Kobie Marketing Quarterly Review: Retail Edition, June 2013

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Customer loyalty is dynamic, compelling and changing all the time. Awareness of a loyalty program’s importance was once relegated solely to a handful of sponsors of a program at a company, or those of us toiling in our industry to support the program. Today, loyalty programs are an enterprise initiative — reflective of the customer experience of brands, managed by customer service, finance, marketing, operations and IT, driven by segmented media and consumer campaigns, and expected to drive ROI, fostering lifelong connections and creating lifetime brand value. 

The loyalty and customer experience landscape has been positively impacted by several exciting trends:

- The analyses of Big Data which derive meaningful consumer behavioral insights.  We challenge ourselves and our clients to use it to create genuine experiences versus the more simplistic points-for-rewards stereotypes 

- The need for devices and channels (think smartphones, tablets, digital signage, kiosks, radio, TV, print, etc.) to create a consistent customer experience.  We need to build omnichannel loyalty programs, and then mine the data sets they create

- The importance of having programs that appeal to both the rational and emotional sides of the brain — emotional connections can include elements of gamification and social media, while rational are the tangible rewards e.g. discounts or coupons

These trends – and other insights – form the backbone of the Kobie Knowledge Quarterly Review.  Our goal is to bring to you loyalty landscape commentary and analyses of where the loyalty industry is heading.  We welcome conversations about loyalty through our observations, commentaries, insights and, in some cases, criticisms of the developments taking place.

We hope the Kobie Knowledge Quarterly Review leaves you with a greater appreciation that customer loyalty isn’t just about the program itself. Or even solely for driving ROI and heightening customer engagement. Loyalty, the bond an individual makes with another, is central to the human condition. It’s about reciprocity, faith, trust and at its greatest intensity, a type of moral obligation, akin to the connections we forge with family and friends. 

Brands and businesses, the best ones, are no different.


Michael Hemsey, President
Kobie Marketing, Inc.

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Kobie Marketing Quarterly Review: Retail Edition, June 2013

  1. 1. KOBIEQUARTERLYREVIEWJUNE 20137 SpotlightCreating OptimizedCustomer ExperiencesBy Bram Hechtkopf15 Retail ReviewJ.C. Penney and theBillion-Dollar Question17 Restaurant SpotlightGenuine CustomerExperience is Back forSecondsBy Marc GlazerRETAIL EDITIONTHINGS YOURRETAILCUSTOMERSEXPECT THISYEARBY MICHAEL HEMSEYPAGE 9@Kobie_Marketingon.fb.me/17n5zxVlinkedin.com/company/kobie-marketing www.kobie.com
  2. 2. CONTENTS10% Of real-time data isactually being utilizedmissed opportunities$$The New Customer ConnectionThe New Customer Connbig databig dataOMNICHANNEL LOYALTYOMNICHANNEL LOYALOMNICHANNEL LOYALTYp.o.s. tweets likes surveysemailwebsites blogsforums purchasesToo often marketers fail to incorporate loyalty early enoughinto the omnichannel “big picture.” It isn’t about offering adiscount, it’s about offering someone the right offer at theright time.Big Data refers to the constant incoming information solarge it surpasses what typical storage tools can handle. Arecent IBM study showed that only about 10% of real-timedata being collected is being used effectively by businesses!$$ $$$$ $$$$$$$$$$$$$$Omnichannel loyalty (OCL) is an enterprise-level initiative to drive, track, measure and rewardincremental behavior throughout the enterprise and customer experience.With omnichannel loyalty, traditional loyalty attrition is reduced, as brand advocates playan enhanced role across the customer lifecycle. Consumers become empowered througha mix of compelling and coordinated cross-channel engagements, as well as trulypersonalized messaging that delivers more meaningful and relevant brand interactions, and theright reward for the “right” behaviors along the way. The result when executed with precision is atrue impact on customer lifetime value (LTV) – the ultimate loyalty metric.$$$$$$$$$$$$Of businesses createdan experience-based42%Of businesses definedcustomer engagement37%Of customers expect asimilar experience42%Of businesses surveyedindicated little to no58%90%Of Big Data becomesmissed opportunities$$ $$$$4CREATING OPTIMIZED CUSTOMER EXPERIENCESAsk marketers or loyalty marketing service providers (L-MSPs) what the common2013 theme is and they’ll tell you “convergence” – just like 2012. But what type ofconvergence do I mean? By Bram Hechtkopf7FIVE THINGS YOUR RETAILCUSTOMERS EXPECT THIS YEARWhile Toys “R” Us’ recent miss stems fromheightened discount competition, some ofthe company’s shortcomings might beinternal too – hyper-reliance on excessivediscounts. By Michael Hemsey5 WHEN IT COMES TO LOYALTY, EXPERIENCE IS EVERYTHINGSumming up loyalty comes down to experiences: positive experiences engenderingdecades of loyalty and negative ones that take longer to subside. By Michael Hemsey9MOVING FROM TRANSACTIONALTO EMOTIONAL LOYALTYConsumers increasingly expect an enhancedbrand experience, one that takes loyaltybeyond the points-for-rewards stereotype,delivering on emotional experiences as muchas any tangible reward. By Bram Hechtkopfwww.kobie.com
  3. 3. FOUR THINGS YOUR RESTAURANT LOYALTY PROGRAMSHOULD BE DOING TO EMPOWER CUSTOMER ENGAGEMENTFaced with these uncertainties, restaurant loyalty programs are more valuable than everin attracting, engaging and retaining patrons. By Marc Glazer12GENUINE CUSTOMEREXPERIENCE IS BACK FORSECONDSAsk the technology skeptics whetherthey think technology has helped orhindered interpersonal communication,and invariably they’ll offer mutedgrumblings like “talk much, say little,connect less.” By Marc GlazerSOLVING THE RIDDLE OF BIG DATAFor all the talk of Big Data and its global impact, more than a quarter of North Americanretailers in 2012 — 27% — remain unaware of Big Data or are aware of its existence,but uncertain of its retail potential. By David AndreadakisJCP AND THE BILLION-DOLLAR QUESTIONCoupon king Myron Ullman is back in the spotlight trying to save J.C. Penney fromitself. But can he succeed? That’s the $1 billion question being asked by media andretail industry experts. By Bram HechtkopfSTARBUCKS AIMS TOCREATE LOYALTY FROM ITSDISLOYAL CUSTOMERS. HUH?It’s rare when a company voluntarilyadmits it could do something better –especially when that company isStarbucks. With a record $1 billionplaced on its Starbucks Cards in the firstquarter of 2013, the king of coffee haslittle to worry about. By Pamela Sullins25THE KEY TO PERSONALIZING EACH CUSTOMER’S LOYALTYEXPERIENCE? ACTING ON BUSINESS INTELLIGENCEIndividualized  pricing,  however,  is  just  the  beginning.  A  growing  number  of  brands  across  different  ver=cals  (most  no=ceably  in  financial  services  and  retail)  are  upping  their  loyalty  game  by  trumpe=ng  the  value  of  individualized  experiences  over  just  discounts  and  deals.  By Michael Hemsey151720ARE LAST YEAR’S BIGGEST TRENDS IN THE LOYALTY INDUSTRYCHANGING, OR ARE THEY GROWING?Big Data, social media and the continued expansion of mobile market saturation were alltopics of wide discussion and analysis throughout the loyalty industry. By Bram Hechtkopf22www.kobie.com2
