Loyalty Marketing Blog - Sage Words

INFOGRAPHIC : The Growth of Interactions (and the rise of the quantified self)

noreply@blogger.com (Mark Sage) — Mon, 03 Jun 2013 08:17:00 +0000

New Frontier:Unhosted Loyalty - Less big data, more my data

noreply@blogger.com (Mark Sage) — Fri, 24 May 2013 17:36:00 +0000

There's an intriguing new application available called Forever.

From a functional perspective it's not ground breaking - it simply provides address book functionality. What is interesting however is that it does this without actually holding any data.

Of course it manages personal data - it has to so it can bring up a friends address details - but it doesn't persist it. It keeps your address book in sync and up to date - but it doesn't change anything.

Forever is a new breed of application known as an unhosted app and this has been defined by unhosted.org as:-

"Also known as "serverless", "client-side", or "static" web apps, unhosted web apps do not send your user data to their server. Either you connect your own server at runtime, or your data stays within the browser"

The application provides a service and works upon your own data, but it never actually "owns" the data. Instead, you connect your own data store, such as that provided by a personal cloud, which the application can then work with.

In a world where everyone is talking about big data, this really is a breath of fresh air.

Rather than gathering data in bigger and bigger corporate repositories, the data is essentially always owned by the the customer. Sure, it's probably still going to be hosted by a 3rd party for most people - the average consumer is not going to want to spin up their own homebrew hosting solution.
However, these 3rd party personal cloud suppliers are more akin to the 4th party concept spoken about within VRM - they work for the consumer.

Now, I'm a marketing technologist at heart, so I like customer data because I want to be able to market relevant products and services to that customer - and to be relevant, I need to know something about them - I need their data. However, I don't think that the 4th party personal cloud as utilised by the unhosted app concept precludes this from happening.

We just need to think differently.

If the data belongs to the customer, then we essentially need permission from the customer to access it. This permission will be granted if the customer sees a worthwhile value exchange for their data and also feels in control of it. They can grant access and they can revoke it - which side of the fence we're on will depend on what we provide back.

In reality though, as corporates, we don't need huge repositories of personal data despite our quest to build them.

Increasingly the battle field for relevant communications is real-time. As I spoke about in my last post, technologies like Complex Event Processing and other solutions like collaborative filtering (people who bought x also bought y) are executing at the time a customer is carrying out a behaviour - on that behaviour. At this point of interaction, we're working with the customer and will have access to their personal data and can use this within the application to make decisions. Of course, we'll also need large amounts of historical data to support recommendations, but this doesn't need to be "a single customers data", it just needs to be aggregates of behaviours.

Imagine this within a loyalty programme context - one of the biggest aggregators and users of consumer behavioural data.

In an "unhosted loyalty app" context, when I swipe my identity card (4th party identity provider), the retailer would send my purchase information about the transaction to my 4th party personal cloud. At this point, that data is mine to do with as I wish - it's basically an electronic till receipt.

I could then choose to connect this data to a 3rd party application that analyses my nutritional intake
I could connect it to the retailers loyalty programme which would then recognise my purchases and update my connected bank provider (cash or points)
I could connect it to one or more FMCG/CPG manufacturers who could choose to recognise my purchase of their products (or my purchase of their competitors), and respond to me with relevant offers or rewards
I could simply connect it to my shopping list app to tick off what I'd already purchased

It's my data, I get to choose who I let see it and for how long - but they don't need to hold it, process it, sell it or bombard me using it.

While this may seem like a step back for companies currently designing big data solutions which will increasingly sweep wider and wider customer interactions into larger and larger repositories, it's actually a giant leap forward. I'm betting that Walmart would love to see detail on the transactions I've made with Costco. Or Visa would love to see my spend with MasterCard. Presently this data will never be shared between these competitors.

However, when it's my data, I can choose to share it with whom I like - my supermarket can have access to my credit card spend (and see who else I spend with) if I feel this provides value back to me.

Why though would a retailer simply give this data away in a format I can use electronically?

Well, ignoring the fact that this will likely be mandated soon by governments, it's also a customer retention mechanic. When my data has value to me, then I'm more likely to frequent a retailer that can actually provide it.

In the last century, I gave my loyalty to a retailer so they could have my data; in this centuary I'll be giving my loyalty to the retailer so I can have my data back.

In my professional role I design and build loyalty solutions for clients including the backend systems to support these - I'm part of the machine that is gathering big data across wider interactions to help engage and retain customers. I'm positive about this and it's an exciting place to be, both as a marketer and as a consumer.

I also understand however that consumer attitudes are shifting, government approaches are changing and technology is democratising data - looking out 5 to 10 years, I'm betting it's "My Data", not "Big Data" thats going to be the new frontier.

Data the new oil? Then exploration is just the start

noreply@blogger.com (Mark Sage) — Tue, 14 May 2013 19:43:00 +0000

What do Google, Amadeus, AmEx and Tibco all have in common?

Well, they are all market leaders in their verticals.

Amadeus for example are the largest travel transaction processor in the world, processing 440m bookings per year for 693 airlines across 195 countries. Tibco are a software company with a suite of products that focus on real-time data transfers powering many of the Fortune 500. AmEx account for almost a quarter of all dollar volume for credit cards in the US and Google... well they are Google.

What they also all have in common is data.

Each company manages and processes vast amounts of data. You could say that they are in the data business and they just specialise in a particular vertical, whether this is travel bookings or web search. If, as has been said before, data is the new oil, then these companies have very deep reserves.

It's this data though that is also the catalyst for the third thing they have in common.

They all do loyalty.

They may not be widely known or recognised as loyalty companies and this may not be their core business - however they recognise the importance of loyalty and have made strategic acquisitions to add this capability to their services.

Back in 2010, Google acquired loyalty startup Punchd and Tibco acquired SAAS vendor Loyalty Lab. In 2011 AmEx acquired Loyalty Partner which operates Payback in Germany and Poland and i-Mint in India. Then in 2013 Amadeus recently acquired airline loyalty specialist Hitit who provides loyalty solutions for over 40 airlines - more than any other provider.

So what's the rationale here? Why are these companies branching out into loyalty marketing?

AmEx stated that this was to "diversify it's fee service", "deepen merchant relationships" and "add more than 34 million consumers". Ed Gilligan, Amex's Vice Chairmain said at the time that:-

"The loyalty coalition model is growing rapidly in many parts of the world. Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings"

It's that final statement that real nails it. "Consumer decisions...are based on loyalty offerings".

If you can package up the offering from the initial consumer decision then you potentially get to control the whole value chain.

This seems in part to also be the rationale for Tibco purchasing Loyalty Lab.

Increasingly loyalty is about real-time decisioning and next best action and the software to manage this, known as CEP (Complex Event Processing), is an emerging frontier. Tibco provide the software, but Loyalty Lab allows them push further up the value chain for their consumers in the B2B space, helping them steal a march on their competitors (incl. Oracle, SAP and IBM) by providing a solution to the problem (packaged up in a loyalty application) rather than just a cog in the overall solution.

Google is interesting in that having acquired loyalty start-up Punchd, they then went on to shut it down. It's not totally dead however and the "closed for business" web page alludes to something bigger and better coming when it says:-

"The team has been working to integrate Punchd features and ideas into other Google products. Retiring Punchd is the next step towards our integration with Google"

For Google, Punchd provided a means to access small, local, offline retailers - and this is a key, strategic market for them. As I've discussed previously, Google actions seem to be about protecting it's "economic castle" - it's ad revenue. Having increased control from personalised online offer, through to purchase (via Google Wallet), loyalty and repeat purchase helps them to secure the whole value chain.

Continuing with the data being the new oil analogy - these companies have essentially mastered the "upstream" segment in terms acquiring the resource through exploration and production. They've got the data reserves and the means to extract them.

However the "downstream" segment which involves refining, processing and distribution is increasingly attractive. Loyalty is very similar to a network of forecourts - it provides a guaranteed consumer base for the core product and ensures the companies have line of sight from raw material through to consumer demand.

Vertical integration doesn't work for every industry or company, but what these examples show is that loyalty still has the power to drive and direct consumer demand.

The 5 steps to creative ideas (still relevant today)

noreply@blogger.com (Mark Sage) — Sun, 17 Mar 2013 17:16:00 +0000

I'm not a big fan of workshops or brainstorming.

They are typically done to generate ideas or solve problems, and yet the research suggests that in fact large groups of people has the opposite effect on creating on ideas. It creates "group think", stifles ideas and can lead to the lowest common denominator being accepted. It could also be that I just don't like large meetings.

It's not just me though... organisational psychologist Adrian Furnham is quoted as saying "Evidence from science suggests that business people must be insane to use brainstorming groups. If you have talented and motivated people, they should be encouraged to work alone when creativity or efficiency is the highest priority."

Innovation and creativity is though of paramount importance to businesses and even more so now because the costs of cutting edge technology become less and less with every month that passes. Now, a couple of people in a garage (or more likely their spare bedroom) can spin up a new idea in a matter of weeks - mashing together cheap cloud infrastructure with free open source solutions. This can make established companies, with layers of bureaucracy, established roles and "group think" workshops seem slow and antiquated.

It was interesting then to see on the BBC Horizon programme this week some new research into how we have new ideas - what creates that spark of creativity - and importantly when we have it.

Psychologists and scientists are mapping the brain as they work with people to see how they solve problems, whether this is done analytically or through flashes of insight... and there were some interesting findings.

The spark of creativity is generated within the sub-concious - Using a divergent thinking test whereby they ask a subject to come up with as many uses for a house brick as they can, people were allowed a break after coming up with initial ideas. Those people who either did nothing or who worked on another complex problem were the worst at coming up with additional ideas after the break. However, those people who did something mundane during the break so that they were occupied on something different, but not mentally taxed were then able to come up with even more uses for the house brick.

Breaking existing routines can make you more creative - In the Netherlands, researchers showed how just changing simple everyday routines such as the order in which you prepare breakfast can make you more creative, allowing new ideas to flow. The suggestion is that we need to break established neural paths to allow more things to connect and reconnect and so providing more opportunity for divergent thoughts to collide and provide creative ideas.

What really amazed me though is that all of this cutting edge research into creativity seemed to just be confirming what had been published back in the 1940s by an advertising executive called James Young Webb. He had no formal scientific training and yet in his book A Technique for Producing Ideas (McGraw-Hill Advertising Classic) he basically lays out the steps required for creative thinking, all of which is backed up by modern science.

Step 1 - Gathering of raw materials - For the first step, Webb recommends reviewing materials both for the immediate problem and wider, from general knowledge, adjacent knowledge, etc. The purpose is really to ensure that you have enough material lodged in the grey matter to actually allow it to collide in different forms. Ideas don't really come from the ether, they come from building on existing knowledge. As Italian sociologist Pareto (of 80/20 fame) is quoted as saying, "an idea if nothing more nor less than a new combination of old elements".

