figure the more a customer buys, the more customer loyalty they have shown. After all, every decision to purchase is a choice of buying from my business or from my competitor’s business. In fact there is always the option not to buy at all! The loyal customer is one who comes back again!

I’d like to ask the authors a question like, how do they suppose businesses can inexpensively communicate to customers without having the customers’ contact information? Email, telephone calls, and direct mail all work as effective marketing channels. Of the three contact methods, email is the least expensive for delivering a targeted marketing message, but it’s very difficult to execute an email direct marketing campaign without knowing the customers’ email address. In absence of a customer loyalty and rewards program, how do the authors think most businesses gather their customers’ email addresses?

Sure, ecommerce merchants obtain e-mail addresses as part of their transaction and some percentage of terrestrial customers will opt in to an email list, but most businesses have to make it worthwhile to obtain their customers’ email address. More and more consumers are wary of providing email addresses for fear of attracting too much spam.

Speaking of spam and the importance of avoiding contributing to this growing problem, I’d like to ask the authors how do they think a business can target their marketing messages without having a record of their customers’ transaction history? The best businesses have their customers purchase history in a database that has been married with customer profile and supplemented by geo-demographic data. The resulting combination is a rich customer profile suitable for targeting marketing messages.

In absence of a customer loyalty and rewards program, how do the authors think businesses can afford to lift and shift loyal customers buying behaviors. They can’t easily, so predictably it appears the authors believe it’s more effective to spend money advertising in hopes of acquiring new customers? I suspect their conclusion may be true for the market leader, but not for everybody else. Let us not forget there is only one leader and often lots of followers who want to be the next leader. The wannabes need to do everything possible to developer their customers’ loyalty!

Who could criticize Hilton Honors loyalty program?

Today I read an interesting article having the title: Time To Rethink Loyalty http://tinyurl.com/bk4mrx.  The article’s author Robert Howard is like me in one regard.  Our last names are common first names for many men.  Despite the name similarity, I don’t agree with everything he says, but I believe his article is thought provoking!

 

It is time to rethink loyalty, especially in light of the current economic climate!  With every retailer challenged to make their sales plan, what better time to recognize and reward the loyal shopper?  This is exactly when a smart retailer needs to know their best customers and market to them.  Converting shoppers into buyers is tough anytime, but it is doubly difficult these days with layoffs and bankruptcy making the news every day.  Doesn’t it stand to reason now is the time to know who the best customers are, understand what they are buying, and target marketing messages giving them reasons to continue shopping and buying?

 

Contrary to his pronouncement that the traditional loyalty model has grown tired and provides little differentiation in the market today, I believe the retail marketplace is still wide open for conventional loyalty programs operated by standalone businesses and coalitions having multiple partners participating in a loyalty network.  Even the most basic loyalty  programs continue to differentiate because every retailer I can think of has one or more competitors, some with and some without loyalty programs.

 

I live in the northeast and many of the everyday retail businesses where I shop have frequent shopper programs of one kind or another.  CVS has ExtraCare, a loyalty and rewards program unmatched by competitor Walgreens.  The Brooks/Eckerds chain of drug stores, while not offering a loyalty program of its own, is at least connected to Upromise, the way to save for college.  Big grocery chains like StopandShop and Shaws groceries have discount card programs, and they are connected to Upromise too.  Staples has their Staples Rewards, Best Buy has Rewards Zone, Hallmark has Crown Rewards and the list goes on and on.

 

For every retailer I can think of with a loyalty program, there is a similar competitor who doesn’t have a defensible loyalty strategy and they lose market share because competitors have loyalty programs that help them recognize and reward their best customers.

Mr. Howard makes a good point when he says loyalty programs can create disdain when reward redemption is too difficult.  His comment reminds me of the saying “guns don’t kill people, people do!  I can paraphrase by saying “loyalty programs aren’t bad for people, but people can create bad loyalty programs!” 