  4. 4. Customer  loyalty  is  dynamic,  compelling  and  changing  all  the  =me.  Awareness  of  a  loyalty  program’s  importance  was  once  relegated  solely  to  a  handful  of  sponsors  of  a  program  at  a  company,  or  those  of  us  toiling  in  our  industry  to  support  the  program.  Today,  loyalty  programs  are  an  enterprise  ini=a=ve  —  reflec=ve  of  the  customer  experience  of  brands,  managed  by  customer  service,  finance,  marke=ng,  opera=ons  and  IT,  driven  by  segmented  media  and  consumer  campaigns,  and  expected  to  drive  ROI,  fostering  lifelong  connec=ons  and  crea=ng  life=me  brand  value.  The  loyalty  and  customer  experience  landscape  has  been  posi=vely  impacted  by  several  exci=ng  trends:• The  analyses  of  Big  Data  which  derive  meaningful  consumer  behavioral  insights.    We  challenge  ourselves  and  our  clients  to  use  it  to  create  genuine  experiences  versus  the  more  simplis=c  points-­‐for-­‐rewards  stereotypes  • The  need  for  devices  and  channels  (think  smartphones,  tablets,  digital  signage,  kiosks,  radio,  TV,  print,  etc.)  to  create  a  consistent  customer  experience.    We  need  to  build  omnichannel  loyalty  programs,  and  then  mine  the  data  sets  they  create• The  importance  of  having  programs  that  appeal  to  both  the  ra=onal  and  emo=onal  sides  of  the  brain  —  emo=onal  connec=ons  can  include  elements  of  gamifica=on  and  social  media,  while  ra=onal  are  the  tangible  rewards  e.g.  discounts  or  couponsThese  trends  –  and  other  insights  –  form  the  backbone  of  the  Kobie  Knowledge  Quarterly  Review.    Our  goal  is  to  bring  to  you  loyalty  landscape  commentary  and  analyses  of  where  the  loyalty  industry  is  heading.    We  welcome  conversa=ons  about  loyalty  through  our  observa=ons,  commentaries,  insights  and,  in  some  cases,  cri=cisms  of  the  developments  taking  place.We  hope  the  Kobie  Knowledge  Quarterly  Review  leaves  you  with  a  greater  apprecia=on  that  customer  loyalty  isn’t  just  about  the  program  itself.  Or  even  solely  for  driving  ROI  and  heightening  customer  engagement.  Loyalty,  the  bond  an  individual  makes  with  another,  is  central  to  the  human  condi=on.  It’s  about  reciprocity,  faith,  trust  and  at  its  greatest  intensity,  a  type  of  moral  obliga=on,  akin  to  the  connec=ons  we  forge  with  family  and  friends.  Brands  and  businesses,  the  best  ones,  are  no  different.Michael  Hemsey,  PresidentKobie  Marke=ng,  Inc.FROM OUR PRESIDENTwww.kobie.com3
  5. 5. 10% Of real-time data isactually being utilized$$The New Customer ConnectionThe New Customer Connbig databig dataOMNICHANNEL LOYALTYOMNICHANNEL LOYALOMNICHANNEL LOYALTYp.o.s. tweets likes surveysemailwebsites blogsforums purchasesBig Data refers to the constant incoming information solarge it surpasses what typical storage tools can handle. Arecent IBM study showed that only about 10% of real-timedata being collected is being used effectively by businesses!$$ $$$$ $$$$$$$$$$$$$$Omnichannel loyalty (OCL) is an enterprise-level initiative to drive, track, measure and rewardincremental behavior throughout the enterprise and customer experience.With omnichannel loyalty, traditional loyalty attrition is reduced, as brand advocates playan enhanced role across the customer lifecycle. Consumers become empowered througha mix of compelling and coordinated cross-channel engagements, as well as trulypersonalized messaging that delivers more meaningful and relevant brand interactions, and theright reward for the “right” behaviors along the way. The result when executed with precision is atrue impact on customer lifetime value (LTV) – the ultimate loyalty metric.$$$$$$$$$$$$90%Of Big Data becomesmissed opportunities4Lines  are  becoming  blurred  between  marke=ng  channels  and  media  in  a  way  that  has  a  huge  impact  on  how  customers’  want  to  experience  your  brand.  Omnichannel  Loyalty  is  the  key  to  bringing  this  all  together.  With  Omnichannel  Loyalty,  you  can  reach  your  loyal  customers  across  all  plaYorms,  mediums,  and  channels  in  a  more  efficient  and  aligned  manner  allowing  you  to  track  data  be[er  than  ever  and  ensure  the  most  meaningful  customer  experience  and  engagement.  One  size  fits  all  is  over.  SCAN ME!FOR THE FULLINFOGRAPHICOMNICHANNEL LOYALTY FRAMED
  6. 6. Summing  up  loyalty  comes  down  to  experiences:  posi=ve  experiences  engendering  decades  of  loyalty  and  nega=ve  ones  that  take  longer  to  subside.  But  let’s  focus  on  the  posi=ve  with  two  anecdotes.  On  Valen=ne’s  Day,  my  wife’s  friend  received  a  handwri[en  note  from  a  sales  associate  at  Neiman  Marcus,  thanking  her  for  a  Tom  Ford  perfume  purchase  while  sugges=ng  two  new  fragrances  from  the  same  line,  samples  included.“Dear  XXX,  I  know  that  the  Italian  Cypress  must  s8ll  be  exci8ng  your  senses,”  the  card  began.  “Based  on  what  we  discussed  last  8me  you  were  here  I  put  together  a  couple  of  samples  of  what  I  thought  you  might  like.”In  an  age  of  impersonal  emails  and  untargeted  offers,  personal  messaging  made  my  wife’s  friend  feel  valued.  It’s  great  to  see  handwri[en  notes  and  unexpected  samples  have  not  been  forgo[en.  Clearly,  the  Neiman  Marcus  salesman  recorded  customer  preferences  into  a  CRM  program  and  turned  data  into  ac=on.Then  theres  my  own  experience  with  Uber,  a  two-­‐year-­‐old  app.  Uber  pinpoints  your  loca=on,  or  you  enter  a  pickup  address,  and  it  allows  you  to  select  private  taxis,  limos  or  SUVs  without  the  hassle  of  finding  a  cab  or  doing  the  “New  York  wave.”  The  app  links  your  credit  card  to  each  payment  and  eliminates  card  swipes  and  clones  while  accruing  points  on  various  loyalty  programs.  Chase  Sapphire  Preferred  awards  2.14  points  per  dollar  spent  and  car  services  count  as  travel  expenses.  Here,  too,  the  experience  concluded  with  a  Thank  You  email."Hi  Michael,  we  hope  you  enjoyed  your  first  ride  with  Uber!”  it  read.  “Below  is  your  custom  Uber  invite  link.  Each  friend  that  signs  up  with  your  link  will  receive  $10  off  their  first  Uber  ride.  And,  for  each  of  your  friends  that  takes  a  ride,  well  drop  $10  Uber  credits  on  your  account."“Summing up loyalty comesdown to experiences: positiveexperiences engenderingdecades of loyalty and negativeones that take longer tosubside”WHEN IT COMES TO LOYALTY,EXPERIENCE IS EVERYTHINGBy Michael Hemsey5
  7. 7. The  Science  Behind  LoyaltyThese  examples  work  because,  as  Forrester  Research  pointed  out  in  a  2012  study,  consumers  reward  brands  that  “make  them  feel  special”  and  will  pay  more  for  that  service.  American  Express,  for  instance,  scored  37%  higher  than  MasterCard  on  delivering  special  experiences  and  enjoyed  18%  higher  pricing  power  as  a  result.  Part  of  that  experience  means:  brands  empowering  frequent  users  to  promote  products  via  social  media  and  tradi=onal  outlets,  good  corporate  ci=zenship  and  becoming  an  “invaluable  resource”  –  or  a  brand  that  consumers  feel  they  can’t  do  without.None  of  these  findings  directly  link  to  specific  loyalty  programs.  It’s  the  li[le  things  — the  subtle  corporate  signals  that  inform  customers  that  their  experience,  managed  across  all  channels,  is  tops.  For  brands,  mee=ng  consumer  experience  expecta=ons  has  a  prac=cal  marke=ng  purpose,  and  is  only  the  beginning.Delivering  quality  experiences:• Is  how  brands  dis=nguish  themselves  in  compe==ve  markets.  For  instance,  global  ad  spending  was  up  4.3%  in  the  third  quarter  of  2012,  to  $139  billion.  Samsung,  Microsop  and  Apple  shelled  out  $3  billion,  $1.9  billion  and  $933  million,  respec=vely,  in  adver=sing  in  2011,  as  each  wrestled  for  dominance.  With  this  kind  of  rivalry  common,  experiences  set  brands  apart.  • Equals  emo=onal  connec=ons  that  drive  product  loyalty  —  a  vital  omnichannel  component  as  marketers  promote  brands  across  mul=ple  channels.  The  17th  Annual  Brand  Keys  Customer  Loyalty  Engagement  Index  found  that  emo=onal  engagement  trumps  promo=ons  and  discoun=ng  in  consumer  importance.  So  when  Hyundai  =es  for  the  number  one  spot  in  the  automo=ve  subcategory  of  the  loyalty  index,  something  is  right.• Ensures  the  rise  of  brand  ambassadors.  Emo=onal  connec=ons  inspire  people  to  discuss  their  posi=ve  experiences.  And  despite  brand-­‐fickle  and  loyalty-­‐suspect  consumers,  commi[ed  fans  drive  further  brand  buzz,  resul=ng  in  higher  profits  and  ROI.Loyalty  Management  Goes  A  Long  Way  TooWhen  discussing  customer  experience  importance,  back-­‐end  loyalty  legwork  is  also  key  —  the  convergence  of  management  styles  uni=ng  tradi=onal  loyalty  program  metrics  and  customer  rela=onship  management  (CRM)  under  one  roof.  For  Neiman  Marcus,  imagine  customer  insights  volume  if  in-­‐store  experiences  (and  the  informa=on  used  craping  the  note)  were  augmented  with  loyalty  program  data.  I  suspect  far  more  customer-­‐specific  notes  could  be  wri[en.  Merging  CRM  and  loyalty  helps  realize  experience-­‐driven  outcomes,  increases  brand  efficiency  and  corrects  downstream  errors.Experience  is  everything.  Yet  what  experiences  inspire  loyalty  remains  fluid.  Keeping  these  observa=ons  in  mind  will  not  guarantee  brand  success,  but  it  will  improve  loyalty  odds.  And  combining  tradi=onal  outreach  with  CRM  might  be  the  best  loyalty  solu=on  yet.“When discussing customerexperience importance, back-end loyalty legwork is also key— the convergence ofmanagement styles unitingtraditional loyalty programmetrics and customerrelationship management(CRM) under one roof.”6GET AMPED!A revolutionary new loyalty marketing platform is coming.Find out more info@kobie.com