Step 2- Work over the materials in your mind - This is an analytical process where you try different ideas, fitting them together in different ways and trying to form relationships. What Webb is suggesting here is that you start off analytically - this may sometimes produce some immeadiate results, but either way, it's all about creating new connections and relationships. The research that was presented on the Horizon program showed this too, with subjects being asked to solve various puzzles and to indicate if these were solved through analytical comparison (trying each piece in different ways) or via insight (it just came to me). This is about breaking existing routines / assumptions and making new connections and relationships.

Step 3 - Incubate the idea - Just like the work with the divergent thinking tests, Webb recommends you simply go and do something else unconnected with the problem. He says "drop the problem completely and turn to whatever stimulates your imagination and emotions. Listen to music, go to the theatre, read poetry or a detective story."

Step 4- The "eureka moment" - This is when the idea comes to you; when you're not actually thinking about it.

Step 5 - Shaping and development - This is where you take the wonderful new idea and begin to circulate it to colleagues, friends, etc. The chances are the idea will not be perfect and working with others to shape it will turn it from a good idea to a great idea. The idea itself is a combination of old elements joined in a new relationship; this new relationship will break existing routines and assumptions for those around you, letting their creative juices flow too.

It's interesting that author Susan Cain who has written the book Quiet: The power of introverts in a world that can't stop talking highlights in an article she wrote on this topic for the New York times that "During the last decades, the average amount of space allotted to each employee shrank 300 square feet, from 500 square feet in the 1970s to 200 square feet in 2010"

In our rush to bring people together for the free exchange of ideas in our open plan offices, it's ironic that we may in fact have suppressed innovation and free thinking.

Whatever job we do, new ideas and new approaches are needed to keep us moving forward and being leaders in our industry. Understanding better how these ideas form, how there is a process to it and that this process can be helped will lead to a greater number of truly innovative ideas.

Rallying cry for innovation - and faith

noreply@blogger.com (Mark Sage) — Fri, 15 Mar 2013 17:29:00 +0000

I've spoken about VRM - Vendor Relationship Management before on this blog and it's one of the topics that I feel is currently mis-understood and undervalued in terms of its future impact on customer relationships and loyalty. Like many new things, people think it irrelevant, unworkable or simply solving a problem that doesn't exist. It was great then to see today on the ProjectVRM mailing list, Doc Searls, author, journalist, blogger and VRM evangalist, discuss these challenges and to put them into context.

I've repeated the majority of Doc's post here for those without access to the ProjectVRM list:-

[..] Nobody is ever interested in a new category before it is given shape by applications people want once they see them. Personal computing, starting in '76, was positioned as "a way to do your checkbook and keep recipes." Really. None of the early hardware makers were especially successful, with the conditional exception of Apple, thanks to Visicalc. IBM took a look at Visicalc and introduced the PC in '82. But even then the PC succeeded in business in part because Attachmate and other companies sold micro-to-mainframe cards that turned $2500 PCs into $1000 IBM 3270 and DEC VT-100 and -200 "dumb terminals." But by then Visicalc had a foothold, as did Wordstar and DOS. Lotus 123 picked up where Visicalc left off, and a wave of applications followed. The Mac succeeded in part because of Quicken, which really did, finally, eight years after PCs were born, make balancing a checkbook easy. Quicken was an invention that mothered necessity, as were the rest of the early programs. Still, business dismissed PCs from '76 to '82, and ordinary people dismissed them until at least '84.
Likewise the Internet was nowhere until graphical browsers showed up. We forget that Bill Gates saw no way the Net could make money for itself, or anybody, until it was clear that Netscape's browsers and Web servers would threaten Microsoft to the core. That was in '95, when the Net's protocols, which we still use today, were up to decades old. Smartphones were Palm's idea, but not many people took advantage of the apps on them, because they were too hard to get and use. Once Apple showed how it could be done, the market exploded. That was more than a decade after Palm began. I remember an early VRM meeting at Berkman where Paul Trevithick said "Nothing that requires a user install will succeed." That was true, then. But not long after that, Apple made user-install easy, Google followed, and now all of us install apps with ease all the time. Yet it would be easy to say there was no appetite for the Internet in '93, or smartphones in '05. All we needed were inventions to mother necessity.
So, likewise, it's easy to say nobody cares about managing relationships with vendors, because, obviously, they don't. Or, do they?
What about the stacks of loyalty cards people keep on keychains, in their wallets and purses, or in the armrests of their cars? That's a crude form of management. What about clipping and carrying coupons, or spending hours or days adding up "points" from credit cards to trade in for miles on airlines? (I have a friend who is obsessed with doing that.) What about going over stacks of receipts and trying to match them up with credit card bills — arduously reviewing old calendars to see what we did and when, so we can minimize our tax hit? Is there no management in that?
Think of all the pain points any one of us deals with in relating to vendors — or anybody. All those pain points are potential business opportunities. Not all of them will be pursued, but none of them are worth dismissing because nobody seems interested in dealing with them now. As Henry Ford said, "If I'd asked people what they wanted, they'd have said 'faster horses.'" To my Irish grandmother growing up in The Bronx, the biggest problems were horse manure piling up in the streets and the danger of fire from gas light. Neither problems were relieved by the industries of the time. Yet both horse-drawn wagons and gas light were obsoleted by new inventions.
[..]Everybody manages data today already.
We do it with folders on our hard drives, with bookmarks and tabs in our browsers, with boxes in our mail programs, and with every online service that organizes files for us. Are all these in such a complete and final state that they are un-improvable? Or is there opportunity here for many kinds of new approaches? Again, it's easy to say "nobody is interested." But it's not wise to bet against relieving whatever causes people pain. Or what opens up new opportunity where almost nobody is looking.
[..]
And most of us don't care about advertising. (Though some do, and we respect that.)
Fixing advertising's problems, or pursuing its opportunities, is almost entirely a vendor-side issue. My own attitude toward advertising is kind of like Ford's toward horses and trains: those things will keep doing what they're best for, and we'll go invent something else. My guess is that, if VRM succeeds, it will help brand advertising and hurt adtech or alter it for the better. But VRM's purpose has nothing to do with any of that.
Still, business senses that we are on to something here, so we can't help talking about it, and, in some cases, getting invited to conclaves where advertising is a big issue.
For example, yesterday I attended one of those things here in New York. The word "intention" was used a lot. The context was using "big data" to "intuit" what customers "intend," without ever having to listen to what those customers want to say, directly, to the "brands" doing the advertising. So the talk was about "listening in" on "conversations" among "consumers" in "social spaces" so those consumers could be "delivered" a "better experience." It was the sound of one hand slapping, not two hands clapping. A few voices from within the business were raised, saying "Are we listening to ourselves? Do we not realize that we're abusing people's privacy, and that this will have consequences?" As usual those voices were mostly not heard. But the wilderness from which those voices were raised is called the marketplace.
Are those voices pointing toward actual requirements, as you suggest? Well, let's look at what the market is already doing.
Today the most popular browser extensions are ones that block advertising and turn off tracking. Governments (especially in Europe) want to switch off tracking altogether, because their citizens are tired of it. These are significant trends. Look up "privacy" on Google or Bing and see how many results you get, and the order in which they are prioritized. Is there no market for solutions here?
Personally, I don't want legislative relief. Anti-adtech laws today will protect yesterday from last Thursday with legal code that won't change for decades, or perhaps ever. On the whole that's not good in a vital and fast-changing marketplace. I'd rather come up with technic fixes that will take care of business without new laws. (Though perhaps with legal decisions based on standing laws. Those are likely to happen in any case.)
Finally, just because a glass is 1/Nth full doesn't mean that it's X/Nths empty, or can't be filled. Faith, St. Paul tells us, is "the evidence of things unseen." Without it we wouldn't have civilizations, or markets. There would be demand only for the hides of animals and sharpened rocks.
VRM isn't complicated. It's only about giving customers means toward two things: independence and engagement. To see how that can be done, one needs to stand on the side of the customer. So that's what we're doing.

Tesco ClubcardTV part of a new trend?

noreply@blogger.com (Mark Sage) — Sun, 17 Feb 2013 16:39:00 +0000

When it comes to innovative ways of going to market, airlines have traditionally been the bellwether. From basically creating the modern day, database driven loyalty programme through to their innovative yield management for maximising profits, the airline industry typically sets the standard that all other industries follow.

So when someone like Jeff Katz, (Currently CEO of Nextag, a global digital shopping network and former VP at AA/CEO of Swissair/CEO of Orbitz) highlights another trend in the airline industry that's likely to cross-over into retail, it's worth paying attention.

In a recent article for Fast Company entitled "Fasten Your Seatbelts: The Future of Shopping Looks a Lot Like Airline Travel", Jeff describes how over the last few years, airlines have basically deconstructed their product offering to provide the cheapest price for the base commodity - an airline seat. All the value add elements such as luggage allowance, in-flight meals and seat selection have been stripped back and then re-purposed as benefits which can either be montised to those customers who value them, or used as recognition rewards for valuable customers like frequent flyers.

Discussing this, Jeff says:-

Airlines have taken a commodity (a seat on a plane) and caused us to change our view about what we’re buying and how we’re buying it. It’s no longer about buying a product at the cheapest price, it’s about selecting and paying for a package of services that we value most--from an aisle seat, to a faster security lines, in-flight meals, rewards for frequent patronage, or in-flight Wi-Fi connectivity

He then goes on to discuss how retail may actually start to follow this trend. Deconstructing the retail experience and then rebuilding it with additional, value add options that customers can either buy into if they value them or be provided with for free if they are frequent shoppers.

It's hard to imagine right now how this may look as you can't really see a clothing retailer "unbundling" their changing room or a supermarket "unbundling" their late night opening hours. However, as technology improves and customers are able to shop using their own smart phones such as in the new Sainsbury's "Mobile Scan & Go" initiative, you can see how this suddenly changes the landscape.

Being able to scan goods and simply walk out of the store, bypassing tills is a real benefit. Scanning products as you shop allows for personalised pricing, so elements of yield management can start to be introduced - scanning an item with a longer shelf life remaining could actually cost me more for example. Tying this into the loyalty programme like the airlines do could allow for certain products or product ranges to only be available to loyalty card holders or to be bundled differently so that a "Silver Tier" customer gets a free bottle of wine with their ready-meal which a normal customer doesn't.

However this manifests itself, I agree with Jeff that this unbundling trend that airlines have started (and which Ryanair continues to push the boundaries on) will cross over into retail and some retailers are already putting a toe in the water today.

Online retailer Amazon for example is already doing something like this today with their Amazon Prime offering, providing customers with additional benefits, including free shipping, a free book rental per month and unlimited instant streaming of movies and TV shows.

In the UK, Tesco is trialling Clubcard TV, a service for its loyalty card holders which, like Prime, looks to provide free entertainment content in recognition of their customers continued loyalty. The website describes it as:-

"Offer[ing] thousands of movies and TV shows for free. There are no schedules, no subscriptions, no fees – as long as you are a Tesco Clubcard customer and you have access to the internet, you’re free to enjoy Clubcard TV"

Also like Amazon Prime, Tesco "Delivery Saver" provides free delivery for online grocery orders for a single, upfront payment.