 

I was surprised however when Mr. Howard criticized the HiltonHonors program.  Oh my goodness, it’s one of my favorite programs.  I’m a road warrior and the HiltonHonors program gives me great rewards every year and Hilton has earned my loyalty as a result.  I’m always looking for a Hilton property whenever I’m traveling and need overnight lodging.

I think Mr. Howard himself is missing the point.  HiltonHonors isn’t targeting people who travel so infrequently they might not stay in a Hilton property at least once every twelve months.  The special circumstances he mentions are easy to avoid for even those people who are occasional travelers, and if the customer is at risk of losing their points, just make a redemption and you will remain active.

 

For all my disagreement with some of the points in his article, I agree with his wrap up and conclusion.  Loyalty programs that only offer discounts don’t really create customer loyalty.  Eliminate the discounts and the customers’ loyalty evaporates, or introduce a competitor with lower prices and watch the previously loyal customers leave in droves.  Well designed and executed loyalty programs are much more than just giving discounts.  In the best of examples, you will find loyal customers are insensitive to discount pricing by competitors!

 

It is time to rethink loyalty!

Can a simple punch card really work as a loyalty program?

Punch card programs do reward loyalty, but most executions of this type don’t fulfill on the promise of a true loyalty program. The typical coffee shop’s punch card program, where one buys 9 cups and gets the 10th one free certainly rewards volume business, but is it anything other than a discount?

I have two criticisms of the simple punch card execution for a loyalty program. First, it doesn’t really develop loyalty or change behaviors. Instead I believe it simply rewards the heaviest customers for doing what they were already doing. The customer who frequently buys coffee will participate because ultimately they get something free! The customer understands it’s like a deferred 10% discount. Infrequent customers decline to participate because they know it is unlikely to ever payoff for them. In my opinion, a punch card program used this way seldom changes the typical customer’s normal buying behavior. It’s really just a margin giveaway, with one possible exception I’ll discuss later.

My second criticism is that too few retailers using punch card programs seize the opportunity to learn who their customers are and develop new business with them. I often see pre-printed punch cards that allows for entry of customer’s name and contact info, but seldom have I seen this information actually required or captured. If a retailer is going to use a punch card and give away product, then by all means capture enough customer information to support future direct marketing efforts.

Ideally the retailer should collect the completed punch card. In addition to contact info, the punch card can provide necessary data ingredients for calculating the customer’s recency, frequency, and monetary metrics. In addition to helping know the customer, I believe the punch card reward provides an excellent opportunity to develop new business with the customer. Instead of giving away another free cup, one I expect the customer would have purchased anyway, why not give away a tasty muffin or scone with the 10th cup of purchased coffee. This way the giveaway promotes trial of a potentially new product, instead of just surrendering margin on the regular item the customer already buys.

There are exceptions of course where I believe the punch card works like magic. One I’ll highlight is the volume buyer situation. Consider the construction site worker who gathers everyone’s hot coffee and sweet donut orders before driving somewhere nearby to purchase. Or think about the high rise office tower secretary who accepts orders from desk-bound coffee addicts, and then l walks somewhere nearby to purchase. These people are making a volume buy and often have some discretion in choosing which coffee shop to patronize. I have seen more than once, these volume customers going out of their way to make their purchases at a coffee shop having a punch card program. What’s in it for them is they are getting free product on the back of other’s purchases. It’s a slightly twisted form of loyalty, but it’s one that really works in my opinion.

I’m encouraged when I see simple punch card loyalty programs mentioned in business news publications like the Pacific Business News . In a recent article  the write describes how the Sedona gift shop in Hawaii uses their punch card program. Let me point out several smart things the retailer is doing. One, they collect customers contact info from their punch card for use in future direct marketing efforts. Second they set the “punch” unit of measure at a $10 minimum amount designed to lift average sale amounts overall. Third, they use the collected punch cards to score the customer’s recency, frequency, and monetary metrics as an aid in segmenting the customer in business analysis and future targeted mailings. With just a simple punch card program they have created a situation where they know most of their best customers, they can direct market to them via postal mail or e-mail as appropriate, and they have enough data to be able to make targeted offers. It’s all good!