  8. 8. Ask  marketers  or  loyalty  marke=ng  service  providers  (L-­‐MSPs)  what  the  common  2013  theme  is  and  they’ll  tell  you  “convergence”  –  just  like  2012.  But  what  type  of  convergence  do  I  mean?  There  are  two  types,  one  unfolding  in  response  to  the  other.  Last  year,  marketers  anxiously  sought  the  implica=ons  of  channel  convergence  capitalizing  on  many  touch  points:  smartphones,  tablets,  TV,  email  and  social  media.  The  upside  to  convergence  and  channel  prolifera=on  was  copious  customer  data.  Everything  from  shopping  habits  and  loca=on  to  loyalty-­‐program  status  can  be  tracked  across  mul=ple  channels.  One  challenge  for  marketers  and  L-­‐MSPs  comes  down  to  managing  the  data  deluge:  how  to  turn  data  into  ac=onable  insight  that  drives  ROI.  Tradi=onally  some  of  this  data  were  organized  through  CRM  sopware.  But  thanks  to  informa=on  inunda=on,  corporate  structures  developed  siloed  management  styles,  making  internal  communica=ons  difficult.  Now,  experien=al  metrics  gathered  from  loyalty  programs  plus  CRM  sopware  are  yielding  new  types  of  customer  experience  management,  or  CEM.  It’s  a  vital  convergence  helping  prove  loyalty’s  worth.Even  so,  Temkin  Group’s  2012  report  finds  that  while  59%  of  respondents  plan  to  help  their  companies  become  CEM  leaders  in  the  next  three  years,  only  7%  of  North  American  companies  have  a  strong  grasp  of  CEM.CREATING OPTIMIZED CUSTOMEREXPERIENCESBy Bram Hechtkopf“Experiential metrics gatheredfrom loyalty programs plus CRMsoftware are yielding new typesof customer experiencemanagement, or CEM. It’s a vitalconvergence helping proveloyalty’s worth.”- Bram Hechtkopf7
  9. 9. Clearly,  there’s  more  to  do.  Loyalty  and  CRM  Converge  Crea<ng  Customer  Experience  ManagementLike  omnichannel  loyalty,  a  loyalty  program’s  integra=on  with  CRM  and  CEM  must  start  at  the  highest  levels.  C-­‐Level  execu=ves  must  be  on  board  and  so  must  subordinates.  Only  then  can  CRM  –  what  Forrester  Research  calls  “the  right  metrics  to  track  success  and  prompt  correc=ve  ac=on”  –  be  used  to  give  more  of  what  customers  seek  at  the  right  =me.  As  with  channel  convergence,  CRM  and  loyalty  convergence  are  about  the  coming  together  of  data,  people,  process  and  technology  –  real-­‐=me  responses,  tracking  and  rewarding  customers  for  their  ac=ons  in-­‐store  or  online.  Of  course,  arbitrarily  rewarding  members  for  ac=ons  they  would  have  already  taken  via  social  media  is  foolish.  It’s  even  worse  if  the  social  channel  in  ques=on  isn’t  directly  driving  purchasing  behavior.  Yet  technology  that  manages  CRM,  CEM  and  loyalty  ensures  repeat  business,  improved  ROI  and  upselling  opportuni=es.This  is  what  Bob  Thompson,  CEO  of  CustomerThink  Corp.,  calls  “lep  brain”  and  “right  brain”  teamwork.  CRM,  he  argues,  concerns  a  customer’s  value  to  a  given  enterprise.  It’s  about  systems  and  transac=ons  and  “func=onal  value,”  or  lep  brain.  CEM  is  about  the  enterprise’s  value  to  customers  and  concerns  people  and  interac=ons.  Here,  customer  “emo=onal  value”  –  right-­‐brain  thinking  –  is  priority  one.  But,  as  with  our  brains,  there  is  constant  sharing  of  data,  maximizing  problem  solving.Loyalty  marketers  have  access  to  a  host  of  data  points  (travel  preferences,  frequently  visited  des=na=ons,  average  purchase  prices,  types  of  purchases,  purchase  loca=on,  customer  gender,  etc.,)  that  provide  valuable  insight.  The  convergence  with  CRM  allows  marketers  to  improve  CEM  through  that  insight.Ul=mately,  consumers  will  demand  such  coordina=on  in  order  to  seamlessly  enjoy  the  mul=ple  channels  they  already  use.Rediscovering  the  ‘R’  in  CRM  While  the  ‘E’  in  CEM  EvolvesThe  above  subhead  is  a  nod  to  the  =tle  of  a  recent  Forbes  ar=cle  that  drives  home  the  essence  of  CRM  and  CEM  convergence  and  what  Forrester  calls  the  “age  of  agile  commerce.”  Whether  it’s  CEM  or  CRM  and  loyalty  management  programs,  converging  management  approaches  come  down  to  brands  driving  quality  rela=onships  with  customers  and  mee=ng  customer  expecta=ons  through  smart,  =mely  campaigns  and  op=mized  opera=ons.  It’s  about  taking  the  wealth  of  metrics  now  accumulated,  turning  that  informa=on  into  genuine  experiences  that  people  enjoy  and  managing  that  data  under  one  roof.Think  of  management  convergence  in  terms  of  the  five  Es:  enterprise  (C-­‐level  buy-­‐in),  economics  (your  converged  CRM/  Loyalty  management  system  yielding  tangible  economic  benefits),  experience  (do  your  sales  and  IT  teams  have  the  tools  and  training  needed  to  manage,  measure  and  track  an  omnichannel  and  CRM-­‐CEM-­‐loyalty  framework?),  engagement  (is  your  data  aligned  with  your  messaging  and  branding?  What  is  your  level  of  data  accuracy  or  “hygiene?”),  and  execu=on,  or  actually  geung  the  job  done,  demonstra=ng  a  genuine  customer  connec=on  through  improved  ROI,  repeat  business  and  posi=ve  feedback.Just  as  CRM  and  loyalty  convergence  discussions  begin  with  real  people  in  real  boardrooms,  real  salespeople–  “customer  advocates”  –  remain  vital  to  the  downstream  process,  humanizing  brand  interac=on.Customers  are  a  business’s  most  valuable  asset  and  loyalty  ini=a=ves  are  the  best  way  to  drive  brand  allegiance.  Only  with  a  CRM  and  loyalty  management  system  working  together  seamlessly  will  the  best  customer  experience  emerge.    “As with channelconvergence, CRMand loyaltyconvergence areabout the comingtogether of data,people, process andtechnology –real-time responses,tracking andrewarding customersfor their actions in-store or online.”- Bram Hechtkopf8
  10. 10. MOVING FROMTRANSACTIONALTO EMOTIONALLOYALTYBy Bram HechtkopfA  Forrester  Report  and  CMS  Wire  cri=que  earlier  this  year  reiterated  a  point  which  Kobie  has  endorsed  for  quite  some  =me  in  our  efforts  to  educate  clients  and  the  loyalty  industry.  There  is  compelling  evidence  sugges=ng  that  consumers  increasingly  expect  an  enhanced  brand  experience,  one  that  takes  loyalty  beyond  the  points-­‐for-­‐rewards  stereotype,  delivering  on  emo=onal  experiences  as  much  as  any  tangible  reward.  Despite  this,  brands  con=nue  to  play  catch  up.They’re  stuck  in  what  we  and  Forrester  call  “loyalty  1.0.”While  generally  an  objec=ve  review  of  the  data  at  hand  and  Forrester’s  handling  of  it,  the  ar=cle  raises  two  important  ques=ons  –  ques=ons  that  require  serious  thought.  Con8nued  on  page  11FIVE THINGSYOURRETAILCUSTOMERSEXPECTTHIS YEARBy Michael HemseyFor  Toys  “R”  Us,  this  year  has  been  a  troubled  one.  The  global  retailer’s  CEO,  Gerald  Storch,  stepped  down  aper  the  company  failed  to  hit  revenue  targets  and  had  lackluster  same  store  and  overall  store  sales  during  the  2012  holiday  season.  While  Toys  “R”  Us’  recent  miss  stems  from  heightened  discount  compe==on,  some  of  the  company’s  shortcomings  might  be  internal  too  –  hyper-­‐reliance  on  excessive  discounts.Discounts,  as  we  have  seen,  can  do  a  lot  of  damage.But  at  least  there’s  a  lesson  to  be  learned  by  other  retailers.  Despite  Storch  being  credited  for  heralding  an  omnichannel  strategy  at  Toys  “R”  Us,  relying  heavily  on  in-­‐store  and  merchandising  across  mul=ple  channels,  increasingly  consumers  are  striving  for  quality  brand  experiences  as  much  as  they  seek  quality  prices.And  with  experiences  being  central  to  customer  engagement  and  loyalty,  here  are  five  things  that  retail  customers  can  expect  more:#1.  The  con<nued  rise  of  corporate  philanthropy  and  brand  social  awareness:  Panera  Bread  is  a  good  example.  While  the  brand  is  spending  some  $70  million  on  its  “Live  Consciously”  campaign  through  mul=ple  channels,  its  Panera  Bread  Founda=on  established  Panera  Cares  Cafés.  These  are  places  offering  variable  pricing  based  on  customers’  ability  to  pay,  if  at  all.  Instances  like  this  support  recent  eMarketer  data  which  finds  56%  of  US  Internet  users  have  purchased  a  product  based  on  a  brand’s  cause  allegiances.Con8nued  on  next  page“56% of US Internetusers havepurchased a productbased on a brand’scause allegiances”- eMarketer“Consumers increasingly expect anenhanced brand experience, one that takesloyalty beyond the points-for-rewardsstereotype, delivering on emotionalexperiences as much as any tangiblereward.” - Bram Hechtkopf9