Whilst these offerings are more about bundling products to enhance the retail experience rather than unbundling them, it does demonstrate how the retail experience is being taken wider than the basic shopping experience.

It's clear that competition is increasing and retailers are always looking for more ways to deliver the right value to the right customers. If unbundling/bundling can create a differentiated retail experience, catering to the price conscious consumer at one end and the convenience conscious consumer at the other, then it's a trend that's sure to continue.

Feast or Famine: The next move for Netflix?

noreply@blogger.com (Mark Sage) — Sun, 10 Feb 2013 12:32:00 +0000

Something interesting happened recently in entertainment; there was a slight shift in the balance of power.

Netflix, traditionally a channel for reaching the content of other networks became a producer in their own right.

Their new production, "House of Cards" was a shot across the bow for the likes of HBO and more traditional networks and at the moment it seems their $100m gamble is paying off with generally positive reviews.

A Netflix spokesman is quoted as saying:-

"We’re not releasing any data, but we are happy with the reception the show has gotten in the media, on social media and from our members in reviews"

This is a big deal for Netflix and they know it. Ted Sarandos, Chief Content Officer is quoted as saying:-

"The goal is to become HBO faster than HBO can become us."

While this is interesting for the entertainment market, what's more interesting for me is the potential impact this series will have on both customer acquisition and retention for Netflix.

Clearly, unique, exclusive content is a major acquisition tool for Netflix, helping them draw in both new and lapsed customers. This is a tried and tested model used by the likes of BSkyB who would in many cases pay over the odds for subsequent series of shows like 24, Heros or more recently Mad Men that had previously aired on free-to-air channels, hoping to bring those hooked customers across in the process.

Indeed, customers such as respected blogger Dave Winer who had previously (and publicly) turned off his Netflix account then made an about turn and switched it back on specifically because of this new content.

So there is no question that exclusive content can be a big draw for new customers. However with "House of Cards" Netflix is also chalking up another first.

They have launched the whole of the House of Cards series in one go. Original programming made available like a box set from the get-go.

This is really significant as traditionally broadcasters would utilise a high profile series to draw in audiences regularly at an appointed time; keeping viewers restricted and waiting with baited breath for the next episode. For commercial broadcasters these episodes would be timed to maximise the audience and hence the revenues from advertisers. It would also provide the opportunity to gain from the halo effect of viewers staying tuned into the channel for longer pre/post airing.

For Netflix however, this doesn't matter; their revenue comes from subscriptions, not advertisers. Without this restriction they have provided a veritable feast of television, allowing subscribers to binge on the whole series in one sitting if they like. Whilst figures aren't available from Netflix directly, it has been reported that a "significant portion of fans binged on the entire series in the first weekend".

It's worth contrasting this with another form of entertainment, that of social games.

I'm currently hooked on the popular social game "Clash of Clans" which uses all of the best gaming mechanics to keep me playing, progressing and in the flow. The more I play the more I unlock. If I had access to everything all at once - if I could feast on all it offered - then I'd tune out pretty quickly. It would be fun, but there would be no challenge. Instead, they try to balance the game play, including the strength of foes I have to battle based on my current experience and level achieved.

In discussing the winning formula of the game design, the blog Deconstructor of Fun highlights how the game supports different types of play, saying:-

"Not all of the parts of the core loop are equally important as the importance of each part is influenced by [the] player's ongoing goal in the game, which creates different style[s] [of] game play [,] from resource gathering and building, [to] heavy [and] active battling"

Creating this "flow" within social gaming that ensures players are hooked with a fun and entertaining experience takes data. They need to constantly monitor usage of the game and adjust the mechanics as users progress or they see usage drop at certain points.

Now Netflix are not short of data but i'd argue they're not really getting the maximum value from it as game designers do.

They are well known for their detailed data analysis of their customers viewing habits in order to serve up better and more targeted content. Currently, around 75% of Netflix customers select content to watch based on their recommendations and Netflix aim for this to be higher. Mohammad Sabah, Netflix Senior Data Scientist is quoted as saying:-

"The ultimate goal is to show Netflix customers content they’ll view to completion and then recommend the next thing they’ll view to completion"

The problem Netflix have though is the classic situation all retailers face; the consumer has choice.

There is an increasing plethora of streaming services and so whilst recommendations are important and so is exclusive content, the real key is that consumers "value" Netflix. The stickyness from content only lasts for as long as the content is "exclusive". Letting customers essentially burn through that exclusive currency too quickly may in fact reduce the time period its effective for but also the extent to which customers actually value the content.

PSYBLOG recently reported on an interesting study that looked at how consumers valued chocolate based on how they consumed it.

In the study, the consumers were split into 3 groups with one told to give it up completely for 1 week, the next given a big bag and told to gorge and the final group, acting as a control, given no chocolate related instructions at all. At the end of the study, the groups were given more chocolate and asked to rate the experience.

Those who abstained reported getting more pleasure from the chocolate than either the gorging group or the control group. Not only that, but they also savoured it more - in essence they valued it much more because they'd been restricted.

Getting the balance between feast and famine is key to keeping customers involved and ensuring they continue to value your product/service.

It's early days for the Netflix experiment but it will be interesting to see if they start to introduce some of these restrictions on consumption to gain additional loyalty; managing the flow of their customers. You could easily see top rated Netflix consumers - those who watch more shows, over more hours and engage more with other viewers via social media - being given the ability to watch new exclusive content more quickly than others. This would then provide social currency into the mix, ensuring those customers stay loyal longer and encouraging others to strive to level up.

If you want to stop your brand falling down like a House of Cards, it's worth looking at how game mechanics can strengthen those bonds.

Game mechanics are not just for games.

Blockbuster should have traded time before it ran out of it

noreply@blogger.com (Mark Sage) — Wed, 30 Jan 2013 19:55:00 +0000

There was an interesting film I saw recently called In Time that was based on the premise that the currency of the future wasn't money but instead was time.

In the future, having solved the problem of people dying naturally, there was a new solution needed to help "balance" the population and so people had been genetically engineered with a built in timer that kicked in when you were 25 and from then on you had to work to get more time added and if your time ran out - well, your time had run out, literally.

As with money today, there were those that were born a little more privileged - and had literally thousands of years to live - and those that didn't and would perish quite quickly. In this fictional world, time was traded as a currency for goods and services and so wasn't something to be wasted.

What's interesting about this is that essentially, it's already happening today.

We don't have the timer genetically linked into us and people still pursue money in preference to time. However, in an attention economy where people are being bombarded with a multitude of activities which will take up time, getting them to waste time with your brand or product rather than someone else's or something else in increasingly hard.

I was reading a short book by Dr Wu from Lithium entitled "The Science of Social" that discussed the topic "Cultivating Superfans & Influence" and highlighted this issue facing brands saying:-

One of the biggest challenges of attracting attention from fans willing to spend time interacting in brand communities, time thinking and talking about their products, and time taking action that's helpful to the brand is the fact that time... is scarce.

The answer apparently is about fostering and strengthening relationships between individuals so that you're more likely to be of relevance and more likely to get a share of that attention and the trust that it brings.

This is probably right to some degree, but I actually think it's simpler than that - it's about being useful.

I don't ask my friends for product recommendations in conversation because i trust them - it's because I don't have the time to do the research myself. It's not even because I have "strong ties" with them as frankly, I don't care if I've just met the person in the pub - if they own a product and are speaking positively about it then I'm going to be much more likely to put it to the top of the list.

Researching products takes time. It takes time to find the products that are available. It takes time to understand and decipher all of their features. It takes time to compare and evaluate them. My time then is probably better spent asking someone who has already solved the problem what they have and if they're happy with it.

This is where I think the difference is. Yes, trust is important. I need to trust a brand will have the product I want. I need to trust a brand will deliver the product I want in a timely manner. I need to trust that they will take it back, no questions asked if it doesn't work. I need to trust that the brand will look after my details.

But I expect that of all brands I deal with.

Brands that get my attention; brands that I will spend time with are those that recognise my time is precious and help me get the best from it.

Blockbuster failed not because it didn't stock products customers wanted - people still want to watch films. They didn't fail because people didn't trust them - ironically their brand is still strong. They failed because they didn't recognise my time is precious. I don't want to go back to the store and I don't want to be on their timeline for returns. More recently, I don't want to have to wait (and make a journey) to get my film. Customers found alternative ways of getting the same thing in less time.

The high street is failing in some sectors because of time. The brands on the high-street aren't trusted any less, they are simply not as convenient. I can shop online at a time that suits me. It's also quicker, saving me time. Better still though, winning brands like Amazon also save time through relevant search and product recommendations, giving the whole purchase process less friction and with that, less time required.

Brands doing well on the high-street though like Costa Coffee in the UK are also about time. They are creating opportunities to spend time in a more pleasurable, relaxed way. Given time is a precious resource, we'd rather spend it with friends and family than doing chores like weekly shopping.

Time is a currency today and it is something that's traded. Customers will give you their time if you treat it like the precious commodity it is and give them value for it.

If you waste a customers time with complex in-store procedures, difficult to find products, slow purchase processes, difficult returns processes, long-winded loyalty enrolment forms, overly engineered rewards processes - then customers will spend their time elsewhere; and in the process, your time may simply run out too.

Loyalty+Coupons = Positive Price Discrimination

noreply@blogger.com (Mark Sage) — Tue, 15 Jan 2013 22:15:00 +0000

I was at a conference last week where the speaker was from the gaming industry and touched upon the topic of price discrimination - where essentially a customer is given a unique price based on both their price elasticity and potential value.

The thinking was that given a casino hotel gets near 100% occupancy, isn't it better to fill rooms based on the total potential value of a customer (i.e. including how much they might spend in the casino), rather than just look at the margin on the room itself. In that scenario, if a lower value customer wants a room then you can simply price the room higher for them to ensure you get the same overall margin return from the customer (and the room).

Price discrimination is a really interesting concept and one most retailers would love - being able to price items individually based on what a customer is prepared to pay for the item - in essence maximising reach and margins.

This practice is quite common in some industries today such as airlines and hotels through yield management strategies and results in customers self selecting whether they are prepared to pay that price or not. However this still isn't personalised pricing based on the profile of the customer.

A recent blog article discussed the topic of price discrimination and highlighted two recent studies into the practice that found no real evidence that it was happening in online retail - at least not on a per customer basis.

One of the reasons for this is that price discrimination can create negative publicity. It doesn't seem fair if two different customers pay different prices for the same item, simply because one is "willing" to pay more for it. There has been no additional value provided and from the customers perspective, no additional costs incurred for delivering it.

In fact, in the US, where retailer Staples was highlighted as using price discrimination based largely on a customers proximity to a competitors store, the customers affected said "I think it's very discriminatory", questioning, "How can they get away with that?".