Working in the data mines filled with gold!

It appears this AP article http://tinyurl.com/7wyj7e was picked up and run in over a 100 news publications yesterday and today. Could be indicative that editors across the nation find it interesting that grocery stores are capable of knowing what their customers purchase at a SKU level and then targeting these shoppers with new promotions based on their individual purchase history. Or was it these editors expect the grocery shopping masses to freak out at the thought of big brother watching their every purchase.

I for one believe what Dunn Humby are starting to do with Kroger represents a best practice in retail database marketing. For a hint of where they are most likely headed with all this, you should read the book Scoring Points It’s a good read and explains the database marketing potential quite well.

Dining loyalty: what’s on the menu?

I saw an interesting article (http://tinyurl.com/874xys) published last Friday.  Written by Sylvia Rector, a Detroit Free Press staff writer, the article reports what Detroit area restaurants are doing to ensure their dining customer’s loyalty in the difficult economy. 

dining menu

Reading the article reminded me of two loyalty program maxims warranting further discussion.  They are: (1) discount prices is not a strategy for customer loyalty, and (2) the best customer loyalty programs are free for the customer and profitable for the operator!

 

Discounts are not a customer loyalty reward.  I refer to the quote attributed to Jim Eggl, restaurant operator and president of the Michigan Restaurant Association, who says “My longer view of discounting is that it does not breed loyalty. Why would you come in today and pay full price, when the same thing was half as much yesterday?”  It appears Mr. Eggl understands well that one can acquire customers with temporary discounts, but the customers won’t be loyal customers when the price goes back up.

 

Every day low prices is a sound marketing strategy for the dominant market leaders, as evidenced by Wal-Mart, but in reality the customer is showing loyalty to the price, not the brand or particular store.  It’s hard for me to imagine another big box retailer overtaking Wal-Mart anytime soon, but just imagine if there was another one.  Consider for example, what would happen if the customer could find and purchase the same wide variety of products at consistently lower prices from Target?  Would the customer be loyal to Wal-Mart alone?  I think not!

 

Why make a customer pay for the privilege of sharing name, profile, and contact info, plus opting into receiving marketing promotions?  I refer to the quote attributed to Matt Prentice of the Matt Prentice Restaurant Group, a restaurant chain operator in the Detroit area.  Mr. Prentice says he is eliminating the membership fee for his company’s frequent-diner program, hoping to dramatically increase customer participation, so he can e-mail them directly with offers and promotions.

 

I predict Mr. Prentice will be happy with the result of this charge!  A true loyalty program can work for all kinds of dining customers: big spenders and not-so-big, frequent and infrequent, plus recent and lapsed diners alike.  Charging for membership ensures that only the best customers will join.  Often it’s more difficult and costly to improve the recency, frequency and monetary metrics for the best customers segment, compared with easier, faster improvements resulting from marketing campaigns designed to recover lost customers at any level, move poor up to good, and good up to best. 

 

Consider this simple fact.  To know your best customers, you must first know all your customers and know their dining behaviors.  Once you know all your customers, it becomes possible to execute promotions and measure the impact on all customer segments, lost, poor, good, and best. 

 

With a complete customers list and some minimal transaction history about their dining recency, frequency, and monetary levels, it becomes easier to segment the customer list and market accordingly.  Identify the recent and frequent diners having average tickets, and then promote something to lift their average spend, perhaps a special deal on appetizers and dessert.