  11. 11. Con8nued  from  previous  page  top...#2.  An  increase  in  loyalty  program  transparency,  where  fewer  hoops  means  happier  customers:  It  should  be  obvious  –  shoppers  want  the  most  bang  for  their  loyalty  buck.  Consider  gas  sta=ons.  Most  gas  sta=on  loyalty  programs  link  their  rewards  to  convenience  store  purchases.  But  Bri=sh  Petroleum  is  changing  that  with  its  BP  Driver  Rewards  program.  Star=ng  in  April  2013,  BP  will  launch  a  new  loyalty  program  where  consumers  earn  5  cents  off  every  gallon  of  gas  they  pump,  aper  the  first  20  gallons.  Consumers  will  see  direct  savings  for  buying  something  they  already  need:  fuel.  Similarly,  Winn  Dixie’s  Fuelperks  program  earns  users  5  cents  off  per  gallon  pumped  at  Shell  sta=ons  for  every  $50  they  spend  on  groceries.    Simple,  honest  and  direct  loyalty  programs  mean  business  and  retailers  are  eager  to  jump  on  board.#3.  Customer  engagement  that  uses  21st  century  Big  Data  metrics  to  drive  tradi<onal  outreach:  Or  as  Claud  Cecil  Gurney,  founder  of  design  firm  de  Gournay,  describes  a  consumer  purchase:  “[Feeling]  like  something  they’ve  created  for  themselves  rather  than  something  that’s  been  bought  off  a  shelf  and  stuck  in  their  house.”  Accomplishing  that  genuineness  requires  constant  engagement  across  all  channels.  It  also  requires  ac=ng  on  gathered  data  which  is  a  central  tenet  of  the  omnichannel  loyalty  experience.#4.  The  improved  organiza<on  and  de-­‐siloing  of  Big  Data:  This  one’s  a  no-­‐brainer  but  it  bears  repea=ng.  A  Forbes  ar=cle  discusses  how  brands  should  opt  for  a  single  “golden  version”  of  customer  data  and  maximize  engagement  by  taking  a  holis=c  view  of  the  customer.  To  me,  this  sounds  a  lot  like  convergence  and  the  need  to  bring  loyalty  data  and  tradi=onal  CRM  data  under  one  de-­‐siloed  roof.  Forbes  refers  to  it  as  “master  data  management.”  Whatever  you  call  it,  convergence  is  key.  The  good  news  is  that,  according  to  a  2012  Retail  Horizons  report,  nearly  67%  of  retailers  surveyed  ranked  customer  sa=sfac=on  as  their  top  strategic  ini=a=ve  for  2012.  Another  82%  said  customer  service  strategies  would  be  top  priority,  up  from  75%  the  year  before.  If  that  was  the  sen=ment  in  2012,  you  can  be  sure  2013  will  be  just  as  intense.#5.  Growth  of  alterna<ve  forms  of  payment:  We’ve  wri[en  about  the  increasing  popularity  of  mobile  wallets  and  the  brand  possibili=es  that  come  with  Apple’s  Passbook  app.  But  here’s  another  take.  Walmart  is  expanding  use  of  its  iPhone  “Scan  &  Go”  app  to  40  Denver,  Co.  stores.  The  app  allows  customers  to  scan  products  while  they’re  shopping.  When  they’re  done,  the  app  organizes  purchases  under  a  single  QR  code  that  can  be  read  by  QR-­‐equipped  readers  at  checkout.  Think  of  Apple  stores,  where  salespeople  are  on  hand  to  scan  products  throughout  the  store.  There’s  no  checkout  line.  Walmart’s  experiment  is  proving  similarly  effec=ve  in  streamlining  the  in-­‐store  shopping  and  checkout  process.And  if  Walmart’s  doing  it,  others  will  follow.But  as  Toys  “R”  Us  con=nues  its  search  for  a  CEO,  it  would  be  wise  for  it  –  and  other  retailers  –  to  keep  these  five  customer  expecta=ons  in  mind.  An  omnichannel  approach  is  great  and  compe==ve  prices  are  too.  But  that’s  just  the  first  step  toward  enhancing  loyalty  and  driving  ROI.  Enhanced  social  good,  loyalty  program  transparency,  Big  Data  and  the  use  of  its  metrics  in  a  de-­‐siloed  data  environment,  and  one  that  relies  on  innova=ve  payment  methods  are  increasingly  vital  components  to  include  in  the  loyalty  mix.“Accomplishing thatgenuineness requiresconstant engagement acrossall channels. It also requiresacting on gathered datawhich is a central tenet ofthe omnichannel loyaltyexperience.”10
  12. 12. Con8nued  from  page  9  boUom1. Why  isn’t  a  customer  who  uses  a  discount  coupon  engaged  with  the  brand,  since  the  purchase  experience  might  result  in  a  product  or  service  so  terrific  that  the  customer  is  sold  for  life?2. How  is  emo=onal  loyalty  to  a  brand  different  from  becoming  a  brand  advocate  —  and,  if  it’s  the  same,  why  single  out  loyalty  programs  for  that  challenge  when  other  marke=ng  efforts  might  be  needed,  such  as  proac=ve  customer  service?“Dis”  loyalty  Cards  Versus  the  Need  for  ExperienceThe  fact  that  the  first  ques=on  needs  to  be  raised  underscores  in  part  why  companies  remain  at  loyalty  1.0.  Consumers  want  to  know  whether  or  not  they’re  being  offered  “just  another  discount”  (hence,  the  rewards  stereotype)  or  if  they  are  being  provided  relevant  offers.  Relevant  and  =mely  offers  are  the  beginning  of  an  emo=onal  brand  connec=on.  That’s  because  there’s  recogni=on  on  the  part  of  the  consumer  that  craping  that  relevant  offer  required  detailed  customer  knowledge  –  not  something  gleaned  from  email  spam.In  other  words,  the  challenge  for  marketers  is  answering  the  following  ques=ons:• How  well  do  we  know  our  customers?• Do  we  know  what  offers,  customer  experience  and  engagement  techniques  will  drive  customer  life=me  value  and  incremental  behaviors?• What  strategy  and  loyalty  tac=cs  make  the  most  sense  and,  just  as  important  as,  how  long  will  it  take  our  brand  to  reach  next-­‐level  loyalty  engagement?• Finally,  do  we  have  the  metrics  in  place  to  measure  these  outcomes?Emo<onal  Loyalty  Yielding  Brand  AdvocacyAs  for  the  second  ques=on  above,  there  are  obvious  connec=ons  between  emo=onal  loyalty  and  becoming  a  brand  advocate.  I  would  argue  it’s  best  to  describe  one  folding  into  the  next.  Emo=onal  loyalty  is  about  the  brand  connec=ng  with  the  consumer,  making  the  customer  feel  good  about  their  purchase  and  experience,  crea=ng  opportuni=es  for  the  customer  to  return  and  experience  “more  and  be[er”  over  =me.  Customer  service  is  important  too,  as  is  social  media.  In  today’s  tech-­‐centric  world,  consumers  appreciate  genuine  engagement  via  conversa=on.  For  instance,  sop-­‐selling  loyalty  could  be  a  hotel  manager  discovering  that  one  of  their  frequent  guest  couples  a[ends  annual  local  wine  fes=vals.  Rather  than  bombarding  this  couple  with  two-­‐dimensional  email  message,  the  hotel  instead  sends  SMS  messages,  push  no=fica=ons  or  Facebook  posts  related  to  the  fes=val  (and  not  the  rewards)  to  inspire  a  stay.In  another  concrete  example,  Burberry’s  new  London  store  features  a  22p  digital  screen,  500  speakers  and  RFID  chips  in  certain  clothes  that,  when  worn  in  front  of  the  screen,  show  wearers  a  virtual  catwalk.  