Ways around this are to keep the headline price fixed and vary benefits and offers instead. Coupons for example provide a means for retailers and manufactures to lower the price for those customers who are sensitive to it and yet maintain the premium for those who are not.

Loyalty points are obviously another key mechanic in positive price discrimination in that the same price is paid for the goods, but customers are given different levels of deferred discount as expressed through loyalty points depending on their membership of the programme and potentially their tier.

From a customer perspective, loyalty points are not seen as a cost or as part of the price they pay, they are seen as a reward. I could pay the same price for the same item as another customer, but I wouldn't typically complain if the other customer earned double points on that purchase.

Increasingly though, where real value can be achieved for a retailer is through a combination of loyalty and coupons. Using customer purchase behaviour derived from the loyalty programme allows for targeted couponing to reward and shift individual consumer behaviour.

The sticker price stays the same, but price discrimination on a customer by customer basis is alive and kicking.

As recent article in Forbes magazine discussed the emergence of individualised coupons and how they enable price discrimination saying:-

"Coupons are psychological, and that’s why they succeed so much. They are designed for the store’s benefit in profit, but they achieve this by making the customer feel good about the price they “scored.” [...] With individualized coupons, we’re allowing stores to use personal transaction data to make us feel good, in an attempt to subtly modify our spending behavior for the store’s profit"

For ecnomists, price discrimination creates an almost perfect market where every customer gets the product they want for the price they feel it is worth. There is nothing wrong with treating different customers differently and there is nothing wrong with recognising those customers who add more value to your business.

Whilst nothing is perfect and some would argue that rewarding one group is done at the expense of another, using loyalty in combination with targeted offers provides a powerful way for retailers to maximise margins, recognise customers and change consumer behaviour.

Personalised pricing just got a lot easier to implement and loyalty is right at the heart of it!

Whats next for loyalty in 2013

noreply@blogger.com (Mark Sage) — Thu, 03 Jan 2013 20:40:00 +0000

What's my prediction for the big thing in loyalty in 2013? Two words...

User Experience

Increasingly the way we do things has changed. Smartphones have enabled us to find "an app for that" and those apps are getting better and more easy to use with every release.

This is not just about design or how it looks - it's truly about the overall interaction.

Yahoo get this. When recently hiring ex-Google team member Marissa Mayer, Yahoo! co-founder David Filo said

"Marissa is a well-known, visionary leader in user experience and product design and one of Silicon Valley's most exciting strategists in technology development" going on to say "[the appointment] signals a renewed focus on product innovation to drive user experience and advertising revenue for one of the world's largest consumer Internet brands"

Microsoft also get this with the recent release of their Metro interface across platforms for Windows 8 showing how user experience is now front and centre of their operating systems.

Although Apple is lauded for it's hardware design, any user of it's software knows that this design doesn't always flow through everything they do. Indeed, Bill Flora, one of the designers on the early prototypes for the Microsoft Metro interface is quoted as saying:-

"I have found their hardware to be amazing and sophisticated, and I have found their software to be kind of old school"

Apple know this and with the recent shake-up, Jony Ive, the man behind the iMac, iPhone and IPad hardware will now also be looking after human interface design and you can bet that's going to give a real shake-up to the overall iOS user experience.

A designer working at apple is quoted as saying:-

"You can be sure that the next generation of iOS and OS X will have Jony’s industrial design aesthetic all over them"

User experience is important in all interactions, it's not just about online or digital experiences. Take a look at the humble POS receipt below and how this has been reimagined both visually and for the enhancements it makes to the overall user experience:-

Created by design consultancy BERG, this is a great example of how an everyday customer interaction can be completely transformed.

Earlier in 2012, Kickstarter project Mail Pilot successfully secured their funding from over 1,600 backers for their redesign of email claiming "Email is in need of a fresh start. A redesign from the ground up.. [Mail Pilot] intuitively works the way you've always wanted to use email"

This is the real essence of user experience design, creating interactions and user experiences based on what users and customers want to do and making that easier for them.

Within loyalty, when we talk about terms like gamification and how these are changing the face of loyalty, most commentary is about the mechanics. However what gamification is really doing is improving the user experience. It's making loyalty programmes more responsive, giving users feedback on what they've done, what other users like them have done and providing easy to interpret pointers about what to do next.

We increasingly rely on real-time feedback to understand when something has happened, whether thats a button depressing when clicked or a screen moving when dragged. If we didn't see things change in real-time with our actions and gestures we'd be unsure as to whether the application had interpreted our request and may try again. Either way, if we didn't get feedback we'd eventually just give up.

The same is true within our marketing programmes. Increasingly the user experience is what sets us apart from competitors. Making things easy, engaging, responsive, fun and useful is critical.

This is something i'd previously spoken about back in September when looking at how Pinterest was creating loyalty and longer engagement through immersive discovery and basically, a great user experience. It's also something that we're increasingly seeing creep into B2B interactions as evidenced by CBA with their Pi payments solution.

One of the clear leaders in this area last year however has to be PayPal and their re-imagining of how customers interact with money and the development of a solution for the PayPal Digital Wallet that works the way customers think, not the way banks do.

I think 2013 is when we'll see the real battle lines being drawn based on user experience and how this sets the leaders apart from the laggards.

Loyalty Magic - A lesson from Santa

noreply@blogger.com (Mark Sage) — Fri, 14 Dec 2012 16:07:00 +0000

When we're young we tend to believe what we're told.

If your mum or dad tell you about Santa and how he delivers presents to all the kids on his "nice" list, young children will be in awe of the whole magical world you've created. However, kids grow up, become more curious, more literate and start to dig under the illusion.

Spoiler alert here... they then work out that Santa doesn't really exist.

There is a parallel here for marketing as well.

As consumers, new to a brand, we tend to believe what we're told - the less cynical amongst us tend to buy into the brand promise. However, if that's all it is - a promise - then the consumers will quickly lift the veil on the illusion.

An article entitled "Marketing Magic and Illusions of Simplicity" in a recent MISC magazine discussed how "To truly mesmerize [..] consumers, a savvy brand magician plays first into their faculties for astonishment and disbelief, and then engages their curiosity". Going on to say "For brands, that sense of spellbound infatuation translates as a unique opportunity to close sales and secure extended loyalty".

As an example, daily deal sites like Groupon promised much - access to local, great deals that I'd want. People signed up in their millions, word of mouth spread - they were spellbound. However, the reality didn't really live up to the hype - offers felt badly targetted to many people and so the illusion of a good deal was simply that - an illusion.

To really captivate customers you have to be able to astonish them.

Customers know that when they sign-up to a loyalty programme, provide personal details or swipe their loyalty card that this information is being tracked and analysed. The veil has been lifted - points alone won't astonish them anymore.

Instead, they expect that this information will be used to provide them with a better experience. When an offer is made or a new product highlighted, if it's relevant - truly relevant - then it has the power to mesmerize. We've seen this within our own programmes; as we increasingly tighten up our offers to better target these based on customer behaviours - people suddenly see the selection presented and simply say "Wow - that's me".

It's not just about offers, though, it's also about how you go to market.

In the US for example the credit union Patelco has a fantastic service for buying cars called "Members Advantage Plus". Essentially you tell them what kind of car you want and they then shop around for you across 500 dealers in California - they haggle for the best cost, sort out the finance and deliver the vehicle to your home - and if you don't like it, just send it back, they sort that too.

Keep in mind this is a loan company... not an auto-dealer. For me, that's not something I expected and when I read about it I was truly amazed. Their customers are amazed to...

"Try shopping for a Prius at dealerships. No one is dealing, everyone wants a Prius so the dealerships don't have to. [Petelco] found exactly the car we wanted, color, accessories -everything. And at $900 below MSRP. Fantastic."

Patelco have worked out how to add more to their basic product - finance - and in the process have created a service that helps to extend loyalty as well as satisfy the curiosity of their customers.

Whether it's help getting the best offers, selecting gifts, picking a film or buying a new car, consumers still want to be amazed. As marketers we still have the power to amaze, to mesmerize and to keep customers curious - we just need to stop selling the dream and start delivering it - and we don't need a sleigh, elves or a red suit for that (unless you're Coca-Cola) ;)

Merry Christmas / Happy Holidays

Curiosity = Loyalty3

noreply@blogger.com (Mark Sage) — Sun, 18 Nov 2012 12:37:00 +0000

cu·ri·os·i·ty - noun
1. A strong desire to know or learn something.
2. A strange or unusual object or fact
3. An app that has hooked over 500k people

That last point is strongly linked to points 1 & 2 and also provides some interesting lessons for loyalty programme design.

In case you missed it, Curiosity is a new iOS and Android app in which people slowly destroy layers of a huge cube with the mission to reveal what's inside. It's like a multi-player pass the parcel in which there can only be one winner.

The cube is apparently made up of 64 billion tiny blocks which users have to destroy one block at a time until a single layer is completely removed and then they begin on the next layer.

Thats it - In terms of gameplay, it could be argued that it's a little lacking.

However, if thats all you got from it - a Zen like feeling from destroying blocks and making patterns in them - then I can't imagine it would be anywhere near as popular as it is. Instead, the game locks onto some powerful gaming mechanics employed by more complex ecosystems like Farmville to provide a rewarding and addictive experience.

These can be summarised as:-

Social - Everyone taking part - like a shared experience. Connect it with your Facebook account and you can see how your friends are doing.
Reward - There is something to aim for even though no one knows what that something is.
Gamified - There is skill involved and you can "level up" to get a perceived advantage. Destroying more blocks earns coins and these in turn can be traded for tools to destroy even more blocks.

It's these 3 points combined that make Curiosity both an interesting take of gameplay as well as a great model for Social Loyalty.

People will download and play with the app for different reasons, either because they've heard about it and are curious (social element) or are intrigued by the possibility of the final prize (reward).

Whichever path brings them into the app, both then play a part in retaining them.

The "gamified" element though is also very important in keeping people playing - essentially keeping them loyal. Users will very quickly tire of simply destroying blocks one at a time. Instead, by recognising their activity and rewarding this with coins that in turn can be used to purchase tools to increase their activity, Curiosity is looking to maintain "flow" in the gameplay. Keeping users somewhere between boredom and anxiety.

This is enhanced further, as these additional tools give users an advantage over others, something expressed within the social element by being able to compare your stats to friends. Solo gameplay is rarely as rewarding as that played against others.

Just using these 3 simple mechanics, Curiosity shows us in a stripped back, minimalist way how to engage and harness peoples attention. There's no fields to plough, crops to plant or farms to build - it's as basic as it gets, and yet it still works.

The lesson for us in loyalty is that it's not about how complex your programme is or how many rewards it has - it's all about the design and how this too can engage and harness the customers attention.

Many loyalty programmes today are one dimensional - simply using rewards as the mechanic to drive people forward. Increasingly though Social Loyalty programmes look to harness the power of social currency as expressed and magnified through a gamified experience to add depth to the programme and turn into into a more rounded, 3-dimensional experience.