 

Find the recent yet infrequent diners, and then promote something to get them back in again soon.  Find the long term regular diners who have inexplicably abandoned the restaurant for many weeks or perhaps months, and promote something special to win them back!  Find families that dine together most often on weekend nights and run special promotions to get them back in on a less busy weeknight.  My personal favorite is kids eat free on Tuesday promotions!  Knowing the size of family and first names and birthdates of individual family members is important for this.  Thos who have read my blog will know I believe birthday recognition offers guaranteed sales promotion winners! 

 

The ideas go on and on, but the real secret sauce in Mr. Prentice’s comment is that once he acquires a bigger list of customers, all who enroll for free and provide their contact information and demographic data, he can massage the customer database and target market special offers using less expensive marketing channels like email, text, and telephone. 

 

A well designed and executed customer loyalty programs should be free for the consumer AND profitable for the program operator.  Attractive returns on investment (ROI) are both predictable and the actual results measurable.

 

 

 

 

 

 

 

 

 

Alaska Air to build loyalty with birthdays?

I saw another timely article about an airline loyalty program this morning http://tinyurl.com/6wp7uc. In the article Steve Jarvis, Alaska Air’s VP of Marketing, is reported saying the airline is going to do much more than keep track of and dole out customers’ earned miles using their new Siebel Loyalty Management software platform from Oracle. He goes on to say they have plans to heavily use the system’s “triggered events” feature and explains that at a future time, this might include offering a promotion tied to an important date, such as a customer’s birthday.

 

Wow, that’s a cool idea!  Have you heard me comment on that before? I say kudos to Alaska Air and Steve Jarvis, and I muse that implementing birthday recognition to building customer loyalty needn’t await a complicated and expensive new system.

dump truck and excavator

Sometimes the job can be done with just a shovel and bucket, no need to wait for a big new excavator and dump truck.  I don’t mean to infer it is child’s play, but it just isn’t that difficult.  If you want some help figuring out how to start doing it now, contact me!  The payback on these sorts of customer loyalty marketing campaigns is fast and the ROI usually very attractive!

shovel and bucket

 

Plunging value of flier’s miles saps loyalty

I read this article in The Salt Lake Tribune http://tinyurl.com/74h9sv about the plunging value of airline miles as a loyalty currency and sarcastically thought the real reason for the decline is that one has to be a masochist to want to fly anywhere these days. It’s so unpleasant on many levels, who in their right mind would want to be rewarded by doing that? OK, flying beats walking or driving long distances. That’s why people do it, I know this. I feel flying is so unpleasant I prefer to take the train (Acela) from Boston to New York City, instead of flying like I used to do a lot of. For longer distances, I’m stuck flying in coach, often in the middle seat, sometimes paying extra for baggage, doing without a water bottle, and buying my own snacks if I’m hungry. It’s not really an enjoyable experience I lust for more of!

But seriously now, the reason air miles are no longer the preferred loyalty currency is there are so many better options! There is competition, and lots of it. Some loyalty programs give cash back, others give rewards. My personal favorite in the non-cash rewards category is the HiltonHonors program. Their primary currency is free hotel rooms and I find that very valuable. Weekend trips for motorsports and annual vacations usually involve staying in hotels for me and my family.

As an example, I spent several nights in an expensive Tokyo Hilton hotel earlier this year for the same number of points it would have cost to stay in a domestic Hampton Inn located in Nowhereville.

Hilton Hotel in Tokyo near Shinjuku Station

A free hotel room in Tokyo was a great reward because if you haven’t checked lately, fancy hotel rooms in Tokyo are pretty pricey. Not only was my room free for points, there was room availability when I wanted to stay, where I wanted to stay! When traveling for business I always pick a Hilton property if I have a choice, and that’s the loyalty rewards equation working! As a consumer I’ve also taken an American Express HiltonHonors card because that helps me attain more points and rewards faster.