While  less  conversa=on-­‐specific,  technology-­‐driven  loyalty  is  also  at  the  heart  of  the  new  engagement.Only  aper  these  connec=ons  have  been  established  can  marketers  expect  true  brand  ambassador  engagement  –  consumers  willing  to  promote  a  given  brand  as  much  out  of  rewards  expecta=on  as  they  are  mo=vated  to  support  a  brand  they  believe  genuinely  connects  with  them.Regardless,  achieving  both  kinds  of  loyalty,  experience  and  rewards-­‐driven  (because  loyalty  1.0  is  s=ll  very  important),  requires  engagement  throughout  the  customer  lifecycle  and  through  all  touch  points  –  the  central  tenet  of  an  omnichannel  loyalty  focus.  Defined  as  an  enterprise-­‐level  ini=a=ve  to  drive,  track,  measure  and  reward  incremental  behavior  throughout  the  enterprise  and  customer  experience.  The  result  is  personalized  messaging  that  delivers  more  meaningful  and  relevant  brand  interac=ons  and  the  right  rewards  for  the  “right”  behaviors  along  the  way.  This  results  in  a  true  impact  on  customer  life=me  value  (LTV)  –  the  ul=mate  loyalty  metric.As  has  been  rightly  pointed  out,  emo=onally-­‐driven  loyalty  2.0  remains  a  struggle.  But  perhaps  answering  the  above  ques=ons  will  help  illuminate  steps  brands  can  take  to  get  the  job  done  faster.What  addi=onal  steps  can  brands  take  to  turn  transac=onal  loyalty  into  emo=onal  loyalty  and  where  else  are  they  falling  short?    To  add  your  comments,  visit  the  Kobie  blog  at  www.blog.kobie.com.  11
  13. 13. Just  when  it  seems  that  an  economic  spring  has  arrived  –  stocks  are  up  and  unemployment  con=nues  to  fall  –  we’re  treated  to  a  blizzard  of  hard-­‐to-­‐stomach  restaurant  industry  sta=s=cs.  According  to  a  recent  Knapp-­‐Track  Index  of  monthly  restaurant  sales,  casual  restaurant  sales  fell  5.4%  in  February,  .6%  in  January  and  1.6%  in  December.  This  was  the  first  consecu=ve  three-­‐month  drop  in  nearly  three  years.  While  some  of  those  declines  might  reflect  winter  doldrums,  when  more  people  stay  home,  it  might  also  signal  =ght  consumer  spending  and  the  specter  of  renewed  economic  troubles.Faced  with  these  uncertain=es,  restaurant  loyalty  programs  are  more  valuable  than  ever  in  a[rac=ng,  engaging  and  retaining  patrons.  It’s  not  so  much  that  diners  require  coaxing  via  points-­‐for-­‐rewards  gimmicks.  Rather,  as  much  as  diners  crave  a  great  meal  and  great  service,  they  seek  loyalty  programs  that  are  accessible  on  their  preferred  channels,  offer  meaningful  rewards  and  enhance  their  overall  experience  with  the  restaurant.To  that  end,  I’ve  listed  four  sugges=ons  that  can  help  restaurants  nourish  their  loyalty  programs  and  be[er  feed  restaurant  goers’  desires  to  enjoy  fun  rewards.Number  1:  Rewards  need  to  be…  well…rewarding  –  That’s  a  line  borrowed  from  Cynthia  Boris’  Marke=ng  Pilgrim  blog.  With  data  showing  that  58%  of  loyalty  program  members  prefer  to  dine  at  eateries  with  a  rewards  program,  there  are  strong  indica=ons  that  if  restaurants  improved  their  offerings,  more  members  would  join.  That’s  true  even  if  the  same  study  reveals  only  36%  of  respondents  are  members  of  a  given  program.                                  “58% of loyalty programmembers prefer to dine ateateries with a rewardsprogram; there are strongindications that if restaurantsimproved their offerings, moremembers would join.”FOUR THINGS YOUR RESTAURANTLOYALTY PROGRAM SHOULD BEDOING TO EMPOWER CUSTOMERENGAGEMENTBy Marc Glazer12
  14. 14. Too  many  restaurants  make  their  loyalty  program  members  jump  through  too  many  hoops  to  earn  a  reward  or  don’t  offer  rewards  commensurate  to  customers’  outlays:    no  one’s  going  to  eat  at  a  restaurant  full  price  10  =mes  just  to  earn  a  free  T-­‐shirt.  But  consider  BJ’s  Restaurant  and  Brewhouse’s  Premier  Rewards  loyalty  program,  which  offers  rewards  including  a  5-­‐course  dinner  valued  at  $30  per  person.  They  also  offer  the  chance  to  purchase  items  via  points  at  auc=on.  The  latest  offer:  a  Guinness-­‐sponsored  mountain  bike.Number  2:  Get  Your  Game  on  –  Ea=ng  out,  even  if  it’s  just  for  dessert,  is  supposed  to  be  fun.  And  it  isn’t  only  children,  tweens,  teens  and  20-­‐somethings  playing  video  games  (the  average  gamer  is  more  like  30+).  So  why  not  add  gamifica=on  to  your  program  and  link  virtual  points  to  real-­‐world  rewards  as  an  added  endorphin  rush?  Take  Rita’s  Italian  Ice,  the  Italian  ices  chain.  Recently  the  brand  created  a  new  loyalty  program,  Rita’s  Rewards.  Timed  to  coincide  with  the  first  day  of  spring,  the  Rita’s  Rewards  app  lets  users  share  their  Rita’s  experiences  via  Facebook,  write  reviews  and  earn  points  toward  free  Italian  ices.  In  May  the  app  will  expand  to  include  a  Rita’s  Italian  Ice  Factory  game.  While  details  are  unknown,  the  game’s  working  =tle  suggests  users  will  be  able  to  create  their  own  virtual  flavors  and  dream  up  their  own  concoc=ons,  earning  addi=onal  points  along  the  way.  With  chain  restaurants  like  the  Cheesecake  Factory  specializing  in  dessert  offerings,  similar  sweet  tooth  incen=ves  could  apply  here  too.Number  3:  Serving  up  SoLoMo  Hot  or  Cold  –  Central  to  gaming’s  popularity  are  its  communal  and  social  applica=ons.  SoLoMo  refers  to  the  connec=on  of  social  media  and  local  or  proximity-­‐based  adver=sing  through  smart  mobile  devices.  Smartphone  and  tablet  adop=on  rates  hover  near  55%  and  30%,  respec=vely,  and  digital  signage  costs  con=nue  to  fall.  For  restaurants,  this  means  the  =me  for  new  levels  of  patron  engagement  is  now.  Third-­‐party  “social  apps”  are  helping  restaurants  be[er  achieve  this  goal  by  allowing  customers  to  share  their  dining  experiences  with  their  networks.  Open  Table,  a  San  Francisco-­‐based  company,  connects  diners  via  Facebook  and  allows  users  to  make  mobile  reserva=ons.  Beginning  in  February,  the  Places  I’ve  Eaten  Facebook  app  will  let  users  view  their  friends’  restaurant  preferences  –  where  they  ate,  what  they  ordered  and  descrip=ons  of  their  general  experience.  While  it’s  not  strictly  a  loyalty  program,  restaurants  could  easily  add  a  =ered  loyalty  structure  to  an  in-­‐house  Open  Table-­‐like  app,  incen=vizing  visits.        Number  4:  Don’t  Get  Aggravated,  Aggregate  –  Not  only  do  rewards  need  to  be  rewarding,  the  earning  process  needs  to  be  seamless  and  efficient.  One  way  to  achieve  this  is  through  points  aggrega=on.  While  the  average  American  household  is  a  member  of  18  loyalty  programs  —  the  restaurant  industry  alone  claims  9.7  million  members  –  a  third  of  all  loyalty  dollar  value,  $16  billion,  goes  unredeemed  yearly.  Part  of  that  disconnect  stems  from  the  clu[ered  nature  of  exis=ng  loyalty  currencies.  However,  Chicago  startup  Belly  is  working  to  change  that.  The  loyalty  currency  aggregator  allows  members  to  use  and  share  the  same  points  across  small  businesses  that  include  restaurants,  while  benefi=ng  from  social  media  and  the  metrics  gathered  from  the  experience.  In  February,  Belly  announced  that  it  boasted  over  1  million  loyalty  members,  had  4,500  businesses  signed  up  and  planned  to  hire  150  more  employees  this  year.  Plink,  another  burgeoning  loyalty  aggregator  that  includes  retail,  restaurants  and  the  American  Red  Cross,  recently  announced  that  it  had  surpassed  50,000  offline  loca=ons  to  earn  rewards.  The  restaurant  industry  may  have  a  bit  further  to  go  in  realizing  its  own  economic  spring.  But  adop=ng  these  four  guidelines  will  help  encourage  new  levels  of  patron  engagement,  increased  revenue  and  a  chance  for  your  eatery  to  help  break  this  recent  three-­‐month  sales  slump.13
  15. 15. WOULD YOU ASK A MECHANIC TOPERFORM OPEN HEART SURGERY?PUT YOUR PROGRAM BACK IN THEHANDS OF THE LOYALTY EXPERTSKobie is the secret. Reach your customers atevery touchpoint with omnichannel loyalty.Scan the QR code or go to kobie.com/GRMA.