It's Loyalty³.

Intent casting shifts balance of power (and Facebook dips a toe)

noreply@blogger.com (Mark Sage) — Sat, 27 Oct 2012 07:18:00 +0000

Back in 1980, Prof. Allan Schnaiberg wrote about a theory he'd developed called "The Treadmill of Production" which was in part used to explain the drastic changes in US production quantities and/or qualities after the second World War. It suggested how advances in technology, driven mainly by producers seeking increased profits allowed them to invest in new technologies which further increased production which was necessarily then matched by an increase in consumption. This created an ever growing cycle as more efficient production required further economic growth to offset unemployment created by the previous mechanisation.

At a simple level it suggested that it is not demand from the consumer that drives supply but rather supply that creates the desire for demand. In the paper "Interrogating the treadmill of Production" it went on to discuss the focus of the theory on the production side rather than consumption side and the fact that consumers can only consume what is produced saying:-

"Consumers may opt not to consume specific produced items. But they are not empowered by market processes to determine how such items will and will not be produced."

Ignoring the environmental aspects of this (as the ToP theory was focused on how this impacted the environment), it's interesting how this power play between producers and consumers may be changing in the sense that consumers are increasingly being given control of production.

Traditionally there was no way to access consumer needs in any formal way and so producers would create mass-market products based on limited market research studies. However, technology is changing that allows consumers to provide feedback on products that don't yet exist, create demand for new product ideas and even to create their own products.

The concept of "Intent Casting" is one way this is manifesting itselt, with consumers able to create and issue their own personal RFP for a product or service they want and for producers/suppliers to be able to respond to this. The website AskForIt for example allows consumers to ask for anything and through social sharing, to gain support for this from others. Another website called OffersByMe allows you to indicate what activity/service you want and how much you're prepared to pay for it - offers are then shown/sourced based on this request.

It is probably home services which is the biggest growth area for intent casting however with services like Thumbtack allowing the consumer to indicate the service they want (plumber / electrician / etc.) and to then receive quotes from local tradesmen for the request.

Facebook has recently extended into the area of intent casting by extending it's "Like It" button to include a "Want It" button. This allows consumers to indicate products they want which are then added to collections. They, or more importantly friends can then reviews these and click through to actually buy then. While at the moment this is more of a wish list function, I suspect it won't be long before Facebook are mining these "wants" (or essentially consumer intents) to provide relevant offers from other service providers.

Intent casting for existing products and services is just the start of it though.

Crowdfunding website Kickstarter is opening up to UK projects at the end of this month, allowing anyone with an idea to sell it to consumers before they've even produced it. In this model, intent casting actually starts to drive production as users on Kickstarter essentially help to bring the product to the market through demand (and donations).

Consumers can also now take a step back even further and become producers in their own right.

CreateSpace by Amazon is one of a number of companies that allows consumers to create their own books and to have these professionally printed on demand. Website Ponoko takes this even further, allowing consumers to become producers with physical materials. The user submits 2D and 3D designs and can then have these custom manufactured in over 80 different materials. These products can then be listed and sold via the Ponoko website and custom manufactured on demand based on each individual order.

Brands such as Nike have also experimented in this area, allowing consumers to design their own trainers and have these uniquely produced.

Finally, new technologies are letting the consumers actually manufacture their own uniques goods on demand, in their home.

3D printers are now becoming commercialised to the extent that early adopter consumers can now purchase them, with brands like MakerBot and Cubify leading the charge. The BBC recently reported how Disney Research is looking into how toys can be designed that can only be produced with a 3D printer due to their unique characteristics and controversial file-sharing website Pirate Bay is starting to host what it terms "Physibiles", or 3D printable designs.

It doesn't take much to see how all of these trends may ultimately come together, allowing the consumer to find products that don't yet exist and express a preference for them to direct what ultimately gets produced or is simply produced on-demand, whether by a 3rd party or at home.

This won't slow down the treadmill of production (and it's environmental impact), but it may change the economics and dynamics of it. Given that "a key dimension of power is the ability to influence, if not dictate, the choices of those less powerful.", giving consumers more direct choice and the ability to state their intent is certainly a step forward.

Do loyalty points kill the relationship?

noreply@blogger.com (Mark Sage) — Sun, 30 Sep 2012 08:21:00 +0000

A recent blog article on Harvard Business Review discussing the concept of the "gift economy" provided a great example that stopped me dead in my tracks. It said:-

"To understand a gift economy, consider the example of moving into a new apartment. When friends help you move, you express your appreciation by providing pizza and beer — really good pizza and beer. When you hire professional movers, you pay with money. Offer your friends money instead of pizza and beer, and they are likely to be offended. Offer to pay the movers in pizza and beer, and they won't unload the truck. Your friends are operating in a gift economy; the movers in a market economy."

Take a moment to think about that example and then think about some of your favourite loyalty programmes.

Would your loyalty programme be operating in the gift economy or the market economy?

In the HBR article, author Mark Bonchek goes on to point out how in the market economy the focus is on transactions. You receive a service or product and hand over money in exchange. Market economies are normally between strangers and the trust lies within the currency. This is reinforced by the the latin term for money which is "specie", literally meaning "payment in kind".

Gift economies in contrast are much more focused on relationships and are typically between friends or close communities. It's not about the value of the gift or the expectation of return, as Mark points out the purpose is "not to execute a transaction, but to express a relationship".

Loyalty programmes normally look to operate in this space, creating an emotional connection with members and typically stating that the desire is to develop a relationship which transcends the basic transaction. Tesco for example state on their website that the Clubcard loyalty programme is "our way of saying thank you for shopping with us"

Yet despite this, many loyalty programmes simply reward a purchase with a set number of corresponding points; it's a transaction - a payment in kind.

While this works well and the customer understands the principle, it is essentially an exchange between strangers.

Using the example listed at the start, imagine if every time you called a friend it was to ask for something and you then responded to their help with a payment in money. It's not difficult to see that this relationship would very quickly end or turn into a supplier/customer one; and this is exactly what we do within a basic loyalty programme.

This doesn't mean however that we throw away traditional points recognition - it serves a purpose in both helping to establish the initial relationship and keeping a focus between the member and the brand on the "value" of the relationship. We do however need to recognise its limitations in that it is a transactional relationship and like all transactions, customers will be free to make the next one with your competitor. Loyalty points help to simplify decision making (all things being equal, I'll use the store with invested points value), create goal directed behaviour and form part of the price comparison - but they don't build relationships.

To develop a relationship in part requires the programme to operate within the gift economy. The programme needs to be able to express the relationship and demonstrate a different kind of value, a different kind of currency. The gift economy operates on a Social Currency and can be expressed simply as:-

Things that help me belong
Things that help me feel significant

If when designing a loyalty programme, we build in components which align to these requirements, the programme will start to operate in both the market and the gift economies and move from being purely transactional to being emotional. Whether it's providing benefits, surprise and delight, badges and achievements, access to information or membership of clubs, there are many ways to augment the basic loyalty design to create a social currency that is not directly linked to monetary value.

There is nothing wrong with points and indeed these form a crucial part of recognition. We simply need to make sure that if the aim is to create a loyalty programme and not simply an incentive programme then moving the interaction from being transactional to being emotional is important.

5 Reasons why Evian "Smart Object" creates a new CPG loyalty solution

noreply@blogger.com (Mark Sage) — Wed, 19 Sep 2012 20:16:00 +0000

Apple basically invented the phrase "There's an app for that" and promptly trademarked it.

Whilst a catchy advertising line however, what it neatly demonstrates is how Apple popularised the concept of small, situationally specific applications that do a single job very well. Whether it's a mapping app, a camera app or a Scrabble app, people now have on average 41 different apps installed on their smartphones.

This trend though may not just be limited to smartphones and tablets. There seems to be an emerging trend of "smart objects" or essentially real world apps. Situationally specific devices which perform just one task and are starting to be used by brands to connect customers directly from the point of need to the point of supply.

Start-ups like Green Goose have been creating ways of connecting the physical world to the online world through their smart sensors and this is part of trend known as the internet of things, something i wrote about 12 months ago.

The world moves on however and so it was interesting to see that Evian in France has just launched their own real world app in the form of a fridge magnet that will place an order for a water delivery when pressed, simply using a wifi connection to do it. Developed by French company Joshfire, the device was developed from scratch to provide this unique proposition - and potentially a new loyalty solution.

A previous example was launched by a pizza company in Dubai who had a fridge magnet that would automatically order your faviourite pizza when pressed and I suspect at the time was seen more as a novelty. However, a major global brand like Evian changes the playing field a little.

There are 5 main reasons why this more than just a sales promotion novelty and has the potential instead to be a powerful loyalty mechanic.

1. Direct Channel - It allows Evian to build a direct connection between the customer and the brand, disintermediating the retailer from the solution who would normally "own" this relationship.

2. Reduces Price Sensitivity - For some CPG categories, as much as 88% of all sales can be while the product is on promotion so anything that takes price out of the equation will be welcomed. This solution provides a simple way for a consumer to just make a purchase without comparison of competitor/promotional pricing.

3. Reduces Paradox of Choice - It's no surprise that consumers find it hard to stay loyal. In the water category alone, a top UK supermarket has 55 still water options and 25 sparkling. Having just one decision and one button to press makes that choice simple (and you don't need to carry it home!). This "one-click" decision works for Amazon online and has served them well; it's almost as frictionless as you can get for a purchase process.

4. Point of Need - As marketers we're always trying to get to the consumer at the point of purchase. This is why mobile and location are such hot topics - if I know when you're out shopping and near my store I can remind you I exist and send you an offer. How about being there though when the customer first gets a need - when they run out of something, before they even head to the shops?
This is what the Evian solution provides.

When I've poured my last glass (or better still opened my last bottle), I just press a button to get another supply. This potentially provides a direct dialogue with customers at a key point of need and a customer who has just consumed something is going to be much more open to a re-purchase (assuming they were satisfied).

5. Reward and Recognition - Although not part of the Evian solution at the moment, this is potentially the most powerful opportunity that this kind of solution opens up. Being able to simply say to customers "this ones on us" is a really strong loyalty mechanic and would be very simple to implement. Better still, there is no need for customers to enter on pack codes, collect labels or send in receipts - you have all the data you need, immediately.

Loyalty is all about reducing friction in a customer relationship and I think this Evian smart object is a fantastic example of how to do this well. It won't work for every brand, but whether its a button for nappies in the nursery, toiler paper in the bathroom or beer in the games room, the opportunity for this solution is potentially massive.

To infinity and beyond - Engaging consumers through immersive discovery

noreply@blogger.com (Mark Sage) — Sat, 01 Sep 2012 17:36:00 +0000

Have you noticed a subtle change in how you browse some content online?

For many sites, you no longer have pages of content that you need to navigate with "next" and "previous" buttons. Instead as you browse the content and start to reach the end, new content is simply loaded in underneath. Social networks like Twitter and Facebook are big users of this technique, as is Google if you're searching for images.