Seat availability is the most common problem I’ve found with the airline frequent flier points programs. Now it’s true the points for free flight exchange value has gotten worse over the years. You don’t earn miles as quickly and it seems to require twice as many miles to get a free airline ticket now compared with thirty years ago when I was just starting my career. Over the years I have still managed to earn plenty of airline miles, but it’s too difficult to use them on short notice. The airlines have also added all various fees and charges when you actually redeem for a flight, so it is no longer really FREE. But the real problem is the flights I want to take (going to popular vacation sorts of places) are seldom available, and for sure they are not available for a family of four to fly all together on the same airplane.

I don’t know how many years ago I encountered this problem, but I seem to remember a catch twenty two situation where finding free seat availability for a family of four from Boston to Honolulu required planning more than two years in advance, but the airline’s reservation system couldn’t book free seats that far ahead! Go figure?

It is true I’m still partial to earning miles in a short list of airline frequent flyer programs, but as the article points out, more often than not low fare and convenient schedule trumps loyalty to a specific brand of airline. Let’s just say I’m loyal to a degree. The airline’s loyalty program still has influence, but it’s definitely not as strong as it once was. The airlines should tweak their programs, but unless they remove blackouts and make more seats available, they are not going to recover their premier position in loyalty programs.

Is it your birthday?

I saw an interesting blog article yesterday, http://tinyurl.com/7pnqxf and noted with agreement that frequent shopper and customer loyalty programs in the retail sector often collect birth date, but seldom is that data used for targeted birthday mailings. This is especially interesting when one reads that birthday greetings are among the highest opened messages. The personal proof will be to simply ask you, does the grocery and/or drug store where you frequently shop have a scan able key tag or wallet-sized card program? The retailer could be running a discount or a rewards program, it doesn’t really matter because either way they should know who you are and have records of what you’re buying.  So tell me, does your grocery or drug store send you a special birthday greetings?  If you’re one of the lucky ones and have received birthday greetings, can you tell if the mailing was targeted in any way based on the retailer’s knowledge of your shopping behaviors? Most likely the answer is no and no, and that’s a real shame. 

Everyone, you and me included, enjoys receiving birthday greetings and surprise gifts.  Retail marketers understand targeted marketing messages perform better.  They should put the two together and sent targeted messages to customers on their birthday!  It’s a huge opportunity that too many retailers are ignoring.  If as the hyperlinked article reports, email delivers $57 in sales back for every $1 invested; virtually any retailer’s average gross margin is going to make this an attractive ROI.  Targeted happy birthday emails are low hanging fruit waiting to be picked!

have your cake and eat it too

Hello world!

Most of us have heard the old joke that says…..”those who can do, DO and those who can’t, TEACH, and then those who can’t teach, CONSULT”….. Fortunately I’m a thick skinned consultant and can usually ignore the implicit insult because I believe myself capable of all three: doing, teaching, and consulting!www.YouTube.com and using his fine writing skills to author and publish a blog on www.wordpress.com. Then I proceeded to explain several of the good reasons why doing this could promote his specialty consulting business, develop his personal brand image, and of course attract traffic to his web sites.

Sometimes I do find myself giving others good advice while it appears I’m not smart enough to follow the same advice myself. Usually I make the same old lousy excuses others commonly give…. not enough time, too many conflicts, not enough money, and various other real and perceived risks, etc. but you know what, business is kind of slow right now and I should take action on some of those things I want to do. Writing a blog is one of them.

This insight knocked me up side the head when responding to an associate’s inquiry about how to get his humorous business travel articles published. I suggested recording and publishing some videos on

My goal with this blog will be to share ideas, discuss current issues, and create the reusable fodder that might someday later be used to write a marketable article or book. The chosen topics will orbit around my interest in innovative approaches to consumer direct marketing and retail customer relationship management (CRM). Sure I’d love to go directly to writing and publishing a best selling book, but I’m pragmatic enough to realize writing a free blog and discovering if anyone cares is a much better way to approach it for now!

Here’s looking forward to discovering new friends, enjoying a learning experience, and possibly making a difference in the field of loyalty!