  16. 16. Coupon  king  Myron  Ullman  is  back  in  the  spotlight  trying  to  save  J.C.  Penney  from  itself.  But  can  he  succeed?That’s  the  $1  billion  ques=on  being  asked  by  media  and  retail  industry  experts.  It’s  also  how  much  J.C.  Penney  lost  last  year  when  so  many  of  its  customers  took  their  loyalty  elsewhere  aper  the  retailer  phased  out  the  coupons  shoppers  had  come  to  love  and,  more  importantly,  expect.  As  part  of  its  turnaround,  pundits  argue,  JCP  needs  to  return  to  basics:  no  more  costly  store  redesigns,  fewer  in-­‐store  bou=ques  and  a  complete  restora=on  of  the  retailer’s  daily  discounts.  Judging  from  its  latest  ad,  JCP  recognizes  its  errors,  admits  its  mistakes  and  says:  “we  learned  a  very  simple  thing,  to  listen  to  you.”I  think  what  the  retailer  is  also  trying  to  say  is:  “we’re  sorry.”At  Kobie,  we’d  recommend  not  geung  stuck  in  that  kind  of  discount  dilemma  to  begin  with.  Stereotypical  points-­‐for-­‐rewards  programs  and  coupon-­‐condi=oning  aren’t  what  inspires  true  brand  loyalty.  They  simply  inspire  behavioral  condi=oning  based  on  cost,  not  brand  a[ributes  –  and  it’s  very  difficult  to  build  a  sustainable  loyalty  program  based  on  offering  the  lowest  price  alone.  And  at  the  2013  GRMA  Leadership  Forum,  a  high-­‐level  gathering  of  retail  execu=ves  and  industry  influencers  which  took  place  in  Kobie’s  home  city  of  St.  Petersburg,  many  shared  that  sen=ment.  JCP AND THE BILLION-DOLLARQUESTIONBy Bram Hechtkopf“Stereotypical points-for-rewardsprograms and coupon-conditioning aren’t what inspirestrue brand loyalty. They simplyinspire behavioral conditioningbased on cost, not brandattributes – and it’s very difficultto build a sustainable loyaltyprogram based on offering thelowest price alone.”- Bram Hechtkopf15
  17. 17. The  Response  to  Coupon  Condi<oningLet’s  say  you  are  a  retailer  who  offers  daily  deals  or  coupons  as  part  of  your  corporate  culture.  What  do  you  do  then?  Does  that  contradict  our  typical  customer  reward  program  recommenda=ons?  In  light  of  a  recent  2013  Coupon  Trend  Report  which  showed  a  14%  drop  in  the  US  coupon  redemp=on  rate  for  2012,  can  J.C.  really  win  back  its  formerly  loyal  customers  this  way,  one  penny  at  a  =me?Yes.  I  think  it  can  –  by  embracing  both  old  and  new  tac=cs.  That  means  returning  to  brand  experience  basics,  including  a  store  filled  with  discounts  and  deals.  But  it  also  means  the  use  of  omnichannel  marke=ng  and  loyalty  tac=cs  –  an  approach  which  growing  numbers  of  US  retailers  are  adop=ng.  Omnichannel  loyalty,  an  enterprise-­‐level  ini=a=ve  to  drive,  track,  measure  and  reward  incremental  behavior  throughout  the  enterprise  and  customer  experience,  is  channel-­‐agnos=c  and  delivers  true  customer  engagement.So,  if  I  were  in  Myron  Ullman’s  shoes,  I  would  be:• Launching  aggressive  campaign  outreach  across  mul=ple  channels,  asking  members  of  JCP’s  Rewards  program  which  discounts  they  would  like  restored  first  –  beyond  what’s  already  been  put  back.• Making  in-­‐store  product  research  and  price  comparisons  easy  and  transparent.• Puung  myself  in  the  shoes  of  your  customers.  Don’t  just  listen  to  my  customers.    Understand  what  it  means  to  “be”  them.• Considering  QR  codes  or  at  least  using  image-­‐recogni=on  technologies  like  Google  Goggles,  a  standard  feature  on  the  mobile  search  engine.• Improving  the  brand’s  mobile  interface  and  online  buying  experience.• Becoming  Amazon-­‐aware  and  bea=ng  compe=tors  at  their  own  game,  improving  rewards  technology.Almost  a  year  ago,  I  wrote  a  blog  called  The  Drug  of  Discounts:  Couponing  Addic=on  and  What  to  Do  About  It,  tepidly  endorsing  the  now  defunct  “Fair  and  Square”  pricing  ini=a=ve  and  praising  the  brand’s  a[empt  to  break  its  couponing  addic=on.  Rather  than  going  cold  turkey  though,  perhaps  JCP  should  have  explored  some  form  of  “coupon  replacement”  therapy  instead.Retail  analyst  Robin  Lewis  calls  the  current  JCP  crisis  a  “saga”  and  “perhaps  the  most  colossal,  drama=c,  tragic,  transparent,  rapid  and  microscopically-­‐tracked  meltdown  in  the  history  of  retailing.”Let’s  see  if  Ullman’s  approach  to  the  brand  and  to  rebuilding  customer  loyalty  can  prove  him  wrong.    Retail analyst Robin Lewis calls thecurrent JCP crisis a “saga” and“perhaps the most colossal,dramatic, tragic, transparent, rapidand microscopically-trackedmeltdown in the history of retailing.”Bram Hechtkopf16
  18. 18. STARBUCKS AIMSTO CREATELOYALTY FROMITS DISLOYALCUSTOMERS.HUH?By Pamela SullinsIt’s  rare  when  a  company  voluntarily  admits  it  could  do  something  be[er  –  especially  when  that  company  is  Starbucks.  With  a  record  $1  billion  placed  on  its  Starbucks  Cards  in  the  first  quarter  of  2013,  the  king  of  coffee  has  li[le  to  worry  about.Which  is  why  Joe  LaCugna,  Starbucks’  director  of  analy=cs  and  business  intelligence,  may  have  surprised  a  few  people  when  he  revealed  what  Starbucks  is  doing  now:  catering  to  its  disloyal  customers.    Con8nued  on  page  19...GENUINECUSTOMEREXPERIENCEIS BACK FORSECONDSBy Marc GlazerAsk  the  technology  skep=cs  whether  they  think  technology  has  helped  or  hindered  interpersonal  communica=on,  and  invariably  they’ll  offer  muted  grumblings  like  “talk  much,  say  li[le,  connect  less.”In  their  minds,  services  like  tex=ng,  Facebook  and  Twi[er  have  done  plenty  to  help  people  broadcast  what’s  on  their  minds  from  the  highest  mountain,  but  done  li[le  to  actually  facilitate  meaningful  communica=on.  In  other  words,  the  more  we  become  digitally  linked,  synced  and  wired,  the  less  we  establish  genuine  rela=onships.They  do  have  a  point.  It  could  be  easy  to  agree  with  the  skep=cs  that  something  has  been  lost—that  something  has  been  lep  off  the  modern  menu  of  restaurant-­‐diner  rela=ons.“Love  Can’t  Be  Automa<c”Dining  remains  one  of  the  most  in=mate  and  important  human  experiences—a  celebra=on  of  good  food,  service,  style,  atmosphere  and,  of  course,  good  company.  When  you  think  about  it  driving  a  genuine  personal  experience  in  the  casual-­‐dining  and  quick-­‐service  restaurant  space  shouldn’t  be  that  difficult.  The  experience  of  warmth  and  connectedness  is  as  memorable  when  the  waiter  brings  you  your  meal  as  it  is  when  the  friendly  drive-­‐through  a[endant  asks  you  the  “light”  to  “sweet”  balance  in  your  coffee  rather  than  taking  the  order  on  faith.  That’s  the  way  to  drive  true  restaurant  loyalty  and  enhanced  revenue:  through  engagement.Today,  technology  (in  the  form  of  smartphones,  tablets,  and  on-­‐the-­‐go  social  media  as  well  as  the  omnichannel  loyalty  and  CRM  programs  they  augment)  is  bringing  back  a  bit  of  that  dining  nostalgia—and  finding  new  and  crea=ve  ways  to  mone=ze  it.  The  reality  is  that  people  have  changed  far  less  than  our  technology.  The  craving  for  a  genuine,  personal  dining  experience  remains  as  true  now  as  when  McDonalds  first  opened  its  doors  in  1955,  or  when  its  first  class  of  15  Hamburger  University  students  graduated  in  1961.      Con8nued  on  next  page...“The reality is thatpeople have changedfar less than ourtechnology. Thecraving for a genuine,personal diningexperience remainsas true now as ever.”- Marc Glazer17