Infinite scrolling as it's technically known is also being used by some commercial sites. Amazon for example is trialling a version of it with it's Windowshop offering which is still in beta. Although it works on standard PC browsers, it comes into its own on a touch based tablet such as the iPad where the Windowshop app allows you to simply explore the store by navigating what appears to be a borderless page jammed full of visual eye candy.

And it's this eye candy that really works well, enabling us to scan through hundreds of images until something catches the eye. There is no purpose to it - sure you can search, but that kinda misses the point. This is all about the browse experience. You're supposed to just sit back and window shop, literally.

Amazon describe this as "[a] new experience [..] designed to make exploring everything from books and toys, to video games and gym equipment easy, fun, fast and convenient for iPad owners"

It would be wrong though to see this as simply another way to view content; instead, this immersive discovery moves the user experience from a functional activity to a leisure activity.

Whereas you would normally go to Amazon to make a purchase and would use it's search functions to find the item you were looking for, the Windowshop is instead something you do with almost no purpose - like watching TV, browsing a magazine or watching the sun set - it's about filling time with something enjoyable.

This is a really interesting difference and something I think could be leveraged by anyone with a large amount of content, whether retailers, publishers or even loyalty programmes with rewards. Moving the users mindset from "doing" to "enjoying" has the opportunity to create greater engagement and give you a slice of if that finite resource - attention.

One of the leaders in this area has to be Pinterest. It has turned immersive discovery through its infinite scrolling from a convenience feature into a real engagement mechanic.

At over 97 minutes on average per month spent on the site by each visitor, Pinterest is a highly sticky user experience - and all it does is let you browse images. This compares to just 21 minutes for users on twitter and 3 minutes for those on google. Only the behemouth that is Facebook exceeds this time - by a mile -at 405 minutes per month per visitor. When viewed per visit though, Pinterest does even better, clocking up 15.8 minutes per visitor on average compared with just 12.3 minutes for Facebook.

So what's different?

Well Pinterest have taken infinite scrolling to the next level by using different image heights and laying these out with what is known as the masonry layout. This essentially allows them to show images in a more natural, engaging layout that doesn't feel like a fixed grid. The real benefit though of the masonry layout is the fact that there is no clean cut line - no easy place for the user to abandon from. By showing the following images just peaking out from below the fold, the user is more likely to be intrigued by something they can't quite see and will scroll down a little more - and so the process repeats.

Another thing that works for Pinterest is the fact that there is essentially no ordering from good to bad. In a traditional search result, the returned set is ordered by something such as ratings, value, recency, etc. This means that after a few pages, if you see results that you're not sure about you'll feel like you've hit the bottom, even if there is more content to go. With Pinterest however, the pictures are all mixed, some good, some bad, some intriguing, some boring.

You don't know what you'll find on the next page, but you get a peak of it thanks to the masonary layout.

This is the difference between searching and browsing; between doing and enjoying.

With search, you want to bring back the minimum amount of results matching the search criteria - it's about pinpointing exactly what the user is looking for. With browsing however, the user experience is very different. The user is simply looking for something that catches their attention and so if you put all the good stuff at the top, they are unlikely to keep browsing. However, if you seed the good stuff, the most popular items throughout the browsing set then the user will continue to be surprised. They won't know what's coming next but they'll want to find out more, to browse more - to engage more.

Sure, let the customer find exactly what they want when they want it - but also just let them explore and have fun. Its the immersive discovery experience you're looking for and it fills a different need for consumers.

I think Pinterest has set the bar high on immersive discovery using its clean design, masonry layout and infinite scrolling - but it has also shown a new way engaging people and engaging with content. Changing the user experience from one of "doing" to one of "enjoying" and gaining a greater share of attention makes this something really worth exploring more.

Talk to the hand, the customer's not listening

noreply@blogger.com (Mark Sage) — Sun, 19 Aug 2012 20:45:00 +0000

Working in loyalty and IT for almost 20 years you see a lot of change in customer communication requirements. The telex faded away, replaced by the more flexible and accessible fax - which then itself faded away even quicker. Phone numbers changed so that it was no longer unusual for customers to have two or more. Email addresses appeared and everyone clambered to update their systems to begin capturing these.

As more channels appeared and these became cheaper to use, Robinson Lists or preference services started to spring up to control over zealous marketers. FPS (Fax Preference Service), MPS (Mailing Preference Service) and TPS (Telephone Preference Service)/Do Not Call Registry all purported to give consumers control over unsolicited contact. Opt-outs became a standard part of campaign communications as marketing departments were forced to play nicely and now customers are being given Do Not Track support within the web channel.

But recently there has been another evolution which is a lot more interesting.

As social channels emerge, the balance of power in communications has shifted.

Consumers can now turn off communications from a brand at will - essentially disconnecting their ability to even make contact. Within Facebook for example, a customer has to explicitly enable a brand to communicate with it either through application preferences or by "liking" the brand. Either way, if communications become too much, the customer can simply opt out of these by choosing to hide the individual story or to hide all stories from that brand. If the customer wants to revoke their relationship completely, they can simply "Unlike" the brand directly.

This means, in order for a brand to post messages on a customer's Facebook wall, the brand has to have established trust between them and the customer's Facebook account and to have maintained this trust with useful, relevant content.

Irrelevancy is simply a click away.

Imagine how this would work with established channels today.

A company or friend could only phone you if you had "Liked" them via the phone company
A company or friend could only mail you if you had "Liked" them via the Post Office

Sounds a little far fetched? Well some people are talking about this not just for social channels but for more above the line channels such as digitial advertising. In an AdAge Digital article, Judy Shapiro says:-

"We can begin to design new types of media inventory -- call them 'trust ads' -- based on consumer choices: an opt-in/ pull marketing paradigm. This would include platforms where people have powerful tools to pick which brands they want in their digital lives" going on to say "It's time to pivot the [..] debate into a practical discussion of how marketing-technology platforms (free or paid) can support the urgent, emerging need for trust-marketing innovation."

This is wise as consumers favour channels they can control.

In a recent Epsilon study it was reported that 42% of consumers state they like email because it gives them control over whether they receive it or not. However the same study then went on to say that 65% of consumers feel they get too much email and 75% admit to simply "getting a lot of emails that they don't open".

It would appear the balance of control is lacking even here.

As consumer communications move to new channels where it is easier to simply switch the message off, it's going to be increasingly difficult to simply rely on the "spray and pray" model to marketing. Instead, marketing is going to need to become more relevant, more targeted and quite simply more interesting for it to gain time within a consumers limited attention.

Loyalty programmes provide the ability to be relevant, giving you insight into consumer purchase habits and social connections. However you'll need to actually use this information wisely to become relevant otherwise you'll quite literally be talking to the (down-turned) hand because the customer will no longer be listening.

3 reasons why CBA Pi pivots retail

noreply@blogger.com (Mark Sage) — Tue, 24 Jul 2012 12:20:00 +0000

Commonwealth Bank of Australia have just launched a video showing their new merchant payments solution called Pi.

This is truly interesting for a number of reasons:-

1. As with previous innovators in this space such as Square, they are bringing together a number of different parts of the value chain within a single platform. Watch out if you currently make money out of ePOS, stock control or loyalty!

2. They are creating a platform which is both open and closed - just like Apple. It's open in that developers can build custom applications that add value (it's based on Android), but closed in the sense that CBA own it and will ultimately control it. This is not something I've seen before from Square or PayPal.

3. The platform blurs the boundary between the user (the retailer) and the customer. Any payment terminal allows interaction with the customer, but normally only in the sense of identifying themselves or possible picking their chosen payment type (check / credit account). With Pi though the customer can truly interact, chosing for example how to pay amongst friends and I would assume select how they want to receive receipts.

The increasing use of tablets within the retail space is opening up more and more opportunities to create engaging customer interactions. Unlike dedicated terminals or tills, with a tablet the scope is limited only by the imagination of the developers. By CBA providing a platform like Pi that allows developers to create new functionality they benefit by having a constantly evolving merchant solution which they control.

CBA say on their website, "Pi is the future of business". I'd argue it's also possibly the future of ePOS, e-receipts, acquiring, stock management, loyalty and anything else the merchant may think of or need.

Loyalty design - Treat it "lean" keep them keen

noreply@blogger.com (Mark Sage) — Sun, 15 Jul 2012 16:38:00 +0000

I was on a training course the other week learning about Agile Scrum which is a "lean" software development methodology that looks to develop software people actually want and need.

The traditional approach to software development (known as waterfall) requires users to provide their input up front. This is then used develop requirements that are passed to developers who write the software. The written software is then passed to testers to make sure it works. The completed, tested software is then installed and unveiled to users - possibly 12-18 months later... who then say "that's not what I wanted".

Using Scrum changes this in a number of ways.

Firstly, it mandates that the business (as represented by the Product Owner) and developers work closely together (daily) on the development of the product. Next, it stipulates that software is developed in chunks or sprints (no more than 4 weeks long). This short time frame allows for a small number of important features to be developed, but ensures that if anything is going in the wrong direction it is caught early.

After the sprint is finished, there is a review which allows the team to show off what they have built so far as a releasable product to the wider business/users. This then allows for comments and feedback so that subsequent sprints/releases can incorporate this.

Using this methodology allows us to ensure that what we build is always based on something useful and allows us to fail fast - and learn from this. Most importantly though, it allows us to build something the users actually want and need in shorter timescales.

This approach though shouldn't just be limited to software development.

Within loyalty programme development the approach can be the same. We speak with users initially; carrying out research studies and focus groups to understand what they want (or think they want). Programmes are then designed, developed, implemented and launched - at which point we involve the users again, hoping they might actually participate.

The problem with this approach is the same as with waterfall software development - the potential for an incorrect perception of what consumers actually want and an inability to separate out what they say from what they do.

For example, a recent WorldPay Report entitled Perfect Passenger Payments highlighted the misalignment between what factors airlines think are important to consumers and what consumers feel are important.

Within the report, airlines stated that the #1 factor for customers was the "Overall speed of the online booking process" (96%), closely followed by the "Website functionality" (80%).

Customer however sited "Ease of finding flights" (89%), "Clear, upfront pricing" (88%) and "Confirmation/After-Sales support" (85%). Overall, "Speed" ranked 7th and "Website Design" was down at 12th position. Worryingly, while 85% of customers said after-sales support was important, only 18% of airlines felt this was important to customers.

This disparity between what customers want and what airlines think they want is reflected in how customers are consulted. Within the research, less than 40% of the airlines spoken to said they consulted customers on the booking experience - and even then, only "periodically".

Sometimes we think we know what's best for our customers when really, we're simply thinking about what's best for our business. Using "lean" methods is one way to join these two requirements together. Building and launching a small number of features and functions, quickly and cheaply provides a way to test and learn with customers.