  19. 19. Con8nued  from  previous  page  top  ...The  disconnect  between  truly  “human”  customer  service  and  “just  geung  it  done”  customer  service  began  some  years  ago,  and  it  con=nues  to  accelerate  with  the  help  of  technology.  Yet  some  people  out  there  truly  “get  it,”  and  are  saying,  “Stop!”  Speaking  “at”  people  isnt  enough.Case  in  point,  a  guy  who  gets  it:  Ramon  De  Leon,  a  former  Domino’s  Pizza  delivery  guy-turned-social  media  marke=ng  director  for  a  six-­‐store  Dominos  franchise  in  Chicago.  “Love  can’t  be  automa=c,”  he  says.  Its  one  of  the  most  memorable  sentences  Ive  heard  in  years.  He  said  it  passionately  at  the  RAMP  Advanced  Commerce  &  Mobile  Retail  Services  Summit  in  Chicago  last  year.  It  was  possibly  my  biggest  takeaway  from  three  days  spent  at  RAMP.  His  point  was  simple  and  elegant:  automa=c  tweets  and  Facebook  bots  that  try  to  a[ract,  retain,  and  engage  customers  can  only  get  a  restaurant  so  far—if  anywhere  at  all.This  isn’t  a  new  concept  for  Ramon;  this  is  a  guy  who  back  in  1998  began  using  his  cell  phone  to  call  people  if  they  were  not  at  their  door  when  the  delivery  arrived.  By  building  that  level  of  personal  interest,  customers  soon  began  calling  him  directly  for  a  pizza  delivery.  Social  Media  Gets  RealWhat’s  needed  is  a  return  to  a  genuine  one-­‐on-­‐one  personal  connec=on.  Learning  names.  Coaxing  people  into  a  smile.  Fostering  real  rela=onships.  Ramon  De  Leon  buys  the  idea—he  likes  to  impress  this  “truth”  on  his  employees,  encouraging  them  to  develop  similar  rela=onships.  He  calls  it  “the  nonstop  online  conversa=on.”How  does  Dominos  start  this  conversa=on?  Simple.  Employees  are  encouraged  to  interact  with  their  customers  via  Facebook,  Twi[er  and  other  social  media  outlets.  Rather  than  hard-­‐selling  the  pizza,  the  interac=on  is  about  geung  to  know  the  customer—offering  deals  and  discounts  that  are  relevant  and  =mely.Even  back  in  2010,  speaking  to  an  audience  at  WordofMouth.org’s  SuperGenius  Conference  in  New  York,  De  Leon  explained  that  90  percent  of  his  Twi[er  posts  had  nothing  to  do  with  pizza  per  se,  but  instead  were  genuine  reac=ons  and  comments  on  other  people’s  conversa=ons.It’s  important  that  social  media  be  more  like  a  genuine  conversa=on  between  good  friends.  There  is  a  need  for  brutal  honesty  and  unparalleled  transparency.  Ex=nguishing  social  media  “fires”  (nega=ve  reviews)  with  social  media  “water”  (apologe=c  videos  admiung  mistakes)  is  as  important  as  addressing  a  “real-­‐world”  problem  like  a  mixed-­‐up  order.Serving  and  Servicing  One  Customer  at  a  TimeBefore  the  pizza  dough  rises,  other  restaurants  are  re-­‐engineering  their  social  media  efforts  too,  driving  newfound  loyalty  and  engagement  in  the  process.  Recently,  I  stumbled  upon  a  story  about  the  Blue  Heron,  a  small  “farm-­‐to-­‐table”  restaurant  nestled  in  the  Connec=cut  River  Valley  in  Sunderland,  Mass.,  co-­‐owned  by  Deborah  Snow,  61,  and  her  partner.  Snow  knew  it  would  be  hard  to  convince  her  mostly  40-­‐  and  50-­‐something  diners  of  the  value  of  social  media.  Yet  she  has  found  Twi[er  to  be  an  excellent  way  to  keep  in  touch  with  regular  patrons  while  gaining  new  converts.  Rather  than  twee=ng  about  deals,  discounts,  and  the  latest  dishes,  she  tweets  food  recipes  and  even  food  poetry.  She  calls  Twi[er  her  “crea=ve  outlet.”When  it  comes  to  restaurant  customer  engagement  and  loyalty,  it’s  important  to  remember  that  yes,  promo=onal  offers  are  important.  S=ll,  in  an  age  when  it’s  so  easy  for  customers  to  become  reduced  to  faceless  en==es,  personal  connec=ons—connec=ons  that  evoke  an  earlier,  less  tech-­‐centric  =me—are  cri=cal  in  breaking  through  to  the  quick-­‐service  and  casual-­‐dining  crowd.  To  stay  ahead  of  “the  wave  of  the  now”  is  to  become  an  omnichannel  marketer  who  delivers  omnichannel  loyalty  and  customer  experiences,  no  doubt.  In  light  of  Ramon  De  Leons  speech  at  RAMP,  however,  its  important  we  remember  the  real  people  at  the  other  end  of  each  channel.  There  must  be  an  ongoing  dialog,  a  conversa=on  that  advances  a  true  rela=onship.So  is  genuine  customer  experience  back?  You  be[er  believe  it!“It’s important thatsocial media be morelike a genuineconversation betweengood friends. There is aneed for brutal honestyand unparalleledtransparency.Extinguishing socialmedia “fires” with socialmedia “water” is asimportant as addressinga “real-world” problemlike a mixed-up order.”- Marc Glazer18
  20. 20. Con8nued  from  page  17  boUom...Starbucks  will  use  its  metrics  gathering  to  discover  which  members  use  their  rewards  card  least  frequently,  sending  text  messages  to  mobile  phones  offering  free  cups  of  Joe  and  other  =mely  and  relevant  rewards.  So  far  the  company  has  analyzed  about  half  of  its  6  million  loyalty  program  memberships.  The  ques=on  is:  what’s  the  harm  –  if  any  –  in  promo=onal  adver=sing  when  it  costs  Starbucks  pennies  per  cup?With  its  new  approach  to  the  disloyal,  my  advice  to  Starbucks  would  be  to  think  about  the  ‘Five  Es,’  –  that  is,  Enterprise,  Experience,  Economics,  Enablement  and  Execu=on.  Enterprise  speaks  to  the  business  at  hand,  experience  relates  to  the  brand  rela=onship  customers  seek,  economics  concerns  the  cost  of  genera=ng  such  loyalty,  enablement  relates  to  the  mechanics  of  making  loyalty  happen  and  execu8on  refers  to  its  real-­‐=me  deployment.Brands  that  try  appealing  to  every  consumer  segment  all  the  =me  risk  dilu=ng  what  they  stand  for,  undermining  the  enterprise  at  large  and  weakening  the  customer  experience  for  truly  loyal  customers.  They  also  risk  raising  short-­‐term  costs,  making  execu=on  sluggish.  In  contrast:• Commi[ed  long-­‐term  customers  usually  possess  a  strong  sense  of  brand  pride  and  devo=on  for  which,  historically,  loyalty  programs  reward  them.• Doing  so  promotes  posi=ve  brand  engagement  and  the  opportunity  for  genuine  experiences  that,  ideally,  loyalty  program  members  are  eager  to  tell  their  friends  and  family  about  through  every  channel  they  use,  including  mobile,  social  media,  online  and  of  course,  word-­‐of-­‐mouth.Starbucks’  brand  message  is  clear:  it  caters  to  the  upscale  customer,  who  doesn’t  think  twice  about  ordering  a  $7  cup  of  coffee.  Is  it  wise,  then,  to  spend  such  effort  seeking  to  a[ract,  engage  and  retain  a  rela=vely  disloyal  subset?Widening  the  loyalty  net  a  li[le  further  isn’t  a  bad  thing  by  any  measure.  It’s  just  that  the  intensity  of  its  rollout  needs  to  be  measured.  So  if  you’re  a  brand  intrigued  by  Starbucks’  novel  loyalty  approach,  by  all  means  gather  the  data  and  start  hun=ng  for  your  most  disloyal  customers.  But  take  the  economics  (read:  cost)  of  the  Five  Es  seriously,  otherwise  your  enterprise  could  suffer.  Consider  a  six-­‐month  trial  period  to  see  if  the  expense  of  catering  to  disloyal  customers  yields  higher  spends  and  increased  brand  interac=ons.  Otherwise,  efforts  to  a[ract,  engage  and  retain  the  disloyal  might  be  to  your  company’s  disservice.19
  21. 21. Ask  Siri,  the  genderless  iPhone  personal  assistant,  what  the  weather  is  and  it  can  tell  you.  If  you  ask  it  a  ques=on  like  “are  you  married?”  you’ll  get  an  almost  human  response  (it  coyly  dodges  the  ques=on).  But  ask  Siri  what  you’re  likely  to  buy  from  your  favorite  retailer  —  a  deduc=on  based  in  part  on  purchasing  history  and  other  behavior-­‐based  metrics  —  and  Siri  will  falter.Siri  fails  for  the  same  reason  that  many  retailers  fail  when  it  comes  to  a[rac=ng,  retaining  and  engaging  customers.  For  all  the  talk  of  Big  Data  and  its  global  impact,  more  than  a  quarter  of  North  American  retailers  in  2012  —  27%  —  remain  unaware  of  Big  Data  or  are  aware  of  its  existence,  but  uncertain  of  its  retail  poten=al.  The  rest  report  par=al  awareness  and  knowledge.For  the  more  than  1  in  4  retailers  that  have  yet  to  embrace  the  poten=al  of  Big  Data,  here’s  a  refresher.  For  them,  the  engagement  riddle  is  that  retailers  have  always  been  data-­‐driven,  but  on  paper  and  in  siloed  formats.  It’s  surprising,  then,  that  so  many  have  failed  to  grasp  Big  Data’s  customer  engagement  and  loyalty  implica=ons.  Big  Data  concerns  the  accumula=on  and  analysis  of  —  as  well  as  ac=on  on  —  the  2.5  quin=llion  bytes  of  data  created  every  day,  much  of  it  freely  available  online  or  on  mobile.  In  fact,  90%  of  all  data  that  exists  today  was  created  in  the  last  two  years.Big  Data  and  the  customer  rela=onship  management  sopware  (CRM)  managing  today’s  omnichannel  environment  —  POS,  smartphones,  tablets,  kiosks,  digital  signage,  etc.  —  do  one  thing  well  and  another  increasingly  well:The  recording  of  consumer  habits:  That  includes  items  purchased,  purchase  loca=on,  purchase  frequency,  amount  spent  and,  some=mes,  purchaser  gender.“For all the talk of Big Data andits global impact, more than aquarter of North Americanretailers in 2012— 27% — remain unaware ofBig Data or are aware of itsexistence, but uncertain of itsretail potential.”SOLVING THE RIDDLE OF BIG DATABy David Andreadakis20
  22. 22. The  accumula<on  of  psychographic  metrics:  Retailers  can  be[er  predict  customer  feelings  in  real-­‐=me  and  use  that  informa=on  to  tailor  product  offerings  and  loyalty  rewards  that  address  their  immediate  emo=ons.Reverse  engineering  what’s  already  being  done,  this  new  approach  to  behavioral  Big  Data  analysis  helps  retailers  predict  customer  wants  —  possibly  even  before  those  customers  are  even  aware  of  wan=ng  something.Loyal  to  a  more  social  data-­‐driven  experienceRetailers  are  gaining  this  more  subtle  but  vital  informa=on  through  gamified  loyalty  programs  and  social  media.  Take  Raleys  Family  of  Fine  Stores,  a  California-­‐based  grocery  chain.  The  brand  recently  enhanced  its  Something  Extra  loyalty  program  with  Try-­‐It,  an  online  loyalty  feature  only  available  to  Something  Extra  members.  Try-­‐It  members  are  invited  to  share  their  product  experiences  via  blogs,  social  networks,  site  tools  or  offline  communica=on.  Consumers’  omnichannel  interac=ons  are  scored  by  the  brand  based  on  their  number  of  “likes,”  comments  and  re-­‐tweets,  earning  higher  scores  the  greater  their  interac=on.  Higher  scores  also  mean  access  to  be[er  deals  and  campaigns  down  the  road.Another  example  comes  from  David’s  Bridal,  a  U.S.  wedding  gown  and  formal  wear  chain.  In  an  effort  to  a[ract  and  retain  customers  by  using  social  media  to  gather  even  more  real-­‐=me  customer  informa=on,  Davids  launched  the  "My  Event"  sec=on  of  its  Web  site.  Brides-­‐to-­‐be  use  the  site  to  organize  and  discuss  the  en=rety  of  their  wedding  experience  with  select  Facebook  friends.  The  goal  is  for  brides  to  help  generate  conversa=on  beyond  the  dress.  Party  planning,  shopping  lists,  tasks,  even  a  wedding-­‐related  newsfeed  are  all  encouraged.  Perhaps  the  most  interes=ng  feature  is  the  “mood  board”  where  members  describe  how  they  envision  their  big  day.  While  the  above  helps  the  bride  and  her  family  stay  organized,  the  big  win  for  David’s  comes  in  the  form  of  accumulated  psychographic  metrics  and  the  possibility  that  more  people  —  the  bride’s  social  network  -­‐-­‐  will  consider  David’s  when  it’s  their  turn  to  say  “I  do.”Conversa=onal-­‐based  data  crea=ng  a  more  accurate  customer  behavioral  picture  is  at  the  forefront  of  where  Big  Data  is  going.  Considering  the  speed  at  which  new  informa=on  is  generated  and  consumers’  increasing  desire  for  =mely  and  relevant  offers,  the  more  than  1  in  4  retailers  who  have  yet  to  embrace  Big  Data  are  running  out  of  =me.  This  “retail  riddle”  shouldn’t  be  hard  to  crack.If  retail  chains  both  large  and  small  — like  David’s  and  Raley’s  —  have  figured  it  out,  shouldn’t  your  brand  as  well?  21AMP
  23. 23. Walk  into  a  Kroger  supermarket  and  you  might  be  surprised  by  what  you  see:  adver=sements  promo=ng  individualized  pricing  linked  to  loyalty  program  membership.It’s  a  business  intelligence  strategy  that’s  been  gaining  trac=on  for  several  months  since  the  grocery  chain’s  pilot  pricing  program  launch  last  summer  and  I  expect  its  popularity  (and  rising  acceptance  by  skep=cal  consumers)  will  con=nue.  According  to  a  recent  Loyalty  Report,  Kroger  Rewards  was  the  grocery  sector’s  most  popular  loyalty  program,  with  an  83%  overall  sa=sfac=on  ra=ng.Why  the  success?  Because  individualized  pricing  isn’t  just  about  strict  discounts  and  offers.  It’s  about  enhancing  the  customer  experience  and  elici=ng  life=me  customer  value.  Kroger  bases  its  individualized  pricing  on  past  purchases  and  what  customers  have  typically  spent.  The  result  is  a  sense  of  brand  loyalty  that  far  exceeds  what  you  could  achieve  with  something  as  simple  as  weekly  cutout  coupons  sent  in  the  mail  –  or  similarly  generic  offers  via  email  or  other  channels.  In  other  words,  Kroger  is  taking  loyalty  to  the  next  experience-­‐driven  level,  demonstra=ng  to  its  customers  through  clear  and  transparent  ac=ons  that  “this  company  has  taken  the  8me  and  effort  to  get  to  know  me.”Individualized  pricing,  however,  is  just  the  beginning.  A  growing  number  of  brands  across  different  ver=cals  (most  no=ceably  in  financial  services  and  retail)  are  upping  their  loyalty  game  by  trumpe=ng  the  value  of  individualized  experiences  over  just  discounts  and  deals.  This  is  known  as  transac8onal  loyalty.  While  remaining  a  bulwark  of  loyalty  program  engagement,  transac=onal  loyalty  is  open  a  simpler  consumer  behavior  modifica=on  model  that’s  costlier  to  implement.  “Individualized pricing isn’t justabout strict discounts andoffers. It’s about enhancing thecustomer experience andeliciting lifetime customervalue.”PERSONALIZING YOUR CUSTOMER’SLOYALTY EXPERIENCE THROUGHBUSINESS INTELLIGENCEBy Michael Hemsey22

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