In a recent article on Tech Crunch called "How to create a minimum viable product", Emre Sokullu, founder and Chief Architect of GROUP.PS said:-

"Perhaps the biggest mistake I’ve made at GROU.PS at its initial phase was to add way too many features onto it. [..] The result? An unstable product which was trying to do too much and poor user experiences due to an overwhelming set of functionalities."

Whether you have an mature loyalty programme or are just starting out, using "lean" methods to develop, deploy and decide on features and functions will help your programme become innovative and forward thinking; letting you learn quickly, fail fast and keep customers keen.

Do customers love your brand or your brands customers?

noreply@blogger.com (Mark Sage) — Sun, 17 Jun 2012 21:16:00 +0000

There is little difference between supermarkets in terms of the products they stock. The larger ones may carry more variety, but typically you can buy everything you need from any supermarket.

Yet despite this people are still loyal to their chosen brand.

While place, product, price and promotion all play their part, I'm wondering if ultimately there is another "p" here - people. Not the staff or employees that you'd normally associate with "people" but actually the other customers.

From a demographics point of view, each supermarket attracts a certain type of customer. Whether you think about Aldi, Adsa, Tesco or Waitrose, you can probably quickly draw up a basic persona to represent their "average" customer. While in reality customers will be a mix of age, affluence and attitude, you can feel the difference in customer type if you move between stores.

Obviously brands know this and foster it by catering to these customer types in how they present, price and promote their products. Other brands like Tesco and Sainsburys try to be more inclusive in the customer groups they attract, providing a mixture of products from "Basics" to "Finest" in an attempt to serve the different demographics as well as providing a way for customers to transition up (or down) as circumstances dictate.

Peter Jackson, professor of human geography at Sheffield University highlighted this fact a few years ago in an article in the Guardian when he said:-

"The problem for the supermarkets, is to provide a store environment that is attractive to a wide range of people to maximise their market share, while shoppers seem to want a more differentiated environment where they will be surrounded by people 'like themselves', with whom they feel comfortable."

Some brands however take this customer desire to be "surround by people like themselves" as a positive and go further to actually leverage their customer base as part of the service benefit.

KLM for example has been experimenting in this area for a while. Their most recent offering, "Meet & Seat" allows customers to share their social profiles like Facebook and Twitter to enable them to pick seats next to other customers with complimentary interests. They also provided a similar service a few years ago allowing customers who flew into regions like China to meet up before, during and after flights either online or in person.

Starwood Hotels takes a slightly more hands off approach by promoting the use of Foursquare for customers to check in which allows for people to connect, should they wish to. It also organises events for its loyal customers, providing opportunities for them to socialise.

It's not just service based business like airlines or hotels though that can connect customers. Every business essentially exists because of it's customers and so it makes sense to facilitate connections between them.

Car brand Jeep has been doing this for years with it's Jeep Jamboress, started in 1953 and described as "probably the first owner loyalty programs" by Lou Bitonti, Senior Manager of Jeep Brand Global Marketing. Now using Camp Jeep since 1995, it provides a way for Jeep owners to meet and share their passion for both off-roading and the Jeep brand.

Even though brands like Jeep and Harley Davidson have been building active communities around their brands for years, there is a real opportunity here for brands within many different verticals to facilitate connections between like minded customers. Social media makes this much easier to do, but I think the real trick is to connect social media into the heart of the customer interaction.

For too many brands, social media is just another form of marketing. Treated separately. Operated separated. Measured separately.

The KLM "Meet & Seat" programme is unique and innovative simply because it brings social media right into the purchase transaction and connects the service and product directly with the social network.

That's clever.

Keeping your loyalty star rising

noreply@blogger.com (Mark Sage) — Mon, 28 May 2012 15:00:00 +0000

"If the stars should appear but one night every thousand years how man would marvel and stare" - Emerson

This is an interesting observation from the eminent US poet, lecturer and essayist Ralph Waldo Emerson and was written back in 1836 in his essay Nature.

It is though still as relevant an observation nearly 200 years later.

When we first see something it gets more pleasing and likeable the more we see it. Known as the familiarity principle, it is something advertisers leverage when they constantly expose us to their advertisements across ever increasing channels.

These adverts leverage the mere-expore effect that essentially states that repeated exposure to something increases perceptual fluency which is the ease with which each subsequent stimulus can be processed. This then follows with the branded goods we go on to purchase and is the reason we simply pickup the same brand repeatedly - perceptual fluency makes it easy - we don't have to think about it.

However, this only works to a point. In the research paper "What's in a name? Reputation Building and Corporate Strategy", they showed that "the higher a firms visibility per unit of sales [...], the worse it's reputation. ", even when the exposure is mostly positive.

As the saying goes, familiarity really does tend to breed contempt.

This is obviously interesting (and has implications) for above the line marketing, but how does it impact below the line marketing?

If every one is doing daily deals, does anyone really care anymore?
If every store has a sale, are we excited anymore?
If every day we receive another offer, do we read them anymore?
If every activity has points attached, do we collect them anymore?

Groupon was is a great example. It was new, engaging and different and it took customers, merchants and the market by storm.

Google offered to buy them for $6bn and recent "valuations" suggested $30bn. But then competitors jumped in - lots - including retail behemoth Amazon. With reports suggesting though that Amazon is only selling a handful of deals, 80% of subscribers to deal sites never buy a deal and merchants running away in droves, this would appear to be a sector who's star has already peaked.

Over exposure of both the offers and the approach has meant customers are starting to tune out.

In a similar way with loyalty, if every activity is "sprinkled" with points, there is a danger of points fatigue and ultimately ambivalence towards the points. Using points on all activities, especially those not related to any monetary exchange can devalue the points and make them appear worthless.

Brent Houlden, leader of Deloitte's Retail Practice in Canada highlights this when he says:-

"...Point collecting is losing its lustre... Loyalty programs tend to go stale over time. If you want to continue engaging customers, you need to continuously reinvent your program"

In a recent McKinsey iConsumer survey where consumers were asked why they had posted online comments / reviews - something loyalty programmes are keen to encourage - only 6% said it was to gain points. On the other hand, almost 40% did it because they liked it or liked helping others.

This is something a well designed loyalty programme can also foster and encourage. In a blog entitled "Loyalty: More than Just Points" it discussed how Starwood Hotels’ emphasis on guest service interactions are the key to producing loyalty saying:-

"It is telling that Starwood, so tightly branded by its loyalty points program, places such emphasis on service interactions as the first component of guest loyalty. And it is that passionate loyalty, Starwood’s “Loyalty Beyond Reason” that inspires guests to share their experiences, recommend properties to their friends, and rebook."

This is not to say points programmes in themselves have a problem, it's just that in a competitive market where almost every retailer, branded product or hotel chain has a loyalty programme customers will simply become ambivalent to them. The programmes and their mechanics have become familiar and the danger is that this ultimately leads to contempt and thus consumers tuning out.

In order to attract, engage and retain customers you need to do more to make programmes standout and continue to stand out so as to make people "marvel and stare".

Balancing big data with a big voice

noreply@blogger.com (Mark Sage) — Tue, 08 May 2012 21:02:00 +0000

Back in the day, loyalty communications were pretty simple.

You got a Welcome Pack when you joined and then periodic points statements after that. The statements may have contained some offers, and if you were really lucky, these may have been personalised in some way. Some people really pushed the boat out and sent individual mailings with specific offers, normally in response to a lack of behaviour, trying to get you back in-store.

Then email arrived and it became much cheaper to be relevant - or so we thought. In practice it just became much cheaper. Emails were sent, even if there wasn't anything particularly relevant to say and if you didn't like it... well you could always opt-out. So what happened to that dream of 1-2-1 marketing?

Quite simply, it's actually pretty hard to be relevant all the time.

Sure you can use analytical techniques to target customers who you think have a propensity to do something. Or you can respond to customers with trigger marketing based on their behaviours (i.e. not purchased in a little while) and send an email to encourage them back. However, for regular communications it's much harder to create customised content for each member based on their exhibited behaviours - for many programmes it's just too hard (or costly) to be relevant.

But there is a simpler way - just ask the customer what they'd like through the use of a preference centre.

With an increasing number of channels and ways of interacting with customers, a simple opt-in/out marketing permission doesn't really cut it any more. Customers are being trained by social networks like Facebook that allow them to manage who can access their data and for what purpose.

For example, with a simple Facebook wall post I can choose whether to hide that post or not, increase or decrease further posts from that friend, unsubscribe from further communications from that friend or unfriend them completely. With apps, I get further choices - deciding whether that app/partner can for example access my personal information, access my friends or post on my wall.

LinkedIn go one better and intelligently look to help you control preference. If you subscribe to a group on LinkedIn and opt in to receive updates via email, LinkedIn will proactively dial-down the frequency of communications if you haven't visited the group for a while.

Preference centres essentially help to manage this by giving customers control over what communications they want to receive, about what topics, over what channels and at what frequency. Email marketing specialist Adestra reports that preference centres can have a real impact on unsubscribe rates, suggesting that giving customers choice keeps them engaged. Digital marketing specialists Smart Insights provide some advice on the use of preference centres suggesting that you don't offer what you can't deliver. If you provide choice in terms of topic or frequency, make sure you have the content and capability to manage this.

If you google preference centres however, they seem to be a feature of email marketing but, little else. This is I think needs to change.

Preference centres need to become a key feature of loyalty programmes to control preferences for all aspects of the programme and to help manage some of the innovations that are just around the corner.

For gamification features, members are going to want control about what achievements are posted to which social channels and when. This "social currency" is where the key value is within gamification, but that value will only work if the member feels in control.
Vendor Relationship Management (VRM) functions will allow members to manage their loyalty data and which partners and/or applications can access this on their behalf. Like Facebook, members will expect to be able to control both who has access to the data and what data is shared. They'll also want to able to terminate these relationships at will.
The "Internet of Things" will bring a host of interactions that can be recognised and rewarded, but members will want to be able to control what can be seen (and recorded) and what can't. Just because my toothbrush can tweet it's usage, doesn't mean I want it to.

With an increased focus on "Big Data" and the headlong trend to get more and more data from more and more sources it can sometimes be easy to forget that there is a customer at the heart of that data and they'd actually like to be heard.

Sure, we can use the data to work out when someone might be pregnant based on their purchase patterns, and this can be really useful to both the retailer and the customer.

We could also just provide the customer with an easy way to tell us and to give them a big voice...

Mutualistic Marketing - The Loyalty Cuckoo

noreply@blogger.com (Mark Sage) — Sat, 21 Apr 2012 18:35:00 +0000

As everyone knows, many Cuckoos will lay their eggs within the nests of other species. This activity, known as brood parasitism, relieves the parent cuckoo from the investment of rearing young or building nests and so they have more time to spend foraging for food or producing offspring. It also lets them mitigate risk by distributing their eggs amongst a number of different nests - taking the phrase "not having all your eggs in one basket" to it's literal conclusion.

The word parasite can seem quite negative but it literally means "one who eats at the table of another" and it is just one type of symbiotic relationship. Another type of symbiotic relationship is known as Mutualism and this is where two organisms of different species interact in a relationship in which both parties derive benefit.

As with biology, where different species have evolved to benefit from and to other species, we are seeing a similar evolution within marketing.

Credit card loyalty marketing for example could be classed as a parasitic relationship as it essentially benefits from the merchant (the host) spend without providing it with any real benefit back. However, this is changing with the advent of transaction driven marketing. With companies like Cardlytics allowing merchants to interact directly with consumers through targeted offers that are based on card spend, they now stand to gain from this relationship, moving it from parasitic to more mutualistic.

This is not just about adding value back to merchants though. It also begins to change the loyalty paradigm for many sectors, including loyalty providers.

As an example, consider a retailer looking to get closer to their customers. Setting up and running a loyalty programme would be a costly endeavour and while there are many benefits to running their own scheme, at a basic level they may simply want to be able to identify customers (and prospects), based on their value so that they can communicate with them and encourage repeat purchase.

Traditionally, without a loyalty programme the only method to do this was advertising - getting a message out there far and wide in the hope it hits the right customers.

However, what if you can find someone who already knows your customers and your competitors customers - already knows how much they spend and how frequently. You might want to strike up a relationship...

This is where mutualist marketing comes into play. Working with payment providers like card issuers, retailers can create well designed acquisition and retention campaigns without running their own loyalty programme. To use the cuckoo example, they can put their eggs in someones else's nest, albeit with their permission and for mutual benefit.

This isn't just limited to card issuers though.

Google provides a great example of an acquisition host, letting merchants and brands target their services based on google search resources in a mutually beneficial relationship.

What's really changing though is the number of hosts (vendors with data) and their ability to collect, retain and utilise behavioural information in the form of transactions and interactions.

Whether is location based checkins, TV viewing or sports/fitness tracking services, these are becoming increasingly sophisticated and more importantly utilised. At the same time, they're providing additional ways for a brand to target the right behaviours without the expense/investment of a dedicated loyalty solution.

Pepsi for example has recently run a promotion that tied up with reward company Kiip to offer fitness "achievement rewards" when a user logs activities such as runs through fitness apps such as Nexercise and MapMyRun. Rather than trying to get consumers to enter on-pack codes to interact with Pepsi, they have instead chosen to interact with the consumer at the point when they may actually want a Pepsi.

There has been talk about the divide that may be created between the data "haves and have nots" - in evolutionary terms, a data survival of the fittest. However, like all things in evolution, it was never going to be that simple. Just as symbiotic relationships form in nature to ensure species survive, the same is true for us.

The data "haves" are essentially leveraging their data for the "have nots", creating a mutualistic relationship which benefits both sides.

This means on the one hand your loyalty strategy should take account of all routes to your customer, not just the ones you can create - using other peoples "nests" may just let you focus on growing your business and distributing risk. On the other, a strong loyalty programme may also prove a real data asset that you can leverage for greater synergies.

The question as to what your loyalty strategy should be has just gotten a little more complicated.

What we can learn from PayPal's shunning of skeuomorphic design

noreply@blogger.com (Mark Sage) — Thu, 22 Mar 2012 11:34:00 +0000

Skeuomorph is an interesting word.

It's from the Greek for vessel/tool (skeuos) and shape (morphe) and is basically used to describe something which retains the design cues from an original product, even when these aren't necessary anymore. Examples would include digital music players which have the look and feel of a real-world device like a car radio or online calendars that present information in the style of a paper, month by month calendar.

In many ways, a Skeuomorph is positive as it allows us to transition from the old to the new; letting people understand how something works as it replicates the look and feel of the original. The example below shows how the iphone calculator look and feel is based heavily on the extremely popular 1977 Braun ET44 calculator, even down to the button colouring.

However, skeuomorphs can also hold our thinking back. Rather than trying to re-think a problem with newly available technology, it is sometimes easier to try and transfer the existing solution into a new medium.

Digital advertising for example simply tried to transfer the understanding and heritage of the physical world into the digital. The direct mail campaign morphed into the email campaign and the outdoor poster into the banner ad. It took a different kind of thinking from a young upstart called Google to approach it in another way back in 2000. Google did away with the visual aspects and instead focused on the relevancy, linking text based adverts to search terms. Combined with their innovation around ranking/click-thrus, this helped propel Google to the number 1 position.

Google hasn't done too well in another domain however - namely digital wallets. When people talk about digital wallets, they discuss taking your existing payment cards, loyalty cards and paper coupons and essentially digitising these into a smart phone application. Indeed, the Google Wallet even shows a representation of a credit card so you can choose how to pay.

The problem with this though is it's trying to solve a problem people don't have and doing it by simply moving what people have and do today into another medium. In reality, you are simply exchanging a leather folder for a smart phone - it's skeuomorphic design. What it's not really doing is challenging how people pay.

Of course, I'm not a payments expert, so I'll leave it to someone who is, namely Jack Stephenson, Director of Mobile, E-Commerce and Payments at JP Morgan Chase who said:-

"Consumers don't really have a mobile payment problem. Ninety-five percent of the time, paying with cash and credit cards actually works pretty well. Consumers have a mobile shopping problem. There's a difference."

While I agree with the first part of Jack's observation, I don't really agree with the latter. Consumers don't have a mobile shopping problem either, they have a money management problem - and many of them don't even realise it.

As I've discussed in a previous blog, if we're going to change how consumers pay, we should take the opportunity to change how consumer think about payments. Instead of being bounded by a skeuomorphic requirement to replicate the old, we should look to invent the new.

And that's just what PayPal have done.

Paypal are looking to reinvent our relationship with money. Not just our physical money or payment cards, but all of our liquid assests, from loyalty points to gift cards. If it can be converted into cash, PayPal will let you use it.

To support this they have separated the decision to purchase from the method of purchase. After buying through PayPal you then have 7 days to indicate how you'd like to pay for the item and this could be from a combination of:-

Money you've saved for it such as a travel savings
Money you have on a retailers gift card
Money you have in loyalty points from a frequent flyer
Money you have in your checking/current account
Money you have access to from your credit card
Money you don't have access to yet - so it lets you spread the cost over 3 equal payments

Any and all of these types of funds can be used to pay for the transaction. Now you can save for something and then literally pay for it from your savings.

It's worth watching the following videos from Finextra to see how really revolutionary this is.

Skeuomorphs can help us to transition people from the old to the new, but holding onto the old can also limit our ability to truly transform how we do business.

For loyalty, the collecting of points hasn't really changed fundamentally since the original paper stamps back in the 1930'. Even Google startup Punchd is simply transferring the paper punchcard to a smart phone medium.

Maybe it's time to rethink loyalty recognition for a new era. #gamification

If Apple did loyalty...

noreply@blogger.com (Mark Sage) — Sun, 11 Mar 2012 21:23:00 +0000

I was updating one of my Blackberry phone apps this week - something I'd been putting off for a while as I know from experience what a chore this can be.

Having managed to login, navigate the cumbersome menus and download the application, I was then prompted to re-boot my phone. After what felt like 5 minutes, but was probably closer to 2, my phone was rebooted and I was finally back in with my updated application.

I could say I've been spoilt with my Apple devices. Their app store just works. It's not the most beautiful application in the world, but it certainly sets the standard currently for how it should work. It also doesn't need a reboot after it's installed an update, which is why I'm updating numerous apps daily.

This difference all comes down to the user experience.

I'm reading the Steve Jobs biographyat the moment and this is one of the things that becomes immediately apparent - he cared about the user experience. He may not have expressed it particularly well in dealing with staff, but he certainly knew what was right and wrong (most of the time).

In one part of the book it discusses how he was disappointed with the boot time of the Macintosh. The engineer was initially reluctant to commit to being able to reduce it. Jobs asked him if he would be able to shave 10 seconds of it if someones life depended on it - the engineer suggested he might be able to do it with that kind of thing at stake. Jobs then went on to say:-

Well, let's say you can shave 10 seconds off of the boot time. Multiply that by five million users and thats 50 million seconds, every single day. Over a year, that's probably dozens of lifetimes. So if you make it boot ten seconds faster, you've saved a dozen lives. That's really worth it, don't you think?"

It may not really have been life or death, but every user was thankful for the 28 seconds they ultimately saved as users today are also thankful for the "instant on gratification" offered by it's eventual successor, the MacBook Air.

User experience is a crucial aspect of all design - loyalty programmes included. However it is also one of the things that can tend to get lost in the rush to actually deliver.

The integration is fastidiously planned, making sure all the systems connect. The best hosting environments are sourced, making sure that data is protected and systems resilient. The right rewards and communications plans are devised to encourage mutually beneficial behaviours.

However if the user experience sucks then despite all that hard work, customers may fall by the wayside.

As an example, I've recently tried to collect retrospective earnings on a frequent guest and a frequent flyer programme. Either because I hadn't taken my card or hadn't logged it at the time of booking I needed re-claim my points/miles. This is where the user experience started to break down.

Both un-releated programmes required me to send correspondence to a designated address with my proof of purchase. Correspondence is a quaint word and it's also a quaint concept. Really? You want me to write a letter, put it in an envelope and send it to an international address - just to claim loyalty miles.

Ok, so one of them also provided an electronic version - I could fax it. Now, I'm old enough to remember faxes becoming mainstream communication devices - but I'm also old enough to know they are dead. Sure we still have some dotted around for some reason, but it's not for everyday communication. However, I did try faxing it - twice. Nothing.

Eventually I phoned up the frequent guest programme who i'd been collecting with for a while and established that they did indeed have an email address (unpublished) which I could send a scan to. One web browse, two faxes, one phone call and one email later I have my points.

This gap between my intention (to claim my points) and the allowable actions (the tools provided to claim) is defined as the "Gulf of Execution" by user experience pioneer, Donald Norman and is the same problem that prevents people from using their microwave or programming their PVR. In describing the gulf of execution, Wikipedia states:-

Usability has as one of its primary goals to reduce this gap by removing roadblocks and steps that cause extra thinking and actions that distract the user's attention from the task intended, thereby preventing the flow of his or her work, and decreasing the chance of successful completion of the task

The chance of successful completion of the task and on who/how many complete it will ultimately depend on the balance between the strength of intention and the size of the gulf.

In the case of the frequent guest programme, my invested interest in the programme meant i'd try harder to finish my intention of claiming miles. However, the frequent flyer programme didn't fare so well. I'd only just joined and so had no invested interest in it and so no reason to waste my time. In fact, it was worse than that - it wasn't that I didn't earn the points, it actually felt like i'd had them taken away. This resulted in not just "better luck next time" but "there won't be a next time", I'll just fly with someone else.

Whether it's how members login, how they redeem for rewards or how they claim for missing points, the user experience is a key aspect for any loyalty programme.

A faster starting computer, downloading app or easier retro claim may not actually save lives, but as Apple continues to demonstrate it could certainly help to save customers and that is the whole point after all.